International Public Partnerships Limited
Annual Report 2023

Plain-text annual report

ANNUAL REPORT AND FINANCIAL STATEMENTS 2023 I n t e r n a t i o n a l P u b l i c P a r t n e r s h i p s L i m i t e d A n n u a l R e p o r t a n d f i n a n c i a l s t a t e m e n t s 2 0 2 3 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 – £2.6 billion market capitalisation at 31 December 2023 – 1,911 million Ordinary Shares in issue at 31 December 2023 – 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 GLOSSARY Certain words and terms used throughout this Annual Report and financial statements are defined in the Glossary on pages 109 to 111. Where alternative performance measures (‘APMs’) are used, these are identified by being marked with an * and further information on the measure can be found in the Glossary. COVER IMAGES Front cover: Wakatipu High School, Queenstown, New Zealand Inside cover: Flat Bush Primary School, Auckland, New Zealand CONTENTS COMPANY OVERVIEW 02 Full-Year Financial Highlights 03 Responsible Investment Highlights STRATEGIC REPORT 04 Chair’s Letter 06 Investment Case 08 Business Model – Delivering Long-term Benefits 10 Objectives and Performance 12 Top 10 Investments 14 Case Study – New Zealand PPP Portfolio 16 Value-focused Portfolio Development 20 Market Environment in 2023 and Future Opportunities 22 Operating Review 38 Responsible Investment 50 Continuous Risk Management CORPORATE GOVERNANCE 63 Summary of Investment Policy 64 Board of Directors 66 Corporate Governance Report 75 Audit and Risk Committee Report 78 Directors’ Report 79 Directors’ Responsibilities Statement FINANCIAL STATEMENTS 80 Independent Auditor’s Report to the Members of International Public Partnerships Limited 86 Consolidated Financial Statements 90 Notes to the Consolidated Financial Statements 109 Glossary 112 Key Contacts 113 Annex – SFDR periodic reporting requirements (unaudited) View our company website www.internationalpublicpartnerships.com International Public Partnerships Limited Annual Report and financial statements 2023 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 8.13p 2023 full-year dividend per share1* (5% dividend growth) 8.37p 2024 full-year dividend target per share2* (3% dividend growth) 8.58p 2025 full-year dividend target per share2 (2.5% dividend growth) 5.0% 2023 dividend growth* (2022: 2.5%) 1.1X Cash dividend cover3* (2022: 1.3x) NET ASSET VALUE (‘NAV’)4* TOTAL SHAREHOLDER RETURN (‘TSR’)* £2.9bn NAV at 31 December 20234 (2022: £3.0bn) 152.6p NAV per share at 31 December 20234 (2022: 159.1p) 209.6% TSR since Initial Public Offering (‘IPO’)5 (2022: 222.6%) 4.1% Decrease in NAV (2022: Increase of 20.2%) 4.1% Decrease in NAV per share* (2022: Increase of 7.3%) 6.8% Annualised TSR since IPO5 (2022: 7.5%) PORTFOLIO ACTIVITY REAL RETURNS PROFIT £108.1m Cash investments made during 2023 (2022: £191.6m) 0.7% Portfolio inflation-linked returns* at 31 December 20236 (2022: 0.7%) £28.0m Profit before tax7 (2022: £326.8m) 1 Further information regarding the 2023 full-year dividend and future dividend targets can be found in the Chair’s Letter. The dividend in respect of the six months to 31 December 2023 of 4.07 pence per share is expected to be paid on 13 June 2024. 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 flows before capital activity* as detailed on pages 28 to 29. Movements in the level of coverage from period to period can be expected due to the profile of projected distribution receipts from the portfolio over time (see chart on page 34), and are not necessarily a reflection of changes in the level of asset performance. 4 The methodology used to determine the NAV is described in detail on pages 30 to 37. 5 Since IPO in November 2006. Source: Bloomberg. Share price appreciation plus dividends assumed to be reinvested. 6 Calculated by running a ‘plus 1.0%’ inflation sensitivity for each investment and solving each investment’s discount rate to return the original valuation. The inflation-linked return is the increase in the weighted average discount rate. 7 The decrease in profit in the year is principally reflective of the unrealised fair value loss on the portfolio in the period. Further information is available on pages 28 to 29. 02 International Public Partnerships Limited Annual Report and financial statements 2023 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 demonstrates 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 AS AT 31 DECEMBER 2023 PORTFOLIO SDG ALIGNMENT AS AT 31 DECEMBER 2023 >180,000 Students attending schools developed and maintained by the Company 17% 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% c.2,700,000 Estimated equivalent number of homes capable of being powered by renewable energy transmitted through offshore transmission (‘OFTO’) investments 17% >212,000,000 Annual passenger journeys through sustainable transport investments 24% For further information on the Company’s contribution to Responsible Investment, please see pages 38 to 49 and the Company’s Sustainability Report. International Public Partnerships Limited Annual Report and financial statements 2023 03 CHAIR’S LETTER The Board and the Investment Adviser continue to maintain a focus on actively managing the portfolio to ensure the Company remains well positioned for the long term. MIKE GERRARD CHAIR DEAR SHAREHOLDERS, I am pleased to report that the Company’s diversified portfolio of over 140 assets and businesses has continued to perform well both operationally and financially, with cash generation in line with expectations. Whilst the portfolio continues to demonstrate its resilience, and the need for infrastructure investment has never been stronger, the broader economic environment continues to weigh on the share prices of the Company and those within the wider UK listed investment trust sector. Against this backdrop, the Board and the Investment Adviser continue to maintain a focus on actively managing the portfolio to ensure that the Company remains well positioned for the long term. Accordingly, and in conjunction with the publication of the Company’s Half-yearly Financial Report, the Board committed to taking a number of actions, including revising the dividend targets; reducing the use of the Company’s Corporate Debt Facility (‘CDF’) and realising value from the existing portfolio. During the year, the Company also announced a share buyback programme, owing to the Board’s continued belief that the current discount to NAV, at which the shares are trading, materially undervalues the Company. Notably, the Company’s 29 February 2024 share price implied a projected net return of 9.3%1 which was, in our view, an attractive 4.7% premium to that offered by a 30-year UK government bond. An update on our progress against these initiatives is set out later in this Chair’s Letter. FINANCIAL AND OPERATIONAL PERFORMANCE The revenues generated by the Company’s underlying investments are predominantly availability-based or regulated in nature and, coupled with high levels of inflation-linkage, have enabled the Company to increase its dividends every year since the IPO in 2006. It is a testament to the resilience of the Company’s investment portfolio that such increases have occurred across a number of market cycles and under various macroeconomic conditions. During the year, the Company’s NAV decreased from 159.1 pence per share at 31 December 2022 to 152.6 pence per share2 as at 31 December 2023. This reduction reflects, among other factors, the dividends paid during the year as well as a modest increase in the discount rates used to value the forecast cash flows. Further information on portfolio performance can be found in the Investor Returns and Efficient Financial Management sections of this Report. UPDATE TO CURRENT MARKET ENVIRONMENT ENHANCING SHORT-TERM DIVIDEND GROWTH As reported in the Company’s Half-yearly Financial Report, and acknowledging the higher levels of inflation in the economy, the Company decided to increase its 2023 dividend to 8.13 pence per share, representing a 5% increase compared to the 2022 dividend whilst maintaining cash dividend cover of 1.1x3 (2022: 1.3x). The dividend in respect of the six months to 31 December 2023 of 4.07 pence per share is expected to be paid on 13 June 2024. Inflation remained elevated during the year and although it has now moderated, the Board has decided to increase the 2024 dividend target to 8.37 pence per share4, reflecting growth of 3% (previously 2.5%) compared to the 2023 dividend. The increase in the target dividend growth rate for 2024 takes into account the Company’s ambitions to sustainably grow dividends over the long term, whilst providing full dividend cash coverage from net operating cash flow before capital activity. 1 As at 31 December 2023. 30-year bond used owing to the UK weighting of the portfolio and the weighted average investment tenor of c.38 years. 2 The methodology used to determine the NAV is described in detail on pages 30 to 37. 3 Cash dividend payments to investors are paid from net operating cash flows before capital activity* as detailed on pages 28 to 29. Movements in the level of coverage from period to period can be expected due to the profile of projected distribution receipts from the portfolio over time (see chart on page 34), and are not necessarily a reflection of changes in the level of asset performance. 04 International Public Partnerships Limited Annual Report and financial statements 2023 overview STRATEGIC REPORT corporate governance Financial StatementS Beyond 2024, the Board is forecasting to continue its long-term projected annual dividend growth rate of 2.5% such that the 2025 dividend target is 8.58 pence per share4. The projected cash receipts from the Company’s portfolio are such that even if no further investments are made, the Company should be able to continue to meet its existing progressive dividend policy for at least the next 20 years5. This is an attractive and defining feature of the INPP investment portfolio. REALISING VALUE FROM THE EXISTING PORTFOLIO In December 2023, the Company announced that it had completed a transaction involving the realisation of its four OFTO senior debt investments as well as increasing the leverage in the Lincs OFTO (together, the ‘OFTO realisation’), generating cash proceeds of c.£200 million. The four senior debt investments were realised at a modest premium to INPP’s 30 June 2023 valuations, so demonstrating the robustness of the Company’s NAV. The Company will continue to retain its existing equity and subordinated debt interests in these four OFTOs. In addition to the OFTO realisation, the Company also completed the sale of its stake in Airband6, generating sale proceeds of c.£12 million which was in line with the 30 June 2023 valuation. FOCUS ON REDUCING THE USE OF THE CDF Higher interest rates have rendered the Company’s CDF more expensive to use and therefore the Company previously announced that it would focus on reducing the use of the CDF. Cash drawings under the CDF were reduced to c.£65 million by 31 December 2023 and all cash drawings have since been fully repaid. These repayments were made using surplus free cash flow as well as proceeds from the Airband divestment and the OFTO realisation. As at the date of this Report, the £350 million CDF is undrawn with c.£14 million committed via letters of credit principally in support of investment commitments (as set out on page 17). The Board continues to keep the future use of the CDF under review and recognises that it can provide flexibility for accretive investments at an appropriate level of return. SHARE BUYBACK PROGRAMME The Company previously advised that once the CDF drawn balance had been substantially reduced, it would be in a position to consider further measures to reduce the discount to the NAV at which the Company’s shares are trading. In December 2023, the Board was pleased to announce that it would allocate up to £30 million of the proceeds from the OFTO realisation towards a share buyback programme. The programme of buying back the Company’s shares commenced in early 2024 and is expected to run for a period of up to 12 months. As at 27 March 2024, c.£5 million of shares have been bought back. As further funds become available, the Board may consider increasing the allocation to the buyback programme. REVISED TARGET RETURN GUIDANCE As part of the Company’s Half-yearly Financial Report for the six months to 30 June 2023, the Board announced a reassessment of the Company’s long-term total return target, given recent changes in the macroeconomic environment. This has since been completed and, going forward, rather than apply a static quantitative target to the assessment of new investment opportunities, the Board has decided to introduce a more dynamic and qualitative target that provides the requisite guidance to stakeholders whilst ensuring that the Company considers prevailing market and macroeconomic conditions at the point in time at which investment decisions are made. Under this new framework, the target return for any new investment will be informed by several factors including: (i) the Company’s share price relative to its NAV, (ii) the Company’s weighted average discount rate, and (iii) any pertinent economic or strategic considerations. INVESTMENT ACTIVITY AND STEWARDSHIP Investment activity during the year, which totalled £108.1 million, was predominantly focused on completing acquisitions which the Company had previously committed to. This included the Company’s first investments in New Zealand, being a portfolio of five PPP projects, as well as a small follow-on investment into the Ealing Building Schools for the Future (‘BSF’) scheme. In December 2023, the Company committed to acquire the Moray East OFTO which is the Company’s eleventh OFTO investment. This c.£77 million acquisition was completed in February 2024 using proceeds from the OFTO realisation. Further details of these investments, as well as the Company’s two investment commitments and one further long-standing investment opportunity, can be found on page 17. An increasing area of focus for the Company will be on ensuring an orderly and efficient hand-back of its PPP assets to the public sector client authorities, when the PPP contracts naturally mature. The first of the Company’s PPP contracts to mature will be the Hereford and Worcester Courts scheme which ends in 2025. The overall subject of asset hand-back is one which I will return to in future letters. Further information can also be seen in the Asset Management section on pages 22 to 27. Following an assessment of our ESG KPIs, which included engaging with a number of shareholders, the Company has developed a set of new portfolio-level KPIs to advance its sustainability agenda. These KPIs are informed by industry best practices and encompass material topics such as achieving net zero emissions, fostering diversity and inclusion, and adhering to the sustainability criteria outlined in the EU Taxonomy. This year marks the inaugural disclosure period for these new KPIs, which will shape the next phase of our investment engagement and asset management strategies. Further detail can be found within the Responsible Investment section of this Report and in the Company’s latest standalone Sustainability Report. CORPORATE GOVERNANCE As part of the ongoing succession planning process, John Le Poidevin is due to step down as Chair of the Audit and Risk Committee at the upcoming AGM in May 2024 and Stephanie Coxon will be appointed to this role. John has led this committee with great skill and dedication since 2018, for which I thank him warmly on your behalf. Following this Committee change, there will also be changes to the other Committees. Full details of these updates can be seen in the Corporate Governance section on pages 66 to 74. Following nine years of service, John will retire from the Board at the 2025 AGM and the process of recruiting a new director is already underway. The Board is committed to providing regular and informative updates to existing and prospective investors; and in addition to regular market updates, was pleased to hold a Capital Markets Day for institutional investors and sell-side analysts on 27 February 2024. More information is available on page 74. OUTLOOK The continued strength, long-term nature and inflation-linkage of the portfolio’s projected cash receipts together, provide the Board and the Investment Adviser with confidence that the Company will continue to meet its performance objectives. Whilst the Company does not need to invest to meet these objectives, there continues to be significant demand in the economies where we are present for new investments in infrastructure which meet the Company’s criteria. In navigating the current dynamic market environment and its opportunities we will maintain our disciplined approach to investment acquisitions, divestments and portfolio management, and our commitment to delivering value to our shareholders. I and my fellow directors thank you for your continued support. MIKE GERRARD CHAIR 27 March 2024 4 Future profit projection and dividends cannot be guaranteed. Projections are based on current estimates and may vary in future. 5 This is reflective of the increased 2023 dividend and the 2024 dividend target, and 2.5% annual dividend growth thereafter. 6 The Company’s investment in Airband was through the Amber managed National Digital Infrastructure Fund (‘NDIF’). International Public Partnerships Limited Annual Report and financial statements 2023 05 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 – A diversified portfolio of investments with stable, long-term cash flows and potential growth attributes 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 49 PROJECTED INVESTMENT RECEIPTS FROM EXISTING ASSETS PROJECTED INVESTMENT RECEIPTS FROM EXISTING ASSETS2 Investment Receipts (£ million) 450 400 350 300 250 200 150 100 50 0 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 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 2023 are included. Westermost Rough OFTO, United Kingdom Photo credit: GEO-4D 06 International Public Partnerships Limited Annual Report and financial statements 2023 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 180 employees internationally – Amber adopts a full-service approach and is a leading investment originator, asset and fund manager with a strong track record – Amber has local presence with personnel and offices across the geographies in which the Company invests, responsible for sourcing new opportunities and managing the investments throughout the full lifecycle 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 Durham Regional Courthouse, Ontario, Canada Photo credit: WZMH Architects 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 2023 07 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 Investment Adviser’s 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 08 International Public Partnerships Limited Annual Report and financial statements 2023 overview STRATEGIC REPORT corporate governance Financial StatementS optimiSe We seek to actively manage our investments in order to optimise their financial, operational and ESG performance. Consideration is also given to the potential for divestments to ensure that capital is effectively employed Deliver Through our Investment Adviser’s active 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 – ESG characteristics are assessed and considered throughout 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 49 – 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 50 to 62 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 and performance of each investment commUnitieS Delivering sustainable social infrastructure for the benefit of communities. The Company’s investments provide vital public assets whose benefits also include enhancing local economies, creating jobs and strengthening of 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 2023 09 OBJECTIVES AND PERFORMANCE The value we provide to our investors and our wider stakeholders is monitored using our strategic Key Performance Indicators (‘KPIs’). INVESTOR RETURNS STRATEGIC PRIORITIES Delivering long-term, inflation- linked returns to investors TARGET AN ANNUAL DIVIDEND INCREASE OF 2.5% 5.0% Annual dividend increase achieved for 20231 (2022: 2.5%) TARGET A LONG-TERM TOTAL RETURN OF AT LEAST 7.0% PER ANNUM 7.4% p.a. IRR achieved since IPO2 (2022: 7.9%) INFLATION-LINKED RETURNS ON A PORTFOLIO BASIS 0.7% Inflation-linked returns on a portfolio basis3 (2022: 0.7%) 1 Further information regarding the 2023 full-year dividend and future dividend targets can be found in the Chair’s Letter. The dividend in respect of the six months to 31 December 2023 of 4.07 pence per share is expected to be paid on 13 June 2024. 2 Acknowledging the significant change in the macroeconomic environment, the Board has now revised this target as of 1 January 2024. Further information can be found in the Chair’s Letter and on page 30. The return target that existed previously is 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 weighted average discount rate. 4 Measured by comparing forecast portfolio distributions against actual portfolio distributions received. In the current year, actual portfolio distributions exceeded forecast. 5 The Company’s Investment Adviser was awarded the highest rating of 5-stars in the UN-backed PRI 2023 assessment for the Policy Governance and Strategy and Direct Infrastructure modules. 6 Please refer to page 43 for additional ESG KPIs that are linked to the Company’s approach to asset management. 7 Cash dividend payments to investors are paid from net operating cash flows before capital activity* as detailed on pages 28 to 29. Movements in the level of coverage from period to period can be expected due to the profile of projected distribution receipts from the portfolio over time (see chart on page 34), and are not necessarily a reflection of changes in the level of asset performance. 8 The increase is primarily due to the timing effect of the reduction in NAV during the period. For further information, please see the Efficient Financial Management section on pages 28 to 29. 10 International Public Partnerships Limited Annual Report and financial statements 2023 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 TWO OF FOUR ATTRIBUTES: 1. Stable, long-term returns 4. Other capital enhancement 2. Inflation-linked investor cash flows 3. Early stage investor or investments secured through preferential access attributes In addition, all new investments must meet the Responsible Investment KPI (positive SDG contribution for new investments), as below. 100% of the investments made in 2023 met at least two of the four attributes, as well as the positive SDG contribution KPI (2022: 100%) STRONG ONGOING ASSET PERFORMANCE AS DEMONSTRATED BY: 100% Forecast portfolio distributions received for 20234 (2022: 100%) 0.2% Asset performance deductions achieved against a target of <3% during 2023 (2022: 0.3%) 99.8% Asset availability achieved against a target of >98% during 2023 (2022: 99.8%) ROBUST INTEGRATION OF ESG INTO INVESTMENT LIFECYCLE POSITIVE SDG CONTRIBUTION FOR NEW INVESTMENTS 5-stars PRI rating5 (2022: 5-stars) 100% Percentage of new investments in the year that positively support targets outlined by the SDGs6 (2022:100%) CASH COVERED DIVIDENDS7* COMPETITIVE ONGOING CHARGES8 1.1x Dividends fully cash covered* for 2023 (2022: 1.3x) 1.20% Ongoing Charges Ratio for 2023 (2022: 1.06%) International Public Partnerships Limited Annual Report and financial statements 2023 11 TOP 10 INVESTMENTS The Company’s top 10 investments by fair value at 31 December 2023 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 SECTOR Gas distribution % INVESTMENT FAIR VALUE 31 DECEMBER 2023 16.2% STATUS AT 31 DECEMBER 2023 Operational % INVESTMENT FAIR VALUE 31 DECEMBER 2022 14.5% % HOLDING AT 31 DECEMBER 20231 7% Risk Capital PRIMARY SDG SUPPORTED 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 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 Waste Water % INVESTMENT FAIR VALUE 31 DECEMBER 2023 14.3% STATUS AT 31 DECEMBER 2023 Under construction % INVESTMENT FAIR VALUE 31 DECEMBER 2022 13.5% % HOLDING AT 31 DECEMBER 20231 18% Risk Capital PRIMARY SDG SUPPORTED SECTOR Transport % INVESTMENT FAIR VALUE 31 DECEMBER 2023 8.0% STATUS AT 31 DECEMBER 2023 Operational % INVESTMENT FAIR VALUE 31 DECEMBER 2022 7.2% % HOLDING AT 31 DECEMBER 20231 100% Risk Capital PRIMARY SDG SUPPORTED SECTOR Transport % INVESTMENT FAIR VALUE 31 DECEMBER 2023 6.2% STATUS AT 31 DECEMBER 2023 Operational % INVESTMENT FAIR VALUE 31 DECEMBER 2022 6.0% % HOLDING AT 31 DECEMBER 20231 10% Risk Capital PRIMARY SDG SUPPORTED EAST ANGLIA ONE 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 SECTOR Energy Transmission % INVESTMENT FAIR VALUE 31 DECEMBER 2023 4.4% STATUS AT 31 DECEMBER 2023 Operational % INVESTMENT FAIR VALUE 31 DECEMBER 2022 3.6% % HOLDING AT 31 DECEMBER 20231 100% Risk Capital PRIMARY SDG SUPPORTED View our company website www.internationalpublicpartnerships.com 12 International Public Partnerships Limited Annual Report and financial statements 2023 overview STRATEGIC REPORT corporate governance Financial StatementS 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 FHSP Mezzanine debt investments underpinned by security over seven operational Public- Private Partnership projects, comprising c.21,800 family housing units for US service personnel. LOCATION US 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.48 million train km of annual rail transport. LOCATION Germany BEATRICE OFTO The project relates to the transmission cable connection to the offshore wind farm. The wind farm consists of 84 x 7MW wind turbine generators connected to an offshore substation platform (owned by the OFTO) located within the boundaries of the Beatrice wind farm. LOCATION UK SECTOR Energy transmission % INVESTMENT FAIR VALUE 31 DECEMBER 2023 4.0% STATUS AT 31 DECEMBER 2023 Operational % INVESTMENT FAIR VALUE 31 DECEMBER 2022 6.3% % HOLDING AT 31 DECEMBER 20231 100% Risk Capital PRIMARY SDG SUPPORTED SECTOR Other % INVESTMENT FAIR VALUE 31 DECEMBER 2023 3.9% STATUS AT 31 DECEMBER 2023 Operational % INVESTMENT FAIR VALUE 31 DECEMBER 2022 4.1% % HOLDING AT 31 DECEMBER 20231 100% Risk Capital PRIMARY SDG SUPPORTED SECTOR Transport % INVESTMENT FAIR VALUE 31 DECEMBER 2023 2.8% STATUS AT 31 DECEMBER 2023 Operational % INVESTMENT FAIR VALUE 31 DECEMBER 2022 2.9% % HOLDING AT 31 DECEMBER 20231 33% Risk Capital PRIMARY SDG SUPPORTED SECTOR Transport % INVESTMENT FAIR VALUE 31 DECEMBER 2023 2.5% STATUS AT 31 DECEMBER 2023 Operational % INVESTMENT FAIR VALUE 31 DECEMBER 2022 2.4% % HOLDING AT 31 DECEMBER 20231 100% Risk Capital PRIMARY SDG SUPPORTED SECTOR Energy Transmission % INVESTMENT FAIR VALUE 31 DECEMBER 2023 1.9% STATUS AT 31 DECEMBER 2023 Operational % INVESTMENT FAIR VALUE 31 DECEMBER 2022 1.6% % HOLDING AT 31 DECEMBER 20231 100% Risk Capital PRIMARY SDG SUPPORTED More detail on significant movements in the Company’s portfolio for the year to 31 December 2023 can be found on pages 16 to 17. 1 Risk Capital includes project level equity and/or subordinated shareholder debt. International Public Partnerships Limited Annual Report and financial statements 2023 13 CASE STUDY NEW ZEALAND PPP PORTFOLIO In June 2023, the Company made its first investment in New Zealand (‘NZ’) when it acquired a portfolio of five PPP projects that deliver availability- based, long-term, predictable cash flows. The secondary school includes a multipurpose auditorium fully equipped with modern audio and visual systems, performing and visual arts facilities, well equipped technology spaces, dedicated music areas and a wide range of amenities to support sporting activities – NZ Schools 2 PPP includes four separate schools located across four sites in New Zealand. The combined capacity of these schools is c.5,300 students. All four schools were designed to a 5-star green rating with modern learning environments and specialised facilities. Future expansion is underway with one part of that complete and two other schools’ expansion work already begun – NZ Schools 3 PPP includes five schools located across New Zealand with a combined capacity of educating over 4,000 students. All sites have a unique cultural narrative fostering a strong and distinct identity with its community and include specific units for students with special educational needs within the facility – The Auckland Prison, where the project company only has responsibility for the provision and maintenance of physical assets with the custodial services provided independently by the New Zealand Department of Corrections 1 1 2 3 1 1 2 3 This was procured under a PPP; and – A purpose-built student accommodation facility at the Auckland University of Technology (‘AUT’) underpinned by a service agreement with AUT guaranteeing 96% of rental occupancy and benefitting from high historic occupancy levels. The village includes nine accommodation blocks located adjacent to the University campus, containing 40 fully-furnished five and six-bedroom apartments totalling 204 rooms and common areas and facilities DIFFERENTIATION OF THE OPERATING MODEL A key differentiator for the Company is the relationship with its Investment Adviser. Amber supports the Company (and its investment portfolio entities) with investment origination, financial and asset management services to deliver the best value for INPP’s shareholders and wider stakeholders. The Investment Adviser’s team of over 180 infrastructure professionals, spread across the countries in which the Company invests, have been focused on sourcing and managing the Company’s assets since IPO in 2006. The Investment Adviser has a demonstrable track record, with high standards of governance, stewardship and relationship management across the Company’s investment portfolio of over 140 investments. SUSTAINABLE MANAGEMENT In growing the Company’s contribution to essential infrastructure, the New Zealand investments also meet the Company’s environmental and social commitments, under Article 8 of the EU SFDR designation. The Investment Adviser submits a response to the GRESB Infrastructure Assessment for each school project, with NZ Schools 1 PPP receiving a 4-star rating for the 2023 assessment and the other projects receiving 3-star ratings. 4 5 23 PRIMARY SDGS SUPPORTED The Company’s New Zealand PPP portfolio acquisition demonstrates the Investment Adviser’s ability to originate investments in new geographies which meet the Company’s investment objectives. Consistent with Amber’s approach of having a presence in geographies in which it invests, Amber was pleased to transition four members of staff in Auckland, who were already actively engaged in the management of these investments, to the team. The portfolio comprises the following five projects, where the Company has 100% ownership: – Three education projects, representing an investment in 11 schools across the breadth of New Zealand, all of which were procured via PPP concessions with the NZ Ministry of Education: – NZ Schools 1 PPP includes school facilities across two separate sites at Hobsonville Point. The schools combined have a total capacity of c.2,200 students educating pupils between the ages of 5–18. Both facilities were designed and constructed to a 5-star green rating with modern learning environments, including specialised facilities. The primary school accommodates different styles of learning with multiple outdoor learning areas, drama and art facilities, technology facilities and a multipurpose hall space which can open out to the rear courtyard and playing fields NZ SCHOOLS 1 PPP HOBSONVILLE POINT NZ SCHOOLS 1 PPP HOBSONVILLE POINT NZ SCHOOLS 2 PPP NZ SCHOOLS 2 PPP 1 2 ORMISTON JUNIOR COLLEGE HAEATA COMMUNITY CAMPUS ROLLESTON COLLEGE WAKATIPU HIGH SCHOOL ORMISTON JUNIOR COLLEGE HAEATA COMMUNITY CAMPUS ROLLESTON COLLEGE WAKATIPU HIGH SCHOOL 4 3 NZ SCHOOLS 3 PPP 1 2 3 4 1 2 3 4 5 NZ SCHOOLS 3 PPP 1 2 MATUA NGARU PRIMARY SCHOOL TE UHO O TE NIAKU PRIMARY SCHOOL TE AO MĀRAMA PRIMARY SCHOOL SHIRLEY BOYS HIGH SCHOOL AVONSIDE GIRLS HIGH SCHOOL 3 MATUA NGARU PRIMARY SCHOOL TE UHO O TE NIAKU PRIMARY SCHOOL TE AO MĀRAMA PRIMARY SCHOOL SHIRLEY BOYS HIGH SCHOOL AVONSIDE GIRLS HIGH SCHOOL 4 5 THE AUCKLAND PRISON AUCKLAND UNIVERSITY OF TECHNOLOGY THE AUCKLAND PRISON AUCKLAND UNIVERSITY OF TECHNOLOGY 4 5 23 4 4 14 International Public Partnerships Limited Annual Report and financial statements 2023 overview STRATEGIC REPORT corporate governance Financial StatementS Image: Haeata Community Campus Christchurch, New Zealand Key facts and performance: FINANCIAL CLIMATE SOCIETY 100% availability-based revenue streams with public sector counterparties 2projects have accredited sustainability loans c.12,300 students – capacity of the schools International Public Partnerships Limited Annual Report and financial statements 2023 15 OPERATING REVIEW valUe-FocUSeD portFolio Development 1 Long-term, stable returns 2 3 DESIRABLE KEY ATTRIBUTES FOR THE PORTFOLIO While not an immediate focus for the Company, any new investments made will remain consistent with the Company’s investment objectives. This includes that their risk and return profile enhances the existing portfolio mix and that they complement the existing portfolio through enhancing long-term, inflation-linked cash flows and/or providing the opportunity for capital growth. Consistent with the Board’s KPI target, new investments will be required to have at least two of the four key attributes listed below. In addition, all new investments are required to positively contribute towards the UN-backed SDGs (see the Responsible Investment KPI on pages 10 to 11). 4 Inflation-linked investor cash flows Early-stage investor (e.g. the Company is an early-stage investor in a new opportunity developed by its Investment Adviser) or investments secured through preferential access (e.g. sourced through pre-emptive rights) Other capital enhancement attributes (e.g. potential for additional capital growth through ‘de-risking’ or residual/ terminal value growth) Investment activity during the year, which totalled £108.1 million (2022: £191.6 million), was predominantly focused on completing acquisitions which the Company had committed to prior to the current volatile macroeconomic environment and included its first investment in New Zealand. These opportunities were sourced by the Investment Adviser, either from the start of the project (e.g. early stage developments), through increasing the Company’s interest in existing investments, or accessing opportunities as a result of the Company’s previous investments and experience. Details of investment activity during 2023 is provided below. As mentioned throughout this Report, the Company recognises that current market conditions have remained volatile and are not optimal for raising new equity financing to fund new investments. The Company has remained focused on enhancing its existing portfolio whilst exploring options to reduce the balance of its CDF and demonstrating the value of the existing portfolio, including through divestment. An example of this can be seen through the recent OFTO realisation announced in December 2023, explored in more detail below. The Board will continue to regularly review the overall composition of the portfolio to ensure it remains aligned with the Company’s investment objectives, considering both investment and divestment as appropriate. PERFORMANCE AGAINST STRATEGIC PRIORITY KPIs 100% of the investments made in 2023 met at least two of the four attributes (2022: 100%) INVESTMENTS MADE DURING THE YEAR EALING BSF Location Operational status Operational Investment £0.7 million Investment date March 2023 Key attributes 1 2 3 Primary SDG supported 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. NEW ZEALAND PPP PORTFOLIO Location Investment date June 2023 Operational status Operational Investment £107.3 million1 Key attributes 1 2 4 Primary SDG supported 1 GBP translated value of investment. 16 International Public Partnerships Limited Annual Report and financial statements 2023 In June 2023, the Company acquired a portfolio of five infrastructure assets in New Zealand, including three groups of 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. Further information can be seen in the case study on pages 14 to 15. overview STRATEGIC REPORT corporate governance Financial StatementS INVESTMENTS MADE POST YEAR-END MORAY EAST OFTO Location Operational status Operational Investment c.£77 million Investment date February 2024 Key attributes 1 2 3 4 Primary SDG supported Moray East OFTO is the Company’s eleventh OFTO investment and will further increase the Company’s contribution to the UK’s transition to a net zero carbon economy. This investment has the capacity to transmit sufficient renewable electricity to power the equivalent of c.1.0 million homes, increasing the total equivalent across the Company’s OFTO portfolio to c.3.7 million homes. The Board carefully considered the merits of completing the acquisition of the Moray East OFTO in light of capital allocation priorities. The projected returns from acquiring the Moray East OFTO were judged to be favourable relative to alternative capital allocation options and given the capital was available to the Company as a result of the OFTO realisation, the Board concluded that the acquisition of the Moray East OFTO was in the best interests of shareholders. INVESTMENT REALISATION The Board previously announced a number of actions that would be undertaken in order to address the discount to NAV that the Company and the wider listed investment trust sector have been facing. One of the key areas of focus was to reduce the Company’s CDF and in order to do this, the Company looked to realise additional value from its existing portfolio. As at the date of this Report, the Company’s CDF is fully repaid with c.£14 million committed by way of letters of credit. The repayment was made following the divestment of Airband, one of the Company’s digital investments, and through the realisation of four OFTO senior debt investments as well as the addition of prudent leverage to the Lincs OFTO1. This transaction generated cash proceeds of c.£200 million which were used to fully repay the Company’s CDF balance; fund the Company’s existing investment pipeline, including Moray East OFTO; and to commence a share buyback programme of up to £30 million. EXISTING COMMITMENTS The Company has two long-standing investment commitments to Flinders University Health and Medical Research Building and Gold Coast Light Rail – Stage 3 projects which continue to be supported by letters of credit issued under the Company’s CDF. The Company has also previously announced its intention to make a c.£13 million follow-on investment into toob. This investment is expected to be made during 2024 and 2025. Existing Commitments Location Estimated Investment Investment Status Flinders University Health and Medical Research Building c.£10 million Funding commenced in Q1 2024 Gold Coast Light Rail – Stage 3 c.£7 million Expected funding between 2024 and 2025 toob c.£13 million Expected funding between 2024 and 2025 1 https://www.internationalpublicpartnerships.com/media/press-releases/update-on-portfolio-optimisation-and-capital-allocation/. International Public Partnerships Limited Annual Report and financial statements 2023 17 OPERATING REVIEW continUeD valUe-FocUSeD portFolio Development CONTINUED FUTURE OPPORTUNITIES The Company does not need to make additional investments to deliver current projected returns. Further investment opportunities will be assessed against the Company’s relevant strategic KPIs; and the overall level of returns will be considered against alternative capital allocation options. A high-level summary of wider sectors that the Company continues to actively review is outlined below. SOCIAL INFRASTRUCTURE EXAMPLE INVESTMENTS – Education – Health – Justice – Other social accommodation REGULATED UTILITIES EXAMPLE INVESTMENTS – OFTOs – Distribution and transmission – Other regulated investments TRANSPORT AND MOBILITY EXAMPLE INVESTMENTS – Government-backed transport including: – Light rail – Regional rail Heata Community Campus, New Zealand Gold Coast Light Rail, Australia Photo credit: TransLink, Department of Transport and Main Roads OTHER ESSENTIAL INFRASTRUCTURE EXAMPLE INVESTMENTS – Digital connectivity – Energy management Dudgeon OFTO, UK 18 International Public Partnerships Limited Annual Report and financial statements 2023 overview STRATEGIC REPORT corporate governance Financial StatementS Image: Sylvester Primary School, New Zealand International Public Partnerships Limited Annual Report and financial statements 2023 19 OPERATING REVIEW MARKET ENVIRONMENT IN 2023 AND FUTURE OPPORTUNITIES NORTH AMERICA – Bipartisan stimulus bills including the Infrastructure Investment and Jobs Act (‘IIJA’)1 and the Inflation Reduction Act (‘IRA’)2, totalling US$1,600 billion provide for expansion of transport, communications, energy, carbon and resiliency infrastructure – Deal volumes are expected to increase in 2024, after a reduction in the number of deals closing in 2023, with new procurements issued for transport, social accommodation and energy deals – Government entities are beginning to channel federal funds into the alternative delivery of projects, including PPP’s utilising new funding available from federal sources. Many projects display innovative capital structures utilising various sources of public and private capital – In Canada, aggressive energy and decarbonisation targets have led to an increase in energy-related deals generally, with some degree of involvement from domestic oil and gas majors – Various federal and provincial government agencies are pursuing PPP as a means of project delivery. New models of procurement are being embraced by the public sector in order to improve competition EUROPE (EXCLUDING UK) – 2023 was a challenging year marked by international crises, and the European economy has lost some momentum against the background of high inflation and monetary tightening with sharply rising interest rates. The ECB assumes economic growth to recover rather slowly in the short term, so that it expects growth rates of 0.8% (2024) and 1.5% (2025) after 0.6% in 20233, with inflation likely to decline – A focus has continued to be the pursuit of a net zero energy and infrastructure system, regardless of geopolitical turbulences and difficult market environments. Infrastructure investments in Europe have been continuously supported by wider EU frameworks and initiatives including the Connecting Europe Facility (‘CEF’), which was announced by the European Commission already in 2022, aiming to support investment into infrastructure across Europe to promote growth and deliver the European Green Deal4 – The CEF includes programmes for energy, transport and digital of more than €33 billion in total over the next years. In addition, the c.€800 billion Next Generation EU Recovery Fund5 has continued to be available to support economic recovery post-Covid-19 with the aim to rebuild a ‘greener, more digital and more resilient Europe’, hence featuring a large green infrastructure component – As a result of continued support from these initiatives, an expected recovery in capital markets and a normalisation of interest rates and valuations, transaction activity in the market is predicted to increase, and the Company expects to review a continued pipeline of opportunities in Western Europe6 1 Bipartisan Infrastructure Law, The White House. 2 The Inflation Reduction Act, The White House. 3 https://www.ecb.europa.eu/pub/projections/html/index.en.html#:~:text=Economic%20growth%20will%20remain%20weak%20in%20the%20short,2024%20and%20by%201.5%25%20 in%202025%20and%202026. 4 https://cinea.ec.europa.eu/programmes/connecting-europe-facility/about-connecting-europe-facility_en#cef-digital 5 https://commission.europa.eu/strategy-and-policy/eu-budget/eu-borrower-investor-relations/nextgenerationeu_en 6 https://www.kkr.com/content/dam/kkr/insights/pdf/infra-market-review-2023.pdf 20 International Public Partnerships Limited Annual Report and financial statements 2023 overview STRATEGIC REPORT corporate governance Financial StatementS AUSTRALIA AND NEW ZEALAND – Government sponsored infrastructure initiatives are expected to continue to play a major role in private infrastructure investment in 2024, with a particular focus on the energy and transport sectors in response to increasing populations in the major cities and pressure to accelerate the energy transition – Per Infrastructure Partnerships Australia, A$316.2 billion of general government budget expenditure (across both state and federal tiers of government) is allocated to infrastructure spending through to 2025-202611 – A number of mega public infrastructure projects (>A$5 billion in size) are currently in delivery or forecast to commence delivery in the next 24 months. This includes the recently awarded Central-West Orana Renewable Energy Zone, the forthcoming tender for the New England Renewable Energy Zone and the North East Link PPP – States and territories continue to sponsor smaller-scale greenfield social infrastructure projects, primarily across healthcare, housing and broader civic sectors – A New Zealand general election was held in 2023 which resulted in a change of government. The successful NZ National Party (along with its minority parties) pre- election policy agenda included an aim to connect domestic and offshore investors with New Zealand infrastructure, and improve funding, procurement and delivery12 – The Company is already seeing a pipeline of opportunities emerge in New Zealand alongside a steady pipeline of opportunities in Australia UNITED KINGDOM – Whilst the current macroeconomic environment remains characterised by low growth and high interest rates, the requirement for infrastructure investment continues to be in line with the National Infrastructure Strategy (‘NIS’), with the UK Government planning to invest £164 billion during 2024/20257. Notwithstanding the forthcoming general election, we anticipate that the newly elected government would continue this programme of infrastructure investment – The Government’s focus is on sustainable investment in infrastructure, for example through commitments of £64 billion in investment towards Modern Methods of Construction over the next two years7 – Overall, the Government continues to recognise the importance of infrastructure investment and has announced measures to remove barriers to investment in critical infrastructure by reforming the UK’s planning system, following recommendations from the National Infrastructure Assessment in 2023. A full response by the UK Government to the National Infrastructure Assessment is expected in 20248 – In April 2023, the Government published its Net Zero Growth Plan9 to bolster the delivery of net zero by 2050 against the UK’s Net Zero Strategy where it aims to leverage around £100 billion of private investment in new industries and innovative low carbon technologies which in turn will support up to 480,000 jobs by 2030 – Following the UK Infrastructure Bank being established in 2022 to support the UK in reaching its net zero targets, in November 2023, UK Parliament released a 2023 Net Zero Growth Plan which set out an update to the existing strategies, focusing on the scale up and deployment of technologies for decarbonising homes, power, industry and transport10 7 https://www.gov.uk/government/publications/national-infrastructure-and-construction-pipeline-2023/analysis-of-the-national-infrastructure-and-construction-pipeline-2023-html 8 https://www.gov.uk/government/publications/autumn-statement-2023/autumn-statement-2023-html 9 https://www.gov.uk/government/publications/powering-up-britain/powering-up-britain-net-zero-growth-plan 10 https://researchbriefings.files.parliament.uk/documents/CBP-9888/CBP-9888.pdf 11 https://infrastructure.org.au/policy-research/budget-hub/australian-infrastructure-budget-monitor-2022-23/#full-report 12 https://www.national.org.nz/infrastructureforthefuture International Public Partnerships Limited Annual Report and financial statements 2023 21 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. 0.38 Accident Frequency Rate per 100,000 hours worked (2022: 0.35) PERFORMANCE AGAINST STRATEGIC KPIs 100% Forecast distributions received (2022: 100%)2 Infrastructure assets and businesses inherently involve health and safety risk both during construction and whilst operational. The health and safety of clients, delivery partners, employees and members of the public who come into contact with our assets is of the utmost importance to the Company and so we accord the highest priority to health and safety. The Company’s Accident Frequency Rate (‘AFR’) is calculated based on the number of occupational injuries that resulted in lost time during the relevant period. For the year to 31 December 2023 this remained low at 0.38 per 100,000 hours worked (31 December 2022: 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 during the year to 31 December 2023 with 100% of the investment portfolio’s overall forecast distributions having been received (31 December 2022: 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. 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. 2 Measured by comparing forecast portfolio distributions against actual portfolio distributions received, in local currency. In the current period, actual portfolio distributions exceeded forecast. 22 International Public Partnerships Limited Annual Report and financial statements 2023 overview STRATEGIC REPORT corporate governance Financial StatementS PORTFOLIO OVERVIEW SECTOR BREAKDOWN GEOGRAPHIC SPLIT 143 investments in infrastructure projects and businesses across a variety of sectors1 Investments are diversified by developed geographies Transport 20% Energy Transmission 17% Education 17% Gas Distribution 16% Waste Water 14% Other 16% INVESTMENT TYPE INVESTMENT OWNERSHIP Investments across the capital structure Preference to hold majority stakes Risk Capital2 98% Senior Debt 2% UK 72% Belgium 8% Australia 7% US 4% Germany 4% New Zealand 3% Canada 1% Ireland <1% Denmark <1% 100% 44% <50% 50% <50-100% 6% MODE OF ACQUISITION/INVESTMENT STATUS INVESTMENT LIFE Early stage investment gives first mover advantage and maximises capital growth opportunities Weighted average portfolio life of c.38 years5 Operational 86% Construction 14% Early Stage Investor3 65% Later Stage Investor4 35% <20 years 38% >30 years 37% 20-30 years 25% 1 The majority of projects and businesses benefit from availability-based or regulated revenues. ‘Other’ includes Family Housing for Service Personnel (‘FHSP’) (4%), Health (4%), Judicial (2%) and Digital (1%) among other assets. 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 2023 23 OPERATING REVIEW continUeD active aSSet management CONTINUED The Company’s PPP portfolio (accounting for 42% of the portfolio by investment fair value) is comprised of individual concession- based investments where a private sector entity is generally responsible for designing, building, financing, operating and maintaining a social infrastructure facility generally in exchange for availability-based revenues. These investments span various sectors such as education, healthcare, justice and other social infrastructure sectors across multiple jurisdictions. The Company’s PPP investments consistently fulfil key objectives, ensuring facility availability, safety, security and adherence to performance standards outlined in the underlying agreements. The Company’s Investment Adviser holds significant expertise in this field and has overseen the majority of the PPP projects in the Company’s portfolio since their inception. – Monitoring availability and performance deductions serves as a vital KPI. While deductions are typically transferred to facilities management providers under long- term fixed price contracts, the Investment Adviser actively oversees its subcontractors to optimise project performance. During the year to 31 December 2023, the overall availability of the Company’s PPP assets was 99.8% (31 December 2022: 99.8%) with performance deductions of only 0.2% (31 December 2022: 0.3%), both of which were ahead of targets and demonstrate the high level of operational performance achieved The first of the Company’s PPP investments that will go through the hand-back process is Hereford and Worcester Courts in 2025 and the necessary activities are well underway. The expiry dates for the rest of the Company’s PPP concessions span the next 25 years. The Investment Adviser is a leading contributor to the Infrastructure and Projects Authority (‘IPA’) working groups which aim to provide guidance and greater certainty to the public and private sector in the UK in relation to how hand-back should be delivered to ensure a consistent approach is adopted across the sector. PPP PROJECTS PORTFOLIO BREAKDOWN PPP 42% PERFORMANCE AGAINST STRATEGIC KPIs 99.8% Asset availability achieved against a target of >98% (2022: 99.8%) 0.2% Asset performance deductions achieved against a target of <3% (2022: 0.3%) OTHER KEY UPDATES ASSET HAND-BACK As the Company’s PPP assets approach the end of their concessions terms, there is a growing emphasis on the process of transferring these assets and the associated services to the public sector. The Investment Adviser proactively monitors asset condition, maintenance and lifecycle works to ensure the assets meet the necessary criteria for hand-back. Where an asset’s condition does not meet the necessary criteria, the PPP company must undertake remedial works. The risk associated with the costs of these works are generally contractually passed to subcontractors. This proactive approach aims to facilitate an efficient and seamless transfer to the relevant public sector counterparty. 24 International Public Partnerships Limited Annual Report and financial statements 2023 – During the year, the Company’s Investment Adviser oversaw the delivery of lifecycle works (including repair, refurbishment, and replacement works) totalling £50.5 million on behalf of public sector clients. This work ensures the facilities continue to perform in line with the contractual requirements for the relevant public sector clients – The Company’s public sector clients initiated over 800 contract variations during the year, amounting to £22.1 million in value. These variations range from minor adjustments and renovations to substantial upgrades and expansions, and help ensure the facilities continue to meet clients’ needs – 11 benchmarking exercises were performed and agreed for the Company’s social accommodation projects, which included reviewing the cost of the services delivered in order to ensure value for money for the public sector client DIABOLO Diabolo is a rail infrastructure investment which connects 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. 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. In total, €17.3 million of this facility was utilised with the remaining commitment having now been cancelled. Passenger numbers have broadly returned to pre-pandemic levels and the project has now resumed paying distributions. overview STRATEGIC REPORT corporate governance Financial StatementS Ofgem expects incumbent OFTOs to be best positioned to operate transmission assets in an extension period with their preferred approach being to promote bilateral negotiation with the incumbent OFTO when setting any extension revenue stream. Ofgem’s consultation process continues with work underway to consider certain issues further. 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. 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 considering hydrogen is a part of the future energy mix and is actively engaging with UK Government and regulators to build awareness of the opportunities offered by green gases in the journey towards net zero. 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 the Water Services Regulation Authority (‘Ofwat’) which, in 2015, granted Tideway a licence to design, build, finance, commission and maintain a new 25km ‘super sewer’ under the River Thames. When fully operational, the new infrastructure will capture 95% of overflows from London’s sewerage network, dramatically improving the water quality of the Thames and delivering significant environmental benefits. Overall construction works are now more than 90% complete and the project remains on course to be fully operational in 2025. Notable milestones reached during the year include the completion of the secondary lining and the opening of the first new area of public realm. The estimated cost of the project remains in line with the £4.5 billion stated in INPP’s Half-yearly Financial Report for the six months to 30 June 2023 and the cost to Thames Water customers remains well within the initial estimate provided at the outset of the project. Tideway continues to monitor developments in relation to the financial position of Thames Water which is being reported on by the media. The matter is not expected to have a material impact on the Company’s investment in Tideway. Whilst Thames Water possesses a licence requirement to collect Tideway’s revenues from its customers, and pass those amounts onto Tideway, statutory and regulatory protections are afforded to Tideway which are designed to mitigate the risk of disruption to the receipt of revenues in the event that Thames Water’s financial standing changes. REGULATED INVESTMENTS PORTFOLIO BREAKDOWN Regulated Investments 48% As at 31 December 2023, the Company was invested in Cadent, Tideway and a portfolio of 10 OFTOs (together accounting for 48% 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 in the governance of its investments. This includes seeking to ensure effective risk management and driving the overall 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 process regarding the potential regulatory developments underpinning an extension of the OFTO revenue stream is ongoing. In January 2024, Ofgem published decisions on some of the questions raised in their 2022 consultation. This confirmed Ofgem’s overarching objective to maximise the combined operational lifetimes of both generation and transmission assets where it is economic and efficient to do so. 1 Formerly part of the Department of Business, Energy and Industrial Strategy (‘BEIS’). International Public Partnerships Limited Annual Report and financial statements 2023 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 these operating businesses and it is through these positions that the Company engages in the governance of these investments. This engagement includes seeking to ensure effective risk management and driving the overall financial, operational and ESG performance of its investments. ANGEL TRAINS Angel Trains has an asset base of over 4,000 vehicles, making it the UK’s largest rolling stock leasing company (‘ROSCO’). It is one of the three original ROSCOs established in 1994 in preparation for the privatisation of British Rail. During the year, Angel Trains continued to perform well and in line with expectations with its trains on lease to TOCs across the UK as planned. 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. 26 International Public Partnerships Limited Annual Report and financial statements 2023 Whilst Angel Trains contracted lease revenues are unaffected by passenger numbers, it is noteworthy that despite disruption from industrial action, passenger numbers have continued to improve since the pandemic. The business participated in the development of the UK rail industry’s ‘Sustainable Rail Blueprint’ which was launched in November 2023. The blueprint, which was commissioned by government and developed by industry leaders, aims to align efforts across the industry, inspire change, and make the railway even more sustainable. The CEO of Angel Trains chairs the Sustainable Rail Executive which oversaw the development of the blueprint, further emphasising the business’ position as a thought leader within the industry. BENEX BeNEX is an investor in both rolling stock and TOCs which operate regional passenger rail franchises across Germany under contract with numerous German federal states. During the year, one of BeNEX’s TOCs started operating a new rail concession, which had been awarded by the transport authority for Germany’s northernmost state, increasing the total transport volume of BeNEX by c.10% to c.48 million train km per annum. The ‘Deutschlandticket’, a subsidised monthly €49 regional public transportation ticket introduced in early 2023 to encourage the use of regional railways, has led to a sharp increase in passenger numbers. This is a positive development for the industry, and encouraging for longer-term opportunities, notwithstanding that BeNEX’s TOCs have no exposure to passenger INPP SERVICE PROVIDERS¹ numbers during the initial two-year period for which the ‘Deutschlandticket’ will be made available owing to an agreement made with the relevant authorities. Beyond the two-year period, a minority of annual revenues (c.20%) will revert to being linked to passenger numbers. DIGITAL INFRASTRUCTURE In May 2023, the Company announced its intention to invest a further c.£13 million into toob, alongside additional capital from its co-investors in the Amber-managed NDIF. The business has a current fibre network covering c.190,000 premises across Southampton and other towns in the South of England. INPP’s further investment is part of a wider potential £300 million of additional funding raised by the business, which should enable toob to reach over 600,000 premises. The Company’s investment is expected to be made during 2024 and 2025. In July 2023, the Company, through NDIF, completed the sale of Airband. INPP first invested in Airband in 2018 and has supported the business in expanding its fibre network to cover more than 290,000 premises in the West of England. Following this divestment, the Company has interests in two digital assets, toob and Community Fibre. Community Fibre continues to make strong progress, with the business achieving the significant milestone in July 2023 of having passed over one million homes with fibre and becoming London’s largest 100% full fibre broadband provider. The business ended the year with c.1.3 million homes passed and over 220,000 customers. Infrabel 8% Downer & Spotless 7% Hunt Military Communities 4% Bouygues 3% Mitie 3% G4S 2% OCS 2% Amey 2% FES 1% Kier 1% Honeywell 1% Others 8% Regulated Investments² 48% Operating Businesses² 10% 1. Based on percentage of Investment at fair value as at 31 December 2023. 2. These Risk Capital investments operate with no significant exposure to any one service provider or delivery partner. 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 2023: TIDEWAY Location Construction completion date 20251 Defects completion date 2028 Status at 31 December 2023 Scheduled for completion in 20252 % of investment at fair value at 31 December 2023 14.3% Overall construction works were more than 90% complete at 31 December 2023. The secondary lining has now been completed and system commissioning is due to commence in 2024. GOLD COAST LIGHT RAIL – STAGE 3 Location Status at 31 December 2023 Scheduled for completion in 20264 Construction completion date 20263 Defects completion date 2027 % of investment at fair value at 31 December 2023 0.0%5 The project extends the existing Gold Coast Light Rail network a further 6.7km south from Broadbeach to Burleigh Heads. It will include eight new stations, five additional light rail trams, new bus and light rail connections at Burleigh and Miami, and an upgrade of existing depot and stabling facilities. FLINDERS UNIVERSITY HEALTH AND MEDICAL RESEARCH BUILDING Location Status at 31 December 2023 Scheduled for completion in 2024 Construction completion date 2024 Defects completion date N/A6 % of investment at fair value at 31 December 2023 0.0%5 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 Health and Medical Research Building is a public institution and one of the largest universities in South Australia. 1 Scheduled handover date. 2 Handover remains scheduled for 2025. 3 The current anticipated handover date. 4 Construction completion remains scheduled for 2026. 5 The Company’s investment is only due to be made following construction completion. The valuation of the commitment is currently immaterial. 6 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 2023 27 OPERATING REVIEW continUeD eFFicient Financial management The Company aims to manage its finances efficiently in order to provide financial flexibility 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 KPIs 1.1x Dividends fully cash covered (2022: 1.3x) 1.20% Ongoing Charges Ratio (2022: 1.06%) £28.0m Profit before tax (2022: £326.8m) 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 £151.6 million (2022: £136.0 million) – Cash dividends were 1.1 times (2022: 1.3 times) covered by the Company’s net operating cash flows before capital activity*. Movements in the level of coverage from period to period can be expected due to the profile of projected distribution receipts from the portfolio over time (see chart on page 34), and are not necessarily a reflection of changes in the level of asset performance – Dividends were 1.7 times covered by cash flows when including amounts received in the year from the Airband and OFTO asset realisation activity – Cash receipts from investments were £307.1 million (2022: £205.9 million), reflecting the continued good operational performance of the portfolio as well as the additional one off cash inflows from the OFTOs in December 2023 ONGOING CHARGES – Corporate costs were managed effectively during the year. Ongoing Charges were 1.20% (2022: 1.06%). The increase is principally due to the timing effect of the reduction in NAV during the year – Corporate costs include management fees paid of £32.2 million in the year (2022: £27.9 million) OPERATIONAL PERFORMANCE – Profit before tax of £28.0 million was reported (2022: £326.8 million). The decrease in profit in the year is principally reflective of the unrealised fair value loss on the portfolio in the period. Further information is available on page 86 – The Company’s cash balance as at 31 December 2023 was £128.6 million, held to service ongoing costs and upcoming dividend payments (2022: £92.8 million) – £108.1 million of new capital was invested during the year (2022: £191.6 million). See more information in note 12 of the financial statements and on pages 16 to 17 – As noted in the Chair’s Letter, the proceeds from the Airband sale and OFTO realisation were used, alongside free cash flow, to repay c.£80 million of the CDF. Following this repayment, at the date of this Report, the Company’s £350 million CDF is undrawn (with c.£14 million committed by way of letters of credit), with fund level leverage therefore representing less than 1% of the Company’s 31 December 2023 NAV. The CDF remains available until June 2025 – In April 2023, the Company increased the size of its existing CDF from £250 million to £350 million with the existing banking group (Royal Bank of Scotland International, National Australia Bank, Barclays Bank and Sumitomo Mitsui Banking Corporation) and extended the maturity date from March 2024 to June 2025 – Net financing costs paid were £7.8 million (2022: £2.9 million) reflecting the level of utilisation and extension of the Company’s CDF during the year 28 International Public Partnerships Limited Annual Report and financial statements 2023 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 Cash dividend cover (excluding cash from realisation activity) Year to 31 December 2023 Year to 31 December 2022 £ Million £ Million 92.8 307.1 (35.8) (7.8) 263.5 (108.1) (3.7) 35.7 – (151.6) 128.6 1.7x 1.1x 56.1 205.9 (30.2) (2.9) 172.8 (191.6) (1.8) (126.9) 320.2 (136.0) 92.8 1.3x 1.3x 1 The operating cash flows before capital activity as disclosed above of c.£263.5 million (31 December 2022: c.£172.8 million) include net repayments from investments at fair value through profit or loss of c.£134.4 million (31 December 2022: c.£34.0 million), and finance costs paid of c.£7.8 million (31 December 2022: c.£2.9 million) and exclude investment transaction costs of c.£3.7 million (31 December 2022: c.£1.8 million) when compared to net cash inflows from operations of c.£133.3 million (31 December 2022: c.£138.6 million) as disclosed in the consolidated cash flow statement on page 89 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 2023 £ Million Year to 31 December 2022 £ Million (32.2) (1.1) (0.5) (2.0) (35.8) (27.9) (0.6) (0.5) (1.2) (30.2) Year to 31 December 2023 £ Million Year to 31 December 2022 £ Million (35.8) 2,974.0 (30.2) 2,858.3 (1.20%) (1.06%) 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 2023 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. TSR* AND NAV TOTAL RETURN The Company’s annualised TSR since IPO to 31 December 2023 was 6.8% (31 December 2022: 7.5%). The total return based on the NAV appreciation plus dividends paid since IPO to 31 December 2023 is 7.40% (31 December 2022: 7.9%) on an annualised basis. As part of the Company’s Half-yearly Financial Report for the six months to 30 June 2023, the Board announced a reassessment of the Company’s long-term total return target, given recent changes in the macroeconomic environment. This has since been completed and, going forward, rather than apply a static quantitative target to the assessment of new investment opportunities, the Board has decided to introduce a more dynamic and qualitative target, that provides the requisite guidance to stakeholders whilst ensuring that the Company considers prevailing market and macroeconomic conditions at the point in time at which investment decisions are made. Under this new framework, the target return for any new investment will be informed by several factors including: (i) the Company’s share price relative to its NAV, (ii) the Company’s weighted average discount rate, and (iii) any pertinent economic or strategic considerations. PERFORMANCE AGAINST STRATEGIC KPIs 0.7% p.a. Inflation-linked returns on a portfolio basis1 (31 December 2022: 0.7%) 5.0% Annual dividend increase achieved (31 December 2022: 2.5%) 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 2023, 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 in which the Company is invested (31 December 2022: 0.7%). DIVIDEND GROWTH As reported in the Company’s Half-yearly Financial Report, acknowledging the higher levels of inflation, the Company decided to increase its 2023 dividend to 8.13 pence per share, representing a 5% increase compared to the 2022 dividend. The dividend in respect of the six months to 31 December 2023 of 4.07 pence per share is expected to be paid on 13 June 2024. Inflation remained elevated during the year and although it has now moderated, the Board has decided to increase the 2024 dividend target to 8.37 pence per share2 reflecting growth of 3% (previously 2.5%) compared to the 2023 dividend. The increase in the target dividend growth rate for 2024 takes into account the Company’s ambitions to sustainably grow dividends over the long term whilst providing full dividend cash coverage. Beyond 2024, the Board is forecasting to continue its long-term projected annual dividend growth rate of 2.5% such that the 2025 dividend target is 8.58 pence per share2. 1 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 weighted average discount rate. Please refer to page 36 for further detail. 2 Future profit projection and dividend cannot be guaranteed. Projections are based on current estimates and may vary in future. 30 International Public Partnerships Limited Annual Report and financial statements 2023 overview STRATEGIC REPORT corporate governance Financial StatementS INPP DIVIDEND GROWTH Pence per share +c.2.5% consistent annual growth YoY 6.00 6.15 6.30 6.45 6.65 6.82 7.00 7.18 7.36 7.55 7.74 5.25 5.40 5.55 5.70 5.85 +3.0% growth in 2024 +2.5% growth in 2025 8.37 8.58 +5.0% growth in 2023 8.13 9 8 7 6 5 4 3 2 1 0 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 2 0 2 5 Actual Forecast 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 0.4 over the 12 months to 31 December 2023 (31 December 2022: 0.33). Changes in the global macroeconomic environment have impacted the share price of the Company and that of those in the wider listed investment trust sector. As a result, the Company’s share price traded at a discount to the NAV during the year to 31 December 2023. The Board and its Investment Adviser continue to believe the share price materially undervalues the Company and have actively been pursuing actions that it may take to address this. These initiatives are discussed further in the Chair’s Letter on pages 4 to 5. SHARE PRICE PERFORMANCE (% change) 140 120 100 80 60 40 20 0 -20 -40 -60 D e c 0 6 J u n 0 7 D e c 0 7 J u n 0 8 D e c 0 8 J u n 0 9 D e c 0 9 J u n 1 0 D e c 1 0 J u n 1 1 D e c 1 1 J u n 1 2 D e c 1 2 J u n 1 3 D e c 1 3 J u n 1 4 D e c 1 4 J u n 1 5 D e c 1 5 J u n 1 6 D e c 1 6 J u n 1 7 D e c 1 7 J u n 1 8 D e c 1 8 J u n 1 9 D e c 1 9 J u n 2 0 D e c 2 0 J u n 2 1 D e c 2 1 J u n 2 2 D e c 2 2 J u n 2 3 D e c 2 3 INPP FTSE 250 FTSE All-share INPP NAV Source: Bloomberg International Public Partnerships Limited Annual Report and financial statements 2023 31 OPERATING REVIEW continUeD inveStor retUrnS CONTINUED VALUATIONS NAV 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 £142.5 million. NET ASSET VALUE MOVEMENTS (£ million) During the year, Sterling strengthened against the Australian Dollar, Canadian Dollar, the Danish Krone, Euro, New Zealand Dollar and US Dollar, 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 negative impact on the NAV was £20.9 million. Adjustments to short-term inflation and deposit rate assumptions were made during the year to reflect the prevailing macroeconomic environment. Further details of these changes can be seen on page 35 and in aggregate these had a positive £37.4 million impact on the NAV. 3,200 3,100 3,000 2,900 2,800 2,700 2,600 2,500 3,039.8 (314.7) 142.5 (151.6) 183.6 2,916.1 (20.9) 37.4 NAV at 31 December 2022 Change in Government Bond Yields Change in Investment Risk Premia Cash Distributed to INPP Shareholders Change in Foreign Exchange Rates1 Change in Macroeconomic Assumptions NAV Return2 NAV at 31 December 2023 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 year, resulting in a net £314.7 million decrease in the NAV. In line with forward guidance provided previously, cash dividends of 3.87 pence and 4.06 pence per share were paid to the Company’s shareholders during the year, in relation to the six-month periods to 31 December 2022 and 30 June 2023 respectively, totalling £151.6 million. Among other things, the NAV Return of £183.6 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 year – 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 2023 overview STRATEGIC REPORT corporate governance Financial StatementS INVESTMENTS AT FAIR VALUE An increase of £108.1 million owing to new investments made during the year. The rebased investments at fair value of £2,749.0 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 £226.8 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 year, Sterling strengthened against the Australian Dollar, Canadian Dollar, the Danish Krone, Euro, New Zealand Dollar and US Dollar, these being the foreign currencies the Company was exposed to during the year. The negative impact on the investments at fair value was £22.1 million. INVESTMENTS AT FAIR VALUE MOVEMENTS 108.1 (307.1) 2,948.0 226.8 (172.2) 2,749.0 (22.1) 37.4 2,818.9 (£ million) 3,100 3,000 2,900 2,800 2,700 2,600 2,500 Investments at Fair Value at 31 December 2022 Investments Investment Distributions Rebased Investments at Fair Value Portfolio Return1 Change in Discount Rates Change in FX Rates Change in Macroeconomic Assumptions Investments at Fair Value at 31 December 2023 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 £307.1 million due to distributions paid out from the portfolio during the year. 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 £172.2 million. Please refer to page 36 for more information. Inflation assumptions across the majority of applicable geographies were either in-line or marginally lower than previously forecast in the near-term, as inflation came down faster than had been previously forecast. Deposit rate assumptions have also been adjusted upwards. Further details of these changes can be seen on page 35 and in aggregate these had a positive £37.4 million impact on the NAV. 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 2023 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 Investment Receipts (£m) 450 400 350 300 250 200 150 100 50 0 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 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 agreed investment commitments as at 31 December 2023 are included. 34 International Public Partnerships Limited Annual Report and financial statements 2023 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 minor adjustments should be made to the short-term inflation rate and deposit rate assumptions used to value the Company’s investments. These changes were prompted by forecasts reviewed by the Company, which indicate that inflation rates and interest rates across the majority of the countries in which INPP is invested are expected to remain above the Company’s longer-term assumptions throughout the next 12 to 18 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 UK Australia New Zealand Europe Canada US2 UK Australia New Zealand Europe Canada US2 GBP/AUD GBP/NZD GBP/DKK GBP/EUR GBP/CAD GBP/USD UK Australia New Zealand Europe Canada US2 Long-term deposit rates3 Foreign exchange rates Tax rates4 31 December 2023 31 December 2022 RPI: 4.50% until Dec 2024, 3.00% until Dec 2025, 2.75% thereafter1 CPIH: 3.25% until Dec 2024, 2.25% until Dec 2025, 2.00% thereafter 3.25% until Dec 2024, 3.00% until Dec 2025, 2.50% thereafter 2.75% until Dec 2024, 2.25% until Dec 2025, 2.25% thereafter 3.00% until Dec 2024, 2.25% until Dec 2025, 2.00% thereafter 2.75% until Dec 2024, 2.25% until Dec 2025, 2.00% thereafter N/A 2.50% 2.75% 2.50% 1.50% 2.50% N/A 1.87 2.01 8.60 1.15 1.69 1.27 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 N/A 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% N/A 1.50% 2.50% N/A 1.77 N/A 8.40 1.13 1.64 1.21 25.00% 30.00% 28.00% Various (12.50% – 32.28%) Various (23.00% – 26.50%) N/A 19.00%/25.00%5 30.00% N/A Various (12.50% – 32.28%) Various (23.00% – 26.50%) N/A 1 Where insufficient protections exist within project agreements or through regulatory precedent, RPI is assumed to align with CPIH post-2030. 2 The Company’s US investment is in the form of subordinated debt and therefore not directly impacted by inflation, deposit and tax rate assumptions. 3 Actual current deposit rates being achieved are assumed to be maintained until 31 December 2024 before adjusting to the long-term rates noted in the table above from 1 January 2025. The 31 December 2023 valuation adjusted to the longer-term assumption from 1 January 2024. 4 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. 5 The UK Government announced a corporate tax rate of 25% applicable from 1 April 2023 at the Spring Budget 2021. International Public Partnerships Limited Annual Report and financial statements 2023 35 OPERATING REVIEW continUeD inveStor retUrnS CONTINUED 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 Company continues to see strong demand for well-structured infrastructure assets and businesses and has sought to ensure that the all-in discount rates remain commensurate with market pricing. Whilst the Company notes that historically, discount rates have not moved in lockstep with government bond yields, in respect of the current period, it has prudently allowed a portion of the government bond yield increases observed since 31 December 2022 to result in higher discount rates. Further, the realisation of the OFTO senior debt, which has historically had a lower weighted average discount rate than the INPP portfolio, has had a positive impact on the portfolio weighted average discount rate as of 31 December 2023. Notwithstanding, the Company and its Investment Adviser continue to believe that the discount to NAV at which the Company’s shares are trading materially undervalues the Company. The Company previously published both a Risk Capital weighted average discount rate and a portfolio weighted average discount rate – the latter of which captured the discount rates of all investments including the lower-risk senior debt investments. Owing to the OFTO senior debt realisations in the period, senior debt investments now represent less than 2% of the Company’s portfolio by fair value and therefore only one discount rate, which encompasses all of the investments, is presented. Weighted average government bond yield Weighted average risk premium Weighted average discount rate 31 December 2023 31 December 2022 4.25% 4.12% 8.37% 3.13% 4.38% 7.51% Movement 112 bps (26 bps) 86 bps 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 2023 BASED ON NAV OF 152.6 PENCE PER SHARE Discount rates +/-1% -12.6 Inflation +/-1% -10.9 15.1 12.3 Foreign exchange +/-10% -4.1 4.1 Deposit rates +/-1% Tax rates +/-1% Lifecycle +/-10% -1.2 1.2 -0.7 -0.9 0.7 0.9 -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 2023 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 2022: 0.7%). The uplift in the portfolio’s inflation-linkage has largely been a function of the realisation of the OFTO senior debt, which had a lower inflation-linkage that the portfolio average. 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 the CPIH (CPI including owner occupied housing costs). 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. 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, New Zealand Dollars and US Dollars. The Company seeks to mitigate the impact of foreign exchange rate changes on near-term cash flows by entering into forward contracts, but the Company does not hedge exposure to foreign exchange rate risk on long-term cash flows. The impact of a 10% increase or decrease in these rates is provided for illustration. DEPOSIT RATES The long-term weighted average deposit rate assumption across the portfolio is 2.36% 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. 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 27 March 2024 JOHN LE POIDEVIN DIRECTOR 27 March 2024 International Public Partnerships Limited Annual Report and financial statements 2023 37 RESPONSIBLE INVESTMENT reSponSiBle inveStment The Company has continued to enhance its efforts to ensure that it meets the environmental and social characteristics it promoted in 2022. This has enabled it to disclose additional sustainability indicators across its investments. Over the course of the last year, we have gained greater insight into the current sustainability performance which we intend to use as a baseline to track the impact of our active asset management initiatives. Utilising this enhanced data, the Company has reviewed and updated its ESG KPIs, focusing on the most material sustainability aspects for us and our key stakeholders. The Company has disclosed a selection of data within this Annual Report for reference, but would encourage shareholders to review the third edition of the Sustainability Report for greater detail of the following: KPI REFRESH Following the review of our ESG KPIs, which were informed by engagement with a selection of the Company’s investors, a number of new portfolio-level KPIs have been established to take our active sustainability approach forward. These KPIs draw from sector best practice guidance, and cover material topics including net zero, diversity and inclusion and the sustainability criteria of the EU Taxonomy. This will be the first year of disclosure against these new KPIs and will direct our investment engagement and asset management activities going forward. The Company will continue to review the KPIs on an ongoing basis. JULIA BOND CHAIR, ESG COMMITTEE MESSAGE FROM THE ESG COMMITTEE CHAIR I am pleased to report the Company’s positive sustainability performance during the year. We continued to work with our public sector clients to support the delivery of essential public services and to meet broader environmental and social objectives, across the geographies and sectors in which the Company invests. During the year, the Company’s investments provided facilities to support the education of over 180,000 pupils, treatment of over 610,000 patients and delivered in excess of 200 million passenger journeys. As the ESG regulatory and reporting landscape expands for the Company, its investments and shareholders, we remain committed to providing all our stakeholders with clear and accurate sustainability disclosures. This includes the sustainability performance of our investments as well as the progress from our stewardship activities. To reflect this, the Company has produced the third edition of its Sustainability Report, which has been published alongside this Annual Report. 38 International Public Partnerships Limited Annual Report and financial statements 2023 overview STRATEGIC REPORT corporate governance Financial StatementS 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, Investment Adviser to the Company, for their ongoing commitment to sustainability and we look forward to further engaging with investors on this important topic. JULIA BOND CHAIR, ESG COMMITTEE 27 March 2024 REGULATORY ALIGNMENT AND DISCLOSURES The Company believes its investments have positive environmental and social characteristics and recognises the potential benefit that EU Taxonomy disclosures could provide to the Company’s investors. As such, the Company has undertaken a comprehensive assessment of its investment activities against the Taxonomy criteria. In addition, the Company has introduced a ‘Pathway to EU Taxonomy Alignment’ KPI that challenges eligible investments to avoid significant harm and meet the minimum safeguards set out in the EU Taxonomy Regulation1 and the EU Taxonomy Delegated Acts. For more information on the Company’s alignment with the EU Taxonomy, please refer to the SFDR periodic report in the Annex of this Report and Section 3 of the Company’s latest Sustainability Report. NET ZERO Net zero continues to be a focus of the Company both through the infrastructure that it delivers and its active asset management activities. Notably through our OFTO portfolio, which has the capacity to transmit sufficient renewable electricity to power the equivalent of c.2.7 million homes and, following the recent financial close of Moray East OFTO, this will increase by another one million homes. Alongside the Company’s Investment Adviser, the Board has also introduced two new ‘Pathway to Net Zero’ KPIs at a portfolio level, drawing from the infrastructure net zero guidance developed by the Institutional Investors Group on Climate Change (‘IIGCC’) which supplements the Net Zero Investment Framework (‘NZIF’)2. These KPIs will help track our investments’ alignment with credible net zero pathways as well as our ongoing engagement with investee companies and our public sector partners. 1 Regulation EU. 2020/852. 2 https://www.iigcc.org/resources/guidance-for-infrastructure-assets-complement-to-the-nzif. International Public Partnerships Limited Annual Report and financial statements 2023 39 RESPONSIBLE INVESTMENT continUeD Image: Sylvester Primary School, New Zealand 40 International Public Partnerships Limited Annual Report and financial statements 2023 overview STRATEGIC REPORT corporate governance Financial StatementS APPROACH TO RESPONSIBLE INVESTMENT DISCLOSURES As stated above, the Company believes its investments have positive environmental and social characteristics, as per its categorisation as an Article 8 Financial Product (‘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 latest edition of the Company’s Sustainability Report. Please refer to pages 113 to 121 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 greenhouse gas (‘GHG’) disclosures set out in the SFDR Principal Adverse Impacts (‘PAIs’) as well as the TCFD’s recommended metrics for asset managers. This includes the disclosure of investment-level Scope 1 and 2 emissions, and this year, material Scope 3 emissions2. 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 Company’s latest Sustainability Report. The SFDR requires financial market participants (‘FMPs’) that market an 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 (‘AIFMD’), 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 second 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 46 to 47 and the detailed reporting included in the Company’s latest Sustainability Report. By endorsing and aligning its practices 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 into the Company’s strategy, risk management, governance practices, and reporting. OTHER ESG FRAMEWORKS The Company will continue to monitor other recently implemented and 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. 2 Data completeness 98%. International Public Partnerships Limited Annual Report and financial statements 2023 41 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. >610,000 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 >10,400 Jobs supported across all investments >180,000 Students attending schools developed and maintained by the Company c.2.7million Estimated equivalent number of homes capable of being powered by renewable energy transmitted through OFTO investments >212million 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 2023. 3 Good Health and Well-Being 4% 4 Quality Education 17% 6 Clean Water & Sanitation 14% 7 Affordable & Clean Energy 17% 9 11 Sustainable Cities & Communities 24% 16 Peace, Justice and Strong Institutions 5% Industry, Innovation and Infrastructure 19% 42 International Public Partnerships Limited Annual Report and financial statements 2023 overview STRATEGIC REPORT corporate governance Financial StatementS INPP ESG KPIs Following the strengthening of its ESG data collection and reporting processes during 2022, the Company has further developed its insight into the ESG performance of its portfolio and aligned its processes with the reporting requirements of SFDR and TCFD. Following a review of this enhanced data set, the Company has established a number of new KPIs. These KPIs will enable the Company to monitor its performance across key environmental, social, and governance aspects, and provide stakeholders with valuable insights into the ongoing progression of its sustainability approach. One of the main objectives of the KPI update process was to create closer alignment of its KPIs to regulatory frameworks, including SFDR and the EU Taxonomy. Additionally, the net zero KPI aligns with the IIGCC’s net zero portfolio coverage target criteria, set out in its infrastructure-specific guidance which supplements the NZIF1. Further information on these targets can be found in section 3.1 of the Company’s latest Sustainability Report. The Company continues to monitor progress for several existing KPIs, such as SDG contribution and the Investment Adviser’s ESG integration performance. For the 2023 Principles for Responsible Investment (‘PRI’) assessment, the Company’s Investment Adviser received the highest rating of five-stars for both the Investment and Stewardship Policy and the Infrastructure modules (2022: 5-star rating). ESG KPIs2 Target 31 December 2023 31 December 2022 1. Contribution to Sustainable Development Goals Positive SDG contribution for new investments 2. Investment Adviser ESG Integration Performance Investment Adviser PRI score 100% 100% 100% 5-stars 5-stars 5-stars 3. Governance 3.1 Investments that have policies and processes in line with UN Global Compact Principles3 100% 100% New 2023 3.2 Implementation of INPP minimum Governance policies and procedures on: Conflicts of Interest; Financial Crime Mitigation; Diversity and inclusion; and Whistleblowing3 4. Pathway to net zero4 4.1 In scope investments that are net zero, aligned to net zero or aligning to net zero by 20305 4.2 Remaining investments that are ‘Net Zero Ready’ by 20306 5. Social 5.1 Investments that have undergone a biennial, independent health and safety (‘H&S’) audit3 5.2 Investments with initiatives that aim to improve H&S performance3 5.3 Operating companies that transparently disclose delivery of diversity, equality, and inclusion (‘DEI’) policies7 6. Environmental Performance 6.1 Investments with an environmental management system3 6.2 Investments with initiatives that aim to improve the environmental performance of the monitored Principal Adverse Indicators (‘PAIs’)3 7. Climate risk Investments with initiatives aimed at mitigating climate risks3 8. Pathway to EU Taxonomy alignment Investments eligible for EU Taxonomy alignment that pass the EU Taxonomy Do No Significant Harm (‘DNSH’) and Minimum Safeguards criteria8 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% N/A N/A New 2023 New 2023 86% 100% New 2023 100% 52% New 2023 99% 99% 98% New 2023 79% New 2023 100% 83%9 New 2023 1 https://iigcc.org/resources/guidance-for-infrastructure-assets-complement-to-the-nzif 2 All ESG KPIs, with the exception of the Investment Adviser’s PRI score, are weighted by fair value of investments. 3 KPIs apply to all investments where the Company has a majority equity investment, or a minority equity holding over £2 million. 4 The baseline year for both net zero KPIs will be 2024, assuming 0% alignment for this period. The Company expects to make good progress towards these KPIs during 2024 by focusing its engagement on the NZIF criteria. Please refer to the Company’s latest Sustainability Report for more information. 5 As of 31 December 2023, 29% of the portfolio based on fair value falls under the KPI 4.1 criteria for NZIF infrastructure. Alignment with NZIF criteria determined by the ability of the Company to meet NZIF alignment criteria. 6 As of 31 December 2023, 71% of the portfolio based on fair value falls under the KPI 4.2 criteria for Net Zero Ready KPI. Alignment with Net Zero Ready KPI is determined by INPP requirement to work with third party stakeholders to meet NZIF Alignment Criteria. 7 Applies to operating companies within the portfolio. This includes Cadent, Tideway, BeNEX, OFTOs, Gold Coast Light Rail, Reliance Rail, Angel Trains, Community Fibre and toob. 8 Applies to investments eligible under EU Taxonomy Regulation (Regulation (EU) 2020/852). As at 31 December 2023, this comprises 51% of the portfolio. 9 Represents 43% of current portfolio. Please see the SFDR Periodic Disclosure for formal EU Taxonomy alignment KPIs. International Public Partnerships Limited Annual Report and financial statements 2023 43 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 the Company’s 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 are incorporated in 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. INPP SCOPE 3 FINANCED EMISSIONS INDICATOR Total Attributed GHG emissions (tCO2e) Carbon footprint (tCO2e/£m invested) GHG intensity of investments (tCO2e/£m revenue) 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 1.7 for its investment-level Scope 1 and 2 GHG emissions (High Quality = 1 Low Quality = 5). PORTFOLIO EMISSIONS As described below, 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. The Company is also disclosing the Scope 3 emissions of investments for the first time this year. 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’). Scope 31 December 2023 31 December 2022 Scope 1 of investments Scope 2 of investments Scope 3 of investments Total Scope 1 and 2 Total Scope 1, 2 and 3 Total Scope 1 and 2 Total Scope 1, 2 and 3 Total Scope 1 and 2 Total Scope 1, 2 and 3 35,584 11,039 32,157 46,623 78,780 23 39 141 238 36,667 10,311 N/A 46,978 N/A 27 N/A 145 N/A 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 2023, please refer to Section 3 of the latest Sustainability Report. 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 supports 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. 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. 1 https://www.internationalpublicpartnerships.com/media/press-releases/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. 44 International Public Partnerships Limited Annual Report and financial statements 2023 overview STRATEGIC REPORT corporate governance Financial StatementS EU TAXONOMY The Company is not in scope 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 has not set a minimum proportion for sustainable investments. However, we recognise the potential benefit Taxonomy disclosures could provide to the Company’s investors. As such, the Company has estimated its portfolio alignment with the six environmental objectives of the EU Taxonomy. For more information please refer to Section 4 of the Company’s latest Sustainability Report. SUSTAINABILITY INDICATORS The Company tracks sustainability indicators of its investments to ensure that it meets the environmental and social characteristics it promotes. 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 indicators and five social indicators. The Company has now reported against these indicators for the second successive reporting period, as detailed in the table below. For more information, please refer to Section 4 of the Company’s latest Sustainability Report. Sustainability indicator Metric Investment GHG emissions Scope 1 GHG emissions Scope 2 GHG emissions Scope 3 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 sources2 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 31 December 20231 31 December 2022 Unit tCO2e tCO2e tCO2e tCO2e tCO2e/£m invested tCO2e/£m revenue % 35,584 11,039 32,157 78,780 39 238 16% 36,667 10,311 N/A 46,978 27 145 15% % 94% 97% GWh/£m GWh/£m 0.52 0.26 Energy consumption intensity per high impact climate sector: Construction GWh/£m 0.003 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 Tonnes of emissions to water generated by investee companies per million GBP invested, expressed as a weighted average % Tonnes/£m 0% 0 Water Waste Tonnes of hazardous waste and radioactive waste generated by investee companies per million GBP invested, expressed as a weighted average Tonnes/£m 0.08 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% % % % % 0% 21% 0% 19% 14% 17% 0% 0% 1 Sustainability indicators cover over 98% 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. 2 There are no energy generation assets within the portfolio, so this is consumption only. International Public Partnerships Limited Annual Report and financial statements 2023 45 0.63 0.22 0 0% 0 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. 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. 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 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 ongoing management of the Company’s Investments. The Board and the Investment Adviser 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 Section 4.6 Sustainability Report Section 4.6 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 Section 4.6 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 the 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. 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 Section 4.6 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 3.1 and 4.6 46 International Public Partnerships Limited Annual Report and financial statements 2023 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 Section 4.6 Sustainability Report Section 4.6 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 Section 4.6 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 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. Sustainability Report Sections 4.3 and 4.6 The Company has quantified its Scope 3 emissions (i.e. the combined Scope 1 and 2 emissions of its investments), as per SFDR and PCAF guidelines. Through scenario analysis conducted in 2022, the Company is now considering physical risk metrics across its risk management processes and will embed climate-related risks and opportunities in line with its strategy. The Company has introduced a new KPI aimed at monitoring the financial impact of weather-related events on investments. 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 has no Scope 1 or Scope 2 greenhouse gas 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 4.3 and 4.6 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 3.1 and 4.6 The Company has established portfolio-level KPIs for tracking the progress of its investments on a pathway to net zero. These KPIs draw from the NZIF portfolio coverage criteria and consider the varying levels of control that the Company has over its investments, as well as the importance of collaboration with its public sector clients to achieve emissions reductions. International Public Partnerships Limited Annual Report and financial statements 2023 47 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. 48 International Public Partnerships Limited Annual Report and financial statements 2023 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 support of our 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 During the year, the Company has continued its active engagement with investors, particularly in light of investor focus on capital allocation. Post-period end, this included a Capital Markets Day for the Company’s shareholders and wider stakeholders. In addition, the Company has held several one-to-one meetings to discuss key topics, including net zero. The output of these meetings helped shape the development of our new ESG KPIs, which will help provide investors with clear and trackable data on the sustainability performance of our data. 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 is part of several working groups with the IPA aimed at developing common approaches to hand-backs and net zero for UK PFI buildings. The working group has collectively supported the development of a sector-specific net zero stewardship guidance document, which was published in 20231. – Supporting community initiatives Through its Investment Adviser, the Company continues to work 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. During the year, a group-wide agreement was signed with Collecteco to further roll out this scheme across additional PFI projects, creating social value, net zero and circular economy benefits. 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 During the year, the Company has been working with the Facilities Management Companies within its supply chain to discuss net zero and agreeing actions to conduct project- level feasibility studies and mechanisms for implementing initiatives that are identified to reduce energy and carbon. 1 https://www.gov.uk/government/publications/decarbonisation-of-operational-pfi-projects International Public Partnerships Limited Annual Report and financial statements 2023 49 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 which includes an assessment of longer-term and emerging risks. 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 8 to 9. The framework has been in place for the year under review and up to the date of approval of this Annual Report and 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. 50 International Public Partnerships Limited Annual Report and financial statements 2023 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 62 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 2023 51 CONTINUOUS RISK MANAGEMENT continUeD continUoUS riSK management CONTINUED DEVELOPMENTS IN THE YEAR IN RELATION TO PRINCIPAL AND EMERGING RISKS UK REGULATORY REGIME ANNOUNCEMENTS As at 31 December 2023, the Company was invested in Cadent, Tideway and 10 OFTOs, all of which are regulated by independent statutory 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 review period will run from April 2026 to March 2031. In December 2023, Ofgem launched its sector specific methodology consultation which 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 review 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 review until 2030, after which, it will follow a similar five-yearly price review process to which water and waste water companies are currently subject. 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 albeit elements of the review may indicate how the Company will be regulated in the future. 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 The Bank of England’s response to bring inflation down to its mandated target of 2% curb inflation has seen the base rate of interest rise to its highest level since the 2008 financial crisis. This has added to the financial pressures on UK households. The disruption in the market has seen a continuation of large-scale industrial action across the UK economy including rail, healthcare and education as workers have sought to limit pay erosion and improve working conditions. Whilst inflation in the UK has seemingly stabilised and has trended downwards recently, it is still susceptible to external shocks and remains volatile. 52 International Public Partnerships Limited Annual Report and financial statements 2023 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 56. INTEREST RATES The increases seen in interest rates and government bond yields over the course of 2022 and 2023 have the ability to impact the Company in a variety of ways, including: the discount rates applied to forecasted 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. Whilst historically, discount rates have not moved in lockstep with government bond yields and even though demand for infrastructure assets remains strong, discount rates have seen modest rises in the period. Increased cash flows resulting from higher inflation expectations, foreign exchange gains derived from the weakening of Sterling, and greater interest earned from cash balances have played a mitigating role in offsetting 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. INVESTOR SENTIMENT The listed alternatives sector has continued to be impacted by the challenging macroeconomic environment. The impact is not unique to the infrastructure sector: almost all UK listed investment companies have come under pressure as investors in the space have rotated out of alternatives and into now higher yielding debt causing a negative impact on share prices. This has naturally caused a reduction in fundraising in comparison to previous years and reduced the number of acquisitions taking place. Instead, many investment companies have paused making new investments and have turned their focus to divestments and introducing share buybacks. The economic situation remains volatile, and inflation is forecast to remain above the Bank of England’s target rate of 2% in the near term. Please see further information in the Chair’s Letter on how the Company is responding to the current market environment. overview STRATEGIC REPORT corporate governance Financial StatementS CLIMATE CHANGE Climate change remains a key focus of 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. Please see more information from page 38 in this Report and in the Company’s latest Sustainability Report. GEOPOLITICAL EVENTS Over the last decade, economies worldwide have been affected by repeated geopolitical disturbances including the Covid-19 pandemic, US-China trade destabilisation, the war in Ukraine and most recently the conflict in the Middle East. In particular, the military conflicts have the potential to cause contagion bringing about further disruption and crises in the regions culminating in further division amongst political and economic blocs. These events can cause significant volatility for markets which could impact the Company. The Company continues to actively monitor these events to ensure that the portfolio of investments is protected, to the extent it can be, from the direct and indirect impacts of the conflicts. The Company does not hold any investments in the impacted regions, 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. RISK 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. International Public Partnerships Limited Annual Report and financial statements 2023 53 CONTINUOUS RISK MANAGEMENT continUeD continUoUS riSK management CONTINUED 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. The following key is used in the table below to highlight the Board’s view on movement of risk exposures during the year: Risk exposure has increased in the year Risk exposure has reduced in the year No significant change in risk exposure since last reporting year 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. The majority 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 a residual possible risk of nationalisation remains over the medium-term. 54 International Public Partnerships Limited Annual Report and financial statements 2023 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 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 is still affected by geopolitical events, 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 more than 90% complete as at 31 December 2023. 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. International Public Partnerships Limited Annual Report and financial statements 2023 55 CONTINUOUS RISK MANAGEMENT continUeD continUoUS riSK management CONTINUED 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. The Company works alongside its Investment Adviser to continue its 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. 56 International Public Partnerships Limited Annual Report and financial statements 2023 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 benchmarks the inflation assumptions used in its forecasts to credible independent sources. 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. International Public Partnerships Limited Annual Report and financial statements 2023 57 CONTINUOUS RISK MANAGEMENT continUeD continUoUS riSK management CONTINUED 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. 58 International Public Partnerships Limited Annual Report and financial statements 2023 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 (as noted 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 until June 2025. The facility is £400 million in size (including a £50 million uncommitted ‘accordion’) compared to a current investment portfolio valuation of c.£2.9 billion. As at the date of the Report, the CDF remains undrawn. 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. International Public Partnerships Limited Annual Report and financial statements 2023 59 CONTINUOUS RISK MANAGEMENT continUeD continUoUS riSK management CONTINUED 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. 60 International Public Partnerships Limited Annual Report and financial statements 2023 overview 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. International Public Partnerships Limited Annual Report and financial statements 2023 61 CONTINUOUS RISK MANAGEMENT continUeD continUoUS riSK management CONTINUED 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 2029. 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 2023 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 until June 2025 MIKE GERRARD CHAIR 27 March 2024 JOHN LE POIDEVIN DIRECTOR 27 March 2024 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: 1 2 3 4 An Audit and Risk Committee review and assessment of the risks facing the Company. A summary of the review process is detailed on page 53; 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; Quantification analysis of the potential impact of those principal risks occurring in isolation and under plausible combined sensitivity scenarios over the viability period; 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. 62 International Public Partnerships Limited Annual Report and financial statements 2023 overview 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, New Zealand, 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. 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. 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. As noted elsewhere in this Report, the Board regularly reviews the overall composition of the portfolio to ensure it remains aligned with the Company’s investment objectives, including considering both investment and divestment as part of overall capital allocation considerations. The Company has a long-standing Investment Policy that has been adopted and approved by its shareholders which informs its overall approach to capital allocation. The 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 take the following into account: – 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. International Public Partnerships Limited Annual Report and financial statements 2023 63 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 of the UK, Mike has over 40 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 of 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 was a Director of Guernsey Electricity Ltd, and latterly the Chief Operating Officer for over 12 years. She is a Chartered Engineer and Chartered Director. LISTED COMPANY AND OTHER RELEVANT DIRECTORSHIPS – Impax Asset Management – Foreign, Commonwealth & Development Office (‘FCDO’) – Strategic Command Ministry of Defence (‘MoD’) LISTED COMPANY AND OTHER RELEVANT DIRECTORSHIPS – PPHE Hotel Group Limited – JLEN Environmental Assets Group Limited – Apax Global Alpha Limited – Board member of The Association of Investment Companies LISTED COMPANY AND OTHER RELEVANT DIRECTORSHIPS – Guernsey Electricity Ltd (resigned on 16 September 2023) – Channel Islands Electricity Grid – European Marine Energy Centre Ltd – M&G Guernsey Ltd – M&G Offshore Corporate Bond – 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. 64 International Public Partnerships Limited Annual Report and financial statements 2023 overview Strategic report 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 GILES FROST 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. 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 also chairs a number of audit committees. LISTED COMPANY AND OTHER RELEVANT DIRECTORSHIPS – BH Macro Limited – TwentyFour Income Fund Limited – Super Group (‘SGHC’) Limited 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. 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 BACKGROUND AND EXPERIENCE A resident of the UK, Giles is a founder of Amber Infrastructure and has worked in the infrastructure investments sector for over 25 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 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. International Public Partnerships Limited Annual Report and financial statements 2023 65 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 accountable 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. 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 Financial Reporting Council (‘FRC’) website (www.frc.org.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. 66 International Public Partnerships Limited Annual Report and financial statements 2023 overview Strategic report CORPORATE GOVERNANCE Financial StatementS 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 48 to 49 for more information. 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 7 September 2023. The KID is available on the Company’s website, https://www.internationalpublicpartnerships.com/investors/reports- and-publications, 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 64 to 65, 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. 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. As part of the ongoing succession planning process, John Le Poidevin is due to step down as Chair of the Audit and Risk Committee at the upcoming AGM in May 2024 and Stephanie Coxon will be appointed to this role. John has led this committee with great skill and dedication since 2018, for which the Board thanks him warmly on your behalf. Following this Committee change, there will also be changes to the other Committees, as detailed on page 71. Following nine years of service, John will retire from the Board at the 2025 AGM and the process of recruiting a new director is already underway. 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. 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. The Board recognises the important role the Company’s portfolio investments have in supporting the communities they serve. To ensure that they fully appreciate the impact of the investments, the Board undertakes regular visits to the Company’s assets and, during 2023, visited a number of the Company’s investments, which facilitate education, offer safe and affordable travel, and deliver leading health services and research. 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. International Public Partnerships Limited Annual Report and financial statements 2023 67 CORPORATE GOVERNANCE REPORT continUeD 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. The Board currently has four female directors, making the gender balance 57% female and 43% male. Currently, four of the sub-committee Chair positions are all held by female directors. In addition, post-year end, the Company was ranked 21st in the ‘FTSE 350’s Investment Trust Rankings 2023 Women on Boards only. 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 conducted an internal assessment of Board remuneration. The internal review of the remuneration policy undertaken benchmarked the Company’s position against listed peer funds in the core infrastructure and wider infrastructure sector. The inflationary landscape, time commitment of the Directors during the year under review and additional responsibilities placed on certain Board members were considered. Accordingly, and with effect from 1 January 2024, the Board is recommending that shareholders approve the remuneration levels proposed in the comparative table set out below. Position Board Chair Director (Independent and Non- Independent) Audit and Risk Committee Chair1 Senior Independent Director1 Risk Sub-Committee Chair1 Management Engagement Committee Chair1 Nomination and Remuneration Committee Chair1 ESG Committee Chair1 2024 Fee P.A. £ 2023 Fee P.A. £ 106,500 101,400 59,000 17,700 4,000 3,500 56,200 16,800 3,800 3,250 3,500 3,250 3,500 5,600 3,250 5,350 1 These are additional fees payable to Directors chairing a committee. The Board always appoints individuals on merit considering a balance of skills, qualities and experience that the Board feels are important to function, enhance and grow as a FTSE 250 board. The Board strongly believes that diversity of backgrounds, perspectives and insights is a critical tenet of dynamic and robust decision making and is keen to enhance the diversity of its composition including consideration of potential candidates with the appropriate skills and experience for whom this would be their first appointment as a non-executive director of a listed company. With this critical tenet in mind, the Board is further committed to complying with the FCA Listing Rules (which in turn is in line with a similar recommendation of the Parker Review committee) that each FTSE 250 board have at least one director from an ethnic minority background for accounting periods starting on or after 1 April 2022. As an externally managed investment company with no chief executive officer (‘CEO’) or chief financial officer (‘CFO’), the roles which qualify as senior under FCA guidance are Chair and Senior Independent Director (‘SID’). The Board also considers the Audit Committee Chair to represent a senior role within this context. At 31 December 2023, the Board met the target on the percentage that are women, but not on ethnic diversity criteria and senior roles. The Board is currently well advanced with its recruitment process and expects that the Company will comply with relevant diversity targets by the end of the calendar year. The following table sets out the required information on diversity and inclusion, reflecting on the gender and ethnic background of the Board as at 31 December 2023 in accordance with the requirements of the Listing Rules. The information has been self-provided by the individuals concerned. The questions asked were: “Which gender do you identify by” and “Which of the FCA ethnicity groups do you consider yourself to fall within?”. Male Female White British or other White (including white minority groups) Number of Board Members Percentage of the Board Number of Senior Positions 3 4 7 43% 57% 100% 2 0 2 68 International Public Partnerships Limited Annual Report and financial statements 2023 overview Strategic report CORPORATE GOVERNANCE Financial StatementS 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. DIRECTORS’ INTERESTS Directors who held office at 31 December 2023, had the following interests in the shares of the Company: Director Mike Gerrard Julia Bond Stephanie Coxon Sally-Ann David Meriel Lenfestey John Le Poidevin Giles Frost2 31 December 2023 Number of Ordinary Shares1 31 December 2022 Number of Ordinary Shares1 279,789 114,694 10,000 30,303 25,142 327,898 971,676 243,447 106,542 10,000 30,303 25,142 327,898 971,676 1 All shares are beneficially held. 2 Holds some shares through a personal investment company. There have been no changes to the holdings of existing directors between 31 December 2023 and the date of this Report. Director Mike Gerrard Julia Bond Stephanie Coxon Sally-Ann David Meriel Lenfestey John Le Poidevin Giles Frost1 2023 Fees £ 2022 Fees £ 101,400 61,550 59,450 59,450 59,450 76,800 56,200 98,600 60,619 55,356 55,825 55,356 71,655 53,500 1 The emoluments for Giles Frost are paid to his employer Amber Infrastructure Limited, a related company of the Company’s Investment Adviser. 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 £11,025 in total for the year ended 31 December 2023. The Nomination and Remuneration Committee recommended an increase to £3,310 per entity for 2024. International Public Partnerships Limited Annual Report and financial statements 2023 69 CORPORATE GOVERNANCE REPORT continUeD 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 – Board composition and accountability to shareholders 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 – 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 – Ensure proposals are compliant with the Company’s Investment Policy and strategy – Ensure that proposals do not breach Articles of Incorporation, Prospectus or other constitutional documents – Determine whether proposals are appropriate for investment or divestment and then, assuming the opportunity is approved, authorise the Investment Adviser to enact the transaction 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 composition of the Board – Identify and appoint suitable Board candidates as vacancies arise and ensure succession planning is in place – Articulate the roles of the Chair and Non-Executive 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 70 International Public Partnerships Limited Annual Report and financial statements 2023 overview Strategic report CORPORATE GOVERNANCE Financial StatementS 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. In line with the Board’s succession plan, it is the intention that Stephanie Coxon will become the Chair of the Audit and Risk Committee following the 2024 AGM. The duties of the Audit and Risk Committee in discharging its responsibilities are outlined in the Audit and Risk Committee Report on pages 75 to 77. 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 75 to 77. 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 to 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. It is the intention that Julia Bond will become the Chair of the Management Engagement Committee following the 2024 AGM. The duties of the Management Engagement Committee in discharging its responsibilities are outlined in the diagram on page 70. 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 reviewed the Investment Adviser Agreement and concluded that no substantial changes were required. Furthermore, the 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. It is the intention that Sally-Ann David will become the Chair of the Nomination and Remuneration Committee following the 2024 AGM. 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 68. It also oversees the appointment and reappointment of directors, taking into account the expertise and diversity of the candidates and their independence (see page 70 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. During 2023, an externally facilitated evaluation was undertaken by Fletcher Jones Limited who are independent from the Board and the individual directors. Each Board member completed a survey and attended a meeting with the lead evaluator, who additionally observed two board committee meetings and a quarterly board meeting. Furthermore, the lead evaluator met with the Investment Adviser, the Company’s Broker and the Company Secretary. A report of the findings of the review was presented and considered by the Nomination and Remuneration Committee. No material issues were identified, and the independent review concluded that the Board operated well, with skill and focus and in a harmonious and supportive manner. A small number of areas were identified for further focus, including succession planning, meeting structure and adviser attendance. The Board welcomed all recommendations provided by Fletcher Jones and are proceeding accordingly. ESG COMMITTEE The ESG Committee is comprised of the full Board and is chaired by Julia Bond. It is intended for Meriel Lenfestey to become Chair following the 2024 AGM. 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. International Public Partnerships Limited Annual Report and financial statements 2023 71 CORPORATE GOVERNANCE REPORT continUeD 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, two ad-hoc Board meetings and two 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 Coxon Sally-Ann David Meriel Lenfestey John Le Poidevin Giles Frost3 Quarterly Board Audit and Risk Committee ESG Committee Management Engagement Committee Nomination and Remuneration Committee 4 4 4 4 4 4 4 4 5 N/A 5 5 5 5 5 N/A 3 3 3 3 3 3 3 2 2 2 2 2 2 2 2 N/A 4 4 4 4 4 4 4 N/A 1 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. 2 Mike Gerrard is not a member of the Audit and Risk Committee but attended these meetings as an observer. 3 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. 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 page 68 outlining the Board’s approach to diversity and re-election. 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. 72 International Public Partnerships Limited Annual Report and financial statements 2023 overview Strategic report CORPORATE GOVERNANCE Financial StatementS 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. During the year, the Management Engagement Committee reviewed the Investment Adviser Agreement and concluded that no substantial changes were required. 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. 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. 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. International Public Partnerships Limited Annual Report and financial statements 2023 73 CORPORATE GOVERNANCE REPORT continUeD 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 50 to 62. 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 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). 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. MIKE GERRARD CHAIR 27 March 2024 During the year, the Company held its Results Presentations online, but saw an increase in day-to-day investor relations activities being held in person. During 2023, 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 two Investor Meet Company webinars to reach its retail shareholders. The Company also maintained an active programme of sell-side engagement and the Board is informed on a regular basis of all relevant market commentary on the Company by the Investment Adviser, Administrator and the Company’s Broker. Following the year-end, the Company held a Capital Markets Day on 27 February 2024 which was attended by c.60 institutional investors and sell-side analysts. Members of the Board and representatives of Amber Infrastructure were in attendance. Agenda items included: a market update which also covered the Company’s approach to capital allocation; insights on the Company’s approach to asset management; the challenges and opportunities presented to infrastructure investors by the transition to net zero; a panel discussion with representatives from the Company’s portfolio investments including Cadent and Angel Trains, and public sector representation from the IPA. Recordings from the day are available on the Company’s website. 74 International Public Partnerships Limited Annual Report and financial statements 2023 overview Strategic report 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 64 to 65. 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 Committee’s adherence to the FRC’s Audit Committees and the External Audit: Minimum Standard, that was published during the financial year; – 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; and – Approving the external auditor’s plan for the current year end International Public Partnerships Limited Annual Report and financial statements 2023 75 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. 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. 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 2023 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. Non-audit fees represented 10% of total audit fees during the year under review, relating only to the half-yearly review. 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. 76 International Public Partnerships Limited Annual Report and financial statements 2023 overview Strategic report CORPORATE GOVERNANCE 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 2023 of the auditor’s performance 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. Review of auditor’s remuneration The Committee carried out a review of the proposed audit fees for 2023. The audit fee for the Group (including unconsolidated subsidiaries) increased on the prior year as a result of inflation and scope changes. 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 2023 was the third year for John Luff, the current lead audit partner. The committee remains 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 50. 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 62. 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 completed. 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. The next area of controls review was selected to cover controls around ESG data reporting, and this review is expected to take place over 2024. 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 50. 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’). During the year, the FRC published its Audit Committees and the External Audit: Minimum Standard (the ‘Minimum Standard’). The Committee reviewed the Company’s adherence to the Minimum Standard and concluded that the Company meets or exceeds the requirements contained therein. The Committee notes that in respect of the requirement to review the FRC’s annual report on the auditor as part of their oversight of auditor responsibilities, that the FRC’s reports on Crown Dependency audit firms are confidential private documents and therefore the Committee instead held discussions with the external auditors to ascertain whether any issues were raised in the FRC’s report on the audit firm that needed to be brought to the attention of the Committee. FOCUS FOR 2024 The Company will continue to focus on the impacts arising from the current economic environment and wider market sentiment, 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 27 March 2024 International Public Partnerships Limited Annual Report and financial statements 2023 77 DIRECTORS’ REPORT INTRODUCTION The Directors present their Annual Report on the performance of the Company and Group for the year ended 31 December 2023. 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 66 to 74. 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. 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 16 to 37. The financial position, cash flows, liquidity position and borrowing of the Company and Group are described in the financial statements from page 86. SUBSTANTIAL SHAREHOLDINGS As at 31 December 2023, 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 2023 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 to 31 December 2023. However, on 20 December 2023, the Company announced that it would commence a share buyback programme of up to £30 million. This programme began in January 2024 and is expected to run for up to 12 months. As at 27 March 2024, c.£5 million worth of shares have been bought back. The current authority of the Company to make market purchases of up to 14.99% of the issued Ordinary Share Capital expires on 3 June 2024. The Company will seek to renew such authority at the AGM to take place on 4 June 2024. 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. 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 27 March 2024 JOHN LE POIDEVIN DIRECTOR 27 March 2024 78 International Public Partnerships Limited Annual Report and financial statements 2023 overview Strategic report CORPORATE GOVERNANCE Financial StatementS DIRECTORS’ RESPONSIBILITIES STATEMENT 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 27 March 2024 JOHN LE POIDEVIN DIRECTOR 27 March 2024 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 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. International Public Partnerships Limited Annual Report and financial statements 2023 79 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 2023, 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 2023; – 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, comprising material accounting policy information 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: £72.9 million (2022: £75.9 million) based on 2.5% of equity attributable to equity holders of the parent (i.e. net asset value) – Performance materiality: £54.6 million (2022: £56.9 million) 80 International Public Partnerships Limited Annual Report and financial statements 2023 overview Strategic report 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 £107.8 million and dividend income of £81.4 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 receipt through to bank statement for the interest that have been received to date, and checked any unreceived interest is 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 by (i) recalculating the interest accrued based on contractual terms over the respective period and (ii) inspecting the supporting evidence for the dividends recorded to assess whether they have been recorded in the correct financial year. We obtained further evidence over the cut off and recording 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. International Public Partnerships Limited Annual Report and financial statements 2023 81 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 £2.8 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 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 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 controls, which in our judgment are key in relation to Investments at fair value through profit or loss, 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 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 60% 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 40% of the portfolio. – Finally, for a sample of investments, to ascertain 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. 82 International Public Partnerships Limited Annual Report and financial statements 2023 overview Strategic report 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 £72.9 million (2022: £75.9 million) How we determined it 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% (2022: 75%) of overall materiality, amounting to £54.6 million (2022: £56.9 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 £3.6 million (2022: £3.8 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. 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. International Public Partnerships Limited Annual Report and financial statements 2023 83 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. 84 International Public Partnerships Limited Annual Report and financial statements 2023 overview Strategic report 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 27 March 2024 International Public Partnerships Limited Annual Report and financial statements 2023 85 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME YEAR ENDED 31 DECEMBER 2023 Interest income Dividend income Net change in investments at fair value through profit or loss Total investment income Other operating income / (expense) Total income Management costs Administrative costs Transaction costs Directors’ fees Total expenses Profit before finance costs and tax Finance costs Profit before tax Tax (charge) / credit Profit for the year Earnings per share Basic and diluted (pence) Year ended 31 December 2023 £’000s Year ended 31 December 2022 £’000s 107,756 81,396 (123,080) 66,072 5,944 72,016 (32,251) (2,420) (1,621) (475) (36,767) 35,249 (7,284) 27,965 (104) 27,861 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 1.46 17.75 Notes 4 4 4 5 17 6, 17 8 9 10 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 (2022: nil). The profit for the year represents the Total Comprehensive Income for the year. 86 International Public Partnerships Limited Annual Report and financial statements 2023 overview Strategic report corporate governance FINANCIAL STATEMENTS CONSOLIDATED STATEMENT OF CHANGES IN EQUITY YEAR ENDED 31 DECEMBER 2023 Balance at 1 January 2023 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 2023 Share capital and share premium £’000s Other distributable reserve £’000s Notes Retained earnings £’000s Total £’000s 2,231,276 182,481 626,082 3,039,839 15 15 15 – – – – – – – – 2,231,276 182,481 27,861 27,861 – – (151,562) 502,381 – – (151,562) 2,916,138 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 Notes 15 15 15 Share capital and share premium £’000s 1,908,849 Other distributable reserve £’000s 182,481 Retained earnings £’000s 437,470 Total £’000s 2,528,800 – 327,273 (4,846) – – – – – 2,231,276 182,481 326,897 326,897 – – (138,285) 626,082 327,273 (4,846) (138,285) 3,039,839 International Public Partnerships Limited International Public Partnerships Limited Annual Report and financial statements 2023 Annual Report and financial statements 2023 87 CONSOLIDATED BALANCE SHEET AS AT 31 DECEMBER 2023 Non-current assets Investments at fair value through profit or loss Total non-current assets Current assets Cash and cash equivalents Trade and other receivables 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 27 March 2024. They were signed on its behalf by: MIKE GERRARD CHAIR 27 March 2024 JOHN LE POIDEVIN DIRECTOR 27 March 2024 Notes 11 11 11, 13 11 11, 14 8, 11 8, 11 15 15 15 16 31 December 2023 £’000s 31 December 2022 £’000s 2,818,903 2,818,903 2,947,959 2,947,959 128,561 43,297 1,424 173,282 2,992,185 11,047 – 11,047 65,000 65,000 76,047 92,829 44,096 – 136,925 3,084,884 13,919 1,826 15,745 29,300 29,300 45,045 2,916,138 3,039,839 2,231,276 182,481 502,381 2,916,138 2,231,276 182,481 626,082 3,039,839 152.6 159.1 88 International Public Partnerships Limited Annual Report and financial statements 2023 overview Strategic report corporate governance FINANCIAL STATEMENTS CONSOLIDATED CASH FLOW STATEMENT YEAR ENDED 31 DECEMBER 2023 Notes 4 8 5, 11 12 15 Operating activities Profit before tax in the Consolidated Statement of Comprehensive Income1 Adjusted for: Loss / (gain) on investments at fair value through profit or loss Finance costs2 Fair value movement on derivative financial instruments Decrease in receivables (Decrease) / increase in payables Capitalisation of interest 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 inflow / (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 (outflow) / 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 exchange rates on cash and cash equivalents Cash and cash equivalents at end of year Year ended 31 December 2023 £’000s Year ended 31 December 2022 £’000s 27,965 326,828 123,080 7,284 (3,250) 1,468 (2,872) (20,301) (104) 133,270 (108,088) 134,365 26,277 – (151,562) (7,761) 118,400 (82,700) (123,623) 35,924 92,829 (192) 128,561 (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 1 Includes interest received of £92.3 million (December 2022: £87.2 million) and dividends received of £81.4 million (December 2022: £64.8 million). 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. International Public Partnerships Limited International Public Partnerships Limited Annual Report and financial statements 2023 Annual Report and financial statements 2023 89 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023 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 page 112. The nature of the Group’s (‘Parent and consolidated subsidiary entities’) operations and its principal activities are set out on pages 8 to 9. 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 the 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) Obtains funds from one or more investor(s) for the purpose of providing those investor(s) with investment management services; b) Commits to its investors that its business purpose is to invest funds solely for returns from capital appreciation, investment income, or both; and c) Measures and evaluates the performance of substantially all of its investments on a fair value basis. Accordingly, these financial statements consolidate only those subsidiaries that provide services relevant to its investment activities, such as management services, strategic advice and financial support to its investees, and that are not themselves investment entities. Subsidiaries that do not provide investment-related services are required to be measured at fair value through profit or loss in accordance with IFRS 9 Financial Instruments. GOING CONCERN The Directors have reviewed cash flow forecasts prepared by management. Based on those forecasts, 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 £128 million as at 31 December 2023. 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 £350 million on a fully committed basis, and a flexible ‘accordion’ component which, subject to lender consent, allows for a future extension by an additional £50 million. At the date of this Report, approximately £336 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 June 2025. 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 2023. 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. 90 International Public Partnerships Limited Annual Report and financial statements 2023 overview Strategic report corporate governance 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 centred on the risk-free rates and the maturity of the infrastructure sector within each region. Further, foreign exchange and political risk is identified, as these also determine where resources are allocated. The four reportable segments are UK & CI, Europe (excl. UK), North America and Australia & New Zealand. Segmental results Dividend and interest income Fair value gain / (loss) on investments Total investment income / (loss) Reporting segment profit / (loss)1 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 UK & CI £’000s 148,829 (87,156) 61,673 19,160 2,043,743 173,282 2,217,025 (76,047) 2,140,978 UK & CI £’000s 117,621 151,080 268,701 230,025 2,226,964 136,925 2,363,889 (45,045) 2,318,844 Year ended 31 December 2023 Europe (excl. UK) £’000s 11,615 11,620 23,235 25,048 342,700 – 342,700 – 342,700 North America £’000s Australia & New Zealand £’000s 11,339 (18,013) (6,674) (5,603) 147,292 – 147,292 – 147,292 17,369 (29,531) (12,162) (10,744) 285,168 – 285,168 – 285,168 Year ended 31 December 2022 Europe (excl. UK) £’000s North America £’000s Australia & New Zealand £’000s 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 Total £’000s 189,152 (123,080) 66,072 27,861 2,818,903 173,282 2,992,185 (76,047) 2,916,138 Total £’000s 158,662 210,906 369,568 326,897 2,947,959 136,925 3,084,884 (45,045) 3,039,839 Revenue from investments which individually represent more than 10% of the Group’s interest, and dividend income approximates £25.1 million (2022: £15.9 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. 1 Reporting segment results are stated net of operational costs including management fees. International Public Partnerships Limited International Public Partnerships Limited Annual Report and financial statements 2023 Annual Report and financial statements 2023 91 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023 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 2023 £’000s Year ended 31 December 2022 £’000s 106,687 1,069 107,756 81,396 (123,080) 66,072 93,655 162 93,817 64,845 210,906 369,568 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 INCOME / (EXPENSE) Fair value movement on foreign exchange contracts Other gains on foreign exchange movements Other income Total other operating income / (expense) 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 Accountant fees Interim review Total non-audit fees 92 International Public Partnerships Limited Annual Report and financial statements 2023 Year ended 31 December 2023 £’000s Year ended 31 December 2022 £’000s 3,250 1,151 1,543 5,944 (4,539) 545 16 (3,978) Year ended 31 December 2023 £’000s Year ended 31 December 2022 £’000s 1,621 1,621 2,891 2,891 Year ended 31 December 2023 £’000s Year ended 31 December 2022 £’000s 626 24 215 865 83 – 83 587 18 209 814 77 106 183 overview Strategic report corporate governance 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 £7.3 million (December 2022: £3.6 million). The Group has a corporate debt facility with £350 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 £50 million. The interest rate margin on the corporate debt facility in the year was 170 basis points over SONIA. The facility matures in June 2025 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 2023 the facility was £65.0 million drawn (December 2022: £29.3 million cash drawn), with £16.4 million drawn under letter of credit (December 2022: £16.7 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.£268.6 million (December 2022: £204.0 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 charge / (credit) for the year Reconciliation of effective tax rate: Profit before tax Exempt tax status in Guernsey Application of overseas tax rates Tax charge / (credit) for the year Year ended 31 December 2023 £’000s Year ended 31 December 2022 £’000s – 104 – 104 – (69) – (69) Year ended 31 December 2023 £’000s Year ended 31 December 2022 £’000s 27,965 – 104 104 326,828 – (69) (69) 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. International Public Partnerships Limited International Public Partnerships Limited Annual Report and financial statements 2023 Annual Report and financial statements 2023 93 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023 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 2023 £’000s Year ended 31 December 2022 £’000s 27,861 Number 326,897 Number 1,911,243,132 1,841,400,896 1.46 17.75 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 2023 £’000s 31 December 2022 £’000s 2,818,903 2,947,959 43,297 128,561 1,424 44,096 92,829 – 2,992,185 3,084,884 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 sole 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. 94 International Public Partnerships Limited Annual Report and financial statements 2023 overview Strategic report corporate governance 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 adopt 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 2023 £’000s 31 December 2022 £’000s 11,047 65,000 – 76,047 13,919 29,300 1,826 45,045 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 50 to 62). 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. International Public Partnerships Limited International Public Partnerships Limited Annual Report and financial statements 2023 Annual Report and financial statements 2023 95 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023 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 that 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. Sensitivity analysis showing the impact of variations of the above risks on the fair value of investments is shown in note 11.5. 31 December 2023 £’000s 31 December 2022 £’000s Cash Euro Canadian Dollar Australian Dollar New Zealand Dollar US Dollar Danish Krone Current receivables Euro receivables US Dollar receivables Investments at fair value through profit or loss Euro Danish Krone Canadian Dollar Australian Dollar New Zealand Dollar US Dollar Total 6,925 796 3,448 5,362 4,060 362 20,953 1,298 – 1,298 330,762 11,938 40,355 188,228 96,940 106,937 775,160 797,411 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 Sensitivity analysis showing the impact of variations of the above market 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. 96 International Public Partnerships Limited Annual Report and financial statements 2023 overview Strategic report corporate governance 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 June 2025 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 2023, the Group’s only derivative financial instruments were currency forward contracts amounting to an asset of £1.4 million (December 2022: liability of £1.8 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 2023, the fair value of financial instruments classified within Level 3 totaled £2,818.9 million (December 2022: £2,948.0 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. 1 Indicative valuations are calculated in respect of each at 31 March and 30 September. International Public Partnerships Limited International Public Partnerships Limited Annual Report and financial statements 2023 Annual Report and financial statements 2023 97 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023 continUeD 11. FINANCIAL INSTRUMENTS CONTINUED 11.4 FAIR VALUE HIERARCHY CONTINUED 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 below. Inflation rates UK Australia New Zealand Europe Canada US2 UK Australia New Zealand Europe Canada US2 GBP/AUD GBP/NZD GBP/DKK GBP/EUR GBP/CAD GBP/USD UK Australia New Zealand Europe Canada US2 Long-term deposit rates3 Foreign exchange rates Tax rates4 31 December 2023 £’000s 31 December 2022 £’000s RPI: 4.50% until Dec 2024, 3.00% until Dec 2025, 2.75% thereafter1 CPIH: 3.25% until Dec 2024, 2.25% until Dec 2025, 2.00% thereafter 3.25% until Dec 2024, 3.00% until Dec 2025, 2.50% thereafter 2.75% until Dec 2024, 2.25% until Dec 2025, 2.25% thereafter 3.00% until Dec 2024, 2.25% until Dec 2025, 2.00% thereafter 2.75% until Dec 2024, 2.25% until Dec 2025, 2.00% thereafter N/A 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 N/A 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% 2.50% 1.50% 2.50% N/A 1.87 2.01 8.60 1.15 1.69 1.27 2.50% 2.75% N/A 1.50% 2.50% N/A 1.77 N/A 8.40 1.13 1.64 1.21 25.00% 30.00% 28.00% Various (12.50% – 32.28%) Various (23.00% – 26.50%) N/A 19.00% / 25.00%5 30.00% N/A Various (12.50%–32.28%) Various (23.00%–26.50%) N/A 1 Where insufficient protections exist within project agreements or through regulatory precedent, RPI is assumed to align with CPIH post-2030. 2 The Company’s US investment is in the form of subordinated debt and therefore not directly impacted by inflation, deposit and tax rate assumptions. 3 Actual current deposit rates being achieved are assumed to be maintained until 31 December 2024 before adjusting to the long-term rates noted in the table above from 1 January 2025. The 31 December 2023 valuation adjusted to the longer-term assumption from 1 January 2024. 4 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. 5 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 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; 98 International Public Partnerships Limited Annual Report and financial statements 2023 overview Strategic report corporate governance FINANCIAL STATEMENTS – 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 112 bps. The weighted average investment premium marginally decreased, reflecting observable market-based evidence. Portfolio weighted average discount rates increased by 86 bps. Valuation assumptions 31 December 2023 31 December 2022 Weighted Average Government Bond Yield Weighted Average Investment Risk Premium Weighted Average Discount Rate 4.25% 4.12% 8.37% 3.13% 4.38% 7.51% Movement 112 bps (26 bps) 86 bps Reconciliation of Level 3 fair value measurements of financial assets Balance at 1 January Additional investments during the year Net repayments during the year Capitalisation of interest Net change in investments at fair value through profit or loss Balance at 31 December 31 December 2023 £’000s 31 December 2022 £’000s 2,947,959 108,088 (134,365) 20,301 (123,080) 2,818,903 2,579,434 191,604 (33,985) – 210,906 2,947,959 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 2023 Discount rate Inflation rate (overall) UK (CPI/RPI) Europe North America New Zealand Australia FX rate Tax rate Deposit rate Significant assumptions 31 December 2022 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 8.37% 2.30% 2.00%/2.75% 2.00% 2.00% 2.25% 2.50% Sensitivity factor + 1.00% + 1.00% + 1.00% + 1.00% + 1.00% + 1.00% + 1.00% Change in fair value of investment £’000s Sensitivity factor Change in fair value of investment £’000s (241,561) – 1.00% 288,391 235,302 185,918 35,488 626 5,437 7,836 – 1.00% – 1.00% – 1.00% – 1.00% – 1.00% – 1.00% (209,274) (165,756) (30,778) (574) (4,978) (7,186) 78,962 13,784 N/A + 10.00% (78,956) – 10.00% 25.48% 2.35% + 1.00% + 1.00% (13,498) – 1.00% 23,306 – 1.00% (23,006) Weighted average rate in base case valuations 7.51% 2.35% 2.00%/2.75% 2.00% 2.00% 2.50% N/A 25.39% 1.02% Sensitivity factor +1.00% +1.00% +1.00% +1.00% +1.00% +1.00% +10.00% +1.00% +1.00% Change in fair value of investment £’000s (271,841) 260,036 211,400 39,054 821 8,761 72,128 (14,101) 24,235 Sensitivity factor –1.00% –1.00% –1.00% –1.00% –1.00% –1.00% –10.00% –1.00% –1.00% Change in fair value of investment £’000s 328,070 (227,357) (183,950) (33,901) (764) (8,742) (72,132) 12,358 (24,100) International Public Partnerships Limited International Public Partnerships Limited Annual Report and financial statements 2023 Annual Report and financial statements 2023 99 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023 continUeD INVESTMENT ACTIVITY 12. 2023 Date of investment Description Consideration £’000s % Ownership post investment March 2023 June 2023 The Group made a follow-on investment into a Building Schools for the Future asset, UK The Group made an investment into a portfolio of New Zealand Social Infrastructure assets Total capital spend on investments during the year 741 107,347 108,088 100.0% 100.0% In addition to the new capital spend noted above, during the year, INPP also completed on transactions realising value from its existing portfolio. In July 2023, the Company sold its stake in Airband (held through NDIF) for c.£12 million. In December 2023, the Company completed a transaction to generate c.£200 million proceeds realising value from within its OFTO portfolio, which included repayment of the Company’s four senior debt investments in the OFTO portfolio. 2022 Date of investment Description Consideration £’000s % Ownership post investment 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 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% 31 December 2023 £’000s 31 December 2022 £’000s 41,813 1,484 43,297 40,327 3,769 44,096 31 December 2023 £’000s 31 December 2022 £’000s 9,820 1,227 11,047 9,798 4,121 13,919 13. TRADE AND OTHER RECEIVABLES Accrued interest receivable Other debtors Total trade and other receivables 14. TRADE AND OTHER PAYABLES Accrued management fee Other creditors and accruals Total trade and other payables 100 International Public Partnerships Limited Annual Report and financial statements 2023 overview Strategic report corporate governance FINANCIAL STATEMENTS 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 2023 shares ’000s 31 December 2022 shares ’000s 1,911,243 – – 1,911,243 1,706,104 203,762 1,377 1,911,243 31 December 2023 £’000s 31 December 2022 £’000s 2,231,276 1,908,849 – – – – 325,000 2,273 327,273 (4,846) 2,231,276 2,231,276 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. Other distributable reserve Balance at 1 January Movement in the year Balance at 31 December 31 December 2023 £’000s 31 December 2022 £’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 31 December 2023 £’000s 31 December 2022 £’000s 626,082 27,861 (151,562) 502,381 437,470 326,897 (138,285) 626,082 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 dividends paid in respect of the year ended 31 December 2023. 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 2023 was 4.06 pence per share (2022: 3.87 pence per share) Interim dividend for the period 1 July to 31 December 2023 was 4.07 pence per share3 (2022: 3.87 pence per share) 31 December 2023 £’000s 31 December 2022 £’000s 151,5622 138,285 77,596 77,788 73,965 73,965 1 2 3 Includes scrip element of £nil in 2023 (December 2022: £2.3 million). Includes the 2022 interim dividend for the period 1 July to 31 December 2022. The dividend for the period 1 July to 31 December 2023 was approved by the Board on 27 March 2024 and therefore has not been included as a liability in the balance sheet for the year ended 31 December 2023. International Public Partnerships Limited International Public Partnerships Limited Annual Report and financial statements 2023 Annual Report and financial statements 2023 101 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023 continUeD 15. SHARE CAPITAL AND RESERVES CONTINUED 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 63. 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 2023 £’000s 31 December 2022 £’000s 2,916,138 3,039,839 Number Number 1,911,243,132 1,911,243,132 152.6 159.1 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 £55,525 (2022: £53,500) for Giles Frost’s directorship of the Company are paid to his employer, Amber Infrastructure Limited (a member of the Amber Group). The amounts of the transactions in the 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 2023 £’000s For the year ended 31 December 2022 £’000s At 31 December 2023 £’000s At 31 December 2023 £’000s International Public Partnerships GP Limited1 Amber Fund Management Limited2 Total 32,251 1,621 33,872 29,421 2,891 32,312 9,820 – 9,820 9,798 2,134 11,932 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. 102 International Public Partnerships Limited Annual Report and financial statements 2023 overview Strategic report corporate governance FINANCIAL STATEMENTS 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 2023, the Amber Group held 8,002,379 (December 2022: 8,002,379) shares in the Company. The shares held by the Investment Adviser in the Company helps further strengthen the alignment of interests between the two parties. TRANSACTIONS WITH DIRECTORS 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 2023 Year ended 31 December 2022 36,342 8,152 – – – – – – 44,494 84,266 34,098 10,000 – 15,163 167,245 – 37,854 348,626 Remuneration paid to the Non-Executive Directors is disclosed on page 69. Directors received dividends on total shares held as disclosed on page 69, in accordance with the approved dividends detailed under note 15. 18. CONTINGENT LIABILITIES AND COMMITMENTS As at 31 December 2023, the Group has committed funding of up to c.£19.7 million (December 2022: c.£145.6 million), which includes committed investment amounts as noted in the Strategic Report on pages 16 to 17, and a deferred commitment of c.£3.3 million for BeNEX (December 2022: £12.5 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 In January 2024, the Company commenced a share buyback programme of up to £30 million, expected to run for 12 months. As at the date of this Report, c.£5 million shares have been bought back by the Company. Following the year end, the Company commenced its funding of the Flinders project, investing c.AUD 7 million by the date of this Report. In February 2024, the Company invested c.£77 million in the Moray East OFTO project, its eleventh OFTO investment. International Public Partnerships Limited International Public Partnerships Limited Annual Report and financial statements 2023 Annual Report and financial statements 2023 103 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023 continUeD 20. OTHER MANDATORY DISCLOSURES NEW STANDARDS THAT THE GROUP HAS APPLIED FROM 1 JANUARY 2023 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. – 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); – Amendments to IAS 1 Classification of Liabilities as Current or Non-current (1 January 2023) 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. – Amendments to IAS 7 and IFRS 7 Supplier finance arrangements (1 January 2024); – Amendments to IAS 1 Classification of liabilities (1 January 2024) UNCONSOLIDATED SUBSIDIARIES A list of the significant investments in unconsolidated subsidiaries, including the name, country of incorporation as at 31 December 2023 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 ASV Project LP 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 Essex Schools Limited Future Ealing Phase 1 Limited Future Schools Partners LP 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 104 International Public Partnerships Limited Annual Report and financial statements 2023 Place of incorporation (or registration) and operation Proportion of ownership interest % UK UK Canada Germany UK UK UK New Zealand Canada UK UK UK UK UK Australia UK UK UK UK UK UK New Zealand UK UK UK UK Germany UK Ireland UK UK UK UK UK UK 100 100 100 98 50 50 50 100 100 100 100 100 100 100 100 90 100 100 100 100 100 100 90 90 100 100 100 100 100 100 58 90 90 90.1 90.1 overview Strategic report corporate governance FINANCIAL STATEMENTS Name Inspiredspaces Wolverhampton (Project Co 1) Limited Transform Islington (Phase 1) Limited Transform Islington (Phase 2) Limited IPP (Moray Schools) Holdings Limited Maesteg School Partnership Next Step Partners LP 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 ShapEd NZ LP 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 New Zealand UK Belgium UK Denmark Denmark Denmark Denmark UK Australia UK New Zealand UK Australia Australia UK UK UK UK UK UK UK UK UK UK UK UK 100 90 90 100 100 100 100 100 99 66.7 66.7 66.7 66.7 92.5 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 The entities listed above in aggregate represent 54.7% (December 2022: 55.0%) 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. 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 International Public Partnerships Limited International Public Partnerships Limited Annual Report and financial statements 2023 Annual Report and financial statements 2023 105 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023 continUeD INVESTMENTS 21. The Group holds 143 investments across energy transmission, education, transport, health, courts, waste water, police, military housing and other sectors. The table below 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 Country Status at 31 December 2023 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 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 50.0 50.0 50.0 100.0 0.02 0.02 0.02 92.52 0.02 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 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 2038 November 2041 August 2040 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 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 2023 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 2023 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 International Public Partnerships Limited International Public Partnerships Limited Annual Report and financial statements 2023 Annual Report and financial statements 2023 107 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023 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 Light Rail Victoria Schools Two Flinders University New Zealand NZ Schools 1 NZ Schools 2 NZ Schools 3 Auckland Prison ASV North America Alberta Schools Durham Courts FHSP Europe (excl. 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 2023 Per cent. Risk Capital owned by the Group1 Investment end UK UK UK UK Australia Australia Australia Australia Australia Australia Australia Australia Australia New Zealand New Zealand New Zealand New Zealand New Zealand 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 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 30.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 December 2061 March 2150 June 2069 July 2027 August 2031 July 2034 February 2044 December 2036 December 2035 December 2035 May 2029 December 2042 March 2049 December 2037 December 2042 December 2043 June 2043 June 2045 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. 108 International Public Partnerships Limited Annual Report and financial statements 2023 GLOSSARY INCLUDING ALTERNATIVE PERFORMANCE MEASURES AGM The Company’s Annual General Meeting AIC Association of Investment Companies AIF Alternative Investment Fund CDF The Company’s corporate debt facility CEF Connecting Europe Facility CMA Competition and Markets Authority AIFMD Alternative Investment Fund Managers Directive 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 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 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 FHSP The Company’s Family Housing for Service Personnel investment FMP Financial Market Participant FP Financial Project FRC The Financial Reporting Council International Public Partnerships Limited International Public Partnerships Limited Annual Report and financial statements 2023 Annual Report and financial statements 2023 109 GLOSSARY INCLUDING ALTERNATIVE PERFORMANCE MEASURES continUeD GAV Gross asset value GDNS Gas distribution networks GFSC The Guernsey Financial Services Commission GHG Greenhouse gas emissions GRESB INFRASTRUCTURE The Infrastructure Asset Assessment assesses ESG performance at the asset level for infrastructure asset operators, fund managers and investors that invest directly in infrastructure 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 ISA Individual Savings Account KID The Company’s Key Information Document KPIs Key performance indicators 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 28 NET ZERO Net zero refers to balancing the amount of emitted greenhouse gases with the equivalent emissions that are either offset or sequestered. This should primarily be achieved through a rapid reduction in carbon emissions, but where zero carbon cannot be achieved, offsetting through carbon credits or sequestration through rewilding or carbon capture and storage needs to be utilised 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 110 International Public Partnerships Limited Annual Report and financial statements 2023 PAI SFDR Principal Adverse Impacts SDR The proposed UK Sustainability Disclosure Requirements PCAF Partnership for Carbon Accounting Financials SFDR The EU Sustainable Finance Disclosure Regulation PEPS Personal Equity Plan account PFI Projects and private finance initiative SID Senior Independent Director SIPPS A self-invested personal pension PORTFOLIO INFLATION-LINKED RETURN / INFLATION- LINKED CASH FLOWS Non-GAAP measure. Calculated by running a ‘plus 1.00%’ inflation sensitivity for each investment and solving each investment’s discount rate to return the original valuation. The inflation-linked cash flows is the increase in the portfolio weighted average discount rate. This measure provides an indication of the portfolio’s inflation protection. There is no near comparable in the financial statements PPP Public-private partnerships PRI The UN-backed Principles for Responsible Investment PRIIPS Packaged Retail and Insurance-based Investment Product PwC The Company’s auditors PricewaterhouseCoopers CI LLP RNS Regulatory news service ROSCO Rolling stock leasing company 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 SONIA SONIA is the effective reference for overnight indexed swaps for unsecured transactions in the Sterling market SPV Special Purpose Vehicle TCFD Task Force on Climate-related Financial Disclosures THE COMPANY International Public Partnerships Limited TOCs Train operating companies TOTAL SHAREHOLDER RETURN (‘TSR’) Non-GAAP measure. Share price appreciation plus dividends assumed to be reinvested since IPO. The total return based on the NAV appreciation plus dividends paid since the IPO. There is no direct reconciliation to the financial statements, being a calculation instead derived from the Company’s share price. However, a nearest comparison were this measure based on a figure in the financial statements is provided in the Strategic Report, Investor Relations, Total Shareholder Return paragraph TNFD Taskforce on Nature-related Financial Disclosures 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 WACI Weighted Average Carbon Intensity WTW Willis Towers Watson International Public Partnerships Limited International Public Partnerships Limited Annual Report and financial statements 2023 Annual Report and financial statements 2023 111 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 112 International Public Partnerships Limited Annual Report and financial statements 2023 International Public Partnerships Limited International Public Partnerships Limited Annual Report and financial statements 2023 Annual Report and financial statements 2023 113 SFDR PERIODIC REPORTING REQUIREMENTS (unaudited) Product name: International Public Partnerships Ltd (the ‘Company’) Legal entity identifier: International Public Partnerships Ltd (2138002AJT55TI5M4W30) 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 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.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: (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 42 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 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. invest in 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 43 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: 114 International Public Partnerships Limited Annual Report and financial statements 2023 International Public Partnerships Limited International Public Partnerships Limited Annual Report and financial statements 2023 Annual Report and financial statements 2023 115 •Category A – Investments with the potential to cause adverse environmental and social risks and/orimpacts 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 addressedthrough 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. How did the sustainability indicators perform? Information regarding the performance of the Company’s investments against its Sustainable Development Goal alignment and sustainability indicators are provided on pages 42 and 45 of this Report and pages 23 and 27 of the Company’s Sustainability Report. In addition, 100% of investments met the Company’s exclusion criteria, minimum governance standards and ESG incorporation into the investment process. …and compared to previous periods? Information regarding the performance of the company's investments against its sustainability indicators, in comparison to the previous period, is provided on page 45 of this report and page 27 of the Company’s Sustainability Report. Similarly, we confirm that there is no change to meeting the Company’s exclusion criteria, minimum governance standards and ESG incorporation into the investment process. Please see a comparison of Sustainable Development Goal alignment below. 2023 2022 Patients treated in healthcare facilities developed and maintained by the Company >610,000>650,000Students attending schools developed and maintained by the Company > 180,000>173,000Estimated equivalent number of homes powered by renewable energy transmitted through offshore transmission investments >2,700,000>2,700,000Jobs supported across all investments >10,400>12,500Annual passenger journeys through sustainable transport investments > 212,000,000>154,000,000The three components of the London Tideway Improvements will work conjunctively to reduce discharges in a typical year by about 37 million cubic metres 37,000,000 m3 37,000,000 m3 Sustainability indicators measure how the environmental or social characteristics promoted by the financial product are attained. 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. What were the objectives of the sustainable investments that the financial product partially made and how did the sustainable investment contribute to such objectives? 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 investments must also not significantly harm any environmental or social objectives. 116 International Public Partnerships Limited Annual Report and financial statements 2023 International Public Partnerships Limited International Public Partnerships Limited Annual Report and financial statements 2023 Annual Report and financial statements 2023 117 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? Largest investments Sector % Assets Country Cadent Gas Distribution 16.2% UK Tideway Waste water 14.3% UK Diabolo Transport 8.0% Belgium Angel Trains Transport 6.2% UK OFTO – East Anglia Energy Transmission 4.4% UK OFTO – Lincs Energy Transmission 4.0% UK Family Housing for Service Personnel Other 3.9% US Reliance Rail Transport 2.8% Australia BeNEX Transport 2.5% Germany OFTO – BeatriceEnergy Transmission 1.9% UK 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 2023 118 International Public Partnerships Limited Annual Report and financial statements 2023 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. 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. 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 and custodial. To what extent were the sustainable investments with an environmental objective aligned with the EU Taxonomy? In accordance with the criteria for sustainable investments under the SFDR, the Company does not have a sustainable investment objective, nor has it committed to making sustainable investments. However, this Annual Report includes a summary of an internal assessment of the Company's investments based on the EU Taxonomy technical screening criteria outlined in the Delegated Regulation (EU) 2021/2139 (‘Climate Delegated Act’) and Delegated Regulation (EU) 2023/2486 (‘Environmental Delegated Act’). For more information, please refer to page 26 of the Company’s Sustainability Report. #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#1 Aligned 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. Asset allocation describes the share of investments in specific assets. International Public Partnerships Limited International Public Partnerships Limited Annual Report and financial statements 2023 Annual Report and financial statements 2023 119 43% of the Company’s investments, by portfolio value, were determined to be aligned with the EU Taxonomy, further to the Company's internal assessment and based on the information provided by the investment companies. Those Taxonomy-aligned investments contributed substantially to two of the environmental objectives under the EU Taxonomy: (i) climate change mitigation and (ii) sustainable use and protection of water and marine resources. The Investment Adviser has determined that portfolio value is the most relevant indicator for calculating the Taxonomy-alignment of its investments in infrastructure assets. The Company's Investment Adviser has also sought to determine the proportion of Taxonomy-alignment using turnover, Capex and Opex, as required for the purposes of disclosing in accordance with the charts below. For the purpose of these calculations, the proportion of each Taxonomy-aligned investments' turnover, CapEx and OpEx that is Taxonomy-aligned was weighted according to the proportional value of the Company's total investments. Climate change mitigation-aligned investments meet the following environmentally sustainable economic activities: •Transmission and distribution of energy•Passenger interurban rail transportSustainable use and protection of water and marine resources aligned investments meet the following environmentally sustainable economic activities: •Urban Waste Water TreatmentAs noted above, the charts below provide details of turnover, CapEx and OpEx for those investments estimated to be aligned with the EU Taxonomy. These investments include OFTOs, Reliance Rail, Diabolo, Gold Coast Light Rail (Climate Change mitigation) and Tideway (Sustainable use and protection of water and marine resources). For completeness, the Company estimates that 51% of the portfolio is eligible for alignment with the EU Taxonomy. The Company’s Investment Adviser is working to identify those investments that are eligible for alignment with the EU Taxonomy but have not yet been determined to be aligned. They aim to gather greater evidence of policies and procedures in place to ensure that all underlying criteria are met. Therefore, the Investment Adviser has taken a conservative approach and determined that 0% of the Company's remaining investments are Taxonomy-aligned. A contributing factor is that a significant proportion of these investments are in the social infrastructure space, which is not considered under the current iteration of the EU Taxonomy and its technical screening criteria for environmentally sustainable economic activities. 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 comply 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 activities that comply with the EU Taxonomy are laid down in Commission Delegated Regulation (EU) 2022/1214. 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. 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. 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 and custodial. To what extent were the sustainable investments with an environmental objective aligned with the EU Taxonomy? In accordance with the criteria for sustainable investments under the SFDR, the Company does not have a sustainable investment objective, nor has it committed to making sustainable investments. However, this Annual Report includes a summary of an internal assessment of the Company's investments based on the EU Taxonomy technical screening criteria outlined in the Delegated Regulation (EU) 2021/2139 (‘Climate Delegated Act’) and Delegated Regulation (EU) 2023/2486 (‘Environmental Delegated Act’). For more information, please refer to page 26 of the Company’s Sustainability Report. #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#1 Aligned 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. Asset allocation describes the share of investments in specific assets. 120 International Public Partnerships Limited Annual Report and financial statements 2023 What was the share of investments made in transitional and enabling activities? 43% of investments made in the period were made in Taxonomy-aligned investments, including activities that in and of themselves contribute substantially to one of the six environmental objectives (26%) and enabling activities (17%). How did the percentage of investments that were aligned with the EU Taxonomy compare with previous reference periods? Not previously monitored 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 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. 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* Taxonomy aligned investmentsOther investmentsOpExCapExTurnover0%20%40%60%80%100%2. Taxonomy-alignment of investments excluding sovereign bonds* Taxonomy alignedinvestmentsTaxonomy-aligned activities are expressed as a share 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.International Public Partnerships Limited International Public Partnerships Limited Annual Report and financial statements 2023 Annual Report and financial statements 2023 121 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) Sustainable Development Goal Alignment; (b) Alignment with INPP Exclusion criteria;(c)Alignment with INPP’s minimum Governance standards; and (d) ESG incorporated through the investment process. Please refer to the Company’s 2024 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 Reference benchmarks are indexes to measure whether the financial product attains the environmental or social characteristics that they promote. What was the share of investments made in transitional and enabling activities? 43% of investments made in the period were made in Taxonomy-aligned investments, including activities that in and of themselves contribute substantially to one of the six environmental objectives (26%) and enabling activities (17%). How did the percentage of investments that were aligned with the EU Taxonomy compare with previous reference periods? Not previously monitored 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 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. 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* Taxonomy aligned investmentsOther investmentsOpExCapExTurnover0%20%40%60%80%100%2. Taxonomy-alignment of investments excluding sovereign bonds* Taxonomy alignedinvestmentsTaxonomy-aligned activities are expressed as a share 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.NOTES 122 International Public Partnerships Limited Annual Report and financial statements 2023 CBP024450 Printed by a Carbon Neutral Operation (certified: CarbonQuota) under the PAS2060 standard. Printed on material from well-managed, FSC™ certified forests and other controlled sources. This publication was printed by an FSC™ certified printer that holds an ISO 14001 certification. 100% of the inks used are HP Indigo ElectroInk which complies with RoHS legislation and meets the chemical requirements of the Nordic Ecolabel (Nordic Swan) for printing companies, 95% of press chemicals are recycled for further use and, on average 99% of any waste associated with this production will be recycled and the remaining 1% used to generate energy. The paper is Carbon Balanced with World Land Trust, an international conservation charity, who offset carbon emissions through the purchase and preservation of high conservation value land. Through protecting standing forests, under threat of clearance, carbon is locked-in, that would otherwise be released. I n t e r n a t i o n a l P u b l i c P a r t n e r s h i p s L i m i t e d A n n u a l R e p o r t a n d f i n a n c i a l s t a t e m e n t s 2 0 2 3 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 

Continue reading text version or see original annual report in PDF format above