ANNUAL REPORT AND
FINANCIAL STATEMENTS 2023
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OUR PURPOSE IS TO INVEST RESPONSIBLY
IN SOCIAL AND PUBLIC INFRASTRUCTURE
THAT DELIVERS LONG-TERM BENEFITS FOR
ALL STAKEHOLDERS.
We aim to provide our investors with stable, long-term, inflation-
linked returns, based on growing dividends and the potential for
capital appreciation.
We expect to achieve this by investing in a diversified portfolio
of infrastructure assets and businesses which, through our
active management, meets societal and environmental needs
both now and into the future.
OVERVIEW
Strategic report
corporate governance
Financial StatementS
COMPANY FACTS
– London Stock Exchange trading code: INPP.L
– Member of the FTSE 250 and FTSE All-Share indices
– £2.6 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
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8
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2
9
2
0
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1
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3
2
2
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3
3
2
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3
4
2
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3
5
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3
6
2
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3
7
2
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3
8
2
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9
2
0
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0
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4
1
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4
2
2
0
4
3
2
0
4
4
2
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1
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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
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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.
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Annual Report and financial statements 2023
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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%.
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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%
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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.
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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.
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International Public Partnerships Limited
Annual Report and financial statements 2023
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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.
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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.
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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.
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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.
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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.
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overview
STRATEGIC REPORT
corporate governance
Financial StatementS
PORTFOLIO OPERATIONS continUeD
5. CONTRACT RISK
DESCRIPTION
The performance of the Company’s investments is dependent
on the complex set of contractual arrangements specific to each
investment continuing to operate as intended. The Company
is exposed to the risk that such contracts do not operate as
intended, are incomplete, contain unanticipated liabilities, are
subject to interpretation contrary to its expectations or otherwise
fail to provide the protection or recourse anticipated.
MACROECONOMIC
6. INFLATION
DESCRIPTION
Inflation may be higher or lower than expected. The net cash
flows from the Company’s investment portfolio are positively
correlated to inflation. Should actual inflation turn out to be
higher or lower than the rates assumed by the Company at
the relevant valuation date, this would be expected to impact
positively or negatively, respectively, on the Company’s projected
cash flows.
The level of inflation-linkage across the investments held by
the Company varies and is not consistent. The consequences
of higher or lower levels of inflation than that assumed by the
Company will not be uniform across its portfolio.
The Company is also exposed to the risk of changes to the
manner in which inflation is calculated by the relevant authorities.
MITIGATION
Such contracts have been entered into, usually only after
extensive negotiations and with the benefit of external legal
advice. A legal review of contract documentation is undertaken
as part of the Company’s due diligence at the time of making
new investments.
The Company benchmarks its inflation forecasts to credible
independent sources.
MITIGATION
The Company 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.
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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.
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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.
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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.
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Financial StatementS
CENTRAL OPERATIONS
11. FINANCIAL FORECASTS
DESCRIPTION
MITIGATION
The Company’s projections depend on the use of financial
models to calculate its future projected investment returns.
There may be errors in any of these financial models, including
calculation, input, logic, and output errors. Once corrected,
such errors may lead to a revision in projected cash flows
and thus impact valuation.
The financial forecasts of certain operating infrastructure
businesses can have more variability than contracted
concessions, given the wider range of variables that apply
and are therefore inherently more difficult to forecast accurately.
Sensitivities
The Company publishes information relating to its portfolio
including projections of how portfolio performance and valuation
might be impacted by changes in various factors e.g. interest
rates, inflation rates, deposit rates, etc. The sensitivity analysis
and projections are not forecasts and actual performance
is likely to differ (possibly significantly) from that projection
as in practice the impact of changes to such factors will be
unlikely to apply evenly across the portfolio or in isolation from
other factors.
The financial models used to generate financial forecasts
are generally subject to model audit by external professional
service firms, which is a process designed to identify errors.
The comparison of past actual performance of investments
against past projected performance also gives confidence
in financial models where actual performance has closely
matched projected performance. However, there can be
no assurance that forecasts will be realised, particularly in
relation to operational infrastructure businesses where more
variables apply.
Investments in regulated businesses are considered very long-
term, beyond the much shorter regulatory cycles. Valuations of
such businesses should take into account robustness of yield
and potential for increases in regulated asset base over time.
Financial models are managed by a dedicated team with a
background in financial modelling and experience of managing
models in a manner that seeks to minimise the risk of error.
Sensitivities are produced for the information of relevant
stakeholders and are accompanied by disclaimers and guidance
explaining that limited reliance can be placed upon them.
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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.
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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.
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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.
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CORPORATE GOVERNANCE
Financial StatementS
COMMITTEE MEMBERSHIP KEY:
Audit and Risk
Committee
ESG Committee
Investment Committee
Management Engagement
Committee
Nomination &
Remuneration
Committee
Risk Sub-Committee
MERIEL LENFESTEY
Chair, Management
Engagement Committee
JOHN LE POIDEVIN
Chair, Audit and Risk Committee,
Senior Independent Director
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.
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CORPORATE GOVERNANCE REPORT
MIKE GERRARD
CHAIR
INTRODUCTION
The Board of Directors are committed to high standards of
corporate governance and has put in place a framework for
corporate governance which it believes is appropriate for an
investment company that is a constituent of the FTSE 250 and
FTSE All-Share indices.
The Board is 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.
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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
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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
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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.
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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
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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.
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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.
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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.
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Annual Report and financial statements 2023
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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.
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CORPORATE GOVERNANCE
Financial StatementS
AUDIT AND RISK COMMITTEE REPORT
JOHN LE POIDEVIN
CHAIR, AUDIT & RISK COMMITTEE
The Audit and Risk Committee (the ‘Committee’ for the purposes
of this section of the Annual Report) is an essential part of the
Company’s governance framework. The Board has delegated
oversight of the Company’s financial reporting, internal controls,
compliance and external audit to the Committee. The terms of
reference for the Committee, together with details of the standard
business considered by the Committee, have been approved
by the Board and are available on the Company’s website
(www.internationalpublicpartnerships.com).
The Committee is chaired by John Le Poidevin. An overview of the
Committee’s work during the year and details of how the Committee
has discharged its duties are set out below.
COMMITTEE MEETINGS
The Committee meetings during the year were attended by the
Investment Adviser and Administrator by invitation. A representative
of the Company’s external auditor also attended those meetings
where the annual audit cycle, the Annual Report and financial
statements and the half-yearly financial report were considered.
The Audit and Risk Committee is comprised of the full Board,
with the exception of Mike Gerrard as Board Chair and Giles Frost
as the Non-Independent Director. All Committee members are
considered to be appropriately experienced to fulfil their role, having
significant, recent and relevant financial experience in line with the
UK Corporate Governance Code. Biographies of the Committee
members can be found on pages 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
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AUDIT AND RISK COMMITTEE REPORT continUeD
KEY ACTIVITIES CONSIDERED DURING THE YEAR
The Committee undertook the following activities in discharging
its responsibilities during the year:
The Committee concluded that a consistent valuation methodology
has been applied throughout the year and any forecast assumptions
applied were appropriate.
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.
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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
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DIRECTORS’ REPORT
INTRODUCTION
The Directors present their Annual Report on the performance of the
Company and Group for the year ended 31 December 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
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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.
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INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF INTERNATIONAL PUBLIC PARTNERSHIPS LIMITED
REPORT ON THE AUDIT OF THE CONSOLIDATED FINANCIAL STATEMENTS
OUR OPINION
In our opinion, the consolidated financial statements give a true and fair view of the consolidated financial position of International Public
Partnerships Limited (the “Company”) and its subsidiaries (together “the Group”) as at 31 December 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)
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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.
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INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF INTERNATIONAL PUBLIC PARTNERSHIPS LIMITED continUeD
Key audit matter
How our audit addressed the key audit matter
Fair value
measurement of
investments at fair
value through profit
or loss
The investment portfolio,
valued at £2.8 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.
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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.
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INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF INTERNATIONAL PUBLIC PARTNERSHIPS LIMITED continUeD
Our audit testing might include testing complete populations of certain transactions and balances, possibly using data auditing techniques.
However, it typically involves selecting a limited number of items for testing, rather than testing complete populations. We will often seek to
target particular items for testing based on their size or risk characteristics. In other cases, we will use audit sampling to enable us to draw
a conclusion about the population from which the sample is selected.
As part of an audit in accordance with ISAs, we exercise professional judgement and maintain professional scepticism throughout the audit.
We also:
– Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and
perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our
opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may
involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
– Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control.
– Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made
by the directors.
– Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence
obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to
continue as a going concern over a period of at least twelve months from the date of approval of the consolidated financial statements.
If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the
consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit
evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue
as a going concern.
– Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether
the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
– Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to
express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the
Group audit. We remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and
significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding
independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our
independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of most significance in the
audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters
in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances,
we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably
be expected to outweigh the public interest benefits of such communication.
USE OF THIS REPORT
This report, including the opinions, has been prepared for and only for the members as a body in accordance with Section 262 of
The Companies (Guernsey) Law, 2008 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for
any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed
by our prior consent in writing.
REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS
COMPANY LAW EXCEPTION REPORTING
Under The Companies (Guernsey) Law, 2008 we are required to report to you if, in our opinion:
– we have not received all the information and explanations we require for our audit;
– proper accounting records have not been kept; or
– the consolidated financial statements are not in agreement with the accounting records.
We have no exceptions to report arising from this responsibility.
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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
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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.
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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
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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
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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.
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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.
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FINANCIAL STATEMENTS
3. SEGMENTAL REPORTING
Based on a review of information provided to the chief operating decision makers of the Group (determined to be the Board), the Group has
identified four reportable segments based on the geographical risk associated with the jurisdictions in which it operates. The factors used to
identify the Group’s reportable segments are 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.
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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
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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
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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.
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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.
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FINANCIAL STATEMENTS
Derivative financial instruments
Derivatives are classified as financial assets and liabilities at fair value through profit or loss, held for trading. Derivatives are recognised
initially, and are subsequently remeasured, at fair value. Derivatives are shown as assets when their fair value is positive or as liabilities when
their fair value is negative. Fair value movements on derivative financial instruments held for trading are recognised in the Consolidated
Statement of Comprehensive Income.
Impairment of financial assets
Financial assets, other than those classified at fair value through profit or loss, being trade and other receivables 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.
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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.
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FINANCIAL STATEMENTS
LIQUIDITY RISK
Liquidity risk is defined as the risk that the Group would encounter difficulty in meeting obligations as and when they fall due associated with
financial liabilities that are settled by delivering cash or another financial asset. The Group invests in relatively illiquid investments (mainly non-
listed equity and loans). As a closed-ended investment vehicle there are no automatic capital redemption rights. The Group manages liquidity
risk by maintaining adequate cash reserves, banking facilities and reserve borrowing facilities and by continuously monitoring forecast and
actual cash flows. Cash flow forecasts assume full availability of underlying infrastructure to the relevant public sector body or end-user.
Failure to maintain assets available for use or operating in accordance with pre-determined performance standards or licence conditions may
lead to a reduction (wholly or partially) in the investment income that the Group has projected to receive. The Directors review the underlying
performance of each investment on a quarterly basis, allowing asset performance to be monitored. The terms of public-private partnership
contractual mechanisms also allow for significant pass-down of unavailability and performance risk to sub-contractors. Regulated asset
regimes allow for the pass through of efficiently incurred costs to the purchaser. The Group’s financial liabilities comprise trade and other
payables, payable within 12 months of the year end, derivative financial instruments, and bank loans, repayable in 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.
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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;
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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)
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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
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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.
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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
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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.
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Annual Report and financial statements 2023
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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
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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
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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.
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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
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Annual Report and financial statements 2023
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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.
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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
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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
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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
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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
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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:
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•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.
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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
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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
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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
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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
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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
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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
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The paper is Carbon Balanced with World Land Trust, an international
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would otherwise be released.
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International Public Partnerships Limited
c/o Ocorian Administration (Guernsey) Limited
PO Box 286
Floor 2
Trafalgar Court
Les Banques
St Peter Port
Guernsey, Channel Islands GY1 4LY
Tel: +44 1481 742 742
WWW.INTERNATIONALPUBLICPARTNERSHIPS.COM