2021
Annual Report and
financial statements
International Public Partnerships Limited Annual Report and financial statements 2021
OVERVIEW
RESPONSIBLE INVESTMENT
In support of its purpose, the Company is committed to
responsible investment that is beneficial to its shareholders,
communities, society and wider stakeholders. The Company
believes that the financial performance of its investments is linked
to environmental and social success and, as such, the Company
considers issues that have the potential to impact the
performance of its investments, both now and in the future.
The Company draws on several frameworks and benchmarks to
provide direction. These frameworks are reviewed on an annual
basis to ensure that the Company remains at the forefront of
sustainable investment, operations and reporting.
The Company’s Investment Adviser, Amber Infrastructure Limited
(‘Amber’) is a signatory of the UN-backed Principles for
Responsible Investment(‘PRI’).
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. The Company contributes towards the SDGs in two
main ways: the positive impact investments have on sustainable
development and our aim to manage investments sustainably.
The Company has also aligned its investment activity with the
objectives of the Paris Agreement and is a supporter of the
recommendations of the Task Force on Climate-related Financial
Disclosures (‘TCFD’).
COMPANY FACTS
– London Stock Exchange trading code: INPP.L
– Member of the FTSE 250 and FTSE All-Share indices
– £2.9 billion market capitalisation at 31 December 2021
– 1,706 million shares in issue at 31 December 2021
– Eligible for ISA/PEPs and SIPPs
– Guernsey incorporated company
– International Public Partnerships (the ‘Company’, ‘INPP’, the
‘Group’ (where including consolidated entities)) shares are
excluded from the Financial Conduct Authority’s restrictions, which
apply to non-mainstream investment products, and can be
recommended by independent financial advisers to their clients
CONTENTS
OVERVIEW
01 Full-Year Financial Highlights
02 Company Overview
STRATEGIC REPORT
04 Business Model – Delivering Long-term Benefits
06 Objectives and Performance
08 Chair’s Letter
12 Top 10 Investments
14 Case Study – Danish PPP Portfolio
16 Operating Review
19 Market Environment in 2022 and Future Opportunities
23 Current Pipeline
38 Responsible Investment
50 Continuous Risk Management
CORPORATE GOVERNANCE
63 Summary of Investment Policy
64 Board of Directors
66 Corporate Governance Report
74 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
87 Consolidated Financial Statements
91 Notes to the Financial Statements
112 Glossary
115 Key Contacts
PRINCIPAL SDGs SUPPORTED
GLOSSARY
Certain words and terms used throughout the Annual Report and
financial statements are defined in the glossary on page 112.
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 IMAGE
Investment: Tinglysningsretten in Hobro, Design: Cubo Arktekter,
Photo: Helene Høyer Mikkelsen
WWW.INTERNATIONALPUBLICPARTNERSHIPS.COM
International Public Partnerships Limited registered number: 45241
International Public Partnerships Limited
Annual Report and financial statements 2021
01
CORPORATE GOVERNANCE FINANCIAL STATEMENTSOVERVIEW STRATEGIC REPORT
OVERVIEW
FULL-YEAR
FINANCIAL HIGHLIGHTS
1 The forecast date for payment of the dividend relating to the six months to 31 December 2021 is 7 June 2022.
2 Future profit projection and dividends cannot be guaranteed. Projections are based on current estimates and may vary in future.
3 Cash dividend payments to investors are paid from net operating cash flow before capital activity* as detailed on pages 29 to 30.
4 The methodology used to determine the NAV is described in detail on pages 31 to 37.
5 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
inthe portfolio weighted average discount rate.
6 Since inception in November 2006. Source: Bloomberg. Share price appreciation plus dividends assumed to be reinvested.
7.74p
2022 full-year dividend target per share
2
*
148.2p
NAV per share at 31 December 2021
4
(2020: 147.1p)
1.1X
Cash dividend cover
3
*
(2020: 1.2x)
0.7%
Increase in NAV per share*
(2020: -2.3%)
8.5% p.a.
Annualised TSR since IPO
6
7.93p
2023 full-year dividend target per share
2
7.55p
2021 full-year dividend per share
1
*
£2.5bn
NAV at 31 December 2021
4
(2020: £2.4bn)
£252.7m
Cash investments made during 2021
(2020: £30.0m)
0.7%
Portfolio inflation-linked returns*
at 31 December 2021
5
(2020: 0.8%)
245.0%
TSR since Initial Public Offering (‘IPO’)
6
£129.2m
Profit before tax
(2020: £60.8m)
2.6%
2021 dividend growth
1
*
6.1%
Increase in NAV
(2020: -1.7%)
DIVIDENDS
NET ASSET VALUE (‘NAV’)
4
* PORTFOLIO ACTIVITY
REAL RETURNS
TOTAL SHAREHOLDER RETURN (‘TSR’)* PROFIT
WE AIM TO PROVIDE OUR INVESTORS WITH
STABLE, LONG-TERM, INFLATION-LINKED
RETURNS, BASED ON GROWING DIVIDENDS
AND THE POTENTIAL FOR CAPITAL APPRECIATION
International Public Partnerships Limited
Annual Report and financial statements 2021
4
5
6
7
8
Actual Forecast
5.25
5.40
5.55
5.70
5.85
6.00
6.15
6.30
6.45
6.65
6.82
7.00
7.18
7.36
7.55
7.74
7.93
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2023
2022
INPP Dividend Payments
Pence per share
0
150
250
300
200
100
50
400
350
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040
2041
2042
2043
2044
2045
2046
2047
2048
2050
2049
2147
2148
2149
2150
Projected Investment Receipts
Investment Receipts (£ million)
Courts 2%
Sector Breakdown
142 investments in infrastructure investments
and businesses across a variety of sectors
1
Energy Transmission 22%
Transport 21%
Education 18%
Gas Distribution 15%
Waste Water 9%
Health 4%
Military Housing 3%
Digital 2%
Other 4%
Investment Type
Investments across the capital structure,
taking into account appropriate risk-return
profiles
Risk Capital
2
91%
Senior Debt 9%
Investment Ownership
Preference to hold majority stakes
100% 47%
50–100% 7%
<50% 46%
Geographic Split
Invested in selected global regions that meet
INPP’s specific risk and return requirements
UK 75%
Australia 8%
Belgium 7%
Germany 4%
US 3%
Canada 2%
Ireland 1%
Denmark <1%
Italy <1%
Mode of Acquisition/
Investment Status
Early stage investment gives first mover
advantage and maximises capital
growth opportunities
Construction 9%
Operational 91%
Early Stage
Investor
3
65%
Later Stage
Investor
4
35%
Investment Life
Weighted average portfolio life of 33 years
5
<20 years 48%
20–30 years 20%
>30 years 32%
02
OVERVIEW
COMPANY OVERVIEW
CONSISTENT AND SUSTAINED RETURNS LOW RISK AND DIVERSIFIED PORTFOLIO
PREDICTABLE PORTFOLIO PERFORMANCE
1 The majority of projects and businesses
benefit from availability-based or
regulated revenues.
2 Risk Capital includes both investment and
business level equity and 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.
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 2021 are included.
International Public Partnerships Limited
Annual Report and financial statements 2021
Board and Committees
Fund level reporting and
Board support
Investment
portfolio
Asset management
representation at Board level
Financial and ‘hands-on’
asset management
Strong and sustainable stewardship of portfolio
03
CORPORATE GOVERNANCE FINANCIAL STATEMENTSOVERVIEW STRATEGIC REPORT
We have a long-standing
relationship with Amber, the
Company’s Investment Adviser
Amber has sourced and
managed the Company’s
assets since IPO in 2006
Relationship with the Investment Adviser Our Strengths
Long-term alignment of
interests between the Company,
Amber and other key suppliers
Amber has physical presence
in all of the major countries in
which we invest, which provides
local insights and relationships
A vertically integrated model
with direct relationships with
public sector authorities
Experienced team in all aspects
of infrastructure development,
investment and management
Active approach to
investment stewardship, which
is the cornerstone of successful
investment
Consideration and integration
of material Environmental, Social
and Governance (‘ESG’) risks
andopportunities
Active engagement with all key
stakeholders
Strong, independent Board
(seven of the eight directors are
independent) with a diversity of
experience and strong corporate
governance
Amber is a specialist
international infrastructure
investment manager and one
of the largest independent teams
in the sector with over 150
employees working internationally.
It is a leading investment originator,
asset and fund manager with a
strong trackrecord
Amber applies an active asset
management approach to the
underlying investments, to
support sustainable performance
The Company has a first right
of refusal over qualifying
infrastructure investments
identified by Amber and for US
investments, by Amber’s
long-term investor, US Group,
Hunt Companies LLC (‘Hunt’)
INTERNATIONAL PUBLIC PARTNERSHIPS INVESTS
IN HIGH-QUALITY INFRASTRUCTURE ASSETS
AND BUSINESSES THAT ARE SUSTAINABLE OVER
THE LONG TERM
See more about the Investment Adviser
on pages 24 to 28
See more about Corporate Governance
on page 10
International Public Partnerships Limited
Annual Report and financial statements 2021
04
STRATEGIC REPORT
BUSINESS MODEL
DELIVERING LONG-TERM BENEFITS
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.
WHAT WE DOOUR PURPOSE
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
VALUE-FOCUSED PORTFOLIO DEVELOPMENT
– We seek a portfolio of investments with no or low 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 unique
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
INVEST
We seek new investments through
our extensive relationships,
knowledge and insights to:
– Enhance long-term, inflation-linked
cash flows*
– Provide opportunities to create
long-term value and enhance returns
– Ensure ESG is core to the
investment process
For more see pages 16 to 18
EFFICIENT FINANCIAL
MANAGEMENT
CONTINUOUS RISK
MANAGEMENT
RESPONSIBLE
INVESTMENT
International Public Partnerships Limited
Annual Report and financial statements 2021
05
OVERVIEW STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
VALUE CREATION
ACTIVE ASSET MANAGEMENT
– The Investment Adviser has an in-house asset management team dedicated
tomanaging the Company’s investments
– Where possible, through the Investment Adviser, we manage the day-to-day
activities of each of our investments internally
– We carry out extensive monitoring, including asset level board and
management meetings which occur on a quarterly basis
– The Company works with public sector clients, partners and service providers
to ensure investments are being managed both responsibly and efficiently to
deliver the required outputs
– We focus on investment stewardship across the portfolio and recognise the
broader value created from our investments
OPTIMISE
Using the Investment Adviser’s highly
experienced in-house asset
management team, we seek to
actively manage the Company’s
investments, balancing risk and
return, and using detailed research
and analysis to optimise the
Company’s financial and ESG
performance
DELIVER
Together with our Investment
Adviser’s active asset management
ofour investments, we aim to deliver
strong ongoing asset performance
forstakeholders and achieve target
returns from the portfolio for investors
INVESTOR RETURNS
Continuing to deliver consistent financial returns for
investors through dividend growth* and inflation-linked
returns* from underlying cash flows and providing
opportunities for potential capital appreciation
PUBLIC SECTOR AND OTHER CLIENTS
Providing responsible investment in infrastructure to
support the delivery of essential public services and
broader societal objectives (e.g. supporting the path to
net zero). Our ability to deliver services and maintain
relationships with our clients and other key stakeholders
is vital for the long-term prosperity of each investment
COMMUNITIES
Delivering sustainable social infrastructure for the benefit
of local communities. The Company’s investments
provide vital public assets which strengthen communities,
and seek to provide additional benefits through deploying
investment in local economies, job creation and by using
investments to help strengthen communities
SUPPLIERS AND THEIR EMPLOYEES
The performance of our service providers, supply chain
and their employees is crucial for the long-term success
of our investments. The Company promotes a
progressive approach to:
– Corporate social responsibility
– Safe, healthy, inclusive workplaces
– Opportunities for professional development
– Staff engagement
For more see pages 24 to 28
EFFICIENT FINANCIAL
MANAGEMENT
– Efficient financial management of investment cash flows and
working capital
– Maintaining cash covered dividends
– Ensuring cost-effective operations
For more see pages 29 to 30
CONTINUOUS RISK
MANAGEMENT
– 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
ongoing asset performance
For more see pages 50 to 62
RESPONSIBLE
INVESTMENT
– Integrated ESG considerations across the investment lifecycle
– Robust ESG objectives to build resilience and drive environmental
and social progress
– Upholding high standards of business integrity and governance
For more see pages 38 to 49
VALUE-FOCUSED PORTFOLIO DEVELOPMENT
INVESTOR RETURNS
ACTIVE ASSET MANAGEMENT
International Public Partnerships Limited
Annual Report and financial statements 2021
06
STRATEGIC REPORT
OBJECTIVES AND PERFORMANCE
Originate investments with stable, long-term
cash flows and potential growth attributes,
whilst maintaining a balanced portfolio
ofassets
Delivering long-term, inflation-
linked returns to investors
Managing strong ongoing asset performance
Target an annual dividend
increase of 2.5%
2.6%
Annual dividend increase achieved
(2020: 2.5%)
Target a long-term total return
of at least 7.0% per annum
7.7% p.a.
IRR achieved since IPO
1
(2020: 7.7%)
Inflation-linked returns on a
portfolio basis
0.7%
Inflation-linked returns on a portfolio basis
(2020: 0.8%)
1 Calculated by reference to the November 2006 IPO issue price of 100p and reflecting
NAV* appreciation plus dividends paid.
2 Measured by comparing forecast portfolio distributions against actual portfolio
distributions received. In the current year, actual portfolio distributions exceeded forecast.
3 In its first year of participation, the Company’s Investment Adviser achieved A+ in the
UN-backed PRI 2020 assessment for both the strategy and governance and the
Infrastructure modules.
4 The Company aims to manage and monitor any potential adverse impact as outlined on
page 41.
STRATEGIC PRIORITIES
EFFICIENT FINANCIAL MANAGEMENT
Making efficient use of the Company’s
finances and working capital
RESPONSIBLE INVESTMENT
Management of material ESG factors
International Public Partnerships Limited
Annual Report and financial statements 2021
07
OVERVIEW STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
New investments meet at least three of six attributes:
1. Stable, long-term returns
2. Inflation-linked investor cash flows
3. Early stage investor
4. Investment secured through preferential access
5. Other capital enhancement attributes
6. Positive SDG contribution
Strong ongoing asset performance as demonstrated by:
100%
Forecast portfolio distributions
received for 2021
2
(2020: 88.4%)
0.1%
Asset performance deductions achieved
against a target of <3% during 2021
(2020: 0.1%)
99.8%
Asset availability achieved against
a target of >98% during 2021
(2020: 99.7%)
THE VALUE WE PROVIDE TO OUR INVESTORS IS MONITORED
USING OUR KEY PERFORMANCE INDICATORS (‘KPIs’).
THE DELIVERY OF VALUE TO BOTH INVESTORS AND OUR WIDER
STAKEHOLDERS IS ACHIEVED BY CAREFULLY MONITORING
OUR PERFORMANCE AGAINST RELATED STRATEGIC PRIORITIES
100%
of the investments made
in 2021 met at least three
of the six attributes
(2020: 100%)
Cash covered dividends*
1.1x
Dividends fully cash covered* for 2021
(2020: 1.2x)
Competitive ongoing charges
1.18%
Ongoing charges ratio for 2021
(2020: 1.18%)
Robust integration of ESG into
investment lifecycle
A+
The Company’s Investment Adviser’s score for the
UN-backed PRI 2020 assessment for both the Strategy
and Governance and the Infrastructure modules
3
Positive SDG contribution for
new investments
100%
Percentage of investments in
the period that positively support
targets outlined by the SDGs
4
International Public Partnerships Limited
Annual Report and financial statements 2021
08
STRATEGIC REPORT
CHAIR’S LETTER
DEAR SHAREHOLDERS,
This has again been a difficult year for the
people who use, build, operate, maintain
and manage the Company’s investments.
So foremost, I and my fellow directors wish
to thank our stakeholders, supply chain
partners and, especially, our Investment
Adviser, who have all had to deal with the
ongoing and wide-ranging impacts of the
Covid-19 pandemic on their working and
personal lives, whilst striving to ensure that
public services have continued to be
delivered by the Company’s investments.
Within this challenging context, I am
therefore doubly pleased to be able to report
that the Company had another successful
year in 2021. Notable highlights during the
12 months to 31 December 2021 included:
– Maintaining our record of dividend growth;
– Further strong operational performance
of the Company’s portfolio;
– Approximately £253 million of capital
deployed into new investments across
the transport, energy, social infrastructure
and digital sectors, including the
Company’s first investments in Denmark;
– Raising £135 million of new capital; and
– Further enhancement of our ESG
reporting, establishing INPP as a leading
choice of investment for sustainability
focused investors.
Whilst some individual asset performance
was inevitably impacted by the pandemic
over the course of the year, overall the
portfolio experienced limited disruption
which illustrates its resilience to such
shocks.
Looking forward, the Company remains
confident that its business model and
investment objectives will continue to
offer a significant degree of protection
for our investors. Moreover, the Board
continues to see a positive outlook
for new investment opportunities.
FINANCIAL PERFORMANCE
Over the period, the Company’s NAV per
share increased from 147.1 pence at
31 December 2020 to 148.2 pence at
31 December 2021. The Company reported
a profit for the year of £129.2 million
(31 December 2020: £60.8 million).
Furthermore, the Company grew its dividend
to 7.55 pence per share for the 2021
financial year, whilst maintaining fully cash
covered dividends (cash dividend cover at
1.1x (2020: 1.2x)). The Board continues to
expect to deliver further growth in our
dividend. The dividend growth for the 12
months to 31 December 2021 of 2.6% is
consistent with the c.2.5% average annual
dividend growth that has been delivered to
investors since the Company’s inception,
and the Board is also pleased to reaffirm its
dividend target for 2022 of 7.74 pence per
share and provide new guidance of 7.93
pence per share for 2023.
The Company’s overall robust performance
and ability to deliver a growing dividend have
been consistent features throughout its
history. I note that investors who became
shareholders in the Company at its inception
in 2006 have achieved a TSR of 245.0%, or
8.5% on an annualised basis on their initial
investment. The Company’s full-year
financial highlights are set out on page 1.
Looking forward, the
Company remains
confident that its
business model
and investment
objectives will
continue to offer a
significant degree
ofprotection for
ourinvestors.
MIKE GERRARD
CHAIR
International Public Partnerships Limited
Annual Report and financial statements 2021
09
OVERVIEW STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
PORTFOLIO OVERVIEW
Whilst overall the portfolio performed well in
2021, the pandemic continued to impact a
small number of the Company’s investments,
whose performance has already started to
improve and is expected to continue to do
so during the course of 2022.
Diabolo Rail Link (‘Diabolo’) has experienced
the greatest impact, as Brussels Airport saw
much reduced numbers of passengers
using its services. However, independent
forecasts predict a gradual recovery in
passenger volumes during 2022 and
thereafter. Discussions are ongoing with
Infrabel, the Belgian rail network owner, over
the implementation of contractual
protections that have the potential to mitigate
some of this impact, although no such
mitigation is assumed within the Company’s
current valuation of its investment in Diabolo.
Tideway, the company building the 25km
‘super sewer’ under the River Thames in
London, has continued to make good
progress with construction 73% complete as
at 31 December 2021 and with the primary
tunnelling expected to be complete in the
coming months. As reported previously,
Tideway has been in discussions with Ofwat
regarding additional measures to mitigate
the impact on Tideway’s investors of both
Covid-19 related cost overruns and the
Financing Cost Adjustment Mechanism
(‘FCAM’). Subsequent to a provisional
agreement with Tideway, Ofwat launched a
public consultation in December 2021 to
gain views from interested parties on the
proposed amendments. As the consultation
was ongoing at the valuation date, the
31 December 2021 valuation of the
Company’s investment in Tideway included
a prudent assessment of the outcome of the
consultation and the necessary licence
modification process. The consultation
subsequently closed in January 2022 and
the licence modifications came into effect in
March 2022.
There has also been satisfactory resolution
of the appeal by Cadent (our gas distribution
investment) to the Competition and Markets
Authority (‘CMA’) against regulator Ofgem’s
final determination in respect of the five-year
regulatory period beginning April 2021. The
CMA published its final determination in
October 2021 and the findings were
modestly positive for the Company’s
valuation of Cadent.
Overall, the activities in this period have
continued to emphasise the need for, and
success of, the Investment Adviser’s active
asset management approach, given the
central role it plays in delivering the long-
term performance of the Company.
INVESTMENT ACTIVITY
During 2021, the Company has completed
£252.7 million of new and follow-on
investments across the education, judicial,
energy transmission, transport, digital and
health sectors. Highlights include:
– Financial close of a new police
headquarters in Offenbach, Germany,
investing £8.1 million for a 45%
shareholding;
– Acquisition of Beatrice and Rampion
Offshore Transmissions projects
(‘OFTOs’), which are the eighth and ninth
OFTO investments undertaken by the
Company and increases the number of
homes that the Company’s OFTO
portfolio is capable of powering to
approximately 2.1 million;
– Completion of an additional c.5%
investment in Angel Trains, the largest
rolling stock company in the UK. Angel
Trains serves the UK passenger rail
sector with a diversified fleet of more than
4,000 vehicles, the majority of which are
electric multiple units. Angel Trains is now
the Company’s third largest investment
holding in its portfolio, by value;
– The Company’s first investments in
Denmark, where it acquired four
Public-Private Partnership (‘PPP’)
projects, including two schools, a
specialist land registry court archive
building and a hospital car parking facility;
and
– A commitment to invest £9.2 million in the
Flinders University Health and Medical
Research Building (‘HMRB’) in South
Australia.
Please see more information on the
Company’s investment activity on pages
17 to 18.
INVESTMENT STEWARDSHIP AND ESG
The Company’s stewardship of its
investments is fundamental to its
performance. The Company’s Investment
Adviser continues to engage with its public
sector partners and key suppliers to ensure
that the projects and businesses in which
the Company invests remain available and
operational to deliver for the communities
which they serve, to the greatest extent
possible, whilst protecting the health and
safety of staff and users.
The Company aims to be a leader in
demonstrating a commitment to ESG issues
and has developed a series of ESG KPIs to
evidence and monitor this, hand-in-hand
with its alignment with TCFD, the EU
Sustainable Financial Disclosure Regulation
(‘SFDR’) and anticipated UK-specific SDR
disclosures. These KPIs are detailed within
the Responsible Investment Section on
pages 38 to 49.
During the course of the year, the Company
issued its inaugural Sustainability Report
1
.
This report reflects the Company’s
commitment to sustainability and provides
investors and other stakeholders with an
in-depth view of the Company’s integrated
approach.
1 https://www.internationalpublicpartnerships.com/media/2471/inpp-2021-sustainability-report.pdf.
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 portfolio weighted average discount rate. Please refer to page 31 for further detail.
International Public Partnerships Limited
Annual Report and financial statements 2021
10
STRATEGIC REPORT
CORPORATE GOVERNANCE
Board succession is of the utmost
importance and I am delighted that
Stephanie Coxon was appointed to the
Board with effect from 1 January 2022.
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 full-time non-executive director,
Stephanie led the investment trust capital
markets team at PricewaterhouseCoopers
CI LLP (‘PwC’) for the UK and Channel
Islands. Her appointment anticipates the
retirement of Claire Whittet from the Board
during 2022.
The Company’s ESG Committee, which is
chaired by Julia Bond, convened its
inaugural meeting in March 2021. The ESG
Committee provides oversight and challenge
to the Company’s ESG-related risks,
opportunities and reporting. The
Committee’s work commenced with the first
edition of the Company’s Sustainability
Report referred to above.
Sally-Ann David was appointed Chair of the
Risk Sub-Committee in March 2021, taking
over from Julia Bond.
As previously reported, the Company
changed its auditors during 2021. Following
a formal audit tender completed in 2020,
PwC was selected as the Company’s new
auditor and received shareholder approval at
the Company’s Annual General Meeting
(‘AGM’) in May 2021. All parties have been
working closely to ensure a smooth and
effective auditor transition.
The Management Engagement Committee
(‘MEC’), chaired by Claire Whittet,
undertakes regular reviews of the Investment
Adviser’s performance and that of the other
suppliers to the Company. We continue to
be well served by our Investment Adviser
and, consistent with this productive and
engaged relationship, during the course of
2021 we were pleased to agree a further
reduction in the investment management fee
charged to the Company. This has now
been reduced from 90bps to 80bps in
respect of fully operational assets with an
adjusted gross asset value in excess of
£2.75 billion.
The approach of the Board to corporate
governance is one of continuous
improvement and, during 2021, the Board
implemented the recommendations of an
externally-facilitated review of its
performance, completed at the end of 2020.
The Board continues to comply with the
Association of Investment Companies (‘AIC’)
Code of Corporate Governance, which
ensures the requirements of the UK
Corporate Governance Code relevant to an
investment fund are adhered to. Further
details are set out in the Corporate
Governance section of this Report.
CURRENT ENVIRONMENT
AND OUTLOOK
Our portfolio’s performance has been robust
throughout the pandemic; and now, as
societies and markets continue their
recovery to post-pandemic norms, general
levels of inflation have emerged as a new key
issue across the economies in which we
invest. Whilst the levels at which inflation will
peak and the duration of these inflationary
periods remain uncertain, we take comfort
from the strong inflation-linked returns* of the
Company’s income streams (0.7%
1
) and its
mitigated exposure to demand risks within
the portfolio.
Infrastructure investment is fundamentally
about long-termism in public policy, capital
allocation and economic growth. It is also
the long-term investment horizon of
infrastructure which places it front-and-
centre of efforts by governments to deliver
sustainable and fairer societies. Therefore,
whilst events such as the pandemic and the
return of inflation may disrupt short-term
plans, they do not alter the fundamental
investment case for modern infrastructure; in
fact, arguably, they strengthen it, as the need
for economic resilience becomes ever
greater. Moreover, these objectives need to
be met within the constraint of stressed
public sector balance sheets. Accordingly,
we expect that over the medium-term,
governments will bring forward a growing
number of new infrastructure investment
plans, based upon funding solutions
requiring private capital. Our strong pipeline
of opportunities already reflects this and
includes over £185 million of investment to
which we are already committed or which
our Investment Adviser has under
development.
We have all learned a great deal from the last
two years about the complementary roles of
public and private sectors in delivering
priority outcomes for society, and of the
need for close cooperation in working to
common goals. It is this learning which will
be applied in tackling climate change – the
single greatest long-term risk facing society
and in the mitigation of which infrastructure
investment will play a pivotal role. The
COP26 conference in November last year
made clear the scale of challenges that we
all face. The Company, with its foundations
in long-term PPP and infrastructure
businesses, and a proven capability to invest
sustainably, is well placed to respond to
these challenges. So it is with confidence
that we face growing opportunities within
our chosen markets.
CONTINUED
CHAIR’S LETTER
International Public Partnerships Limited
Annual Report and financial statements 2021
11
OVERVIEW STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
As I write, the tragic events of the war in
Ukraine are unfolding and there has already
been significant loss of life and human
suffering, with millions of people affected
and displaced to neighbouring countries.
First and foremost our thoughts are with
those people whose lives have been
impacted. We are aware that the Company’s
Investment Adviser and its employees are
taking practical steps to provide assistance
both through its corporate and social
responsibility programme as well as at an
individual level where they are able, including
donating to humanitarian support charities.
We also continue to actively monitor the
situation, to ensure that our portfolio of
investments is protected, to the extent it can
be, from the direct and indirect impacts of
the war, as well as continuing to review
sanctioned entities / individuals. The
Company does not hold any investments in
the affected region and we are not aware of
any material direct implications for the
Company or its portfolio.
I and my fellow Directors thank you for your
continued support.
MIKE GERRARD
CHAIR
23 March 2022
International Public Partnerships Limited
Annual Report and financial statements 2021
12
STRATEGIC REPORT
TOP 10 INVESTMENTS
NAME OF INVESTMENT LOCATION SECTOR STATUS AT
31 DECEMBER 2021
% HOLDING AT
31 DECEMBER 2021
1
% INVESTMENT FAIR VALUE
31 DECEMBER 2021
% INVESTMENT FAIR VALUE
31 DECEMBER 2020
PRIMARY SDG
SUPPORTED
CADENT
UK Gas distribution Operational 7% Risk Capital 15.5% 16.5%
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.
TIDEWAY
UK Waste water Under construction 16% Risk Capital 9.1% 9.1%
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.
ANGEL
TRAINS
UK Transport Operational 10% Risk Capital 7.1% 3.1%
Angel Trains is a rolling stock leasing company which owns more than 4,000 vehicles. Angel Trains has invested over £5 billion in new rolling stock and refurbishment since 1994, and is the second largest
investor in the industry after Network Rail.
DIABOLO
RAIL LINK
Belgium Transport Operational 100% Risk Capital 7.0% 7.8%
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.
LINCS
OFTO
UK Energy transmission Operational 100% Risk Capital 6.9% 7.6%
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
under-sea cables, 100km in length.
ORMONDE
OFTO
UK Energy transmission Operational
100% Risk Capital and
100% senior debt
4.2% 5.0%
The project connects the 150MW Ormonde offshore wind farm, located 10km off the Cumbrian coast, to the National Grid. The transmission assets comprise the onshore and offshore substations and
under-sea cables, 41km in length.
RELIANCE
RAIL
Australia Transport Operational 33% Risk Capital 3.7% 3.9%
Reliance Rail is responsible for financing, designing, delivering and ongoing maintenance of 78 next-generation, electrified, ‘Waratah’ train sets serving Sydney in New South Wales, Australia.
BeNEX
Germany Transport Operational 100% Risk Capital 2.8% 3.2%
BeNEX is both a rolling stock leasing company as well as an investor in train operating companies (‘TOCs’), providing approximately 43 million train km of annual rail transport.
US MILITARY
HOUSING
2
US Military housing Operational 100% Risk Capital 2.5% 2.8%
Two tranches of mezzanine debt underpinned by security over seven operational PPP military housing projects, relating to a total of 19 operational military bases in the US and comprising c.21,800 individual
housing units.
BEATRICE
OFTO
UK Energy transmission Operational 100% Risk Capital 2.0% N/A
The project connects the 588MW Beatrice offshore wind farm, located 13.5km off the Caithness coastline of Scotland, to the National Grid. The transmission assets comprise the onshore and offshore
substations, 20km of onshore export cables and 70km of offshore export cables.
1 Risk Capital includes both project level equity and subordinated shareholder debt.
2 Includes two tranches of mezzanine debt into US military housing.
More detail on significant movements in the Company’s portfolio for the year to 31 December 2021 can be found on pages 16 to 18 of the Operating Review.
International Public Partnerships Limited
Annual Report and financial statements 2021
13
OVERVIEW STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
THE COMPANY’S TOP 10 INVESTMENTS BY FAIR VALUE AT 31 DECEMBER
2021 ARE SUMMARISED BELOW. A COMPLETE LISTING OF THE
COMPANY’S INVESTMENTS IS AVAILABLE ON THE COMPANY’S
WEBSITE (WWW.INTERNATIONALPUBLICPARTNERSHIPS.COM).
NAME OF INVESTMENT LOCATION SECTOR STATUS AT
31 DECEMBER 2021
% HOLDING AT
31 DECEMBER 2021
1
% INVESTMENT FAIR VALUE
31 DECEMBER 2021
% INVESTMENT FAIR VALUE
31 DECEMBER 2020
PRIMARY SDG
SUPPORTED
CADENT
UK Gas distribution Operational 7% Risk Capital 15.5% 16.5%
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.
TIDEWAY
UK Waste water Under construction 16% Risk Capital 9.1% 9.1%
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.
ANGEL
TRAINS
UK Transport Operational 10% Risk Capital 7.1% 3.1%
Angel Trains is a rolling stock leasing company which owns more than 4,000 vehicles. Angel Trains has invested over £5 billion in new rolling stock and refurbishment since 1994, and is the second largest
investor in the industry after Network Rail.
DIABOLO
RAIL LINK
Belgium Transport Operational 100% Risk Capital 7.0% 7.8%
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.
LINCS
OFTO
UK Energy transmission Operational 100% Risk Capital 6.9% 7.6%
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
under-sea cables, 100km in length.
ORMONDE
OFTO
UK Energy transmission Operational
100% Risk Capital and
100% senior debt
4.2% 5.0%
The project connects the 150MW Ormonde offshore wind farm, located 10km off the Cumbrian coast, to the National Grid. The transmission assets comprise the onshore and offshore substations and
under-sea cables, 41km in length.
RELIANCE
RAIL
Australia Transport Operational 33% Risk Capital 3.7% 3.9%
Reliance Rail is responsible for financing, designing, delivering and ongoing maintenance of 78 next-generation, electrified, ‘Waratah’ train sets serving Sydney in New South Wales, Australia.
BeNEX
Germany Transport Operational 100% Risk Capital 2.8% 3.2%
BeNEX is both a rolling stock leasing company as well as an investor in train operating companies (‘TOCs’), providing approximately 43 million train km of annual rail transport.
US MILITARY
HOUSING
2
US Military housing Operational 100% Risk Capital 2.5% 2.8%
Two tranches of mezzanine debt underpinned by security over seven operational PPP military housing projects, relating to a total of 19 operational military bases in the US and comprising c.21,800 individual
housing units.
BEATRICE
OFTO
UK Energy transmission Operational 100% Risk Capital 2.0% N/A
The project connects the 588MW Beatrice offshore wind farm, located 13.5km off the Caithness coastline of Scotland, to the National Grid. The transmission assets comprise the onshore and offshore
substations, 20km of onshore export cables and 70km of offshore export cables.
International Public Partnerships Limited
Annual Report and financial statements 2020
14
STRATEGIC REPORT
DANISH PPP
PORTFOLIO
CASE STUDY
International Public Partnerships Limited
Annual Report and financial statements 2021
14
STRATEGIC REPORT
DANISH PPP
PORTFOLIO
CASE STUDY
DENMARK
RANDERS CAR PARK
ØRSTED SCHOOL
HOBRO COURT
Key features of the projects include:
100%
Availability-based revenue streams with public sector
counterparties backed by the Danish State
Long-term stable cash flows with project length of up to
19 years
A track record of strong operational performance
Essential infrastructure – the portfolio’s investments
allprovide social infrastructure services to their
respective communities
THE COMPANY ACQUIRED AN INTEREST IN A
PORTFOLIO OF FOUR PPP PROJECTS THAT
DELIVER AVAILABILITY-BASED, LONG-TERM,
PREDICTABLE CASH FLOWS.
The projects, which provide essential
infrastructure and are geographically
spread across Denmark, include:
A specialist land registry court
archive building in Hobro that
accommodates 150 public sector
employees;
A hospital car parking facility with
c.550 parking spaces adjoined to
a regional hospital in Randers;
A 900-pupil school in Ørsted
for1to 16 yearolds; and
A 600-pupil school in Vildbjerg
for1 to 16 year olds.
VILDBJERG SCHOOL
International Public Partnerships Limited
Annual Report and financial statements 2021
OVERVIEW STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
1515
DIFFERENTIATION OF THE OPERATING MODEL
A key differentiator for the Company is the relationship with its
Investment Adviser. The Investment Adviser supports the Company
(and its investment portfolio entities) with investment origination,
financial and asset management services to deliver the best value
forits shareholders and wider stakeholders. The Investment
Adviser’s team of over 150 infrastructure professionals, spread
across three continents, are focused on delivering and maintaining
high-quality portfolio performance. 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 projects and businesses.
The Company’s recent investment in the Danish PPP portfolio
demonstrates the Investment Adviser’s ability to originate in new
geographies delivering assets that are in line with the Company’s
investment objectives.
SUSTAINABLE MANAGEMENT
The Company views the development and maintenance of social
infrastructure as a key component of delivering the SDGs. In line with
its ESG philosophy, the Company believes all investments should be
managed sustainably. From a social infrastructure perspective, this
starts with the design and construction of the buildings themselves.
For example, through the Company’s due diligence process, it
identified that sustainability was considered in relation to Ørsted
school’s energy efficiency. Specific design features include
classrooms with significant heat loss face south or east, and daylight
is used so that the need for artificial lighting is minimised. At the time
the school was built, its energy requirements were at least 25% lower
than the regulatory requirements.
The Company is now working with its Investment Adviser to identify
opportunities for continuous improvement through active
management, in line with its Sustainability Policy Aims. Please refer to
the Responsible Investment section of this report for a summary of
the Company’s exploratory work on net zero within its wider Social
Infrastructure portfolio.
OUTLOOK
The Company’s Investment Adviser has a local presence and the
team is continuing to see a number of potential pipeline opportunities
in the region.
PRIMARY SDGs SUPPORTED
The investments directly support targets outlined in Sustainable
Development Goals 4 (Quality Education), 9 (Industry, Innovation
andInfrastructure) and 16 (Peace, Justice and Strong Institutions).
Land registry court in Hobro, Denmark
Design: Cubo Arktekter
Photo: Helene Høyer Mikkelsen
BACKGROUND IMAGE: WWW Ørsted School
International Public Partnerships Limited
Annual Report and financial statements 2021
16
STRATEGIC REPORT
OPERATING REVIEW
VALUE-FOCUSED PORTFOLIO DEVELOPMENT
New investments that meet the Company’s
Investment Policy are made after assessing
their risk and return profile relative to the
existing portfolio. In particular, we seek
investments to complement the existing
portfolio through enhancing long-term,
inflation-linked cash flows and/or to provide
the opportunity for capital growth. The Board
regularly reviews the overall composition of
the portfolio to ensure it continues to remain
aligned with the Company’s investment
objectives and ensure it is achieving a
broad balance of risk. In addition, for all new
investments, positive SDG contribution is now
a requirement. This is reflected by a standalone
ESG KPI, presented on pages 6 to 7.
Desirable key attributes for
the portfolio include:
1 Long-term, stable returns
2 Inflation-linked investor cash flows
3 Early stage investor (e.g. the Company is
an early stage investor in a new opportunity
developed by our Investment Adviser)
4 Investment secured through preferential
access (e.g. sourced through pre-
emptive rights or through the activities
ofour Investment Adviser)
5 Other capital enhancement attributes
(e.g. potential for additional capital growth
through ‘de-risking’ or the potential for
residual/terminal value growth)
6 Positive SDG contribution
During the year to 31 December 2021, the
Company invested £252.7 million (2020:
£30.0 million). 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. These three origination
approaches are the Company’s preferred
routes to market, as they limit bidding
in the competitive secondary market.
Details of investment activity during 2021
are provided below. Please refer to the
key performance indicators on pages
6 to 7. Further details for each of these
transactions are provided overleaf.
Performance against
strategic priority KPIs
100%
of investments made in 2021 met
atleast three of the six attributes
(2020: 100%)
INVESTMENTS MADE DURING 2021 LOCATION
KEY ATTRIBUTES
OPERATIONAL
STATUS INVESTMENT INVESTMENT DATE1 2 3 4 5 6
toob
UK
✓ ✓ ✓ ✓
Operational £14.2 million Various
Offenbach Police Centre
Germany
✓ ✓ ✓ ✓ ✓
Operational £8.1 million
1
June 2021
Beatrice OFTO
UK
✓ ✓ ✓ ✓ ✓
Operational £49.8 million July 2021
Angel Trains
UK
✓ ✓ ✓ ✓ ✓
Operational
£97.5 million September 2021
Rampion OFTO UK
✓ ✓ ✓ ✓ ✓
Operational £35.4 million November 2021
Bradford and Lewisham BSF and
Three Shires Private Finance
Initiatives (‘PFI’) schemes
UK
✓ ✓ ✓ ✓ ✓
Operational £29.1 million November 2021
Danish PPP Portfolio Denmark
✓ ✓ ✓ ✓
Operational £14.0 million
1
December 2021
Diabolo Belgium
✓ ✓ ✓
Operational £1.5 million
1,2
December 2021
UK PPP Portfolio
3
UK
✓ ✓ ✓ ✓ ✓
Operational £3.1 million
4
December 2021
£252.7 million
1 GBP translated value of investment.
2 In addition, a contingent commitment of £10.2 million is available, if required.
3 Portfolio includes interests in Townlands Community Hospital in Henley, Eltham Community Hospital and minority interests in the BSF projects STaG 1 and 2.
4 An additional c.£3 million has been committed to invest in 2022.
INVESTMENT COMMITMENT
MADE DURING 2021 LOCATION
KEY ATTRIBUTES
OPERATIONAL
STATUS
INVESTMENT
COMMITMENT VALUE INVESTMENT DATE1 2 3 4 5 6
HMRB
1
Australia
✓ ✓ ✓ ✓
In construction £9.2 million 2024
1 The Company’s investment is only due to be made following construction completion. The valuation of the commitment is currently immaterial.
International Public Partnerships Limited
Annual Report and financial statements 2021
17
OVERVIEW STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
INVESTMENTS AND COMMITMENTS
MADE DURING THE PERIOD
OFFENBACH POLICE CENTRE,
GERMANY
In June 2021, the Company reached
financial close on a new police headquarters
project in South-East Hesse in Offenbach,
Germany. The Company invested £8.1
million for a 45% shareholding. The project
was initially awarded to the Company in
December 2017 to a consortium comprising
INPP Public Infrastructure Germany GmbH
& Co. KG, Amber Infrastructure GmbH, and
Goldbeck Public Partner GmbH. Financial
close took place after construction reached
completion and successful handover to
the Federal State of Hesse in June 2021.
The 36,645sqm newly built centre will
provide a headquarters to the police in
South-East Hesse in Offenbach, which
is approximately 5km from Frankfurt,
accommodating c.1,000 staff. The centre
provides the Hesse State Police with office
space, meeting areas, a police station,
cells, forensic science laboratories, a
nursery, a cafeteria, a multipurpose hall,
a parking deck for cars and bicycles, and
outside facilities. Alongside the provision
of these core functions, the headquarters
have been sustainably designed and
built. Key energy features include c.890
solar power panels generating 302kWp,
a combined heat and power plant and
a low-energy heating/cooling system.
Primary SDG Supported
DIGITAL INFRASTRUCTURE, UK
In July 2017, the Company agreed to invest
up to £45 million in UK digital infrastructure
alongside the UK Government, through
Amber’s National Digital Infrastructure
Fund (‘NDIF’). During the period, an
additional £14.2 million was approved
for investment into one of NDIF’s existing
investments, toob. toob is a UK full fibre
broadband provider delivering broadband
to homes, businesses, public service and
community groups in the South of England.
The Company’s commitment to digital
infrastructure will help to transition the
UK to full fibre at a time when reliance on
digital infrastructure has never been greater.
There has been increased recognition
that digital infrastructure is becoming a
more defensive asset class as the critical
nature of digital connectivity services has
been amplified by the continued shift
to more people working from home.
Primary SDG Supported
OFFSHORE TRANSMISSION
PORTFOLIO, UK
The Company reached financial close on its
eighth and ninth OFTO projects increasing
the Company’s contribution to the UK’s
transition to a zero-carbon economy. These
two OFTOs have the ability to transmit green
electricity equivalent to the needs of
approximately 800,000 homes, increasing
the number of homes that the Company’s
OFTO portfolio is capable of powering to
approximately 2.1 million.
BEATRICE OFTO, UK
In July 2021, the Company reached
financial close on the long-term ownership
and operation of the transmission link to
the 588MW Beatrice offshore wind farm,
Scotland’s largest offshore wind farm, as
part of the Transmission Capital Partners
consortium, comprising the Company,
Amber and Transmission Investment. The
project relates to the transmission cable
connection to the offshore wind farm located
in the Outer Moray Firth, approximately
13.5km off the Caithness coastline in
Scotland. The wind farm consists of 84 x
7MW wind turbine generators connected to
two offshore substation platforms located
within the boundaries of Beatrice wind farm.
RAMPION OFTO, UK
In November 2021, the Company reached
financial close on its ninth OFTO for
the long-term ownership and operation
of the transmission link to the 400MW
Rampion offshore wind farm, as part of the
Transmission Capital Partners consortium,
comprising the Company, Amber and
Transmission Investment. The project relates
to the transmission cable connection to the
offshore wind farm located approximately
13km off the Sussex coast. The wind farm
consists of 116 x 3.45MW wind turbine
generators connected to an offshore
substation platform (‘OSP’) located within
the boundaries of the Rampion wind farm.
Primary SDG Supported
ANGEL TRAINS, UK
In September 2021, the Company, as part
of a consortium including the Public Sector
Pension Investment Board of Canada and
other investors, acquired a further c.5%
shareholding in Angel Trains providing it
with further governance rights through
direct board representation. The Company
invested c.£98 million and the additional
investment means that Angel Trains is now
the third largest holding in its portfolio.
Since making its original acquisition in
2008, Angel Trains has been a successful
investment for the Company, delivering
both capital growth and yield. Angel Trains
is the largest rolling stock company in the
UK, serving the passenger rail sector with a
diversified fleet of more than 4,000 vehicles
with the majority being electric multiple
units and its business plan supports the
decarbonisation of the UK transport system.
Primary SDG Supported
International Public Partnerships Limited
Annual Report and financial statements 2021
18
STRATEGIC REPORT
OPERATING REVIEW
BRADFORD AND LEWISHAM BUILDING
SCHOOLS FOR FUTURE (‘BSF’)
PROJECTS AND PFI SCHEMES, UK
The Company built on its existing portfolio
of education investments in the UK during
the period. In December 2021, the Company
acquired additional interests in the Bradford
and Lewisham BSF projects and interests
in three healthcare PFI schemes (‘Three
Shires’). The BSF projects collective
comprise 14 schools providing education
facilities to over 17,000 pupils across the
Bradford and Lewisham areas in the UK.
The investment builds on the Company’s
existing portfolio of BSF projects supporting
the Company’s commitment to providing
a high-quality teaching environment to
pupils across the portfolio. The Three
Shires schemes comprise the design,
build, funding and partial operation of four
small community healthcare facilities under
the Three Shires banner located in East
Lincolnshire, Leicester and Derbyshire.
The facilities provide a range of community
health services including dentistry,
diagnostics and mental health rehabilitation.
Primary SDG Supported
PPP PORTFOLIO, DENMARK
The Company made its first investments
in Denmark during the period acquiring a
majority interest in four Danish PPP projects,
in Hobro, Randers, Ørsted and Vildbjerg,
that deliver availability-based, long-term,
predictable cash flows. The projects all
provide essential infrastructure services to
their respective communities and include a
specialist land registry court archive building
in Hobro that accommodates 150 public
sector employees, a hospital car parking
facility with c.550 parking spaces adjoined
toa regional hospital in Randers, a 900-pupil
school in Ørsted and a 600-pupil school
in Vildbjerg. Please see more information
in the case study on pages 14 to 15.
Primary SDG Supported
UK PPP PORTFOLIO, UK
In December 2021, the Company acquired
a small portfolio of UK PPP investments
including initial interests in Townlands
Community Hospital in Henley, Eltham
Community Hospital and minority interests
in the BSF projects STaG 1 and 2. The
interests will be acquired from an affiliate
of the Company’s Investment Adviser,
following an independent valuation prepared
by Newbridge Advisors LLP. Investment
in minority interests of a further five BSF
schemes from the same portfolio is
expected to be made by the Company
during the course of 2022, with the first
of these expected to close in H1 2022.
– Eltham is a community hospital project
located in the London Borough of
Greenwich that has been developed
under the NHS LIFT framework with an
availability-based revenue stream. Amber
has been involved in the scheme since its
inception and the team has overseen all
aspects of project delivery, including
design and development. The Company
has acquired a 49.8% interest in the
subordinated debt of the project.
– Townlands is a community hospital
scheme based in Henley-on-Thames
which provides sub-acute care and
comprises an ambulatory care centre
and a palliative care centre. The project
benefits from an availability-based
revenue stream arising under a direct
contract with the NHS. The Company
acquired a 100% interest in the equity
and subordinated debt of Townlands.
– STaG 1 and 2 comprises education
facilities in South Shields and Jarrow in
the UK. The investment builds on the
Company’s existing portfolio of BSF
projects, supporting the Company’s
commitment to providing a high-quality
CONTINUED
teaching environment to pupils across
the portfolio. The Company acquired an
8.00% interest in the project’s
subordinated debt and a 4.36% interest
in the equity.
Primary SDG Supported
FLINDERS UNIVERSITY HEALTH AND
MEDICAL RESEARCH BUILDING
(‘HMRB’) AUSTRALIA
In December 2021, the Company reached
financial close on HMRB. The Company was
awarded the project as part of a consortium
which included Amber and Tetris Capital.
The HMRB is the flagship development of
the Flinders Village project, an integrated
health and education precinct development
on Flinders University’s Bedford Park
campus. The HMRB will co-locate research,
clinical and technological platforms to
further Flinders University’s longstanding
contributions to the health, education and
medical sectors. With over 26,000 students,
Flinders University is a public institution
and the third largest university in South
Australia. The project is being developed
in accordance with the University’s
sustainability guidelines and is targeting a
minimum of ‘gold’ ratings for WELLv2 and
LEEDv4 certification and a 5-star rating for
Green Star certification. By fully integrating
health and sustainability into the design of
HMRB, the project will support several of
the Company’s Sustainability Policy Aims.
Primary SDG Supported
International Public Partnerships Limited
Annual Report and financial statements 2021
19
OVERVIEW STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
OPERATING REVIEW
MARKET ENVIRONMENT IN 2022
AND FUTURE OPPORTUNITIES
UNITED KINGDOM
Following the outbreak of Covid-19, there
has been increased focus in the UK on
ensuring resilience against future exogenous
threats, and the role that infrastructure plays
in delivering this resilience and generating
economic recovery by creating opportunities
for private sector investment. The UK
remains committed to the development
of infrastructure as part of achieving its
ambitious net zero targets alongside the
government’s pledges to ‘Build Back
Better’ and ‘Level Up’ the country.
At the budget spending review in October
2021, the government outlined plans to
support the Build Back Better plan with
over £35 billion of rail investment for 2022
to 2025, to boost connectivity across the
country. Then, in November, a further
£96 billion of investment was announced
for the Integrated Rail Plan. The aim of
which is to deliver faster, more frequent
and more reliable journeys across the
North of England and the Midlands.
The UK government has further emphasised
the importance of infrastructure to deliver
the required climate change mitigation to
achieve net zero by 2050. With £26 billion
of public capital investment for the green
industrial revolution and transition to net
zero announced. The strategy is targeted to
unlock £90 billion in private investment by
2030. The sector is also expected to benefit
from the formation of the UK Infrastructure
Bank which has released a discussion paper
that articulates its two strategic objectives:
– To help tackle climate change, particularly
meeting the government’s net zero
emissions target by 2050; and
– To support regional and local economic
growth through better connectivity,
opportunities for new jobs and higher
levels of productivity.
The government has made clear that high-
quality infrastructure is critical to national
progress. The 2021 National Infrastructure
and Construction Pipeline sets out nearly
£650 billion of public and private investment,
over the next ten years, that aims to
drive economic recovery and growth.
Meanwhile, the UK has also taken its own
regulatory path since the end of the Brexit
transition period. The UK government
has stated its commitment to ‘match
the ambitions’ of the SFDR, while also
publicising its commitment to align itself
with the TCFD. The government also
aims to remove some of the bureaucracy
and red tape involved in infrastructure,
hence they have created ‘Project Speed’,
a Taskforce to support the creation of
faster, better and greener infrastructure.
As demonstrated by the investments made
over the course of 2021, the Company
continues to see a high-quality pipeline of
opportunities in the UK, including in the
energy transmission and social infrastructure
sectors, and we remain confident that
the need for infrastructure investment
will continue to offer opportunities that
meet the Company’s criteria. Please
see more information on page 23.
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Annual Report and financial statements 2021
20
STRATEGIC REPORT
OPERATING REVIEW
MARKET ENVIRONMENT IN 2022
AND FUTURE OPPORTUNITIES
EUROPE
Overall investment into European
infrastructure continues to be supported
by wider EU frameworks and initiatives.
The EU recognises the role of infrastructure
in support of the goal to transition to net
zero and help drive economic recovery.
The EU has announced its Global Gateway
Strategy with the ambition of redesigning
how it connects with the world. The strategy
seeks to increase digital, transport, energy,
and trade projects by investing in both hard
and soft infrastructure. The strategy aims to
generate €300 billion in public and private
funds by 2027. Possible projects the EU
could support include green hydrogen,
underwater data cables and spending in
schools. Global Gateway will make available
up to €135 billion for guaranteed investments
for transformational infrastructure projects
between 2021 and 2027. The EU aims to
offer solid financial conditions for partners,
bringing grants, favourable loans, and
budgetary guarantees to de-risk investments
and improve debt sustainability. The
EU will also seek to provide technical
assistance to partners to enhance their
capacity to prepare credible projects
ensuring value for money in infrastructure.
These initiatives sit alongside the European
Green Deal. As part of the European Green
Deal, the EU has set itself the target of
climate neutrality by 2050, with at least
55% of emissions cut by 2030, known
as Fit for 55. This offers a significant
opportunity for infrastructure, as the
proposed policy framework is intended
to spur the technological innovation
needed to deliver decarbonisation and
digitalisation of European economies.
As such, the Company anticipates there will
be increasing opportunities in infrastructure
that will be critical for facilitating a transition
to net zero, particularly in transport and
energy sectors across Europe, exhibiting
investment criteria that the Company will
find attractive. In particular, the Company
is focusing on stable and well-structured
Northern and Western European economies
which offer a steady flow of opportunities
across all traditional infrastructure sectors.
In addition, as the tragic events of the war
in Ukraine are unfolding the Company and
its Investment Adviser continue to actively
monitor the situation to ensure that our
portfolio of investments is protected, to the
extent it can be, from the direct and indirect
impacts of the war. The Company does not
hold any investments in the impacted region
and we are not aware of any material direct
implications for the Company or its portfolio.
CONTINUED
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Annual Report and financial statements 2021
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OVERVIEW STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
AUSTRALIA
Australia has a long history of private sector
delivery and financing of public infrastructure
facilitated by a stable and transparent legal
and regulatory framework, with active
infrastructure financing and investor markets.
Infrastructure Australia set out its medium to
long-term aspirations for a A$110 billion
investment into the country’s infrastructure
to drive the national Covid-19 recovery and
enhance resilience. Building on the 2019
infrastructure plan, the 2021 Australian
Infrastructure Plan establishes the agenda
for the next 15 years identifying a pipeline
across the various infrastructure sub-
sectors, as well as including a planned
response to Covid-19 in respect to
infrastructure. Infrastructure Partnerships
Australia forecast pipeline expenditure
across the country to exceed A$12 billion
per quarter through to 2026 and reach a
peak of A$19 billion in late 2024. Spending is
primarily concentrated in New South Wales
and Victoria to cater for increasing
populations that outstrip the national
population growth rate
1
. A key component
ofthe pipeline is a number of large-scale
transport (both passenger and freight)
projects that are either in procurement or
planning stages.
The states and territories of Australia
continue to develop smaller-scale social
infrastructure projects, primarily in the health
and social housing sectors. In keeping with
policy recommendations in the Australian
Infrastructure Plan, some states are also
adopting infrastructure procurement models
that outsource operator services to the
private sector, as well as seeking private
sector capital in development.
Australian state and federal governments are
yet to outline a set of decarbonisation
policies which could catalyse investment in
more sustainable projects. Notwithstanding
this, the Company’s view is positive about
the prospects for further investments in the
region and it is well positioned to actively
pursue opportunities.
1 Australia and New Zealand Infrastructure Pipeline Forecast by Expenditure (Produced by Infrastructure Partnerships Australia).
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Annual Report and financial statements 2021
22
STRATEGIC REPORT
NORTH AMERICA
The US relies on a vast network of
infrastructure; however, as demonstrated in
its most recent report card on the condition
of America’s infrastructure, the American
Society of Civil Engineers (‘ASCE’) gave the
US a C or ‘poor’ rating. ASCE estimated in
2021 that the US needed to spend, by 2025,
US$5.9 trillion to ensure that infrastructure
in the United States be brought to a good
state of repair. To maintain the existing
condition of infrastructure, ASCE estimated
that an additional US$2.6 trillion was
required beyond the funding that is currently
in place. With such significant levels of
investment required, there is a great deal
of optimism and a bipartisan commitment
within Congress to foster a considerable
pipeline of projects in the US for many years.
To address this, the Infrastructure and
Jobs Act was signed into law in November
2021. The Act pledges US$1.2 trillion
in funds, including US$550 billion in
new investments on roads, bridges and
tunnels, as well as airports, broadband
and other infrastructure improvements
with the aim of replacing America’s
deteriorating infrastructure with new and
more fit for purpose public services.
Arguably, the opportunity in the US is
not only in the federal mandated ‘mega’
projects, but in sectors such as transport
including airports, ports, bridges and
logistics where much of the existing
infrastructure ownership is in the hands of
local municipalities and other government-
backed entities. As a result, state and local
governments are seeking to implement
more P3 (Public-Private Partnerships) and
alternative procurement models such as
Progressive Development, which leverages
the expertise of the private sector.
The ability to source projects through
collaborative procurement processes
makes the US an attractive geography
on which to focus resource. However,
the growing amount of domestic capital
pursuing projects in the US and the
generally lower commitment given by the
public sector to follow through on privately
funded procurement, create competition
and barriers to entry for many European
investors. The Investment Adviser actively
monitors the development of projects that fit
the Company’s investment objectives and
is able to utilise its greenfield development
expertise to foster projects that progress
under alternative procurement models.
Canada has a strong track record of
infrastructure investment, and the Investing
in Canada plan has a long-term aim to
deliver C$180 billion of infrastructure
investment by 2028 to support local,
provincial and territorial projects over
12 years. In the shorter-term, Canada
has launched a three-year C$10 billion
infrastructure plan to help the economy
recover after the Covid-19 pandemic.
The funds will come from the Canada
Infrastructure Bank which manages C$35
billion. It will focus on providing high-
speed internet connectivity for households
and small businesses, strengthening
Canadian agriculture, and accelerating
towards a low-carbon economy. The
Canadian model increasingly relies
upon Progressive Development and
alternative forms of procurement to
deliver critical infrastructure projects.
The ability for the private sector to participate
in more North American infrastructure
projects provides the Company with a
broad variety of investment opportunities.
The Company is well positioned to
capitalise on these developments through
its Investment Adviser’s relationship with
US group, Hunt Companies LLC.
OPERATING REVIEW
MARKET ENVIRONMENT IN 2022
AND FUTURE OPPORTUNITIES
CONTINUED
International Public Partnerships Limited
Annual Report and financial statements 2021
23
OVERVIEW STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
The Company’s performance does not depend upon additional investments to deliver current projected returns. Further investment
opportunities will be judged by their anticipated contribution to overall portfolio returns relative to risk. Selected commitments and future
opportunities that may be considered for investment in due course, as identified by the Investment Adviser, are outlined below.
KNOWN/COMMITTED
OPPORTUNITIES LOCATION ESTIMATED INVESTMENT
1
EXPECTED
INVESTMENT PERIOD INVESTMENT STATUS
DIABOLO
Belgium £10.2 million 25 years A further contingent commitment
remains available, if required
EAST ANGLIA ONE OFTO
UK Up to £90 million c.21 years Preferred bidder. Investment expected
H2 2022
UK PPP PORTFOLIO
UK c.£3.0 million 12–19 years Investment expected over the course
of 2022
HMRB
Australia £9.2 million 25 years Investment commitment made.
Expected to be funded in 2024
MORAY EAST OFTO
UK Up to £75 million c.24 years Preferred bidder. Investment expected
H2 2022
1 Represents the current commitment or estimate of total future investment commitment or preferred bidder positions that meet the Company’s investment criteria. There is no certainty that
potential opportunities will translate into actual investments for the Company.
The Company has a longer-term pipeline of investments and has identified over 40 opportunities across the UK, Europe, North America and
Australia. Future areas of investment may include:
KEY AREAS
OF FOCUS
SOCIAL
INFRASTRUCTURE
REGULATED
UTILITIES
TRANSPORT
AND MOBILITY
OTHER ESSENTIAL
INFRASTRUCTURE
EXAMPLE
INVESTMENTS
– Education
– Health
– Justice
– OFTOs
– Distribution and
transmission
– Direct procurement
– Government-backed
transport including:
– Light rail
– Regional rail
– Digital connectivity
– Energy management
OPERATING REVIEW
CURRENT PIPELINE
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Annual Report and financial statements 2021
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STRATEGIC REPORT
OPERATING REVIEW
CONTINUED
ACTIVE ASSET MANAGEMENT
The Company’s Investment Adviser has a highly experienced, well-resourced, dedicated team of over 40 asset managers globally, as part of
the wider pool of over 150 infrastructure professionals with presence across 11 countries across the UK, Europe, Australia and North America.
The Company’s Investment Adviser operates a full-service approach to infrastructure, and this includes day-to-day asset management and
oversight of the Company’s investments. The Investment Adviser’s priority is to meet or exceed investment performance, creating value for
investors and communities, and its active asset management approach has been fundamental to the Company’s performance since IPO in
2006. It is this performance that has enabled the Company to build a reputation of delivering transparent, responsible stewardship of public
infrastructure assets that support essential services. These skills have been evidenced by the Company’s robust performance during the
current and ongoing unprecedented uncertainty caused by the Covid-19 pandemic.
OPERATIONAL PERFORMANCE
The Company’s Investment Adviser adopts a hands-on approach to monitoring asset performance,
utilising robust internal processes and the expertise of its dedicated asset management team across
the geographies in which the Company holds investments. Whilst the Investment Adviser’s
involvement varies depending on each investment type, each investment is actively managed to
optimise performance. During 2021, 100% of forecast investment portfolio receipts were received
(2020: 88.4%)
1
.
The Company has a weighted average investment life of c.33 years and actively monitors the relevant
investments within the portfolio to ensure that conditions for the hand-back of investments are met on
completion of the project contract, or at the end of the expected investment holding period.
Infrastructure projects and businesses inherently involve health and safety risk both during
construction and whilst operational. The health and safety of the clients, delivery partners, employees
and members of the public who come into contact with our assets are of the utmost importance to the Company, and we accord the highest
priority to health and safety management.
During construction through to operations, the Company’s accident frequency rate for occupational accidents that resulted in lost-time was
low at 0.35 per 100,000 hours worked as at 31 December 2021 (31 December 2020: 0.29)
2
. Health and safety data is reported and evaluated
on a quarterly basis, and includes hours worked, minor injuries, near misses, critical incidents and the number of lost-time injuries which
occurred as a result of work activities.
PPP PROJECTS
PPP projects account for 39% of the Company’s portfolio (by investment at fair value), and the Company’s Investment Adviser has extensive
experience in this sector, having been responsible for the development of the majority of the PPP projects in the Company’s portfolio. Key
deliverables for the Company include ensuring that the facilities are available for their intended use, that areas are safe and secure, and that the
performance standards set out in the underlying agreements are achieved. The Company’s Investment Adviser works closely with its partners
to ensure these standards are met. For those investments measured by both availability and performance standards, for the 12 months to
31 December 2021, the availability of those assets was 99.8% (31 December 2020: 99.7%) and across all projects there were performance
deductions of 0.1% (31 December 2020: 0.1%), both exceeding the Company’s targets.
In addition, the Company’s public sector clients commissioned and funded over 908 contract variations during the period, resulting in over
£19.5 million of additional project work being delivered on behalf of the commissioning bodies. The completed changes during the period
ranged from minor building fabric alterations within education facilities, to the delivery of transport facility upgrades.
Performance against
strategic priority KPIs
100%
Forecast distributions received
1
(2020: 88.4%)
99.8%
Asset availability achieved against
a target of >98%
(2020: 99.7%)
1 Measured by comparing forecast portfolio distributions against actual portfolio distributions received. In the current year, actual portfolio distributions exceeded forecast.
2 This includes UK social accommodation (where the Investment Adviser provides oversight of the management services), BSFI Minority, NDIF, Cadent, Tideway and all investments in Germany,
Australia and Canada.
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Annual Report and financial statements 2021
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OVERVIEW STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
The vast majority of the Company’s social accommodation investments remained open throughout the period. Two social accommodation
assets were closed during the period (at the request of the client), including Royal Melbourne Showgrounds in Australia, which has been
repurposed as an Urgent Medical Care Centre and is being used as a vaccination centre; and one Neighbourhood Support centre in the
UKthat is part of a LIFT Project Company, as a result of Covid-19 and government guidelines. The latter was open for normal use at the end
ofthe year.
Diabolo
Diabolo is a rail infrastructure investment which integrates Brussels Airport with Belgium’s national rail network. The majority of the revenues
generated by Diabolo are linked to passenger use of either the rail link itself, or the wider Belgian rail network. Accordingly, Diabolo has been
impacted by the restrictions on international travel and national lockdowns implemented in Belgium as a result of the Covid-19 pandemic and
we see the timing of the recovery of Diabolo as directly linked to the resumption of pre-pandemic levels of use of Brussels Airport.
In December 2020, the Company committed a further €24 million to the Diabolo project, €10 million of that commitment was invested at the
time and a further €1.8 million was invested in 2021 leaving a contingent commitment of €12.2 million available to protect Diabolo’s liquidity
position and ensure that its debt covenants continue to be met. The extent and timing of any further cash injections will depend upon the
trajectory of the recovery in passenger numbers over the coming months and years. However, the latest traffic forecast report indicates that
the outstanding €12.2 million commitment continues to be sufficient. We will continue to closely monitor passenger numbers.
More positively, the duration of our investment (the concession expires in 2047), the high levels of historic passenger use, continued high levels
of operational performance, the positive and engaged relationship with the Belgian railway authorities and the Investment Adviser’s ability to
influence revenues through the passenger fare adjustment mechanism, all give us confidence for the future recovery and performance of this
investment.
REGULATED INVESTMENTS
The Company invests in a number of regulated investments, including OFTOs, Cadent and Tideway. 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 and membership of committees. The Company’s Investment Adviser actively works with
respective boards to maintain alignment and focus on strategic goals to drive financial and operational best practice and ensure effective
riskmanagement.
OFTOs
The Company’s OFTO investments are regulated by Ofgem, but the revenues are not linked to electricity production or price, instead the OFTO
is paid a pre-agreed, availability-based revenue stream for the duration of the licence. The Company’s OFTO investments continue to be
relatively unaffected by the Covid-19 pandemic and have continued to remain available and meet performance standards.
Ofgem has begun consulting stakeholders on its approach to dealing with the OFTO regime once the initial revenue stream comes to an end,
typically after c.20 to 25 years. OFTO transmission assets have a life of approximately 40 years, which extends beyond the initial revenue
stream period. As an owner of these assets, OFTOs are in a strong position to benefit from any extension to the revenue stream beyond the
initial c.20 to 25 year period. In March 2021, Ofgem issued a consultation which the Company, through its Investment Adviser, responded to.
Ofgem released its first decision document covering the initial steps in establishing an economic and efficient process for extending, where
appropriate, regulatory revenue periods within the current OFTO regime, in July 2021. It is not possible to assess any likely impact on the
Company at this time. The Company notes Ofgem had intended to publish a further consultation on the policy framework in November 2021,
but this is now expected in Spring 2022 and Ofgem are expected to publish their response in late 2022. The announcements to date have
been consistent with our expectations and the Company, through its Investment Adviser, will continue to actively engage with Ofgem and
industry stakeholders on this consultation and will seek to keep investors informed of any material developments.
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Annual Report and financial statements 2021
26
STRATEGIC REPORT
OPERATING REVIEW
CONTINUED
Tideway
Tideway is building a 25km ‘super sewer’ under the River Thames to create a healthier environment for London by cleaning up the city’s
greatest natural asset. Good progress has been made with construction 73% complete as at 31 December 2021 and with the primary
tunnelling expected to be completed in the coming months. As reported previously, Tideway has been in discussions with Ofwat regarding
additional measures to mitigate the impact of both Covid-19 related cost overruns and the FCAM on Tideway’s investors. Subsequent to a
provisional agreement with Tideway, Ofwat launched a public consultation in December 2021 to gain views from interested parties on the
proposed amendments. As the consultation was ongoing at the valuation date, the 31 December 2021 valuation of the Company’s investment
in Tideway included a prudent assessment of the outcome of the consultation and the necessary licence modification process. The
consultation subsequently closed in January 2022 and the licence modifications came into effect in March 2022.
Progress towards system commissioning and handover is an increasing area of focus and, as reported previously, in the earlier part of 2021
Tideway had been working with its stakeholders on a thorough review of the remaining activities to provide clarity on the schedule and costs to
completion. This is a review that is commonly undertaken by major projects at this stage of delivery. The results of this review were published
by Tideway in August 2021 and confirmed the appropriateness of the existing schedule dates with a cost increase of c.1% which, with
rounding, took the cost estimate from £4.1 billion to £4.2 billion. The cost increase had no material financial impact on investors. It is worth
noting that the Tideway project documentation includes provisions to share additional construction costs with construction contractors and
consumers, mitigating the impact of construction cost increases on investors.
Cadent
Cadent is the UK’s largest gas distribution network, serving 11 million homes and businesses and is the Company’s largest investment by fair
value, representing 15.5% of the Company’s portfolio by investment at fair value. As previously announced, in March 2021 Cadent exercised its
right to appeal Ofgem’s final determination in respect of the five-year regulatory period which commenced in April 2021 to the CMA as it
believed this approach would best serve Cadent’s customers’ interests. The CMA published its final determination in October 2021 and the
findings had a modestly positive impact on the Company’s valuation of its investment in Cadent compared to that reported at 30 June 2021.
The cost of wholesale gas increased significantly during 2021 which caused numerous gas suppliers to fail as they were unable to pass
increased costs on to their customers. Customer interests remain protected by the Supplier of Last Resort regime which transfers customers
to alternative energy suppliers to ensure continuity of supply. Cadent is not an energy supplier and instead earns its revenues from providing a
safe and reliable gas transportation network to its customers, the gas shippers, who in turn sell the gas to gas suppliers. Accordingly, Cadent
is largely insulated from changes in gas prices albeit such changes can cause timing differences in certain revenues and costs linked to the
price of gas. Such timing differences had no material impact in the period or to date.
The Company, via its Investment Adviser, also continues to actively engage with Cadent’s management team and the Company’s co-
shareholders in Cadent in relation to the future role of gas initiatives, where Cadent continues to play a role in supporting the UK Government’s
net zero target and is working on several projects designed to demonstrate the feasibility and safety of using its existing gas infrastructure to
distribute cleaner fuel in the future (see page 19 for further information).
In early August 2021, the Government published its long-awaited UK Hydrogen Strategy, the aim of which is to create a ‘world-leading
hydrogen economy’. The publication of the Hydrogen Strategy marks the beginning of the next stage for the development of the UK’s
hydrogen economy and is positive news for Cadent. The strategy contained numerous references to the potential conversion of the existing
gas network, as well as Cadent’s key HyNet project. Further information relating to Cadent’s HyNet projects is available on page 44.
OTHER OPERATING BUSINESSES
The Company invests in a number of operating businesses including BeNEX, Angel Trains and digital infrastructure businesses. The Investment
Adviser holds a board position on each of its operating businesses and uses these positions to influence and strengthen company policies and
procedures; for example, enhancing ESG credentials, monitoring the approach to health and safety, as well as protecting value and mitigating
operational risk.
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OVERVIEW STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
BeNEX
BeNEX generates revenues through the contractual leasing of its rolling stock to TOCs as well as through its investments in TOCs themselves.
Only a minority of annual revenues (currently less than 20%) are linked to passenger numbers and therefore whilst Germany, like many other
countries, continued to see a significant reduction in the number of people using public transport during 2021 as a result of the pandemic, the
financial impact on BeNEX has been limited. In addition, BeNEX should continue to receive compensation from the Federal Government and/
or the relevant Federal State for the vast majority of revenues lost as a result of the disruption caused by Covid-19 during 2022. Finally, during
2021 several expiring concessions were re-won for the next concession term (typically approximately ten years in length) which reduces the
risk profile of the business.
Angel Trains
Angel Trains generates the majority of its revenues from the contractual leasing of its rolling stock to TOCs and therefore its revenues have
continued to be largely unaffected by Covid-19. Following a period in which dividends had been deferred owing to the uncertainty caused by
Covid-19, the board of Angel Trains, which includes shareholder representatives, agreed to resume dividends during 2021. As referenced
earlier in this Annual Report, the Company acquired a further c.5% interest in Angel Trains during the period, demonstrating the Company’s
confidence in the business. See more information on page 17.
During the period, the results from the Williams Rail Review, which was established in 2018 to review the structure of the rail industry and
the way passenger rail services are delivered in the UK, was published. The white paper was titled ‘Great British Railways: Williams-Shapps
plan for rail’, with the main focus of the recommendations being the establishment of the new public body, Great British Railways, and the
replacement of the franchising system with passenger service contracts. The white paper goes on to note that “The reforms set out in this
white paper do not assume any direct change to the current industry model for procurement of train fleets”.
Digital Infrastructure
The Company’s Investment Adviser continues to actively monitor the four businesses in which the Company is invested (via NDIF), including
Community Fibre, Airband, NextGenAccess and toob. Since the beginning of the pandemic, many businesses within the digital infrastructure
sector have faced unprecedented challenges, with government-mandated lockdown restrictions impacting staff movement and availability. In
parallel, certain investments within the portfolio have also witnessed a surge in demand for fibre connectivity due to the volume of people
working from home. Several of NDIF’s portfolio of companies have played a critical role, during the period, in keeping people connected while
at the same time executing their value creation plans. Throughout 2021, and with the easing of lockdown restrictions, several businesses in
which NDIF is invested have continued to gain momentum and market share, and such factors continue to highlight the resilience of digital
infrastructure and the continued consumer and business demand across certain geographical regions for the rollout of fibre.
COUNTERPARTY RISK
Counterparty risk exists to some extent across all investments; however, the risk is particularly significant 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. The
chart below illustrates the Company’s service providers (by investment fair value), highlighting the diversification across the portfolio.
INPP Service Providers
1
Infrabel NV Van Publiek Recht 7%
Downer & Spotless 7%
Mitie
2
4%
ENGIE 4%
G4S 2%
Hunt Military Communities 2%
OCS 2%
Amey 2%
Honeywell International 2%
Kier 2%
Others
2
7%
Regulated Investments –
Cadent & Thames Tideway Tunnel
3
25%
Regulated Investments – OFTOs
2,3
22%
Other – Angel Trains, BeNEX and NDIF 12%
1 Based on percentage of Investments at Fair Value as at 31 December 2021.
2 These include both Risk Capital and senior debt investments. Of the amount shown, senior debt represents the following: Mitie (0.7%), Others (1.6%) and OFTOs (6.7%).
3 These Risk Capital investments operate with no significant exposure to any one service provider or delivery partner.
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Annual Report and financial statements 2021
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STRATEGIC REPORT
OPERATING REVIEW
CONTINUED
During 2021, all of the Company’s facilities have continued to remain operational and available for use, with no disruptions to service delivery,
aside from the two facilities, as referred to above, that were repurposed/temporarily closed upon instruction from clients in the public sector
due to Covid-19. In response to Covid-19, the Company’s Investment Adviser has continued to monitor each counterparty, but has increased
the frequency of its reviews to ensure that any issues as a result of Covid-19 are identified as soon as possible.
The Investment Adviser takes a holistic approach to monitoring counterparty risk. A key aspect of the Investment Adviser’s risk management
activities is a focus on the early identification of signs that a counterparty is encountering problems through regular contract performance
monitoring and internal performance benchmarking of contracts, in-depth reviews of counterparty financial and market data, information
available in the trade press and drawing upon the Investment Adviser’s contacts in the industry. Through contingency planning and identifying
any increased counterparty risk early, it allows for corrective measures identified in the contingency plans to be taken early, mitigating potential
losses to the Company. Those measures may include working more closely with the contractor to support it in its efforts to improve contract
performance or, ultimately, the implementation of the full contingency plan designed to facilitate the replacement of that contractor.
Ultimately, the Company’s desire is to see its service providers succeed and to deliver a high-quality service; and the Investment Adviser
makes all efforts to ensure this is achieved. However, where a subcontractor does fail, the Investment Adviser has the necessary processes
and procedures in place to mitigate and manage the risk to the Company.
PROJECTS UNDER CONSTRUCTION
The Investment Adviser’s asset management team has extensive experience and possesses the key skillsets needed to successfully deliver
projects through construction and throughout the operational phase. 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.
Theteam works closely with the contractors, technical advisers and management companies, where applicable, throughout this stage in
orderto deliver the expected project performance and create value for investors and communities.
There are currently two investments under construction as at 31 December 2021, Tideway and HMRB. During the 12 months to 31 December
2021, Tideway made good progress on the construction of the tunnel and associated infrastructure. The construction works were 73%
complete at the end of the period and the schedule remains unchanged from the previous update, with operational handover to Thames Water
scheduled to occur in March 2025.
The HMRB is the flagship development of the Flinders Village project, an integrated health and education precinct development at Flinders
University’s Bedford Park campus. The HMRB will co-locate research, clinical and technological platforms to further the University’s
longstanding contributions to the health, education and medical sectors. The building of the HMRB commenced in December 2021 and is
expected to complete in 2024. Please see more information on the project on page 18.
ASSET LOCATION
CONSTRUCTION
COMPLETION DATE
DEFECTS
COMPLETION DATE STATUS AT PERIOD END
% OF
INVESTMENTS
AT FAIR VALUE
Tideway UK 2025
1
2028 Behind original schedule
2
9.1%
HMRB Australia 2024 N/A
3
On schedule 0.0%
4
1 Scheduled handover date.
2 Handover is currently scheduled for March 2025, which is 12 months later than the original schedule. The delay can largely be attributed to the impact of Covid-19.
3 This is not applicable as the authority is assuming all risk associated with the construction work that is being undertaken.
4 The Company’s investment is only due to be made following construction completion. The valuation of the commitment is currently immaterial.
International Public Partnerships Limited
Annual Report and financial statements 2021
29
OVERVIEW STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
The Company aims to manage its finances efficiently, to provide the financial flexibility to pursue new investment opportunities, whilst
minimising levels of unutilised cash holdings. Efficient financial management is achieved through actively monitoring cash held and generated
from operations, ensuring cash covered dividends and managed levels of corporate costs. This is supported by appropriate hedging strategies
and prudent use of the Company’s corporate debt facility (‘CDF’).
During the period, the Company achieved its objective to generate dividends paid to investors through
its operating cash flows. Cash dividends paid in the year of £118.5 million (31 December 2020: £101.5
million), were 1.1 times (31 December 2020: 1.2 times) covered by the Company’s net operating cash
flows before capital activity*.
Corporate costs were effectively managed during the period and ongoing charges were comparable
year on year at 1.18% for the year ended 31 December 2021 (31 December 2020: 1.18%). Corporate
costs include management fees of £25.7 million for the year to 31 December 2021 (31 December
2020: £26.4 million).
As outlined on page 87 of the financial statements, IFRS profit before tax of £129.2 million was
reported (31 December 2020: £60.8 million). The increase in profit in the year is principally reflective of
the unrealised fair value gain on the portfolio in the year, following an unrealised fair value loss in 2020
as a result of Covid-19 related uncertainty in the portfolio that impacted overall prior year profit.
The Company’s cash balance as at 31 December 2021 was £56.1 million, an increase on the corresponding balance at 31 December 2020
of£44.3 million. Cash receipts from investments increased by £14.9 million in the year, to £167.9 million (31 December 2020: £153.0 million),
reflecting a resumption of distributions from assets which in the prior year were impacted or deferred as a result of uncertainty caused by
Covid-19. As detailed in note 12 of the financial statements, as well as on page 16 of the Operating Review earlier in this report, £252.7 million
of new capital was invested during the year (31 December 2020: £30.0 million). As a result, investment transaction costs paid in 2021
increased in the year to £3.0 million (31 December 2020: £0.8 million).
At 31 December 2021, the Company’s CDF was £156.2 million cash drawn (31 December 2020: £38.4 million cash drawn), with £9.3 million
drawn under letter of credit (31 December 2020: £nil). Net financing costs paid were £4.8 million, a small increase compared to the prior year
(31 December 2020: £4.2 million) reflecting the level of utilisation of the Company’s CDF during the year. The facility is structured to support the
Company’s near-term pipeline, with £250 million available on a fully committed basis, with a flexible ‘accordion’ component which will, subject
to lender approval, allow for a future extension by an additional £150 million. The facility is available for drawdown until March 2024. The
banking group for the facility consists of National Australia Bank, the Royal Bank of Scotland International, Sumitomo Mitsui Banking
Corporation and Barclays Bank.
Performance against
strategic priority KPIs
1.1x
Dividends fully cash covered
(2020: 1.2x)
1.18%
Ongoing charges ratio
(2020: 1.18%)
EFFICIENT FINANCIAL MANAGEMENT
International Public Partnerships Limited
Annual Report and financial statements 2021
30
STRATEGIC REPORT
OPERATING REVIEW
CONTINUED
SUMMARY OF CASH FLOWS
Summary of Consolidated Cash Flow
Year to
31 December
2021
£ Million
Year to
31 December
2020
£ Million
Opening cash balance 44.3 45.6
Cash from investments 167.9 153.0
Corporate costs (for ongoing charges ratio) (28.5) (28.3)
Net financing costs (4.8) (4.2)
Net operating cash flows before capital activity
1
134.6 120.5
Cost of new investments (252.7) (30.0)
Investment transaction costs (3.0) (0.8)
Net movement of CDF 117. 8 10.5
Proceeds of capital raisings (net of costs) 133.6 –
Dividends paid (118.5) (101.5)
Closing cash balance 56.1 44.3
Cash dividend cover 1.1x 1.2x
1 Net operating cash flows before capital activity as disclosed above of c.£134.6 million (31 December 2020: c.£120.5 million) include net repayments from Investments at Fair Value through profit or
loss of c.£53.4 million (31 December 2020: c.£39.5 million), and finance costs paid of c.£4.8 million (31 December 2020: c.£4.2 million) and exclude investment transaction costs of c.£3.0 million
(31 December 2020: c.£0.8 million) when compared to net cash inflows from operations of c.£83.3 million (31 December 2020: c.£84.2 million) as disclosed in the consolidated cash flow statement
on page 90 of the financial statements.
CASH FLOWS ASSOCIATED WITH ONGOING CHARGES RATIO
Corporate Costs
Year to
31 December
2021
£ Million
Year to
31 December
2020
£ Million
Management fees (25.7) (26.4)
Audit fees (1.0)
1
(0.2)
Directors’ fees (0.4) (0.4)
Other running costs (1.4) (1.3)
Corporate costs (28.5) (28.3)
Ongoing Charges Ratio
Year to
31 December
2021
£ Million
Year to
31 December
2020
£ Million
Annualised Ongoing Charges (28.5) (28.3)
Average NAV
2
2,423.2 2,393.3
Ongoing Charges
3
(1.18%) (1.18%)
1 Audit fees include the impact from a timing difference in fee payments between 2020 and 2021. The 2021 figures include portion of 2020 audit fees which were accrued at December 2020 and
paid in 2021, resulting in this unusual difference between periods. Audit fees payable for each period are disclosed in the notes to the financial statements.
2 Average of published NAVs for the relevant period.
3 The Ongoing Charges ratio was prepared in accordance with the AIC recommended methodology, noting this excludes non-recurring costs.
There is no information to report under the requirements of LR 9.8.4. in this Annual Report.
International Public Partnerships Limited
Annual Report and financial statements 2021
31
OVERVIEW STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
DIVIDEND GROWTH
The Company targets predictable and, where possible, growing dividends. The Company forecasts to pay the second dividend in respect of
the 12 months to 31 December 2021, of 3.77 pence per share
1
, in June 2022. Once paid, this would bring the total dividends paid in respect
of2021 in line with the previously announced target of 7.55 pence per share (2020: 7.36 pence per share).
As illustrated in the chart on page 2, the Company has delivered a c.2.5% average annual dividend increase since IPO. The Company is
currently maintaining its previously announced dividend targets of 7.74 pence per share in respect of 2022 and provides new guidance of
7.93pence per share for 2023
2
.
TSR*
The Company’s annualised TSR since the IPO to 31 December 2021 was 8.5%
3
. The total return based
on the NAV appreciation plus dividends paid since the IPO to 31 December 2021 is 7.7%
4
on an
annualised basis compared to the Company’s long-term target of 7.0%
4
.
As shown in the share price performance graph below, the Company has historically exhibited
relatively low levels of correlation with the market. Whilst the correlation in 2020 increased owing to the
impacts of Covid-19 on economies and financial markets worldwide, it has since reduced to pre-
pandemic levels. For reference, the correlation with the FTSE All-Share index was 0.22 over the 12
months to 31 December 2021 which compares to 0.25 and 0.53 over the 12 months to 31 December 2019 and 31 December 2020 respectively.
Apr 07
Aug 07
Dec 07
Apr 08
Aug 08
Dec 08
Apr 09
Aug 09
Dec 09
Apr 11
Au g 11
De c 11
Apr 10
Aug 10
Dec 10
Apr 12
Aug 12
Dec 12
Apr 13
Aug 13
Dec 13
Apr 14
Aug 14
Dec 14
Apr 15
Aug 15
Dec 15
Apr 16
Aug 16
Dec 16
Apr 17
Aug 17
Dec 17
Apr 18
Aug 18
Dec 18
Apr 19
Aug 19
Dec 19
Apr 20
Aug 20
Dec 20
Apr 21
Aug 21
Dec 21
140
120
100
80
60
40
20
0
-20
-40
-60
Source: Bloomberg
Dec 06
INPP FTSE 250 FTSE All-share INPP NAV
Share Price Performance
(% change)
Performance against
strategic priority KPIs
7.7% p.a.
IRR achieved since IPO
3
(31 December 2020: 7.7%)
INVESTOR RETURNS
1 The dividend in respect of H2 2021 is 3.77 pence per share bringing the total dividend paid in respect of 2021 in line with the guidance of 7.55 pence per share.
2 Future profit projection and dividends cannot be guaranteed. Projections are based on current estimates and may vary in future.
3 Since inception in November 2006. Source: Bloomberg. Share price appreciation plus dividends assumed to be reinvested.
4 Calculated by reference to the November 2006 IPO issue price of 100 pence and reflecting NAV appreciation plus dividends paid.
International Public Partnerships Limited
Annual Report and financial statements 2021
32
STRATEGIC REPORT
OPERATING REVIEW
CONTINUED
INFLATION-LINKED RETURNS*
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 2021, the majority of assets in the portfolio had some degree of inflation-linkage
and, in aggregate, the weighted average return of the portfolio (before fund-level costs) would be expected to increase by 0.7%
1
per annum in
response to a 1.0% per annum increase in all of the assumed inflation rates. The reduction compared to the 0.8% as at 31 December 2020 is
principally due to the additional investments made in the period which have a lower level of inflation linkage.
VALUATIONS
NAV*
The NAV represents the fair value of the Company’s investments plus the value of other net assets or liabilities held within the Group. The fair
values of the Company’s investments are determined by the Board, with the benefit of advice from the Investment Adviser, and are
independently audited as part of the annual audit of the Company’s financial statements. The Company reports a 6.1% increase in NAV from
£2,384.4 million at 31 December 2020 to £2,528.8 million at 31 December 2021. Over the same period, the NAV per share increased by 0.7%
from 147.1 pence to 148.2 pence. The key drivers of the change in NAV are described in more detail below.
NAV Movements
2,000
2,400
2,300
2,200
2,800
2,700
2,600
2,500
2,100
Change in
Investment
Risk Premia
Change in
Government
Bond Yields
Capital Raising
(post issue costs)
Change in
Macroeconomic
Assumptions
NAV at
31 December
2020
NAV at
31 December
2021
NAV
Return
2
2,384.4
133.6 (82.4)
(118.5)
163.4
107.2
(25.9)
(33.0)
2,528.8
Cash
Distributed
to INPP
Shareholders
(net of scrip)
Change in
Foreign
Exchange
Rates
1
(£ million)
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 movements seen in the chart above are explained further below:
– During the year, the Company raised additional equity totalling £135 million (net of issuance costs – £133.6 million) by way of a tap issuance
of ordinary share capital;
– The yields on the overwhelming majority of government bonds used as part of the valuation process increased during the period, resulting
in a net £82.4 million decrease in the NAV;
– The net negative impact of the increase in government bond yields was more than offset by a decrease in the investment risk premia
designed to ensure that (i) the valuations continue to reflect recent market-based evidence of pricing for infrastructure investments (this
includes a reduction in the discount rate used to value the Company’s investment in Angel Trains to reflect the transaction that occurred
during the period), and (ii) the discount rate used to value the Company’s investment in Diabolo reflects the lower level of risk within the
forecast cash flows which assume a more conservative recovery in passenger numbers. The net impact of these adjustments was an
increase in the NAV of £107.2 million;
– In line with forward guidance provided previously, two cash dividends of 3.68 pence and 3.78 pence per share were paid to the Company’s
shareholders during the year, in relation to the six-month periods to 31 December 2020 and 30 June 2021 respectively, totalling £118.5
million;
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 portfolio weighted average discount rate.
International Public Partnerships Limited
Annual Report and financial statements 2021
33
OVERVIEW STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
– Over the year, Sterling strengthened against the Australian Dollar and the Euro, whereas it marginally weakened against the Canadian Dollar
and the US Dollar (these being the four foreign currencies the Company was exposed to over the year, and with the recent addition of the
Danish Krone the Company is now exposed to five foreign currencies). Including the change in the value of the forward foreign exchange
contracts, the net negative impact on the NAV was £25.9 million with the most significant impact seen on the Company’s Euro-
denominated investments;
– The long-term assumption for the UK Corporate Tax rate was increased from 19% to 25% (applicable from 1 April 2023 onwards) following
the 2021 Budget announcement during the period, which was the most significant impact (negative £31.7 million) caused by changes to
macroeconomic assumptions. Other, much less significant, changes to the macroeconomic assumptions include a one-year delay in the
step up to the long-term deposit rate assumptions and an alignment of UK RPI to CPIH from 2030 onwards for relevant investments.
Further details of these changes can be seen in the table on page 35 and in aggregate these had a negative £33.0 million impact on the
NAV; and
– Among other things, the NAV Return of £163.4 million captures the impact of the following:
– Unwinding of the discount rate;
– Updated operating assumptions to reflect current expectations of forecast cash flows. This includes an uplift in Cadent’s forecast cash
flows attributable to the successful CMA appeal as well as updated forecasts for Diabolo passenger numbers which continue to be
subdued owing to travel restrictions caused by Covid-19. This risk had previously been accounted for through the discount rate but is
now reflected in the revised forecast cash flows. More widely, and owing to the strong inflation-linkage of the portfolio cash flows, NAV
return has been further supported by recent inflationary pressures, especially in the UK;
– 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.
INVESTMENTS AT FAIR VALUE
The Investments at Fair Value represents the fair value of the Company’s investments without consideration of the other net assets or liabilities
held within the Group which are captured within the NAV. The Company reports a 10% increase in the investments at fair value, from £2,345.4
million at 31 December 2020 to £2,579.4 million at 31 December 2021. The key drivers of the change in the Investments at Fair Value are
described in more detail below.
Investments at Fair Value Movements
(£ million)
2,200
2,500
2,600
2,700
2,800
2,400
2,300
2,900
Investment
Distributions
Investments Portfolio
Return
1
Rebased
Investments
at Fair Value
Investments at
Fair Value at
31 December
2020
Investments at
Fair Value at
31 December
2021
Change in
Discount
Rates
Change in
Foreign
Exchange
Rates
Change in
Macroeconomic
Assumptions
2,345.4
252.7
(167.9)
2,430.2
187.2
24.8
(29.7)
(33.0)
2,579.4
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 2021
34
STRATEGIC REPORT
OPERATING REVIEW
CONTINUED
The movements seen in the chart on page 33 are explained further below:
– An increase of £252.7 million owing to new investments made during the period;
– A decrease of £167.9 million due to distributions paid out from the portfolio during the period;
– The Rebased Investments at Fair Value of £2,430.2 million is presented in order 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 £187.2 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;
– There was a net decrease in the discount rates used by the Company to value its investments which had a positive £24.8 million impact on
the Investments at Fair Value. Further information on the component parts of the impact shown is provided on page 36;
– Sterling strengthened against the Australian Dollar and the Euro, whereas it marginally weakened against the Canadian Dollar and the US
Dollar (these being the four foreign currencies the Company was exposed to over the year, and with the recent addition of the Danish Krone
the Company is now exposed to five foreign currencies). The net negative impact on the Investments at Fair Value was £29.7 million with the
most significant impact seen on the Company’s Euro-denominated investments; and
– The long-term assumption for the UK Corporate Tax rate was increased from 19% to 25% (applicable from 1 April 2023 onwards) following
the 2021 Budget announcement during the period, which was the most significant impact caused by changes to macroeconomic
assumptions. Other, much less significant, changes to the macroeconomic assumptions include a one-year delay in the step up to the
long-term deposit rates assumption and an alignment of UK RPI to CPIH from 2030 onwards for relevant investments. Further details of these
changes can be seen in the table on page 35 and in aggregate these had a negative £33.0 million impact on the NAV.
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 large 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.
0
150
250
300
200
100
50
400
350
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040
2041
2042
2043
2044
2045
2046
2047
2048
2050
2049
2147
2148
2149
2150
Projected Investment Receipts
(£ million)
Note: 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 2021 are included.
International Public Partnerships Limited
Annual Report and financial statements 2021
35
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, (i) a minor adjustment should be made to the deposit rate assumptions (a one-year delay to the start of the long-term
assumption), (ii) the spot foreign exchange rates used to value the Company’s overseas assets should be updated, and (iii) the long-term UK
Corporate Tax rate should be increased from 19% to 25% (applicable from 1 April 2023 onwards) following the 2021 Budget announcement
during the period. The Company notes both the recent higher levels of inflation observed in certain geographies in which it is invested as well
as the uncertainty as to how long such levels will last. After careful consideration, the Company has chosen not to amend its inflation
assumption until there is greater clarity on the likely extent and duration of any inflationary pressures, and it continues to take a long-term view
of inflation in each geography. The Company and its Investment Adviser acknowledge that the war in Ukraine is likely to have macroeconomic
consequences which will of course be reflected, to the extent appropriate, within the assumptions used at subsequent valuation dates.
The key macroeconomic assumptions used as the basis for deriving the Company’s 31 December 2020 and 31 December 2021 investment
valuations are summarised below, with further details provided in note 11 of the financial statements.
Macroeconomic assumptions 31 December 2021 31 December 2020
Inflation rates UK 2.75% RPI/2.00% CPIH 2.75% RPI/2.00% CPIH
Australia 2.50% 2.50%
Europe 2.00% 2.00%
Canada 2.00% 2.00%
US
1
N/A N/A
Long-term deposit rates
2
UK 1.00% 1.00%
Australia 2.00% 2.00%
Europe 0.50% 0.50%
Canada 1.50% 1.50%
US
1
N/A N/A
Foreign exchange rates GBP/AUD 1.86 1.77
GBP/DKK 8.86 N/A
GBP/EUR 1.19 1.11
GBP/CAD 1.72 1.74
GBP/USD 1.35 1.37
Tax rates
3
UK 19.00%/25.00% 19.00%
Australia 30.00% 30.00%
Europe Various (12.50% – 32.28%) Various (12.50% – 32.28%)
Canada Various (23.00% – 26.50%) Various (23.00% – 26.50%)
US
1
N/A N/A
1 The Company’s US investment is in the form of subordinated debt and therefore not directly impacted by inflation, deposit and tax rate assumptions.
2 The portfolio valuation assumes actual current deposit rates are maintained until 31 December 2023 before adjusting to the long-term rates noted in the table above from 1 January 2024.
The31 December 2020 valuation assumed the long-term rates noted in the table above would apply from 1 January 2023.
3 Tax rates reflect those substantively enacted as at the valuation date or those that could reasonably be expected to be substantively enacted shortly after the valuation date.
Please note the UKtaxrate assumptions include the increase from 19% to 25% applicable from 1 April 2023 onwards.
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 associated with that particular investment and is designed to ensure that the resulting valuation reflects
prevailing market conditions.
The majority of the Company’s portfolio (91%) comprises Risk Capital investments, while the remaining portion (9%) comprises senior debt
investments. To provide investors with a greater level of transparency, the Company publishes both a Risk Capital weighted average discount
rate and a portfolio weighted average discount rate – the latter of which captures the discount rates of all investments including the senior debt
interests.
International Public Partnerships Limited
Annual Report and financial statements 2021
36
STRATEGIC REPORT
OPERATING REVIEW
CONTINUED
The weighted average discount rates are presented in the table below.
31 December
2021
31 December
2020 Movement
Weighted average government bond yield – portfolio 0.96% 0.56% 40bps
Weighted average investment premium – portfolio 6.01% 6.41% (40bps)
Weighted average discount rate – portfolio 6.97% 6.97% –
Weighted average discount rate – Risk Capital 7.38% 7. 52% (14bps)
The Company is aware that there are differences in approach to the valuation of investments among listed infrastructure funds similar to the
Company. 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 homogeneous); 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
This section indicates the sensitivity of the 31 December 2021 NAV per share of 148.2 pence to changes in key assumptions. Further details
can be found in note 16 of the financial statements. This 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 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.
Estimated Impact of Changes in Key Variables to 31 December 2021 NAV of 148.2 pence per share
-18.0 -12.0 -6.0
Pence per share
0.0 6.0 12.0 18.0
-14.4 17.3
-11.6 13.5
-3.7 3.7
-1.3
1.4
-0.8 0.8
-0.8 0.8
Lifecycle +/-10%
Tax rates +/-1%
Deposit rates +/-1%
Foreign exchange +/-10%
Inflation +/-1%
Discount rates +/-1%
+ Change – Change
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.
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 1.0% sustained increase in the assumed
inflation rates projected to generate a 0.7% increase in returns (31 December 2020: 0.8%). The returns generated by the Company’s UK
investments are typically linked to the Retail Price Index (‘RPI’), whereas the Company’s non-UK investments are typically linked to the relevant
Consumer Price Index (‘CPI’) for that jurisdiction. Further to recent announcements by the UK’s energy and water regulators, the revenues
earned by Cadent and Tideway will be linked to the CPIH (CPI including owner occupied housing costs) from 2021 and 2030, respectively.
The regulators have stated that this is not designed to negatively impact companies but rather to reflect the perceived shortcomings of the RPI
(i.e. the regulators’ intention is for the transition from RPI to CPIH to be valuation neutral).
International Public Partnerships Limited
Annual Report and financial statements 2021
37
OVERVIEW STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
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 do not benefit from protective contractual agreements or regulatory precedents has been
alignedto CPIH from 2030. For the avoidance of doubt, the impact of this approach on the NAV is negligible.
The inflation sensitivities by geographical region are provided in note 16 of the financial statements.
FOREIGN EXCHANGE
The Company has a geographically diverse portfolio and forecast cash flows from investments are subject to foreign exchange rate risk in
relation to Australian Dollars, Canadian Dollars, Danish Krone, Euros and US Dollars. The Company seeks to mitigate the impact of foreign
exchange rate changes on near-term cash flows by entering into forward contracts, but the Company does not hedge exposure to foreign
exchange rate risk on long-term cash flows. The impact of a 10% increase or decrease in all foreign exchange rates is provided for illustration.
DEPOSIT RATES
The long-term weighted average deposit rate assumption across the portfolio is 1.04% per annum. While operating cash balances tend to be
low given the structured nature of the investments, project finance structures typically include reserve accounts to mitigate certain costs and
therefore variations to deposit rates may impact valuations. The impact of a 1.00% increase or decrease in these rates is provided for illustration.
TAX RATES
Post-tax investment cash inflows are impacted by tax rates across all relevant jurisdictions. The impact of a 1.00% increase or decrease in
these rates is provided for illustration. Other potential tax changes are not covered by this scenario.
LIFECYCLE SPEND
There is a process of renewal required to keep physical assets fit for use and the proportion of total cost that represents this ‘lifecycle spend’
will depend on the nature of the asset.
PPPs will typically need to ensure that the assets are kept at the standard required of them under agreements with relevant public sector
counterparties. To enhance the certainty around cash flows, the majority of the Company’s PPP investments, and all of the Company’s OFTO
investments, are currently structured such that lifecycle cost risk is taken by a subcontractor for a fixed price (isolating equity investors from
such downside risk). As a result, the impact of changes to the forecast lifecycle costs for the Company’s PPP investments is relatively small.
The Company’s investments in rolling stock leasing or operating businesses, or businesses providing digital infrastructure, are also distinct
from PPPs which have fixed revenue streams from which they need to pay lifecycle costs. These businesses will still expect to incur lifecycle
costs, but over time will typically reflect changes in lifecycle costs through the prices they charge their end-users. No lifecycle sensitivity has
been run in respect of the Company’s digital infrastructure investments as the short-term nature of the revenue contracts is assumed to allow
changes in lifecycle costs to be passed on to consumers through changes in the price of services in a timely manner.
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.
Thisapproach 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 JOHN LE POIDEVIN
CHAIR DIRECTOR
23 March 2022 23 March 2022
International Public Partnerships Limited
Annual Report and financial statements 2021
38
STRATEGIC REPORT
RESPONSIBLE INVESTMENT
APPROACH
The Company believes that the financial performance of its
investments is linked to environmental and social success and, as
such, the Company considers issues that have the potential to impact
the performance of its investments, both now and in the future.
Consideration of ESG drivers is an essential part of how the
Company assesses the long-term viability of the investments that it
makes and its associated asset management strategies. ESG drivers
are non-financial factors that can influence and be influenced by the
Company’s business activities and include factors such as climate
change, demographics, resources, technology and social values.
ESG is important to the Company for the following key reasons:
– ESG drivers present an opportunity for new markets
andinvestments;
– Incorporating ESG into the Company’s management processes
supports its high standards of financial rigour and requirements
for long-term financial performance; and
– By investing in infrastructure and associated businesses, the
Company can meaningfully support sustainable development.
The Company’s approach to sustainability and ESG integration is
described in more detail in its recently published Sustainability Report
1
.
POLICY
The Company has a common ESG Policy
2
with its Investment
Adviser. It defines the objectives and approach to embedding
ESGininvestments, operations, and the communities in which
theCompany’s investments operate.
GOVERNANCE
THE ROLE OF THE BOARD AND COMMITTEES
The Board has overall responsibility for ensuring ESG is fully
integrated into all aspects of the investment strategy. To support it in
this role, the Board established a new ESG Committee in March
2021. The ESG Committee provides a forum for discussion, support
and challenge, with respect to ESG. This includes the policies
adopted by the Company in relation to both investments and
divestments and by its Investment Adviser regarding its asset
management and reporting activities on such matters that relate to
the Company. The ESG Committee meets quarterly, and its full
Terms of Reference can be found on the Company’s website
3
.
In addition to the ESG Committee, ESG factors are considered
through the following committees:
– Investment Committee: The Company’s Investment Committee
ensures ESG has been appropriately considered in the investment
and divestment processes and provides a robust challenge to the
Investment Adviser on such processes;
– Audit and Risk Committee: The Company’s Audit and Risk
Committee oversees the Company’s approach to ESG
disclosures and reporting to its stakeholders and ensures all risk
management frameworks consider material ESG risks (e.g.
climate change); and
– Management Engagement Committee: The Company’s
Management Engagement Committee reviews the effectiveness
of ESG integration by the Investment Adviser.
For more information, please refer to the Company’s Sustainability
Report, which can be found on the Company’s website
1
.
ROLE OF THE INVESTMENT ADVISER
The Company’s Investment Adviser is responsible for implementing
the Company’s ESG policies into the Company’s activities on a
day-to-day basis. This includes the integration of ESG considerations
through investment origination and the management of the
Company’s investments.
Amber’s Executive Committee is responsible for the stewardship of
Amber’s business and affairs. The Executive Committee discharges
its sustainability responsibilities directly through its internal Risk
Committee, ESG Steering Committee and Corporate Social
Responsibility (‘CSR’) Sub-Committee.
Amber’s ESG Steering Committee also interfaces with the
Company’s ESG Committee, ensuring the Company can monitor
itsESG performance, and is kept abreast of emerging ESG risks
andopportunities, such as climate change, to inform its strategy.
For more information, please refer to Amber’s Global
SustainabilityReport
4
.
1 https://www.internationalpublicpartnerships.com/media/2471/inpp-2021-sustainability-report.pdf.
2 https://www.amberinfrastructure.com/media/2231/esg-policy_final.pdf.
3 https://www.internationalpublicpartnerships.com/media/2391/inpp-esgc-tor-march-21.pdf.
4 https://www.amberinfrastructure.com/media/2469/amber-2021-global-sustainability-report.pdf.
International Public Partnerships Limited
Annual Report and financial statements 2021
39
OVERVIEW STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
SUSTAINABILITY AND ESG FRAMEWORKS
To deliver the ESG Policy and guide the Company’s ESG strategy, the Company draws on several frameworks and benchmarks to provide
direction. These frameworks are reviewed on an annual basis to ensure that the Company remains at the forefront of sustainable investment,
operations and reporting.
Climate change
Climate change presents both transitional and physical risks to the
Company’s investments. As such, it continues to be a high priority
for the Company. The Company is aligning all new investments with
the objectives of the Paris Agreement and has commenced the
process of adopting the TCFD recommendations.
The Company is continuing efforts to enhance its approach and
disclosures according to the TCFD Guidelines. Please see more
information on pages 45 to 47.
Infrastructure performance standards
The Company recognises its biggest impact on sustainable
development is through its investments, which are wide-ranging
intheir nature. The Company’s priority is to ensure it focuses on
material issues for each sector in which it invests, and it draws
oninternational industry practice to help identify what is important
for each sector.
Where possible, the Company draws on recognised third-party
benchmarks to serve as a proxy for assessing whether an
investment meets or manages material sustainability factors.
Ambition
The Company believes that investing in infrastructure which
supports a sustainable, prosperous, equitable and resilient
society should deliver robust financial performance for its
shareholders. It is supportive of the 2030 Agenda for Sustainable
Development adopted by the UN Member States in 2015.
Alongside the research of its Investment Adviser into emerging
trends and technologies, the Company draws on the SDGs to
help guide its approach to sustainability.
ESG integration
To benchmark its ESG integration performance, the Company’s
Investment Adviser became a signatory of the PRI in August 2019.
The Company’s investment-related activities, as overseen by the
Investment Adviser, are in line with commitments to the Principles.
The Company is pleased to report that its Investment Adviser
obtained an A+ ranking for both the Strategy and Governance
and the Infrastructure modules in 2020. The PRI is currently
carrying out updates to its reporting module, resulting in a delay
toreceiving an updated score. We expect to provide an update
during the course of 2022.
EMERGING REGULATORY FRAMEWORKS
The Company is mindful and supportive of several emerging regulatory frameworks in relation to sustainable finance, particularly the SFDR,
EUTaxonomy for Sustainable Activities (‘EU Taxonomy’) and expected UK Sustainability Disclosure Requirements (‘SDR’). As a Guernsey-
based investment company listed on the London Stock Exchange, the Company is not required to make any specific disclosures at the time
ofpublishing this report. However, the Board is committed to supporting its shareholders and upholding the highest levels of transparency
which includes the importance of considering sustainability risks and opportunities as part of its investment process.
International Public Partnerships Limited
Annual Report and financial statements 2021
40
STRATEGIC REPORT
RESPONSIBLE INVESTMENT
IMPACT
By investing in the ‘right type’ of infrastructure, the Company believes its investments can significantly support the targets set out by the SDGs.
For each investment sector, the Company has identified which SDGs these are positively supporting. The Company’s contribution to the SDGs
at the macro level is summarised below
1
.
1 Data reflects performance over the reporting period. SDG metrics apply to
investments where the Company has a majority equity investment, or a
minority equity holding over £2 million.
SDG CONTRIBUTION IMPACT PORTFOLIO SDG CONTRIBUTION
2
Good Health and Wellbeing
The Company has investments in 37 health facilities,
including the award-winning Royal Children’s Hospital
inMelbourne, providing access to quality essential
healthcare services.
>544,000
Patients treated annually in
healthcare facilities developed
andmaintained by the Company
4%
Clean Water and Sanitation
The Thames Tideway Tunnel is the biggest
infrastructure project ever undertaken by the
privatised UK water industry
3
.
37,000,000m
3
The three components of the
LondonTideway improvements
work conjunctively to reduce
dischargesin a typical year by
about 37 million cubic metres
9%
Industry, Innovation and Infrastructure
Investing in resilient infrastructure is at the heart
of what we do. The Company’s portfolio is invested
into quality, reliable, sustainable and resilient
infrastructure.
131,000km
Length of gas transportation
pipeline
19%
Peace, Justice and Strong Institutions
Through the provision of high-quality judicial
buildings,the Company is supporting effective,
accountable, andtransparent institutions at
all levels.
13
Police stations and judicial
buildings
4%
Quality Education
Good infrastructure is at the base of quality education.
By investing directly in 269 education facilities, and
maintaining them sustainably, the Company can
supporteffective learning environments for all.
>168,000
Students attending schools developed
and maintained by the Company
18%
Affordable and Clean Energy
Through the Company’s investments in offshore
transmission investments, we are supporting the
provision of affordable and clean energy.
>2,100,000
Homes capable of being powered by
renewable energy transmitted through
offshore transmission investments
22%
Sustainable Cities and Communities
The Company’s investments in transport
provide safe, affordable, accessible and
sustainable transportation.
>93,000,000
Annual passenger journeys through
sustainable transport investments
4
24%
CONTINUED
2 Investment at Fair Value.
3 https://www.tideway.london/media/5097/j0115_sustainable-finance-report-vis7a-2.pdf.
4 Annual passenger journeys include those made on BeNEX, Diabolo, Gold Coast and Reliance Rail.
International Public Partnerships Limited
Annual Report and financial statements 2021
41
OVERVIEW STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
SUSTAINABLE MANAGEMENT
The Company’s metrics against the SDGs illustrate the breadth of positive social impacts its portfolio of investments can deliver. The Company
seeks to improve the sustainability performance of its investments and closely monitors and manages against any potential adverse impacts.
An overview of the Company’s approach to sustainable management, including its Sustainability Policy Aims, can be found in the Sustainability
Report located on the Company’s website
1
. The following pages provide some case studies of the Company’s approach to active
management over the period.
The Company continues to focus on managing material ESG risks and opportunities at the individual investment level, monitoring over
40different ESG indicators as part of its ESG data collection processes. This allows the Company to target and manage material ESG issues,
which can vary considerably across a diverse portfolio of investments. To help streamline ESG data for financial reporting and monitor
progress at the portfolio level, the Company has developed a set of preliminary KPIs
2
, which will be further developed over time. These will
support the Company in delivering its ESG Policy Objectives and provide an important stepping-stone towards gathering the detailed data
thatmay be required for reporting in line with EU Taxonomy, SFDR and TCFD. Further detail on the Company’s approach will be included
within the next edition of the Company’s Sustainability Report, along with enhanced sustainability disclosures.
POLICY OBJECTIVE
The Company will use ESG drivers to
create investment opportunities in new
and existing markets
KPI
1. CONTRIBUTION TO SUSTAINABLE DEVELOPMENT GOALS
Positive SDG contribution for new investments
3
TARGET PERFORMANCE DURING THE YEAR
100% 100%
1 https://www.internationalpublicpartnerships.com/media/2471/inpp-2021-sustainability-report.pdf.
2 KPIs apply to all investments where the Company has a majority equity investment, or a minority equity holding over £2 million.
3 The Company aims to manage and monitor any potential adverse impacts of investments as per KPIs 3, 4, 5 and 6.
POLICY OBJECTIVE
The Company will identify and integrate ESG factors into all
aspects of its investment, development and management
decision making and analysis to protect and enhance value
KPI
2. INVESTMENT ADVISER ESG INTEGRATION PERFORMANCE
Investment Adviser PRI score
TARGET PERFORMANCE DURING THE YEAR
A+ A+
POLICY OBJECTIVE
The Company will actively work towards improving the environmental and social performance of its investments by focusing on material
ESG issues and SDGs
3. ROBUST CORPORATE
GOVERNANCE
Investments with appropriate
policies and procedures
concerning:
– Health and safety
– Sustainability
– Equality, Diversity and
Inclusion
– Modern Slavery and
HumanRights
– Conflicts of interest
– Anti-corruption and
financialcrime risk
– Tax and transparency
TARGET
100%
PERFORMANCE DURING THE YEAR
96%
4. ENVIRONMENTAL
PERFORMANCE
Investments with appropriate
systems and processes in place
to improve environmental
performance. Specific indicators
include:
4.1 Investments with an
environmental management
system
TARGET
100%
PERFORMANCE DURING THE YEAR
95%
4.2 Investments with initiatives to
improve environmental
performance of material issues
TARGET
100%
PERFORMANCE DURING THE YEAR
79%
5. HEALTH AND SAFETY
PERFORMANCE
Investments with appropriate
systems and processes in place
to improve health and safety
performance. Specific indicators
include:
5.1 Investments with health and
safety management system
TARGET
100%
PERFORMANCE DURING THE YEAR
97%
5.2 Investments with initiatives
toimprove health and safety
performance
TARGET
100%
PERFORMANCE DURING THE YEAR
93%
6.GREENHOUSE GAS
MANAGEMENT
Investments with appropriate
systems and processes in place
to support management of
energy efficiency and greenhouse
gases. Specific indicators include:
6.1 Investments monitoring
Scope 1 and 2 emissions
TARGET
100%
PERFORMANCE DURING THE YEAR
94%
6.2 Investments with initiatives
toimprove energy efficiency and
greenhouse gas performance
TARGET
100%
PERFORMANCE DURING THE YEAR
88%
KPI
International Public Partnerships Limited
Annual Report and financial statements 2021
42
RESPONSIBLE INVESTMENT
CONTINUED
SOCIAL INFRASTRUCTURE
Social infrastructure is pivotal to the development of sustainable
communities. While the provision of housing, clean water and
electricity are vital for meeting basic human needs, other services
such as schools and healthcare facilities are equally important for
ensuring the long-term wellbeing of people.
Case study
Sustainability aim
– Reduce carbon emissions to move towards
alignment with the goals of the Paris Agreement to limit global
warming to well below 2°C and, ideally to 1.5°C
The Company is committed to identifying ways to work with its
public sector partners to reduce emissions and work towards net
zero. Due to the structure of these investments, any progress needs
to come through collaboration of the Company, its public sector
partners and key supply chain partners.
In 2021, the Company commissioned 20 net zero studies across
the portfolio it manages to identify meaningful ways to support its
public sector partners in reducing the emissions of their buildings.
This work is intended to inform a framework approach to delivering
net zero solutions alongside developing the Company’s approach
at the portfolio level.
Impact
>168,000
Pupils
13
Police stations and
judicial buildings
>3,700
Full-time equivalent
employees
>544,000
Patients
ENERGY TRANSMISSION
As the impacts of a changing climate become more apparent to our
society and the solutions more urgent, it has never been more
important to transition towards efficient, sustainable energy
systems. Offshore wind generation is a success story for the UK.
Long-term government support has underpinned innovation and
investment in the sector, helping to drive down costs while
contributing to decarbonisation of the economy.
Case study
Sustainability aim
– Reduce consumption of natural
resources, work towards elimination of waste to landfill and
move towards a circular economy
The environmental commitment by the management of the OFTO
portfolio is demonstrated by its continued certification to the
ISO14001 environmental standard. This was first achieved in 2019
and has been subject to annual reviews since. This standard
covers all aspects of operations and environmental management
from practical maintenance-based process to waste disposal and
appointment of appropriately certified contractors.
Maintenance routines and actions are accurately recorded, where
events such as an unlikely SF6 gas leak are immediately attended
to. The management of SF6 is a critical aspect of HV switchgear
and Supervisory Control and Data Acquisition (‘SCADA’) remote
monitoring systems are reviewed on a 24/7 basis to alert the team
of the very rare event of recorded pressure loss that may
havedeveloped.
The team has a spill response framework with a nationally
recognised onshore and marine environmental response provider,
which can be called up on at very short notice in the event of a
major asset failure and subsequent fluid loss. This framework
remains unused to date.
Impact
>2.1 million
Homes capable of
being powered by
renewable energy
transmitted by OFTOs
>2.5 GW
Transmission capacity
STRATEGIC REPORT
International Public Partnerships Limited
Annual Report and financial statements 2021
43
OVERVIEW STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
WASTE WATER
Environmental infrastructure provides cities and towns with water
supply, waste disposal and pollution control services. These
municipal works serve two important purposes, including
protecting human health and safeguarding environmental quality.
Case study
Sustainability aim
– Support investments to create an open and
inclusive working environment
In a traditionally male-dominated industry such as construction,
Tideway continues to look at ways to address this imbalance
through measures such as inclusive recruitment, a focus on new
talent in underrepresented groups in their succession planning
activity, mentoring and promoting flexible working.
In support of SDG 5 – Gender Equality and SDG 10 – Reduced
Inequalities, Tideway continually attempts to make the industry
attractive to all members of the community through its STEM
programme, ‘returnship’ programmes, flexible working, and
gender-specific and maternity personal protective equipment.
Over the period, approximately 40% of staff employed were women.
In addition, Tideway supports Women into Construction (‘WiC’), a
small not-for-profit organisation which promotes gender equality in
the industry as well as mentoring women in the industry. In addition,
the project is actively funding the development of a self-assessment
tool to help further the gender diversity progress of smaller
organisations.
Impact
>37 million m
3
Diverted waste water
discharges when
operational
>2,100
Full-time equivalent
employees
TRANSPORT
Well-planned and coordinated transport infrastructure is
fundamental to the economic and social wellbeing of a community.
It is also becoming increasingly important to combat climate
change and has been identified as a crucial part of net zero carbon
strategies emerging internationally.
Case study
Sustainability aim
– Reduce consumption of natural resources,
work towards elimination of waste to landfill and move towards a
circular economy
Reliance Rail has developed a sustainability framework, which
builds on its existing risk management approaches to focus on the
specific sustainability issues that matter most to its business and
operations, and its contractors and stakeholders. Consistent with
the Global Reporting Initiative (‘GRI’), Reliance Rail has undertaken
a materiality assessment to maintain an up to date understanding
of evolving issues and expectations both internally and externally,
which will help to refine its strategic priorities and ensure
sustainability efforts remain relevant over the near and long-term.
In 2021, Reliance Rail obtained an overall GRESB Infrastructure
score of 96 out of 100. This ranks it first out of 114 PPP investments
internationally, with a five-star rating.
Impact
>93 million
Annual passenger journeys
>799 million
Annual train km travelled
>2,300
Full-time equivalent
employees
3 acres
New public space
following construction
International Public Partnerships Limited
Annual Report and financial statements 2021
44
STRATEGIC REPORT
Case study
Sustainability aim
– Reduce carbon emissions to work
towards alignment with the goals of the Paris Agreement
The Company is actively engaging with Cadent on its approach to
enabling the transition to cleaner fuels. Over the period, the
Company is pleased that HyNet has been awarded ‘track one’
status from the government’s carbon capture, utilisation and
storage (‘CCUS’) scheme, and will now enter into negotiations
with viability checks ahead of pulling in support from a £1 billion
fund. HyNet North West is a significant clean growth opportunity
for the UK. The fund is aimed at low cost, deliverable projects
which meet the major challenges of reducing carbon emissions
from industry, domestic heat and transport.
HyNet North West is based on the production of hydrogen from
natural gas. It includes the development of a new hydrogen
pipeline and creating the UK’s first carbon capture and storage
(‘CCS’) infrastructure. CCS is a vital technology to achieve the
widespread emissions savings needed to meet the 2050 carbon
reduction targets, as outlined in the UK Government’s ten-point
plan. The new infrastructure built by HyNet is readily extendable
beyond the initial project, and provides a replicable model for
similar programmes across the UK.
Case study
Sustainability aim
– Ensure investments are accessible to the
widest group of users and available to serve local communities
In an increasingly digital age, those who are not engaging
effectively with the digital world are at risk of being left behind.
Technological change means that digital skills are increasingly
important for connecting with others, accessing information and
services and meeting the changing demands of the workplace
and economy. As a result, this is leading to a digital divide
between those who have access to information and
communications technology and those who do not, giving rise
toinequalities in access to opportunities, knowledge, services
and goods.
The Company’s Investment Adviser is actively involved in
managing the underlying investments of NDIF and working to
support the objectives of each investment. As an example,
Airband, founded in 2009, is an independent internet service
provider bringing high speed broadband to homes, business and
industry in rural and hard-to-reach areas. Since its inception, it
has passed 178,000 properties, connecting over 7,000 rural
businesses and homes, helping to drive productivity, connect
communities and reduce the digital divide in the UK.
GAS DISTRIBUTION
Gas distribution infrastructure plays a critical role in delivering energy
to keep customers safe, warm and connected, whether that is
natural gas, biogas or hydrogen. Cadent’s network of gas pipes
will play a vital role in meeting Britain’s future energy needs and
delivering the UK’s net zero strategy. The network is a national asset
consisting of over 80,000 miles of pipework, connected to 11 million
homes; fuelling industrial sites and supplying domestic gas turbines.
DIGITAL INFRASTRUCTURE
Digital infrastructure underpins the potential of the internet. Over the
next few decades, digital networks will be the enabling infrastructure
that helps drive economic growth and productivity. The recent
Covid-19 crisis underlines this, where remote working has been a
financial and social lifeline to millions of businesses and families.
Impact Impact
5.7 million GJ/day
Maximum energy
throughput
>999,000
Premises
passed
>5,600
Full-time equivalent
employees
>11 million
Homes and businesses
connected to gas
>45,000
Premises
connected
CONTINUED
RESPONSIBLE INVESTMENT
International Public Partnerships Limited
Annual Report and financial statements 2021
45
OVERVIEW STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
GOVERNANCE
Disclose the organisation’s governance around climate-related risks and opportunities.
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.
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 and ensuring it is integrated into the Company’s investment
strategy, including in relation to climate change. The Board maintains oversight of climate risk in the
following ways:
– Investment Committee: The Company’s Investment Committee ensures climate change risks and
opportunities have been appropriately considered through the investment and divestment processes
and provides a robust challenge to the Investment Adviser.
– Audit and Risk Committee: The Company’s Audit and Risk Committee oversees the Company’s
approach to ESG disclosures and ensures all risk management frameworks consider material climate
change disclosures. Risks are reviewed quarterly, including climate change risks.
– ESG Committee: The Company’s ESG Committee monitors its approach to climate change, including
consideration of climate change strategy, disclosures and targets.
The Company’s Investment Adviser is responsible for implementing the Company’s ESG policies in
theCompany’s activities on a day-to-day basis. This includes the integration of ESG, and specifically
climate change, considerations through investment origination and management of the
Company’sinvestments.
CLIMATE-RELATED FINANCIAL DISCLOSURES
Climate change presents both transitional and physical risks to the Company’s investments. As such, it continues to be a high priority for the
Company which, accordingly, has voluntarily adopted the recommendations of the TCFD. As previously reported, during 2020, the Company’s
Investment Adviser commissioned an external third party to undertake a review of the Company’s current practices and make recommendations
as to how the Company can enhance its approach and disclosures in accordance with the TCFD Guidelines.
Climate change is considered alongside other ESG risks by the Company’s ESG Committee, Investment Committee and Audit and Risk
Committee. During the period, the Company commissioned an additional third party to support the enhancement of its approach to assessing
physical and transitional climate risks and opportunities across its portfolio, in line with TCFD recommendations.
Although there is no mandatory requirement for the Company to adopt nor explain areas of non-compliance within the framework, the Company
aims to integrate climate risk assessment consistently within investment decision-making and risk management processes, for existing and
futureinvestments.
The table below shows a summary of our progress to date against the TCFD recommendations.
International Public Partnerships Limited
Annual Report and financial statements 2021
46
STRATEGIC REPORT
STRATEGY
Disclose the actual and potential impacts of climate-related risks and opportunities on the organisation’s businesses,
strategy and financial planning where such information is material.
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
theorganisation’s strategy,
taking into consideration
different climate-related
scenarios, including a 2°C
orlower scenario.
Both the risks and opportunities presented by climate change are a key focus for the Board. The Company
has strengthened the alignment of its investment activity with the objectives of the Paris Agreement. In
practice the Company has a greater formal emphasis on:
– Enhanced screening and due diligence processes to ensure new investments are aligned, or can
directly support, the transition to net zero;
– Fuller deployment of emerging policy and frameworks, such as the UK ten-point plan and EU
Taxonomy, to help guide investment decision making; and
– Increased cooperation with public counterparties to reduce emissions from existing investments,
and to ensure that all assets continue to help deliver on international commitments.
The Company’s investments are located in the UK, Ireland, continental Europe, North America and
Australia. All these regions are forecast to experience a changing climate, including increasing episodes
ofextreme heat, water stress, flooding and extreme precipitation to varying degrees. As an investor in
infrastructure projects and businesses, the Company’s investments are likely to be directly exposed to
changes in weather. These potential physical impacts present the following risks to the Company:
– Unavailability of assets;
– Property damage;
– Insurance premiums;
– Insurance;
– Operational costs;
– Maintenance costs;
– Market value depreciation Capex for resilience; and
– Potential future liabilities.
The majority of the Company’s investments generate availability-based or regulated revenues, with most
costs contractually determined or compensated for via a regulatory regime. The ability for changes in
revenues or costs to have a material impact on the portfolio’s net cash flows is limited owing to the
contracts and/or regulatory frameworks under which the assets currently operate.
The transition to a low-carbon economy will largely depend on the right types of infrastructure to allow
communities to live net zero lifestyles. The changes required are wide-ranging, including decarbonisation
of heat, increased electrification of transportation and other systems previously dependent on fossil fuels,
and decarbonisation of construction. Several of the regions in which the Company invests have set legally
binding net zero targets, although only a small number of the Company’s investments face transition risks,
due to the nature of contracted or regulated frameworks.
The Company is focused on identifying current risks and evolving its assessment and understanding of
longer-term risks, along with mitigation of climate risks. The Company’s Investment Adviser is also working
towards obtaining a better understanding of the potential financial impacts and its resilience with regard to
different climate scenarios. This enhanced approach will directly inform a suite of indicators, which will
support the Company’s objectives and investors’ understanding of the physical and transitional risks.
As an investor in infrastructure, the Company will seek to support this transition and believes it represents
a significant opportunity which forms part of the work of the ESG Committee.
RESPONSIBLE INVESTMENT
CONTINUED
International Public Partnerships Limited
Annual Report and financial statements 2021
47
OVERVIEW STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
RISK
Disclose how the organisation identifies, assesses and manages climate-related risks.
a) Describe the organisation’s
processes for identifying
andassessing climate-
related risks.
b) Describe the organisation’s
processes for managing
climate-related risks.
c) Describe how processes for
identifying, assessing and
managing climate-related
risks are integrated into the
organisation’s overall risk
management.
During the period, the Company commissioned a third party to support it in enhancing its assessment of
climate change risks. The results of this process will be disclosed later in 2022, providing greater detail on
the tools, scenarios and sensitivities that are in the process of being implemented. This enhanced risk
assessment process will provide a more in-depth view of the climate risk across the portfolio.
Climate risk identification and management is integrated within the risk management process as a subset
of wider risk categories, including political, financial, operational and strategic risks.
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 manage,
rather than eliminate, 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. 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.
Although the Company is aligning with TCFD recommendations voluntarily, the Company’s approach to
climate change risk sits alongside other requirements to which we are subject under applicable law and
the Company’s internal policies and procedures, such as the requirement to have robust risk management
policies and procedures. Please refer to the Continuous Risk Management section for more information in
relation to the Company’s approach to risk management.
METRICS
Disclose the metrics and targets used to assess and manage relevant climate-related risks and opportunities where such
information is material.
a) Disclose the metrics used
by the organisation to
assess climate-related
risks and opportunities in
line with its strategy and
risk management process.
b) Disclose Scope 1, Scope 2
and, if appropriate, Scope
3 GHG emissions, and the
related risks.
c) Describe the targets used
by the organisation to
manage climate-related
risks and opportunities
and performance against
targets.
The Company qualitatively assesses the risk of all investments and is in the process of reviewing relevant
climate-related metrics and targets at the portfolio level, which include the consideration of TCFD’s
supplementary guidance on metrics. The Company is currently in the process of collating the information
and as yet the data is too incomplete to draw a reasonable and accurate baseline, given the number and
breadth of assets.
To support the Company in developing these overarching disclosures, it set an interim target for 100% of
investments to monitor and disclose Scope 1 and Scope 2 emissions. During the period, the Company is
pleased to report that 94% are monitoring these metrics.
The Company is actively developing a carbon footprint across all its investments to establish a baseline
and will be developing ways to enhance its consideration and disclosure of transitional and physical risks of
climate change. This baseline is focusing on Scope 1 and 2 emissions initially and will seek to include
Scope 3 emissions where available.
International Public Partnerships Limited
Annual Report and financial statements 2021
48
STRATEGIC REPORT
RESPONSIBLE INVESTMENT
STAKEHOLDER ENGAGEMENT
VALUE CREATION – HOW WE ENGAGE
The Company takes a proactive approach to identifying and engaging with key stakeholders. This is to
ensure that 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. 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 below.
1 – 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 our strategic objectives and to ensure that the Company
understands all views on topical issues. This approach is intended to
maximise investor buy-in to current objectives and performance
whilst also helping shape the Company’s future plans.
The key mechanisms for the Company’s engagement with investors
include:
– Regular and timely updates on performance, including through
the annual and half-yearly reporting cycle
– The Company’s AGM
– 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
Over the period, the Company has increased engagement with
investors around its approach to ESG. For example, in September
2021, the Company held an investor webinar following the release of
its Sustainability Report. In addition, the Company has held several
one-to-one meetings to increase its understanding of investor
requirements as a result of regulations such as TCFD, EU Taxonomy
and EU SFDR.
2 – 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
– Active asset management, which provides monitoring of the
facilities management arrangements on compliance with
maintenance obligations
– Asset managers directly engaging with the client on a day-to
daybasis
The Company’s Investment Adviser has been proactively engaging
with the Company’s public sector clients to provide them with
options on how to work towards net zero solutions. Please refer
tothe case study on pages 14 to 15 for more information.
International Public Partnerships Limited
Annual Report and financial statements 2021
49
OVERVIEW STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
3 – 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
ourcommunities 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 agreements
– Supporting community initiatives
Throughout the pandemic, the Company has been seeking to
support those who have been negatively impacted by Covid-19.
TheCompany, through its Investment Adviser, has been supportive
of its supply chain and has engaged with the communities in which
they and the Company’s investments operate.
4 – 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
ourinvestments.
The 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
Throughout the pandemic, the Board has ensured that its direct
supply chain’s safety and wellbeing has been appropriately prioritised
and managed in line with its Sustainability Policy Aim to Encourage a
Zero Harm Culture. This has been monitored through pre-existing
channels, such as quarterly Board meetings.
International Public Partnerships Limited
Annual Report and financial statements 2021
50
STRATEGIC REPORT
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
tomanage, rather than eliminate, 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
tothe materiality of relevant risks in designing systems of risk
management and internal control.
Risk control levels Principal advisers
BOARD
-
Audit and Risk Committee
-
Management Engagement Committee
-
Investment Committee
-
Nomination and Remuneration Committee
-
Environmental, Social and Governance Committee
– Service provider’s
internal controls
– Independent controls
and
process reviews
– External audit
– Investment Adviser
and 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.
TheBoard recognises the importance of identifying and actively
monitoring the risks facing the business. The framework involves an
ongoing process for identifying, evaluating and managing significant
risks faced by the Company. While responsibility for risk
management ultimately rests with the Board, the aim is for the risk
management framework to be embedded as part of the everyday
operations and culture of the Company and its key advisers.
The risk framework is applied holistically across the Company and, to
the extent possible, to the underlying investment portfolio as illustrated
in the Business Model on pages 4 to 5. The framework has been in
place for the year under review and up to the date of approval of
these annual financial statements.
Direct communication between the Company, its Investment Adviser
and the portfolio investment level asset manager, is a key element in
the effective management of risk through 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.
The risk framework is implemented through the following risk
controlprocesses:
Risk
identification
Risk
assessment
Risk monitoring,
reporting and
reassessment
Mitigation
plan
CONTINUOUS RISK MANAGEMENT
International Public Partnerships Limited
Annual Report and financial statements 2021
51
OVERVIEW STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
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. For investments held by the Company, 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. A risk
register is reviewed and updated by the Board and Audit and Risk
Committee on a quarterly basis. An annual workshop with the
Investment Adviser considers emerging risks and the positions of
thecurrent risks.
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.
MITIGATION PLAN
For newly identified risks or existing risks with increased likelihood or
impact, the Audit and Risk Committee assists the Company in
developing an action plan to mitigate the risk, with enhanced
monitoring and reporting put in place.
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.
Whilst challenges arising from the Covid-19 pandemic remain, the
principal risks affecting the Company and its investment portfolio did
not, in the view of the Board, materially change during the year, in
part due to the typically long-term contractual and regulated nature
of the Company’s portfolio investments. Details of the activities
performed by the Audit and Risk Committee during the year can be
found on pages 74 to 76 in the Audit and Risk Committee report.
DEVELOPMENTS IN THE YEAR IN RELATION TO
PRINCIPAL AND EMERGING RISKS
UK REGULATORY REGIME ANNOUNCEMENTS
Two of the Company’s investments are subject to regulatory regimes
which are designed by the regulators to, amongst 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 these regulated assets.
As previously announced, in March 2021 Cadent exercised its right
to appeal Ofgem’s final determination in respect of the five-year
regulatory period which commenced in April 2021 to the CMA as it
believed this approach would best serve Cadent’s customers’
interests. The CMA published its final determination in October 2021
and the findings had a modestly positive impact on the Company’s
valuation of its investment in Cadent compared to that reported at
30 June 2021.
Also as reported previously, Tideway has been in discussions with
Ofwat regarding additional measures to mitigate the impact of both
Covid-19 related cost overruns and the FCAM on Tideway’s
investors. Subsequent to a provisional agreement with Tideway,
Ofwat launched a public consultation in December 2021 to gain
views from interested parties on the proposed amendments. As the
consultation was ongoing at the valuation date, the 31 December
2021 valuation of the Company’s investment in Tideway included a
prudent assessment of the outcome of the consultation and the
necessary licence modification process. The consultation
subsequently closed in January 2022 and the licence modifications
came into effect in March 2022.
The Company believes its regulated asset valuations continue to
remain appropriate. In addition, investments in regulated assets are
considered very long-term, beyond any individual regulatory cycle.
Therefore, our long-term view of such assets takes into account the
robustness of yield as well as potential for increases in the regulated
asset base over time.
International Public Partnerships Limited
Annual Report and financial statements 2021
52
STRATEGIC REPORT
COUNTERPARTIES AND SERVICE PROVIDERS
Counterparty risk continues to be closely monitored following issues
affecting certain service providers to the Group in the last three years
as well as the challenges placed on those businesses by the Covid-19
pandemic. 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 future events of a
similar nature and has contingency plans in place to allow for a
smooth transition of contracts to an alternative service provider.
TheInvestment Adviser continues to monitor the Group’s counterparty
exposures and contingency plans are reviewed and updated where
appropriate. Please see further information on pages 27 to 28.
CLIMATE CHANGE
Climate change could lead to more frequent or severe weather
events such as flooding, fires, droughts and storms. Investments may
be subject to extreme weather and changes in precipitation and
temperature, all of which may result in physical damage or a
decrease in demand or availability for infrastructure assets located in
the areas affected by these conditions. Should the impact of climate
change be material in nature or occur for lengthy periods of time, the
financial condition or results of operations of the investments could
be adversely affected. In addition, changes in legislation and
regulation on climate change could result in increased capital
expenditures to improve the energy efficiency or reduce the carbon
footprint of the Company’s investments. This transition could also
lead to certain fuels and business models becoming obsolete if
unable to adapt to emerging regulation and customer preference.
The Company takes climate change very seriously and continues to
devote attention to managing this risk. Climate change is a key focus
for the newly formed ESG Committee, ensuring that the Company
continues to evolve its approach to considering both the risks and
opportunities it presents. During the period, the Company
commissioned a third party to support it in enhancing its assessment
of climate change risks. The results of this process will be available
later in 2022, providing greater detail on the tools, scenarios and
sensitivities that are in the process of being implemented. The
enhanced risk assessment process will provide a more in-depth view
of the climate risk across the portfolio. 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. Further
information on the Company’s approach to responsible investing can
be found in the Responsible Investment section on pages 38 to 49.
COVID-19 CORONAVIRUS
The effects of the Covid-19 pandemic continue to impact all
businesses across the world in a variety of ways. The Company is
reassured by the operational performance of its portfolio to date.
Short-term impacts have been witnessed in certain assets with
demand-based risk, although operational performance of these
assets has remained strong.
The Company notes that there are a range of contingent risks
stemming from Covid-19. These include, but may not be limited to,
staff shortages and supply chain breakdowns and their
consequences. The Company continues to monitor and where
possible take action to avoid or mitigate any such impacts on its
portfolio. The Company notes that the overwhelming majority of its
revenues come from availability-based payments or regulated cash
flows that generally provide a range of protections against adverse
scenarios. The Company has exposure to demand risk on a small
portion of the portfolio where restrictions on movements had an
adverse impact on the performance of the asset. The Company
continues to hold reserves to manage unforeseen outcomes over the
next 12 to 18 months.
Whilst the full long-term consequences of the pandemic and its
effects over the long-term are not yet known, the Company believes
that its business model continues to offer a significant degree of
protection to shareholders. Please see more information on
pages 50 to 52.
WAR IN UKRAINE
The Company continues to actively monitor the situation in Ukraine to
ensure that the portfolio of investments is protected, to the extent it
can be, from the direct and indirect impacts of the war. The Company
does not hold any investments in the impacted region and we are
notaware of any material direct implications for the Company or
itsportfolio.
FURTHER INFORMATION
A description of broader risk factors relevant to investors is
disclosedin the latest Company prospectus available on the
websitewww.internationalpublicpartnerships.com.
CONTINUOUS RISK MANAGEMENT
CONTINUED
International Public Partnerships Limited
Annual Report and financial statements 2021
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OVERVIEW STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
RISKS ASSESSMENT
AGGREGATE RISK ASSESSMENT
The Company’s identified risks have been mapped to the five different risk categories: political, portfolio operations, macroeconomic, regulation
and compliance, and central operations.
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
andactions;
– 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;
– 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 below.
PRINCIPAL RISKS
The following 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.
Central operations
Regulation & compliance
Macroeconomic
Portfolio operations
Political
Lower Medium
ASSESSED RISK POSITION
RISK TYPE
Higher
International Public Partnerships Limited
Annual Report and financial statements 2021
54
STRATEGIC REPORT
RISK DESCRIPTION MITIGATION
POLITICAL
1
POLITICAL POLICY
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
andare exposed to political scrutiny and the
potential for adverse public sector or
politicalcriticism.
Most of the Company’s existing investments benefit from
long-term service and asset availability-based pricing
contracts or regulatory frameworks and the countries in
which the Company operates do not tend to have a
tradition of penal retrospective legislation. Governments
tend to be long-term supporters of infrastructure and
similar investment and recognise the risk of deterring
future investment in the event that penal or
disproportionate steps are taken in respect of existing
contractual engagements.
Change in political policy
Political policy and financing decisions may
adversely impact either on existing investments,
or on the Company’s ability to source new
investments at attractive prices or at all.
Thismay impact the Company’s reputation.
A certain degree of reputational risk exists
inthis area as policy decisions adversely
impacting the Company have the potential
tobe made as a direct or indirect result of
reputational developments seen across
thewider sector.
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 where possible.
It also has an active relationship with other external
stakeholders including investors.
Termination of contracts
Often contracts between public sector
bodiesand the Company’s investment
entitiescontainrights for the public sector to
terminatecontracts in certain situations.
Whilethe contracts typically provide for some
compensation in such cases, this may be less
than required to sustain the Company’s
valuation, causing loss of value. There have
been instances of contracts being voluntarily
terminated in the UK (although not affecting
theCompany).
The Company engages with its public sector clients in
developing cost-saving initiatives and seeks to act as a
‘good partner’ including by focusing 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
publicinterest.
The Investment Adviser is a signatory to the Code of
Conduct for Operational PFI/PPP contracts in the UK.
The voluntary Code of Conduct 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.
Nationalisation
Longer term political policy pressures arising as
a consequence of Brexit in the UK or the
Covid-19 pandemic more globally remain
uncertain, so the possible risk of nationalisation
can be seen to remain over the medium-term.
The Company believes significant compensation would
be required in order to enact this policy legitimately within
existing contractual arrangements. Therefore, we
maintain the view that the Company is defensively
positioned in this regard.
CONTINUOUS RISK MANAGEMENT
CONTINUED
International Public Partnerships Limited
Annual Report and financial statements 2021
55
OVERVIEW STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
The following key is used in the table below to highlight the
Board’s view on movement of risk exposures during the period:
Risk exposure has increased in the period
Risk exposure has reduced in the period
No significant change in risk exposure since
last reporting period
RISK DESCRIPTION MITIGATION
PORTFOLIO OPERATIONS
2
ASSET PERFORMANCE
Construction
For the Company’s assets under construction,
there is an element of construction risk that
takes the form of cost overruns or delays that
could impact on investment returns. The
construction industry continues to see
implications resulting from the Covid-19
pandemic, which contain potential
consequential impacts on the Company.
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 73% complete as at
31 December 2021.
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 also have linkage to other factors including
demand risk 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.
Two of the Company’s investments 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.
Disruption arising from Covid-19 may continue
to affect services provision as well as impact
the facilities management industry. Certain
assets within the portfolio have demand risk
based on the usage of the underlying
infrastructure.
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.
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.
A small portion of the portfolio has exposure to demand
risk; cash reserves have been maintained to manage
unforeseen exposures whilst Covid-19 related
uncertainties persist. Certain demand-based assets have
contractual arrangements to adjust pricing in the event of
a substantial decrease in usage.
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.
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56
STRATEGIC REPORT
RISK DESCRIPTION MITIGATION
PORTFOLIO OPERATIONS CONTINUED
2
ASSET PERFORMANCE
continued
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.
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.
The risk of termination of contracts as a result of political
policy is addressed on page 54.
3
COUNTERPARTY RISK
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. These risks would 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. In addition, 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. Information regarding relevant counterparty risk
developments during the year can be found on page 47.
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 if
the counterparties of these swaps were to
default or the swaps otherwise become
ineffective.
The credit risk of such swap counterparties is considered
at the time of entering into these arrangements and is
regularly reviewed. However, there is a risk of credit
deterioration which could impact affected investments.
The Company continues to aim to use reputed financial
institutions with good credit ratings. In most cases, the
swaps are out of money, therefore reducing the risk of
counterparty default.
CONTINUOUS RISK MANAGEMENT
CONTINUED
International Public Partnerships Limited
Annual Report and financial statements 2021
57
OVERVIEW STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
RISK DESCRIPTION MITIGATION
PORTFOLIO OPERATIONS CONTINUED
4
PHYSICAL ASSET RISK
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.
Climate change
Investments may be subject to extreme
weather and changes in precipitation and
temperature, all of which may result in physical
damage to assets.
During the year, the Company commissioned a third
partyto work alongside its Investment Adviser to assess
alignment with the recommendations of TCFD. The
Company has continued to update its investment
processes, further strengthening climate considerations
within investment screening and diligence, ensuring
theseare considered from the earliest point in the
investmentcycle.
5
CONTRACT RISK
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.
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. See Political Policy risk
for further commentary on contractual risk of voluntary
termination.
International Public Partnerships Limited
Annual Report and financial statements 2021
58
STRATEGIC REPORT
RISK DESCRIPTION MITIGATION
MACROECONOMIC
6
INFLATION
Despite recent increases
ininflation, the Company
continues to take a long-
term view of inflation in
eachgeography.
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.
The Company uses a long-term view of inflation within its
forecasts, benchmarked where possible to independent
analysis. It also provides sensitivities to investors
indicating the projected impact on the Company’s NAV of
alternative inflation scenarios, offering investors an ability
to anticipate the likely effects alternative inflation scenarios
may have on their investment.
The Company monitors the effect of inflation on its
portfolio through its biannual valuation process.
7
FOREIGN EXCHANGE
MOVEMENTS
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.
CONTINUOUS RISK MANAGEMENT
CONTINUED
International Public Partnerships Limited
Annual Report and financial statements 2021
59
OVERVIEW STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
RISK DESCRIPTION MITIGATION
MACROECONOMIC CONTINUED
8
INTEREST RATES
The Company is monitoring
the potential impacts of
increased inflation on
interest rates.
Changes in market rates of interest can affect the Company in a variety of different ways:
Valuation discount rate
The Company, in valuing its investments, uses
a discounted cash flow methodology. 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 rates will have a negative
impact on valuation while lower rates will have a
positive impact.
In determining the discount rates used to value its
investments, the Company generally uses nominal
government bond yields to which specific investment risk
premia are added to determine the overall discount rates.
The investment risk premia may provide a buffer against
rising bond yields assuming market demand for
investment is sustained. Higher interest rates can often be
precipitated by higher inflation expectations, and therefore
any inflation-linkage (discussed above) may partly mitigate
the effect of interest rate changes.
Corporate Debt Facility
The Company has a CDF that may be drawn
from time to time. Interest is charged on a
floating rate basis, so higher than anticipated
interest rates will increase the cost of this facility
adversely impacting on cash flow and the
Company’s valuation.
In the event that the interest rate increases, the Company
has the option of repaying its CDF at any time with
minimal notice, providing sufficient funds are available.
The CDF remains available to March 2024. The maximum
facility is £400 million (including the £150 million
‘accordion’) compared to a current investment portfolio
valuation of c.£2.6 billion.
Underlying portfolio considerations
Changes in interest rates have potential
impacts on the portfolio at underlying investee
entity level. Portfolio entities typically choose or
can be required to hold various cash balances,
including contingency reserves for future costs
(such as major lifecycle maintenance or debt
service reserves).
These are generally held on interest-bearing
accounts and under the contractual terms
applicable to certain investments which in
many cases are projected to be held for the
long-term. 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. If the
Company receives less interest than it projects
this will impact cash flows and NAV adversely.
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
theseassets.
As presented in the sensitivity analysis, variations in cash
deposit rates have little impact on the Company’s NAV.
Due to the spread of cash holdings within ring-fenced
Special Purpose Vehicles (‘SPV’) structures and relatively
smaller balances in the SPVs, it is not economically
feasible to hedge against adverse deposit rate
movements.
The Company monitors the effect of historical and
projected interest rates on its portfolio through its
biannual valuation process and reports this to investors.
Italso provides sensitivities to investors indicating the
projected impact on the Company’s NAV of a limited
number of alternative scenarios, offering investors the
ability to anticipate the likely effects of some deposit
interest rate scenarios on their investment.
The risk of adverse movements in debt interest rates for
unhedged debt within regulated entities is limited through
protections provided by the regulatory regime, however,
the Company may potentially be exposed to interest rate
risk on debt outside of the regulatory structure.
International Public Partnerships Limited
Annual Report and financial statements 2021
60
STRATEGIC REPORT
RISK DESCRIPTION MITIGATION
MACROECONOMIC CONTINUED
8
INTEREST RATES
continued
The Company is monitoring the potential
impacts of the move away from LIBOR.
Anumber of the portfolio assets contain
references to LIBOR within the
projectcontracts.
The third-party loans at investee entity level are typically
fully hedged. It is expected that both the loan and the
swaps will switch to the new risk-free rate at the same
time and therefore the protection against fluctuations in
the new risk-free rate will be mitigated as has been the
case with LIBOR denominated loan. To date, the
Company has made good progress in terms of switching
the loans and the related hedging arrangements to the
SONIA benchmark as well as obtaining local authority
consents where necessary.
Synthetic LIBOR may also be available as a fallback
mechanism where the loan arrangements do not
convertto the new benchmark rate and LIBOR is no
longeravailable.
REGULATION AND COMPLIANCE
9
LAW AND REGULATION
Climate change and the
transition to net zero
presents increased potential
of associated regulatory
changes going forward.
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.
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 or as a result of Brexit) that
have the potential to impact costs or obligations of the
Company or portfolio projects, which may not be fully
capable of mitigation.
Transition to net zero
In 2019, the UK Government committed to
thenet zero target as recommended by the
Climate Change Committee. Reaching net zero
Greenhouse Gas (‘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 usecase of a variety of infrastructure
including altering the way infrastructure is
operated andutilised.
A large portion of the Company’s investments are
availability-type assets where the cash flows are based
onmaking the asset available in a pre-agreed manner.
The cash flows from such investments are largely
insulated from changes to the net zero transition.
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.
CONTINUOUS RISK MANAGEMENT
CONTINUED
International Public Partnerships Limited
Annual Report and financial statements 2021
61
OVERVIEW STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
RISK DESCRIPTION MITIGATION
REGULATION AND COMPLIANCE CONTINUED
10
TAX AND ACCOUNTING
Headline rates of Corporation
tax increased inthe UK
reducing the likelihood of
another imminent increase.
However, other jurisdictions
may look to increase rates in
a post-Covid-19 environment.
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.
The Company typically incorporates changes in tax rates
within its forecast cash flows and NAV once substantively
enacted, or where there is a reasonable expectation of
substantial enactment shortly after the valuation date.
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).
The OECD’s Action Plan on Base Erosion and
Profit Shifting (‘BEPS’), published in 2013,
seeks to address perceived flaws in
international tax rules. It sets out 15 actions to
counter BEPS in a comprehensive and
coordinated way. Countries in which the
Company invests have been assessing their
compliance or otherwise with this guidance.
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.
The Company’s Investment Adviser continues to monitor
developments relating to tax reform across the jurisdictions
in which the Company has operations. Future legislation
in response to the OECD proposals, or changes in
approach to existing legislation as a consequence of
market practice or updated guidance, continue to have
the potential to negatively impact the Company.
CENTRAL OPERATIONS
11
FINANCIAL FORECASTS
The Company’s projections depend on the use
of financial models to calculate its future
projected investment returns. These are in turn
dependent on the outputs from other financial
model forecasts at the underlying investment
entity level. 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.
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.
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, 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.
Financial models are managed by a dedicated team with
a background in financial modelling and experience of
managing models in a manner that seeks to minimise the
risk of error.
Sensitivities are produced for the information of relevant
stakeholders and are accompanied by disclaimers and
guidance explaining that limited reliance can be placed
upon them.
International Public Partnerships Limited
Annual Report and financial statements 2021
62
STRATEGIC REPORT
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
ofconfidence 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 An Audit and Risk Committee review and assessment of the risks
facing the Company. A summary of the review process is detailed
on pages 75 to 76;
2 Identification of those principal risks that are deemed more likely
to occur and have a potential impact on the Company’s viability
over the viability period. This exercise has included consideration
of: a persistent low inflation rate environment (noting that a high
rate environment would typically be positive for the Company’s
investment cash flows giving linkage of revenues to inflation
across many investments); large currency fluctuations impacting
on receipts from overseas investments; and the impact from the
loss of income from investments (whether due to key
subcontractor default, or other assets underperformance).
Wenote 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
afive-year viability perspective;
3 Quantification analysis of the potential impact of those principal
risks occurring in isolation and under plausible combined
sensitivity scenarios over the viability period;
4 Assessment of potential mitigation strategies to mitigate the
potential impact of principal risks over the viability period.
Thisexercise has considered the potential to liquidate
investmentsand/or refinance investments if necessary.
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 2027. This assessment is
basedon 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 2021 NAV valuation; and
– Continued availability of sufficient capital and market liquidity to
allow for refinancing/repayment of any short-term recourse debt
facility obligations as they become due, including in relation to the
Company’s debt facility which remains available to March 2024.
MIKE GERRARD JOHN LE POIDEVIN
CHAIR DIRECTOR
23 March 2022 23 March 2022
CONTINUOUS RISK MANAGEMENT
CONTINUED
International Public Partnerships Limited
Annual Report and financial statements 2021
OVERVIEW STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
63
CORPORATE GOVERNANCE
SUMMARY OF INVESTMENT POLICY
OVERVIEW
The Company invests in public or social infrastructure assets and
related businesses located in the UK, Australia, Europe, North
America and other parts of the world where the risk profile meets
the Company’s risk and return requirements.
The Company has a long-term view and invests in operational
andconstruction phase assets for the life of the asset or
concession, or under a licence issued by a regulator unless
thereis a strategic rationale for earlier realisation. The Company
seeks to enhance the capital value and the income derived from
itsinvestments to optimise returns for its investors. The
InvestmentPolicy is summarised below and available in full at
www.internationalpublicpartnerships.com.
INVESTMENT PARAMETERS
Maintaining the performance of the existing portfolio is the
Company’s key focus. However, it will also seek attractive
opportunities to expand its portfolio, including:
– Investments with characteristics similar to the existing portfolio;
– Investments in other assets or concessions or regulated
businesses having a public or social infrastructure character
with either availability, property rental or user paid payment
mechanisms or appropriate regulatory frameworks;
– Investments in infrastructure assets or concessions
characterised by high barriers to entry and expected to
generate an attractive total rate of return over the life of
theinvestment;
– Divestments where an investment is no longer aligned with
theCompany’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
inorder to achieve a broad balance of risk in the Company’s
portfolio. It does not expect to invest in non-OECD countries,
unless it can get comfortable with the risk-return profile.
Asset allocation will depend on the maturity of the local
infrastructure investment market, wider market conditions and
thejudgement of the Investment Adviser and the Board on the
suitability of the investment from a risk and return perspective.
TheCompany Overview on pages 2 to 3 has details of the
currentcomposition of the investment portfolio.
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 29.
CHANGES TO INVESTMENT POLICY
Material changes to the Investment Policy summarised in this
section may only be made by ordinary resolution of the
shareholders in accordance with the UK Listing Rules.
International Public Partnerships Limited
Annual Report and financial statements 2021
64
CORPORATE GOVERNANCE
BOARD OF DIRECTORS
1 All of the independent directors are members of all Committees with the exception of Mr Gerrard, who is not a member of the Audit and Risk Committee. Mr Frost is a non-independent director.
Details of all Directors of
the Company at the date
of this report
BACKGROUND AND EXPERIENCE
LISTED COMPANY AND OTHER
RELEVANT DIRECTORSHIPS
MIKE GERRARD
Board Chair;
Chair, Investment Committee
Date of appointment:
4 September 2018
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.
A resident in the UK, Mike
hasover 30 years of financial
and management experience
in global infrastructure
investment.
He has held a number of
senior positions, including as
an assistant director of Morgan
Grenfell plc, a director of HM
Treasury Taskforce, deputy
CEO and later CEO of
Partnerships UK plc and, later,
a managing director of Thames
Water Utilities Limited.
Mike has a breadth of
experience across a range of
economic and social
infrastructure sectors and has
been involved in some of the
largest infrastructure projects
in the UK. He is a Fellow of the
Institution of Civil Engineers.
JULIA BOND
1
Chair, Nomination and
Remuneration Committee;
Chair, ESG Committee
(with effect from 22 March
2021);
Chair, Risk Sub-Committee
(until 22 March 2021)
Date of appointment:
1 September 2017
– European Assets Trust
(‘EAT’)
– NED of Foreign,
Commonwealth &
Development Office and
Strategic Command
A resident in the UK, Julia has
27 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.
STEPHANIE COXON
1
Date of appointment:
1 January 2022
– PPHE Hotel Group Limited
– JLEN Environmental
Assets Group Limited
– Apax Global Alpha Limited
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.
International Public Partnerships Limited
Annual Report and financial statements 2021
OVERVIEW STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
65
GILES FROST
Date of appointment:
2 August 2006
CLAIRE WHITTET
1
Senior Independent Director;
Chair, Management
Engagement Committee
Date of appointment:
10 September 2012
A resident of Guernsey, Claire
has over 40 years’ experience
in the banking industry with
Bank of Scotland, Bank of
Bermuda and Rothschild and
Co Bank International, where
she was latterly managing
director and co-Head until
May2016 when she became a
non-executive director. She is
also a non-executive director
of a number of listed and
private equity investment
companies, none of which is
atrading company.
Claire is a member of the
Chartered Institute of Bankers
in Scotland, the Chartered
Insurance Institute and the
Institute of Directors and is a
Chartered Banker and holds
the Institute of Directors’
Diploma in Company Direction.
– BH Macro Ltd
– Eurocastle Investment Ltd
– Riverstone Energy Ltd
– TwentyFour Select Monthly
Income Fund Ltd
– Third Point Offshore
Investors Ltd
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.
A resident in the UK, Giles
is a founder of Amber
Infrastructure and has
workedin the infrastructure
investments sector for over
20years.
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.
MERIEL LENFESTEY
1
Date of appointment:
10 January 2020
– Bluefield Solar Income
Fund Limited
Meriel sits on a number of
other commercial boards
including Gemserv, Jersey
Telecom and Aurigny Air
Services and is a committee
member for the Guernsey
Institute of Directors.
A resident of Guernsey, Meriel
has 27 years of multi-sector
business experience.
With a background in
human-centred design for
technology, she brings a
strategic end-user focus and
abroad set of experiences
encompassing many sectors
and scales of organisation
ranging from her own start-ups
through global corporations
and governmental programmes.
JOHN LE POIDEVIN
1
Chair, Audit and Risk
Committee
Date of appointment:
1 January 2016
– BH Macro Limited
– TwentyFour Income Fund
Limited
– Super Group (SGHC)
Limited
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 chairs a number of audit
committees.
SALLY-ANN DAVID
1
Chair, Risk Sub-Committee
(with effect from 23 March
2021)
Date of appointment:
10 January 2020
– Guernsey Electricity Ltd
– Channel Islands Electricity
Grid
Sally-Ann is also a director
of a health-related charity.
A resident of Guernsey,
Sally-Ann has over 35 years of
experience in infrastructure
projects in the energy sector,
including international offshore
transmission systems and the
challenges of the energy
transition.
Having held senior positions
within the power utility arena,
Sally-Ann is currently the Chief
Operating Officer of Guernsey
Electricity Ltd. She is a
Chartered Engineer and
Chartered Director.
International Public Partnerships Limited
Annual Report and financial statements 2021
66
CORPORATE GOVERNANCE
CORPORATE GOVERNANCE REPORT
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 All-Share Index.
The Board is responsible to shareholders for the overall direction and
oversight of the Company, for agreeing its strategy, monitoring its
financial performance, and setting and monitoring its risk appetite.
This section describes how the Company is governed. It explains
how the Board is organised and operates, including the roles and
composition of each of its Committees, and provides details on its
Board members and how they are remunerated. As an investment
company, the Company has no employees and relies on the advice
and expertise of its key suppliers, notably its Investment Adviser,
Amber Fund Management Limited (‘Amber’). This section therefore
also explains the nature of the Company’s relationship with the
Investment Adviser, and how this is managed, including the
remuneration of the Investment Adviser.
COMPLIANCE WITH CORPORATE GOVERNANCE CODES
AND REGULATIONS
The Company has a Premium Listing on the London Stock Exchange
and, in common with other companies listed on the Exchange, is
required to confirm its compliance with (or explain departures from)
the UK Corporate Governance Code (the ‘UK Code’). This
requirement applies regardless of where a company is incorporated.
A revised UK Code was issued in July 2018, which applies to
accounting periods beginning on or after 1 January 2019 and
therefore applies to the Company for the financial year ended
31 December 2021.
The Company is a member of the Association of Investment
Companies (the ‘AIC’). The Financial Reporting Council (the ‘FRC’)
acknowledges that the AIC Corporate Governance Code issued in
February 2019 (the ‘AIC Code’) can assist externally managed
companies in meeting their obligations under the UK Code in areas
that are of specific relevance to investment companies. This also
applied to accounting periods beginning on or after 1 January 2019.
The GFSC has also confirmed that companies that report against the
UK Code or AIC Code are deemed to meet the Guernsey Code of
Corporate Governance.
The AIC Code is available from the AIC website (www.theaic.co.uk).
The UK Code is available from the FRC website (www.frc.co.uk).
The Company has complied throughout the year with all the
provisions of the AIC Code and as such also meets the requirements
of the UK Code. However, 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.
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 EU Regulation
(2017/653) (‘the Regulation’) which deemed it to be a packaged retail
and insurance-based investment product (‘PRIIPs’). In accordance
with the requirements of the Regulation, the Company published and
updated its three-page Key Information Document (‘KID’) on
9 September 2021. The KID is available on the Company’s website,
www.internationalpublicpartnerships.com/investors, and will continue
to be updated at least every 12 months in accordance with the
relevant UK PRIIPs regulations in force at the time.
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 seven of the eight directors are independent.
BOARD OF DIRECTORS
The Board of Directors currently consists of eight non-executive
directors, whose biographies, on pages 64 to 65, demonstrate
abreadth of investment and business experience.
The Board consists solely of non-executive directors and, for the
period of this report, was chaired by Mr Gerrard, who was
responsible for leadership of the Board and ensuring its effectiveness
in all aspects of its role. The Board considered that Mr Gerrard was
independent upon appointment and remained independent
throughout his term of service for the purposes of the AIC Code.
For the purposes of the AIC Code, Mr 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.
International Public Partnerships Limited
Annual Report and financial statements 2021
OVERVIEW STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
67
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.
Ms Whittet joined the Board on 10 September 2012 and will not be
standing for re-election at the forthcoming AGM when she will retire.
The Board will then revert to seven Directors.
On 1 January 2022, the Board appointed Ms Coxon as part of its
ongoing succession planning. An independent external search
agency, OSA, was used for the appointment of Ms Coxon, and the
Board can confirm there is no connection with the Company or the
Investment Adviser. In addition, the Company can confirm Ms Coxon
ceased employment with PwC prior to the audit tender process in
2021 and subsequent appointment of PwC as external auditor of
theCompany.
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.
These duties cover the following areas of responsibility:
– Statutory obligations and public disclosure;
– Approval of the Company’s mandate, objectives and strategy;
– Strategic matters and financial reporting;
– Board composition and accountability to shareholders;
– Overall risk assessment and management, including reporting,
compliance, monitoring, governance and control;
– Other matters having material effects on the Company.
These reserved powers of the Board have been adopted by the
Directors to demonstrate clearly the importance with which the
Board takes its fiduciary responsibilities and as an ongoing means of
measuring and monitoring the effectiveness of its actions.
The Board monitors the Company’s share price and NAV and
regularly considers ways in which shareholder value may be
enhanced. These may include implementing marketing and investor
relations activities, appropriate management of share price premium/
discount and the relative positioning and performance of the
Company to its competitors. The Board is also responsible for
safeguarding the assets of the Company and for taking reasonable
steps for the prevention and detection of fraud and other irregularities.
Individual directors may, at the expense of the Company, seek
independent professional advice on any matter that concerns them
in the furtherance of their duties. The Company maintains
appropriate Directors’ and Officers’ liability insurance in respect of
legal action against its directors on an ongoing basis and the
Company has maintained appropriate cover throughout the period.
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.
BOARD DIVERSITY
The Board is committed to maintaining the appropriate balance of
skills, gender, knowledge and experience among its members to
ensure strong leadership of the Company. When appointing Board
members, its priority will always be based on merit, but will be
influenced by the strong desire to maintain Board diversity. The
Board currently has five female directors making the gender balance
63% female and 37% male. Following the forthcoming AGM and
Ms Whittet’s retirement, the gender balance will be 57% female and
43% male. In addition, post-year end, the Company was listed as
one of the FTSE 250’s ‘Top 10 Best Performers’ for gender diversity
in the FTSE Women Leaders review 2021.
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.
International Public Partnerships Limited
Annual Report and financial statements 2021
68
CORPORATE GOVERNANCE
CORPORATE GOVERNANCE REPORT
During the latter half of 2021, the Nomination and Remuneration
Committee recommended, having considered the Investment
Company Non-Executive Directors’ Fees Review 2020 report
published by Trust Associates, and in line with the recommendations
made by Trust Associates in their evaluation of the Company’s Board
remuneration undertaken in 2018, that Board remuneration be
increased annually in line with inflation. In line with the Nomination
and Remuneration Committee’s desire to conduct an external market
review of Director fees every three years, the Board appointed
Condign Board Consulting Ltd in early 2022 to conduct this work
and their recommendations were also subsequently adopted by
theBoard.
As a result, the Board resolved to increase Board remuneration with
effect from 1 January 2022 as outlined in the table below.
Position
2022
Fee p.a.
£
2021
Fee p.a.
£
Board Chair 96,600 87,600
Audit and Risk Committee Chair 69,500 59,800
Director (Independent and Non-Independent) 53,500 46,400
Senior Independent Director
1
3,600 2,000
Risk Sub-Committee Chair
1
3,100 2,000
Management Engagement Committee Chair
1
3,100 2,000
Nomination and Remuneration
Committee Chair
1
3,100 2,000
ESG Committee Chair
1,2
5,100 2,000
1 These are additional fees payable to directors chairing a committee.
2 The ESG Committee was formed on 22 March 2021.
The Chair of the Board is paid a higher fee in recognition of additional
responsibilities, as are the Chairs of all the Committees of the Board
and the Senior Independent Director.
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.
Director
2021
Fees
£
2020
Fees
£
Mike Gerrard 87,60 0 86,800
Julia Bond 50,400 49,900
Stephanie Coxon
1
nil nil
Sally-Ann David 48,400 44,765
Meriel Lenfestey 46,400 44,765
John Le Poidevin 59,800 59,200
Claire Whittet 50,400 49,080
Giles Frost
2
46,400 45,900
1 Ms Coxon was appointed to the Board on 1 January 2022.
2 The emoluments for Mr Frost are paid to his employer Amber Infrastructure Limited, a related
company of the Company’s Investment Adviser.
Mr 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, Mr Le Poidevin served as a
director to four Luxembourg subsidiary entities of International Public
Partnerships and was entitled to fees of £3,000 per entity for the year
ended 2021.
DIRECTORS’ INTERESTS
Directors, who held office at 31 December 2021, had the following
interests in the shares of the Company:
Director
31 December
2021
Number of
Ordinary
Shares
1
31 December
2020
Number of
Ordinary
Shares
1
Mike Gerrard 159,181 159,181
Julia Bond 72,444 48,372
Stephanie Coxon
2
nil nil
Sally-Ann David 30,303 nil
Meriel Lenfestey 9,979 9,979
John Le Poidevin 160,653 130,350
Claire Whittet
3
76,248 74,594
Giles Frost
4
971,676 944,109
1 All shares are beneficially held.
2 Ms Coxon was appointed to the Board on 1 January 2022.
3 Holds shares through a Retirement Annuity Trust Scheme jointly with Ms Whittet’s spouse.
4 Holds some shares through a personal investment company.
There have been no changes to the holdings of existing directors
between 31 December 2021 and the date of this report.
CONTINUED
International Public Partnerships Limited
Annual Report and financial statements 2021
OVERVIEW STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
69
COMMITTEES OF THE BOARD
BOARD
AUDIT AND RISK COMMITTEE
Delegated responsibilities
—
—
— 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
—
— Advise the Board on appointment of the external
auditor and is responsible for oversight and
remuneration of the external auditor
INVESTMENT COMMITTEE
Delegated responsibilities
— Review investment and divestment proposals,
—
ENVIRONMENTAL, SOCIAL AND GOVERNANCE COMMITTEE
Delegated responsibilities
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
—
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
—
NOMINATION AND
REMUNERATION COMMITTEE
Delegated responsibilities
— 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
—
—
—
— Undertake annual Board performance evaluation
— Review remuneration of the Board and its Committees
Determine whether proposals are appropriate for
investment or divestment and then, assuming the
opportunity is approved, authorise the Investment
Adviser to enact the transaction
Responsibilities
— Statutory obligations and public disclosure
— Sets overall strategy for investments
— Board composition and accountability to shareholders
— Risk assessment and management including reporting
compliance, monitoring, governance and control
Review the Company’s ESG policies, principles and standards
Provide strategic advice to the Board on ESG related matters and policies
Challenge the implementation of ESG policies through 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
Ensure there are no conflicts of interest between
service partners
Review the Company’s financial and
accounting policies
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
— Responsible for financial statements
— Strategic matters and financial reporting
International Public Partnerships Limited
Annual Report and financial statements 2021
70
CORPORATE GOVERNANCE
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
theCompany’s website (www.internationalpublicpartnerships.com).
Inaddition to the Chair of the Board, a Senior Independent Director
isappointed as an alternative point of contact for shareholders and
leads on matters where it is not appropriate for the Chair to do so.
AUDIT AND RISK COMMITTEE
The Audit and Risk Committee is comprised of the full Board, with the
exception of Mr Gerrard as Board Chair and Mr Frost as the Non-
Independent Director. However, Mr Gerrard and Mr Frost routinely
attend meetings of the Audit and Risk Committee as observers.
Mr Le Poidevin is the current Chair of the Audit and Risk Committee
and Ms David is the current Chair of the Risk Sub-Committee.
Ms David was appointed Chair of the Risk Sub-Committee in March
2021, taking over from Ms Bond, who was appointed Chair of the
ESG Committee in March 2021.
The duties of the Audit and Risk Committee in discharging its
responsibilities are outlined in the Audit and Risk Committee Report.
In respect of its risk management function, the Audit and Risk
Committee, through the separately convened Risk Sub-Committee,
isalso 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
ofthe 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 74 to 76.
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 Mr Frost as the Non-Independent Director, and is chaired
by Mr 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 period are outlined
on pages 16 to 18 of this Annual Report.
MANAGEMENT ENGAGEMENT COMMITTEE
The Management Engagement Committee is comprised of the full
Board, with the exception of Mr Frost as the Non-Independent
Director; it is chaired by Ms Whittet. The duties of the Management
Engagement Committee in discharging its responsibilities are outlined
in the diagram on page 69.
The Management Engagement Committee carries out its review of
the Company’s advisers through consideration of objective and
subjective criteria and through a review of the terms and conditions of
the advisers’ appointments; with the aim of evaluating performance,
identifying any weaknesses and ensuring value for money for the
Company’s shareholders.
During the year, the Management Engagement Committee formally
reviewed the performance of the Investment Adviser and other key
service providers to the Company and no material weaknesses were
identified. Overall, the Committee confirmed its satisfaction with the
services and advice received.
NOMINATION AND REMUNERATION COMMITTEE
The Nomination and Remuneration Committee is comprised of the
fullBoard, with the exception of Mr Frost as the Non-Independent
Director; it is chaired by Ms Bond.
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 67. It also oversees the appointment and
reappointment of directors, taking into account the expertise and
diversity of the candidates and their independence (see pages 66 to
67 for more detail on the Committee).
In accordance with the Corporate Governance Code required for
listed companies of the premium segment of the London Stock
Exchange, the Company undertakes an externally facilitated
evaluation every three years. The last review was undertaken in the
later part of 2020 and its recommendations implemented during 2021.
In 2021, the Nomination and Remuneration Committee undertook an
internal evaluation of the performance of the Board and Chair.
CORPORATE GOVERNANCE REPORT
CONTINUED
International Public Partnerships Limited
Annual Report and financial statements 2021
OVERVIEW STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
71
Each Director was asked to provide written feedback regarding the
performance of the Board as a whole and the Chair set against a
range of best practice corporate governance criteria. A report of this
feedback was considered by the Nomination and Remuneration
Committee. No material issues were identified by the Directors
regarding the performance of the Board and Chair. An external review
of the performance of the Board and its Committees is planned to
take place again during 2023.
ESG COMMITTEE
The ESG Committee was formed on 22 March 2021. It is comprised
of the full Board and is chaired by Ms Bond.
The ESG Committee meets at least twice a year and supports the
Board in managing the Company’s ESG performance and provides a
forum for mutual discussion and challenge on ESG policies with
respect to investments and divestments.
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
1
. In addition, during the year, six ad hoc Board
meetings and two Board Committee meetings
2
took place to finalise matters that had been approved in principle at full meetings of the Board.
Directors
Quarterly
Board
Audit and Risk
Committee
ESG
Committee
Investment
Committee
Management
Engagement
Committee
Nomination
and
Remuneration
Committee
Maximum number 4 5 4 2 1 2
Mike Gerrard 4 5 4 2 1 2
Julia Bond 4 5 4 2 1 2
Sally-Ann David 4 5 4 2 1 1
Meriel Lenfestey 4 5 4 2 1 2
John Le Poidevin 4 5 4 2 1 2
Claire Whittet 4 5 4 2 1 2
Giles Frost
3
4 n/a 4 n/a n/a n/a
1 Ms Coxon was appointed to the Board on 1 January 2022 and therefore did not attend any Board or Committee meetings over the course of 2021.
2 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.
3 Mr Frost is not a member of the Audit and Risk Committee, Management Engagement Committee, Nomination and Remuneration Committee or the Investment Committee. While Mr 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 of all Board and Committee meetings
during the year is 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
favourof the re-election of all Directors at the forthcoming AGM.
AsMs Whittet will be retiring from the Board, she will not be
recommended in favour of re-election at the 2022 AGM. Please
referto page 67 outlining the Board’s approach to diversity and
re-election.
International Public Partnerships Limited
Annual Report and financial statements 2021
72
CORPORATE GOVERNANCE
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 on
page 71.
RELATIONSHIP WITH THE INVESTMENT ADVISER
The Directors are responsible for the overall management and
direction of the affairs of the Company. Under the Investment
Advisory Agreement (‘IAA’), Amber Fund Management Limited (a
member of the Amber Infrastructure Group Holdings Limited group
of companies) acts as Investment Adviser to the Company to review
and monitor current investments and to advise the Company in
relation to strategic management of the investment portfolio.
CONTRACTUAL ARRANGEMENTS AND FEES
The IAA allows for the provision of investment advisory and certain
other financial services to the Board. In return, the Investment Adviser
receives fees based on the GAV and composition of the investment
portfolio as well as a contribution to expenses. The annual base fees
are detailed in note 17 to the financial statements and calculated at
the following rates:
– 1.2% for that part of the portfolio that bears construction risk (i.e.
the asset has not fully completed all construction stages including
any relevant defects period and achieved certification by the
relevant counterparty and senior lender);
– For fully operational assets:
– 1.2% for the first £750 million of the GAV of the portfolio;
– 1.0% for that part of the portfolio that exceeds £750 million in
GAV but is less than £1.5 billion;
– 0.9% for that part of the portfolio that exceeds £1.5 billion in
GAV but is less than £2.75 billion;
– 0.8% per annum where GAV value exceeds £2.75 billion.
In addition, the GAV excludes uncommitted cash from
capital raisings.
The Company has a long-standing relationship with the Investment
Adviser and the Board believes that the continuation of this
relationship, on a long-term basis, is in the Company’s best interest.
The current IAA was renegotiated in 2013 and has a 10-year fixed
term with a five-year notice period. The Board considers that, given
the long-term nature of the Company’s investments, its responsibility
for the detailed day-to-day delivery of management services and
relationships with public sector clients, it is important that it benefits
from the continuity of service provided by a long-term advisory
partner. To ensure that shareholder interests are protected,
termination provisions have been put in place to ensure that, in the
event of poor investment performance, the Company has the
flexibility to remove the Investment Adviser.
The Investment Adviser is also entitled to receive an asset
origination fee of 1.5% of the value of new investments acquired
by the Company. It should be noted that, generally, the Investment
Adviser bears the risk of abortive transaction origination costs and
that this fee has been waived or reduced by agreement in the past
where it has been deemed appropriate to do so for the transaction
in question.
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 and overleaf 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.
CORPORATE GOVERNANCE REPORT
CONTINUED
International Public Partnerships Limited
Annual Report and financial statements 2021
OVERVIEW STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
73
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
onwhich the vendors of such assets dispose of their assets are
fairand 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.
Formore detail on the features of this procedure please refer to
theCompany’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
isacquired from a member of the Amber group is on an arm’s
lengthbasis.
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
pages50 to 62.
RELATIONS WITH SHAREHOLDERS
The Board places great importance on communication with
shareholders and encourages shareholders to share their views.
Ithas responsibility for communication with the investor base and
isdirectly involved in major communications and announcements.
The Board receives regular reports on the views of shareholders and
the Board Chair and other Directors, including the Senior
Independent Director, are happy to make themselves available to
meet shareholders as required.
Despite the challenges presented by Covid-19, the Investment
Adviser, on behalf of the Company, has maintained an active investor
engagement programme. During the year, the Company’s Results
Presentations and day-to-day investor relations’ activities moved
online with limited impact on the overall programme. During 2021, the
Investment Adviser and members of the Board held formal meetings
with over 185 shareholders in addition to more informal interaction,
including other forms of correspondence. The Company also
maintained an active programme of sell-side engagement and the
Board is also informed on a regular basis of all relevant market
commentary on the Company by the Investment Adviser,
Administrator and the Company’s Broker.
The AGM of the Company usually provides a forum for shareholders
to meet and discuss issues with the Directors and with the
Investment Adviser of the Company. As a result of Covid-19, the
Company encouraged shareholders to submit proxy forms in respect
of the AGM and to appoint the chair of the meeting as their proxy and
vote on the shareholders’ behalf as they would not be permitted to
attend in person due to Covid-19 restrictions. 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 Audit and Risk Committee (the ‘Committee’ for the purposes of
this 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 Mr Le Poidevin. Ms Bond led
responsibility for risk within the Risk Sub-Committee until March
2021, whereupon Ms David was appointed Chair of the Risk
Sub-Committee. An overview of the Committee’s work during the
year and details of how the Committee has discharged its duties are
set out overleaf.
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74
CORPORATE GOVERNANCE
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.
All Committee members are considered to be appropriately
experienced to fulfil their role, having significant, recent and relevant
financial experience in line with the 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, with a special focus on emerging risks including climate
change;
– Review of the effectiveness of the Company’s systems of internal
control;
– Review of the regulatory environment within which the Company
operates;
– Review of the Annual Report and financial statements and
half-yearly financial report and matters raised by management
and the external auditors (including significant financial reporting
judgements and estimates therein);
– Review of the appropriateness of the Company’s accounting
policies;
– Consideration and challenging of the draft valuation of the
Company’s investments prepared by the Investment Adviser and
recommendations made to the Board on the appropriateness of
the portfolio valuation;
– Review of the effectiveness, objectivity and independence of the
external auditors, and the terms of engagement, cost
effectiveness and the scope of the audit;
– Overseeing transition of the Company’s auditor;
– Approving the external auditor’s plan for the current year end; and
– Review of the policy on the provision of non-audit services by the
external auditor.
KEY ACTIVITIES CONSIDERED DURING THE YEAR
The Committee undertook the following activities in discharging its
responsibilities during the year:
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 to market
comparables 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 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 in applying foreign exchange rates when
converting non-GBP cash flows as part of the valuation process, with
immaterial overall impact. 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).
AUDIT AND RISK COMMITTEE REPORT
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OVERVIEW STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
75
The Committee scrutinised the quality and findings of the external
auditor in relation to their audit of the valuations, including its
assessment of management’s underlying cash flow projections and
assumptions; macroeconomic assumptions; and discount rate
methodology and output. The auditor confirmed no material
adjustments were proposed.
The Committee concluded that a consistent valuation methodology
has been applied throughout the year and any forecast assumptions
applied were appropriate.
Revenue recognition
The Committee has considered the risk of inappropriate accounting
recognition of revenue to be a relatively low risk given the nature of
the Company’s activities.
Internal controls over financial reporting
The Committee satisfied itself that the system of internal control and
compliance over financial reporting was effective, through
consideration of regular reports from the Investment Adviser, the
Administrator and external third-party advisers.
The Committee also considered the adequacy of resources,
qualifications and experience of staff in the finance function and had
direct access to and independent discussions with the external
auditor throughout the year.
Fair, balanced and understandable
The Committee seeks to establish arrangements to ensure fair,
balanced and understandable reporting. The Committee engaged in
extensive dialogue with management throughout the year and
considered the interim and annual financial statements, as well as
quarterly updates and reports prepared by management of the
Investment Adviser. Following review of the Company’s 2021 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 13% of total audit fees during the period
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. These
were reported to us and were not considered to be a significant risk
impacting the objectivity and independence of PwC as
externalauditor.
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 2021 of
the auditor’s performance and the Committee was satisfied in this
regard. This was facilitated through 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 benchmarking exercise of the proposed
audit fees for 2021, by carrying out a formal tendering exercise,
discussed further overleaf.
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Annual Report and financial statements 2021
76
CORPORATE GOVERNANCE
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 2021 was the first year
for John Luff, the current lead audit partner.
During the year to 31 December 2021, following a formal tender of its
audit in line with best practice and continued audit quality, the
Company transitioned its audit to PwC. The Board initiated a formal
tender process in late 2019 with a longlist of suitable audit firms
approached. Following an initial dialogue and screening process,
shortlisted firms were formally invited to tender for the audit of the
Company. Formal tender proposals from participating firms and
meetings with the Board of Directors took place during the year
2020. The key criteria considered by the Audit Committee in reaching
its tender decision included those of audit quality, infrastructure audit
and valuation experience, audit approach, potential for added value,
and fees. Following a comprehensive assessment process, PwC
was selected as the preferred firm and, following approval at the
AGM, assumed the role of the Company’s auditor for financial
periods beginning 2021. A detailed transition plan was agreed, with all
parties working closely to ensure an efficient and effective transition.
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.
External controls review
During the year an independent external review of the Company’s
controls framework in relation to bank payments, supplier
procurement and systems security was commissioned. The review
iscurrently ongoing, and further details will be provided in the
Company’s half-year Interim report later in the year.
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 53.
REGULATORY AND TAX ENVIRONMENT
The Committee received regular reports from the Administrator and
Investment Adviser on regulation and regulatory developments. The
Company continues to maintain compliance with the requirements of
the Common Reporting Standard, the Retail distribution of
unregulated collective investment schemes (regulation which the
Company remains excluded from), the UK Criminal Finance Act 2017,
AIFMD, The Foreign Account Tax Compliance Act (‘FATCA’), and UK
Packaged Retail and Insurance-based Investment Products (EU Exit)
Regulations 2019 as amended (‘UK PRIIPs’).
FOCUS FOR 2022
The Company will continue to focus on the impacts arising from the
Covid-19 pandemic, 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
23 March 2022
AUDIT AND RISK COMMITTEE REPORT
CONTINUED
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OVERVIEW STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
77
INTRODUCTION
The Directors present their Annual Report on the performance of the Company and Group for the year ended 31 December 2021.
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 63 to 79.
DIRECTORS’ INDEMNITIES
The Company has made qualifying third-party indemnity provisions for the benefit of its Directors, which were made during the period and
remain in force at the date of this report.
SUBSTANTIAL SHAREHOLDINGS
As at 31 December 2021, 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
Tilney Smith & Williamson 5.01 85,524,350 11 October 2021
There have been no additional notices between 31 December 2021 and the date of this report.
DIRECTORS’ AUTHORITY TO BUY BACK SHARES AND TREASURY SHARES
The Company did not purchase any shares for treasury or cancellation during the year.
The current authority of the Company to make market purchases of up to 14.99% of the issued Ordinary Share Capital expires on 24 May
2022. The Company will seek to renew such authority at the AGM to take place on 25 May 2022. Any buy back of Ordinary Shares will be
made subject to Guernsey law and within any guidelines established from time-to-time by the Board and the making and timing of any buy
backs will be at the absolute discretion of the Board.
Purchases of Ordinary Shares will only be made through the market at prices below the prevailing NAV of the Ordinary Shares (as last
calculated) where the Directors believe such purchases will enhance shareholder value. Such purchases will also only be made in accordance
with the Listing Rules of the UK Listing Authority, which provide that the price to be paid must not be more than 5% above the average of the
middle market quotations for the Ordinary Shares for the five business days before the shares are purchased (unless previously advised to
shareholders). No such shares were bought back by the Company during the prior year. Up to 10% of the Company’s shares may be held as
treasury shares.
DIRECTORS’ REPORT
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Annual Report and financial statements 2021
78
CORPORATE GOVERNANCE
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 4 to 62. The financial position, cash flows, liquidity position and borrowing of the
Company and Group are described in the financial statements on pages 87 to 111.
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 JOHN LE POIDEVIN
CHAIR DIRECTOR
23 March 2022 23 March 2022
DIRECTORS’ REPORT
CONTINUED
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Annual Report and financial statements 2021
OVERVIEW STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
79
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;
– 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 to 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.
RESPONSIBILITY STATEMENT OF THE DIRECTORS IN
RESPECT OF THE CONSOLIDATED 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 JOHN LE POIDEVIN
CHAIR DIRECTOR
23 March 2022 23 March 2022
DIRECTORS’ RESPONSIBILITIES STATEMENT
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Annual Report and financial statements 2021
80
FINANCIAL STATEMENTS
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 2021, 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 2021;
– the consolidated statement of comprehensive income for the year then ended;
– the consolidated statement of changes in equity for the year then ended;
– the consolidated cash flow statement for the year then ended; and
– the notes to the consolidated financial statements, which include significant accounting policies and other explanatory information.
BASIS FOR OPINION
We conducted our audit in accordance with International Standards on Auditing (“ISAs”). Our responsibilities under those standards are
furtherdescribed 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;
– Following a formal audit tender the Company changed its auditor during 2021, this is therefore the first year we are serving as the appointed
independent auditor of the Company;
– The Group comprises both consolidated and unconsolidated entities. As disclosed under note 1 to these 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
MATERIALIT Y
– Overall Group materiality: £63.2 million based on 2.5% of equity attributable to equity holders of the parent (i.e. net asset value)
– Performance materiality: £47.4 million
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OVERVIEW STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
81
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, and we considered the risk of climate
change and the potential impact thereof on our audit approach. 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 our professional judgement, were of most significance in our 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 auditors, 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,
wereaddressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we
donot 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 £81.9 million and
dividend income of £45.2million,
asreflected 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
tothe Group’s bank statements. For the sample of dividends received from UK entities, we
considered whether these have been paid from sufficient distributable reserves and are
therefore valid distributions;
– On a sample basis, we recalculated interest income based on the contractual agreements
inplace;
– Furthermore, we considered whether the interest and dividends in our sample testing
described above had been recorded in the correct financial year. We obtained further evidence
over cut off and the 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
journalstesting.
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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82
FINANCIAL STATEMENTS
KEY AUDIT MATTER HOW OUR AUDIT ADDRESSED THE KEY AUDIT MATTER
FAIR VALUE MEASUREMENT
OF INVESTMENTS ATFAIR
VALUE THROUGH PROFIT
ORLOSS
The investment portfolio, valued at
£2.6 billion at year end as reflected
in the consolidated balance sheet
and note 11, comprises investments
in infrastructure companies which
largely generate long-term
predictable cash flows.
The valuation of the Group’s
investment portfolio involves
complexity and subjective
management judgements and
estimates. The magnitude of the
amounts involved means that there
is the potential for material
misstatement.
Since the driver of the Group’s value
is the valuation of the investment
portfolio, this is the area of focus for
stakeholders and a significant audit
risk area, and accordingly this has
been reported as a key audit matter.
We assessed the investment valuation accounting policy for compliance with the accounting
framework and best practice, and we checked that the investment valuations are measured in
accordance with the stated policy.
We understood and evaluated the Group’s processes, internal controls and methodology applied
in determining the fair value of the investment portfolio in tailoring our audit approach.
We tested the key controls in relation to the 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. macroeconomic 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 was supplemented with a risk-based assessment
performed to identify, and investigate, investments deemed to be at a higher risk of suffering
an adverse valuation impact as a result of Covid-19 and climate change related risk exposure;
– We performed detailed testing over a sample of models and significant inputs for the selected
sample of investments, selected via risk and value-based targeted sampling, which comprised
65% of the investment portfolio by value. This testing entailed challenging key inputs in the
models and obtaining appropriate supporting documentation and evidence; and
– With the support of our PwC valuation experts, we checked 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 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,
asdetailed above, we performed a risk-based year on year variance analysis to identify, and
investigate, any unusual movements within the remaining 35% of the portfolio.
– Finally, for a sample of investments, to test ownership and existence we obtained third party
evidence of investment holdings and checked whether the details obtained corroborated or
contradicted the records held by the Group and those used for investment valuation purposes.
We have not identified any matters to report to those charged with governance in relation to the
fair value measurement of Investments at fair value through profit or loss.
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF
INTERNATIONAL PUBLIC PARTNERSHIPS LIMITED
CONTINUED
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Annual Report and financial statements 2021
OVERVIEW STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
83
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, and the industry in which
theGroup operates.
We have considered whether the consolidated subsidiary entities included within the Group comprise separate components for the purpose
ofour audit scope. However, we have taken account of the Group’s financial reporting system and the related controls in place at Ocorian and
Amber, and based on our professional judgement have tailored our audit scope to account for the Group’s consolidated financial statements
as a single component.
MATERIALIT Y
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 £63.2 million.
How we determined it 2.5% of the equity attributable to equity holders of the parent (i.e. net asset value).
Rationale for
benchmarkapplied
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% of overall materiality, amounting to £47.4 million for the Group financial statements.
In determining the performance materiality, we considered a number of factors – risk assessment and aggregation risk and the effectiveness
ofcontrols – 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 £3.2 million
aswell 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
notinclude the consolidated financial statements and our auditor’s report thereon.
The Directors are responsible for the other information which includes reporting based on the Task Force on Climate-related Financial
Disclosures (TCFD) recommendations.
Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of assurance
conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in
theaudit, 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.
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84
FINANCIAL STATEMENTS
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
ofGuernsey 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
ofassurance, 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.
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
aconclusion 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
bythe 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.
Ifweconclude 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
asa goingconcern.
– Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether
theconsolidated 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.
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF
INTERNATIONAL PUBLIC PARTNERSHIPS LIMITED
CONTINUED
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OVERVIEW STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
85
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
TheCompanies (Guernsey) Law, 2008 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for
anyother purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by
ourprior 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.
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 continuous risk management section, the corporate governance report, the audit and risk committee report,
theDirectors’ report and the Directors’ responsibilities statement, 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
onlyconsisted of making inquiries and considering the Directors’ process supporting their statements; checking that the statements are
inalignment 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.
International Public Partnerships Limited
Annual Report and financial statements 2021
86
FINANCIAL STATEMENTS
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
theinformation 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 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
withthe Code does not properly disclose a departure from a relevant provision of the Code specified under the Listing Rules for review by
theauditors.
OTHER MATTER – PREDECESSOR AUDITOR
The consolidated financial statements of the Group for the year ended 31 December 2020 were audited by another firm of auditors whose
report, dated 24 March 2021, expressed an unmodified opinion on those statements.
OTHER MATTER – ESEF
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
overwhether 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
23 March 2022
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF
INTERNATIONAL PUBLIC PARTNERSHIPS LIMITED
CONTINUED
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Annual Report and financial statements 2021
OVERVIEW STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
87
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
YEAR ENDED 31 DECEMBER 2021
Notes
Year ended
31 December
2021
£’000s
Year ended
31 December
2020
£’000s
Interest income 4 8 1, 9 3 0 8 1, 2 0 4
Dividend income 4 4 5 , 2 47 42, 8 22
Net change in investments at fair value through profit or loss 4 3 4,62 6 ( 2 7, 7 3 1 )
Total investment income 161, 8 0 3 9 6,29 5
Other operating income/(expense) 5 3,560 (3,326 )
Total income 1 65,363 9 2,9 6 9
Management costs 17 (2 6 ,1 7 3 ) (25,888 )
Administrative costs (2 , 2 81 ) (1 ,825 )
Transaction costs 6, 17 (3,89 6 ) (28 6 )
Directors’ fees (393 ) (416 )
Total expenses (3 2 ,74 3 ) (2 8 , 415 )
Profit before finance costs and tax 13 2 ,6 2 0 64, 55 4
Finance costs 8 (3 ,453 ) (3 ,79 7 )
Profit before tax 1 2 9 ,1 6 7 6 0,75 7
Tax credit/(charge) 9 44 (4 4 )
Profit for the year 1 2 9 , 2 11 6 0 ,713
Earnings per share
From continuing operations
Basic and diluted (pence) 10 7. 7 8 3 .76
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 (2020: nil). The profit for the year represents the Total Comprehensive
Income for the year.
International Public Partnerships Limited
Annual Report and financial statements 2021
88
FINANCIAL STATEMENTS
YEAR ENDED 31 DECEMBER 2021
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Notes
Share capital
and share
premium
£’000s
Other
distributable
reserve
£’000s
Retained
earnings
£’000s
Total
£’000s
Balance at 1 January 2021 1,7 6 9, 5 8 2 18 2 , 4 81 432 ,373 2,384,436
Profit for the year and total comprehensive income – – 1 2 9 , 2 11 1 2 9 , 2 11
Issue of ordinary shares 15 14 0 , 6 2 9 – – 14 0, 6 2 9
Issue costs applied to new shares 15 (1, 3 62 ) – – (1, 3 6 2 )
Dividends in the year 15 – – (1 2 4 ,11 4 ) (12 4 ,114 )
Balance at 31 December 2021 1,908,849 18 2 , 4 81
YEAR ENDED 31 DECEMBER 2020
Notes
Share capital
and share
premium
£’000s
Other
distributable
reserve
£’000s
Retained
earnings
£’000s
Total
£’000s
Balance at 1 January 2020 1,7 5 3 , 8 4 0 18 2, 4 81 4 8 8 , 9 18 2 ,4 25 ,239
Profit for the year and total comprehensive income – – 6 0, 713 6 0 ,713
Issue of ordinary shares 15 1 5 , 74 2 – – 1 5 , 74 2
Dividends in the year 15 – – (117, 2 5 8 )
(117,258 )
Balance at 31 December 2020 1,7 6 9 , 5 8 2 18 2, 4 8 1 4 32, 373 2 ,384 ,436
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Annual Report and financial statements 2021
OVERVIEW STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
89
CONSOLIDATED BALANCE SHEET
AS AT 31 DECEMBER 2021
Notes
31 December
2021
£’000s
31 December
2020
£’000s
Non-current assets
Investments at fair value through profit or loss 11 2,5 79, 434 2 ,345 ,433
Total non-current assets 2,57 9,434 2,345 , 433
Current assets
Trade and other receivables 11, 13 57 ,378
Cash and cash equivalents 11 56,0 9 0 4 4,26 3
Derivative financial instruments 11 2 ,713 268
Total current assets 11 6 ,1 8 1 8 6 , 719
Total assets 2 ,695 ,61 5 2,4 3 2, 1 52
Current liabilities
Trade and other payables 11, 14 10 , 5 97 9 , 316
Bank loans 8, 11 – 38 ,40 0
Total current liabilities 10, 5 9 7 4 7, 7 1 6
Non-current liabilities
Bank loans 8, 11 15 6 , 218 –
Total non-current liabilities 15 6 , 2 18 –
Total liabilities 16 6 , 8 15 4 7, 7 1 6
Net assets 2,528,800 2 ,384, 436
Equity
Share capital and share premium 15 1,908,849 1,7 6 9 , 5 8 2
Other distributable reserve 15 18 2 , 4 81 18 2, 4 8 1
Retained earnings 15 4 3 7, 4 7 0 4 32, 373
Equity attributable to equity holders of the Parent 2,528,800 2 ,384, 436
Net assets per share (pence per share) 16 14 8 . 2 1 4 7. 1
The financial statements were approved by the Board of Directors on 23 March 2022.
They were signed on its behalf by:
MIKE GERRARD JOHN LE POIDEVIN
CHAIR DIRECTOR
23 March 2022 23 March 2022
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Annual Report and financial statements 2021
90
FINANCIAL STATEMENTS
CONSOLIDATED CASH FLOW STATEMENT
YEAR ENDED 31 DECEMBER 2021
Notes
Year ended
31 December
2021
£’000s
Year ended
31 December
2020
£’000s
Profit before tax in the Consolidated Statement of Comprehensive Income
1
Adjusted for:
(Gain)/loss on investments at fair value through profit or loss 4 (3 4,626 ) 2 7, 7 3 1
Finance costs
2
8 3,4 53 3 ,79 7
Fair value movement on derivative financial instruments 5, 11 (2,4 45 ) 3,89 4
Working capital adjustments
(Increase) in receivables (13 , 4 31 ) (13 , 3 4 9 )
Increase/(decrease) in payables 1, 2 8 2
(1,155 )
Income tax (paid)/received
3
(10 5 ) 2,5 3 3
Net cash inflow from operations
4
Investing activities
Acquisition of investments at fair value through profit or loss 12 (252,7 25 ) (29 ,984 )
Net repayments from investments at fair value through profit or loss 53,350 39,4 64
Net cash (outflow)/inflow from investing activities (199,375 ) 9,4 8 0
Financing activities
Proceeds from issue of shares net of issue costs 13 3 , 6 3 8 –
Dividends paid 15 (118 , 4 8 5 ) (1 0 1, 51 6 )
Finance costs paid
2
(4, 8 2 5 ) (4 ,1 7 0 )
Loan drawdowns
2
Loan repayments
2
(6 0,3 97 ) (1 9 , 000 )
Net cash inflow/(outflow) from financing activities
(9 5, 1 42 )
Net increase/(decrease) in cash and cash equivalents 12 , 0 6 6 (1, 4 5 4 )
Cash and cash equivalents at beginning of year 44, 263 4 5 , 6 10
Foreign exchange (loss)/gain on cash and cash equivalents (239 ) 107
Cash and cash equivalents at end of year 56 ,09 0 4 4,26 3
1 Includes interest received of £70.0 million (December 2020: £66.7 million) and dividends received of £45.2 million (December 2020: £42.8 million).
2 These cash flows represent the changes in liabilities arising from financing liabilities during the period in accordance with IAS 7, 44A-E.
3 Includes cash flows received from unconsolidated subsidiary entities in respect of surrender of tax losses.
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 29 to 30.
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OVERVIEW STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
91
1. BASIS OF PREPARATION
(Guernsey) Law, 2008. The address of the registered office is given on the inside back cover. The nature of the Group’s (‘Parent and
consolidated subsidiary entities’) operations and its principal activities are set out on pages 4 to 5.
These financial statements are presented in pounds Sterling as this is the currency of the primary economic environment in which the
Groupoperates and represents the functional currency of the Parent and all values are rounded to the nearest (£’000), except where
otherwiseindicated.
BASIS OF PREPARATION
These financial statements have been prepared in accordance with UK-adopted International Accounting Standards (‘IFRS’), applicable legal
and regulatory requirements of Guernsey, and the Listing Rules of the UK Listing Authority. These financial statements follow the historical cost
basis, except for financial assets held at fair value through profit or loss and derivatives that have been measured at fair value. The principal
accounting policies adopted are set out in relevant notes to the financial statements. The Company voluntarily transitioned to UK-adopted
International Accounting Standards (‘IAS’) on 1 January 2021, following the UK’s departure from the EU, and reflecting the Company’s place of
listing on the London Stock Exchange. This change constitutes a change in accounting framework. However, there is no impact on
recognition, measurement or disclosure in the period reported as a result of the change in framework. The new and revised standards and
interpretations becoming effective in the period have had no material impact on the accounting policies of the Group.
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 £56.1 million as at 31 December
2021. The Company continues to fully cover operating costs and distributions from underlying cash flows from investments. The Company has
access to a corporate debt facility of £250 million on a fully committed basis, and a flexible ‘accordion’ component which, subject to lender
consent, allows for a future extension by an additional £150 million. At the date of this report, approximately £85 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
March2024.
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 2021.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
International Public Partnerships Limited
Annual Report and financial statements 2021
92
FINANCIAL STATEMENTS
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
IFRS10, 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
note11.
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 operating and reportable segments based on the geographical risk associated with the jurisdictions in which it operates. The
factors used to identify the Group’s operating and reportable segments are centered on the risk-free rates and the maturity of the infrastructure
sector within each region. Further, foreign exchange and political risk is identified, as these also determine where resources are allocated.
Management has concluded that the Group is currently organised into four operating and reportable segments being UK, Europe (excl. UK),
North America and Australia.
Year ended 31 December 2021
UK
£’000s
Europe
(Excl. UK)
£’000s
North America
£’000s
Australia
£’000s
Total
£’000s
Segmental results
Dividend and interest income 99,428 8,487 7,111 12 ,151 127,177
Fair value gain/loss on investments 28,840 (2,839) 1,979 6,646 34,626
Total investment income 128,268 5,648 9,090 18,797 161,803
Reporting segment profit
1
92,142 7,803 8,868 20,398 129, 211
Segmental financial position
Investments at fair value 1, 947,001 313,241 105,931 213,261 2,579,434
Current assets 116,181 – – – 116,181
Total assets 2,063,182 313,241 105,931 213,261 2,695,615
Total liabilities (166,815) – – – (166,815)
Net assets 1,896,367 313,241 105,931 213,261 2,528,800
1 Reporting segment results are stated net of operational costs including management fees.
CONTINUED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
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Annual Report and financial statements 2021
OVERVIEW STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
93
3. SEGMENTAL REPORTING CONTINUED
Year ended 31 December 2020
UK
£’000s
Europe
(Excl. UK)
£’000s
North America
£’000s
Australia
£’000s
Total
£’000s
Segmental results
Dividend and interest income 95,371 7,72 3 8,494 12,438 124,026
Fair value gain/loss on investments (20,364) (24,777) 1,021 16,389 (27,731)
Total investment income/(loss) 75,007 (17,0 5 4) 9,515 28,827 96,295
Reporting segment profit/(loss)
1
42,768 (18,569) 9,582 26,932 60,713
Segmental financial position
Investments at fair value 1,729,191 295,824 104,963 215,455 2,345,433
Current assets 86,719 – – – 86,719
Total assets 1,815,910 295,824 104,963 215,455 2,432,152
Total liabilities (47,716) – – – (47,716 )
Net assets 1,76 8,194 295,824 104,963 215,455 2,384,436
1 Reporting segment results are stated net of operational costs including management fees.
Revenue from investments which individually represent more than 10% of the Group’s interest and dividend income approximates £15.4 million
(2020: £26.7 million).
4. INVESTMENT INCOME
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.
Year ended
31 December
2021
£’000s
Year ended
31 December
2020
£’000s
Interest income
Interest on investments at fair value through profit or loss 81,930 81,202
Interest on financial assets at amortised cost – 2
Total interest income 81,930 81,204
Dividend income 45,247 42,822
Net change in investments at fair value through profit or loss 34,626 (27,731)
Total investment income 161,803 96,295
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.
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Annual Report and financial statements 2021
94
FINANCIAL STATEMENTS
5. OTHER OPERATING INCOME/(EXPENSE)
Year ended
31 December
2021
£’000s
Year ended
31 December
2020
£’000s
Fair value movement on foreign exchange contracts 2,445 (3,894)
Other gains on foreign exchange movements 1,089 550
Other income 26 18
Total other operating income/(expense) 3,560 (3,326)
6. TRANSACTION COSTS
Year ended
31 December
2021
£’000s
Year ended
31 December
2020
£’000s
Investment advisory costs 3,896 286
Total transaction costs 3,896 286
Details of total transaction costs paid to the Investment Adviser are provided in note 17.
7. AUDITOR’S REMUNERATION
Year ended
31 December
2021
£’000s
Year ended
31 December
2020
£’000s
Fees payable to the Group’s auditor for the audit of the Group’s financial statements 542 485
Fees payable to the Group’s auditor and their associates for other services to the Group
– The audit of the Group’s consolidated subsidiaries 11 49
– The audit of the Group’s unconsolidated subsidiaries 20 121
Total audit fees 573 655
Other fees
– Interim review 73 17
– Other services – –
Total non-audit fees 73 17
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 period in
which they are incurred, using the effective interest rate method. Arrangement fees are amortised over the term of the corporate debt facility.
Finance costs for the year were £3.5 million (2020: £3.8 million). The Group has a corporate debt facility with £250 million available on a fully
committed basis, with a flexible ‘accordion’ component which will, subject to lender approval, allow for a future extension by an additional
£150million. The interest rate margin on the corporate debt facility in the year was 170 basis points over SONIA. The facility matures in March 2024
with no repayments due ahead of maturity, and is secured over the assets of the Group. The banking group for the facility consists of National
Australia Bank, the Royal Bank of Scotland International, Sumitomo Mitsui Banking Corporation and Barclays Bank. The drawdowns in the period
were in the form of cash drawdowns used to partially fund investments. As at December 2021, the facility was £156.2 million cash drawn (December
2020: £38.4 cash drawn), with £9.3 million drawn as letter of credit (December 2020: no drawings under letter of credit). The uncommitted balance of
the facility which was not cash drawn or notionally drawn via letters of credit, was £84.5 million (December 2020: £361.6 million).
CONTINUED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
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Annual Report and financial statements 2021
OVERVIEW STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
95
9. TAX
ACCOUNTING POLICY
Current tax is based on taxable profit for the period. 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.
Year ended
31 December
2021
£’000s
Year ended
31 December
2020
£’000s
Current tax:
UK corporation tax credit – current year – –
UK corporation tax – prior year (2) –
Other overseas tax – current year (44) 75
Other overseas tax – prior year 2 (31)
Tax (credit)/charge for the year (44) 44
Reconciliation of effective tax rate:
Year ended
31 December
2021
£’000s
Year ended
31 December
2020
£’000s
Profit before tax 129,167 60,757
Exempt tax status in Guernsey – –
Application of overseas tax rates (44) 75
Group tax losses surrendered to unconsolidated investee entities – –
Adjustments to previous year’s assessment – (31)
Tax (credit)/charge for the year (44) 44
The income tax (credit)/charge above does not represent the full tax position of the entire Group as the investment returns received by the
Company are net of tax payable at the underlying investee entity level. As a consequence of the adoption of IFRS 10 investment entity
consolidation exception, underlying investee entity tax is not consolidated within these financial statements. To provide an indication of the tax
paid across the wider portfolio, total forecasted corporation tax payable by the Group’s underlying investments is in excess of £1 billion
(December 2020: £1 billion) over their full concession lives.
10. EARNINGS PER SHARE
The calculation of basic and diluted earnings per share is based on the following data:
Year ended
31 December
2021
£’000s
Year ended
31 December
2020
£’000s
Earnings for the purposes of basic and diluted earnings per share being net profit attributable to equity
holders of the Parent 129,211 60,713
Number Number
Weighted average number of Ordinary Shares for the purposes of basic and diluted earnings per share 1,660,869,679 1,613,799,526
Basic and diluted (pence) 7.78 3.76
International Public Partnerships Limited
Annual Report and financial statements 2021
96
FINANCIAL STATEMENTS
10. EARNINGS PER SHARE CONTINUED
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
31 December
2021
£’000s
31 December
2020
£’000s
Investments at fair value through profit and loss 2,579,434 2,345,433
Financial assets at amortised cost
Trade and other receivables 57,378 42,188
Cash and cash equivalents 56,090 44,263
Derivative financial instruments at fair value through profit or loss
Foreign exchange contracts 2,713 268
Total financial assets 2,695,615 2,432,152
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. The accounting policy for bank loans is
included earlier in note 8.
Investments at fair value through profit or loss
Investments in underlying unconsolidated subsidiaries and other non-controlled investments are held in a portfolio, the business model of
which is to manage them on a fair value basis. The Group’s policy is to fair value both the equity and debt investments in underlying assets
together. All transaction costs relating to the acquisition of new investments are recognised directly in profit or loss. Subsequent to initial
recognition, equity and debt investments are measured at fair value with changes in fair value recognised within total investment income in the
Consolidated Statement of Comprehensive Income.
Trade and other receivables
Trade and other receivables that meet the contracted cash flow test as solely payments of principal and interest and which are held in a
business model to receive these contractual cash flows are classified as trade and other receivables. Financial assets with maturities less than
12 months are included in current assets, financial assets with maturities greater than 12 months after the balance sheet date are classified as
non-current assets.
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and demand deposits and other short-term highly liquid investments with an original
maturity of three months or less that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes
invalue.
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.
CONTINUED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
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OVERVIEW STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
97
11. FINANCIAL INSTRUMENTS CONTINUED
11.1 FINANCIAL ASSETS CONTINUED
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
31 December
2021
£’000s
31 December
2020
£’000s
Financial liabilities at amortised cost
Trade and other payables 10,597 9,316
Bank loans 156,218 38,400
Total financial liabilities 166,815 47,716
Accounting policy
Trade and other payables
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 carrying value
of financial liabilities 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.
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. However, particularly in Australia,
refinancing risk exists in a number of such investments. The Group’s corporate debt facility is unhedged on the basis it is utilised as an
investment bridging facility and therefore drawn for a relatively short period of time. Therefore, the Group is not significantly exposed to cash
flow risk due to changes in interest rates over its variable rate borrowings. Interest income on bank deposits held within underlying investments
is included within the fair value of investments.
International Public Partnerships Limited
Annual Report and financial statements 2021
98
FINANCIAL STATEMENTS
11. FINANCIAL INSTRUMENTS CONTINUED
11.3 FINANCIAL RISK MANAGEMENT CONTINUED
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:
31 December
2021
£’000s
31 December
2020
£’000s
Cash
Euro 875 414
Canadian Dollar 250 675
Australian Dollar 6,220 68
US Dollar 1,603 517
8,948 1,674
Current receivables
Euro receivables 712 126
US Dollar receivables – 989
712 1,115
Investments at fair value through profit or loss
Euro 299,262 295,824
Danish Krone 13,979 –
Canadian Dollar 39,439 39,391
Australian Dollar 213,261 215,455
US Dollar 66,492 65,572
632,433 616,242
Total 642,093 619,031
Sensitivity analysis showing the impact of variations of the above risks on the fair value of investments is shown in note 11.5.
Credit risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in a financial loss to the Group. The Group
has adopted a policy of dealing with creditworthy counterparties and reviewing this on a regular basis at the underlying entity level. The
majority of underlying investments are in public-private partnerships and similar concessions (which are entered into with government, quasi
government, other public, equivalent low risk bodies), or in regulated businesses that inherently exhibit low levels of credit risk. The maximum
exposure of credit risk over financial assets as a result of counterparty default is the carrying value of those financial assets in the balance
sheet. In addition, the underlying investee entities contract with third-party construction and facilities management contractors. The Group
seeks to mitigate this risk through using a diverse range of sub-contractors and through at least a quarterly review of the credit position of
majorcontractors.
CONTINUED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
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Annual Report and financial statements 2021
OVERVIEW STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
99
11. FINANCIAL INSTRUMENTS CONTINUED
11.3 FINANCIAL RISK MANAGEMENT CONTINUED
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, and bank loans, repayable in March 2024 as disclosed under note 8.
11.4 FAIR VALUE HIERARCHY
All financial instruments for which fair value is recognised or disclosed are categorised within the fair value hierarchy, described as follows,
based on the lowest level input that is significant to the fair value measurement as a whole:
Level 1 — Quoted market prices in an active market (that are unadjusted) for identical assets or liabilities;
Level 2 — Valuation techniques (for which the lowest level input that is significant to the fair value measurement is directly or indirectly
observable);
Level 3 — Valuation techniques (for which the lowest level input that is significant to the fair value measurement is unobservable).
During the period 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 2021, the Group’s only derivative financial instruments were currency forward contracts amounting to an asset of £2.7 million
(December 2020: asset of £0.3 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
areobservable.
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 2021, the fair value of financial instruments classified within
Level 3 totalled £2,579.4 million (December 2020: £2,345.4 million).
Financial instruments are classified within Level 3 if their valuation incorporates significant inputs that are not based on observable market data
(unobservable inputs). A valuation input is considered observable if it can be directly observed from transactions in an active market, or if there
is compelling external evidence demonstrating an executable exit price.
Valuation process
Valuations are the responsibility of the Board of Directors. The valuation of unlisted equity and debt investments is performed on a quarterly
1
basis by the Investment Adviser. The valuation is reviewed by the senior members of the Investment Adviser, and reviewed and approved by
the Board.
1 Indicative valuations are calculated in respect of each at 31 March and 30 September.
International Public Partnerships Limited
Annual Report and financial statements 2021
100
FINANCIAL STATEMENTS
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 29 to 30 of the
Strategic Report). The significant unobservable inputs and assumptions used in projecting the Group’s net future cash flows are shown overleaf.
31 December 2021 31 December 2020
Inflation rates UK
Australia
Europe (excl. UK)
Canada
US
1
2.75% RPI/2.00% CPIH
2.50%
2.00%
2.00%
N/A
2.75% RPI/2.00% CPIH
2.50%
2.00%
2.00%
N/A
Long-term deposit rates
2
UK
Australia
Europe (excl. UK)
Canada
US
1
1.00%
2.00%
0.50%
1.50%
N/A
1.00%
2.00%
0.50%
1.50%
N/A
Foreign exchange rates GBP/AUD
GBP/DKK
GBP/EUR
GBP/CAD
GBP/USD
1.86
8.86
1.19
1.72
1.35
1.77
N/A
1.11
1.74
1.37
Tax rates
3
UK
Australia
Europe (excl. UK)
Canada
US
1
19.00%/25.00%
30.00%
Various (12.50% – 32.28%)
Various (23.00% – 26.50%)
N/A
19.00%
30.00%
Various (12.50% – 32.28%)
Various (23.00% – 26.50%)
N/A
1 The Company’s US investment is in the form of subordinated debt and therefore not directly impacted by inflation, deposit and tax rate assumptions.
2 The portfolio valuation assumes actual current deposit rates are maintained until 31 December 2023 before adjusting to the long-term rates noted in the table above from 1 January 2024. The
31 December 2020 valuation assumed the long-term rates noted in the table above would apply from 1 January 2023.
3 Tax rates reflect those substantively enacted as at the valuation date or those that could reasonably be expected to be substantively enacted shortly after the valuation date.
Discount rate
The discount rate used in the valuation of each investment is the aggregate of the following:
– Yield on a government bond with a remaining term equivalent to (or as close as possible to) the investment being valued, issued by the
national government for the location of the relevant investment (‘government bond yield’);
– A premium to reflect the inherent greater risk in investing in infrastructure assets over government bonds;
– A further premium to reflect the state of maturity of the asset with a larger premium applied to immature assets and/or assets in
construction and/or to reflect any current asset specific or operational issues. Typically, this risk premium will reduce over the life of any
asset as an asset matures, its operating performance becomes more established, and the risks associated with its future cash flows
decrease. However, the rate may increase in relation to investments with unknown residual values at the end of the relevant concession life
as that date nears;
– A further adjustment reflective of market-based transaction valuation evidence for similar assets. Such adjustment is considered to implicitly
include the market’s assessment of the risk posed by climate factors to that particular investment.
CONTINUED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
International Public Partnerships Limited
Annual Report and financial statements 2021
OVERVIEW STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
101
11. FINANCIAL INSTRUMENTS CONTINUED
11.4 FAIR VALUE HIERARCHY CONTINUED
Over the period, the weighted average government bond yield increased by 0.40%. The weighted average investment premium decreased,
reflecting observable market-based evidence.
Valuation assumptions
31 December
2021
31 December
2020 Movement
Weighted Average Government Bond Yield 0.96% 0.56% 0.40bps
Weighted Average Investment Risk Premium 6.01% 6.41% (0.40)bps
Weighted Average Discount Rate 6.97% 6.97% –
Weighted Average Discount Rate on Risk Capital
1
7.38% 7. 52% (0.14)bps
1 Weighted average discount rate on Risk Capital only (equity and subordinated debt).
Reconciliation of Level 3 fair value measurements of financial assets
31 December
2021
£’000s
31 December
2020
£’000s
Balance at 1 January 2,345,433 2,382,645
Additional investments during the year 252,725 29,984
Net repayments during the year (53,350) (39,465)
Net change in investments at fair value through profit or loss 34,626 (27,731)
Balance at 31 December 2,579,434 2,345,433
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 2021
Weighted
average rate in
base case
valuations
Sensitivity
factor
Change in fair
value of
investment
£’000s
Sensitivity
factor
Change in fair
value of
investment
£’000s
Discount rate 6.97% +1.00% (245,454) -1.00% 295,025
Inflation rate (overall) 2.37% +1.00% 231,029 -1.00% (197,787)
UK (CPI/RPI) 2.00%/2.75% +1.00% 179,431 -1.0 0% (151,850)
Europe 2.00% +1.00% 40,393 -1.00% (35,843)
North America 2.00% +1.00% 738 -1.00% (1,218)
Australia 2.50% +1.00% 10,451 -1.00% (8,875)
FX rate N/A +10.00% 63,273 -10.00% (63,279)
Tax rate 25.47% +1.00% (13,757) -1.00% 13,541
Deposit rate 1.04% +1.00% 24,626 -1.00% (13,723)
International Public Partnerships Limited
Annual Report and financial statements 2021
102
FINANCIAL STATEMENTS
11. FINANCIAL INSTRUMENTS CONTINUED
11.5 SENSITIVITY ANALYSIS CONTINUED
Significant assumptions
31 December 2020
Weighted
average rate in
base case
valuations Sensitivity factor
Change in fair
value of
investment
£’000s Sensitivity factor
Change in fair
value of
investment
£’000s
Discount rate 6.97% +1.00% (224,463) -1.00% 272,586
Inflation rate (overall) 2.40% +1.00% 259,082 -1.00% (213,162)
UK (CPI/RPI) 2.00%/2.75% +1.00% 207,8 5 4 -1.00% (167,786 )
Europe 2.00% +1.00% 39,622 -1.00% (34,525)
North America 2.00% +1.00% 916 -1.00% (1,525)
Australia 2.50% +1.00% 10,682 -1.00% (9,309)
FX rate N/A +10.00% 62,014 -10.0 0% (62,007)
Tax rate 21.66% +1.00% (20,082) -1.00% 18,937
Deposit rate 1.05% +1.00% 23,369 -1.00% (23,225)
12. NEW INVESTMENTS
2021
Date of investment Description
Consideration
£’000s
% Ownership
post investment
April 2021 The Group made an investment into toob, utilising part of its commitment to invest in
digital infrastructure, UK
14,270 46.1%
June 2021 The Group made an investment into the Offenbach Police Centre, Germany 8,073 45%
July 2021 The Group made an investment in the Beatrice offshore transmission project, UK 49,751 100%
September 2021 The Group made an investment to acquire an additional interest in Angel Trains, UK 97,49 6 10%
November 2021 The Group made an investment in the Rampion offshore transmission project, UK 35,400 100%
November 2021 The Group made an investment to acquire interests in a portfolio of Building Schools for
the Future and UK PPP projects, UK
29,074 Various
December 2021 The Group made an investment to acquire an interest in a portfolio of Danish PPP
projects, Denmark
14,045 66.7%
December 2021 The Group made an investment to acquire interests in a small portfolio UK PPP
projects,UK
3,053 Various
December 2021 The Group made a follow on investment into the Diabolo Rail Link Project, Belgium 1,563 100%
Total capital spend on investments during the year 252,725
2020
Date of investment Description
Consideration
£’000s
% Ownership
post investment
January –
December 2020
The Group made further investments as part of its commitment to the National Digital
Infrastructure Fund, UK
9,489 45%
May 2020 The Group made a follow on investment into the Essex 1 and 2 Building Schools for the
Future projects, UK
6,655 28% – 100%
August 2020 The Group made a series of follow on investments into the Bradford Phases 1 & 2, and
Lewisham Phases 1 to 4 Building Schools for the Future projects, UK
3,636 15.5% – 54%
October 2020 The Group made a follow on investment into the Blackburn 1 and 2 Building Schools for
the Future projects, UK
1,136 100%
December 2020 The Group made a follow on investment into the Diabolo Rail Link Project, Belgium 9,068 100%
Total capital spend on investments during the year 29,984
CONTINUED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
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Annual Report and financial statements 2021
OVERVIEW STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
103
13. TRADE AND OTHER RECEIVABLES
31 December
2021
£‘000s
31 December
2020
£‘000s
Accrued interest receivable 52,657 40,769
Other debtors 4,721 1,419
Total trade and other receivables 57,378 42,188
Other debtors included £1.2 million (December 2020: £1.1 million) of receivables from unconsolidated subsidiary entities for surrender of Group
tax losses.
14. TRADE AND OTHER PAYABLES
31 December
2021
£‘000s
31 December
2020
£‘000s
Accrued management fee 8,308 7,79 0
Other creditors and accruals 2,289 1,526
Total trade and other payables 10,597 9,316
15. SHARE CAPITAL AND RESERVES
Share capital
31 December
2021
shares
‘000s
31 December
2020
shares
‘000s
Authorised and in issue at 1 January 1,620,953 1,610,795
Issued for cash 81,818 –
Issued as a scrip dividend alternative 3,333 10,158
Authorised and in issue at 31 December – fully paid 1,70 6,104 1,620,953
31 December
2021
£’000s
31 December
2020
£’000s
Balance at 1 January 1,769,582 1,753,840
Issued for cash (excluding issue costs) 135,000 –
Issued as a scrip dividend alternative 5,629 15,742
Total share capital issued in the year 140,629 15,742
Costs on issue of Ordinary Shares (1,362) –
Balance at 31 December 1,908,849 1,769,582
At present, the Company has one class of Ordinary Shares with a par value of 0.01 pence which carry no right to fixed income.
On 4 June 2021, 2,602,941 new Ordinary fully paid shares were issued as a scrip dividend alternative in lieu of cash for the interim dividend in
respect of the six months ended 31 December 2020.
On 13 July 2021, the Group raised an additional £135 million of equity through a tap issue of 81,818,178 Ordinary Shares at an issue price per
share of 165 pence.
On 17 November 2021, 729,570 new Ordinary fully paid shares were issued as a scrip dividend alternative in lieu of cash for the interim
dividend in respect of the six months ended 30 June 2021.
International Public Partnerships Limited
Annual Report and financial statements 2021
104
FINANCIAL STATEMENTS
15. SHARE CAPITAL AND RESERVES CONTINUED
Other distributable reserve
31 December
2021
£’000s
31 December
2020
£’000s
Balance at 1 January 182,481 182,481
Movement in the year – –
Balance at 31 December 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
31 December
2021
£’000s
31 December
2020
£’000s
Balance at 1 January 432,373 488,918
Net profit for the year 129, 211 60,713
Dividends paid
1
(124,114) (117, 258 )
Balance at 31 December 4 37,470 432,373
1 Includes scrip element of £5.6 million in 2021 (December 2020: £15.7 million).
DIVIDENDS
The Board is satisfied that, in every respect, the solvency test as required by the Companies (Guernsey) Law, 2008, was satisfied for the
proposed dividend and the dividend paid in respect of the year ended 31 December 2021.
The Board has approved interim dividends as follows:
Year ended
31 December
2021
£’000s
Year ended
31 December
2020
£’000s
Amounts recognised as distributions to equity holders for the year ended 31 December 124,114
1
117, 25 8
Declared and proposed
Interim dividend for the period 1 January to 30 June 2021 was 3.78 pence per share (2020: 3.68 pence per share) 64,463 59,430
Interim dividend for the period 1 July to 31 December 2021 was 3.77 pence per share
2
(2020: 3.68 pence per share) 64,320 59,651
1 Includes the 2020 interim dividend for the period 1 July to 31 December 2020.
2 The dividend for the period 1 July to 31 December 2021 was approved by the Board on 23 March 2022 and therefore has not been included as a liability in the balance sheet for the year ended
31 December 2021.
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 66.
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.
CONTINUED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
International Public Partnerships Limited
Annual Report and financial statements 2021
OVERVIEW STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
105
16. NET ASSETS PER SHARE
31 December
2021
£’000s
31 December
2020
£’000s
Net assets attributable to equity holders of the Parent 2,528,800 2,384,436
Number Number
Number of shares
Ordinary Shares outstanding at the end of the year 1,70 6,103,581 1,620,952,892
Net assets per share (pence per share) 148.2 147.1
17. RELATED PARTY TRANSACTIONS
Details of the Company’s significant consolidated and unconsolidated subsidiaries are included in note 20.
During the period, 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 Mr G Frost is a Director and also a substantial shareholder.
Mr G Frost is also a Director of International Public Partnerships Limited (the ‘Company’); International Public Partnerships Lux 1 Sarl; (awholly-
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 £48,500 (2020: £45,900) for Mr G 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
2021
£’000s
For the year
ended
31 December
2020
£’000s
At
31 December
2021
£’000s
At
31 December
2020
£’000s
International Public Partnerships GP Limited
1
26,173 25,888 8,308 7,79 0
Amber Fund Management Limited
2
3,896 286 247 17
Total 30,069 26,174 8,555 7,8 07
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.
International Public Partnerships Limited
Annual Report and financial statements 2021
106
FINANCIAL STATEMENTS
17. RELATED PARTY TRANSACTIONS CONTINUED
INVESTMENT ADVISORY ARRANGEMENTS
Investment advisory fees payable during the period 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 2021, the Amber Group held 8,002,379 (December 2020: 8,002,379) shares in the Company. The shares held by the
Investment Adviser in the Company helps further strengthen the alignment of interests between the two parties.
During the year the Company acquired interests in a small portfolio of UK PPP investments from an affiliate of the Company’s Investment
Adviser, Amber. The interests were acquired for £3.1 million following an independent valuation of the assets. Further interests in the portfolio
representing up to £3.0 million will be acquired over the coming months. Protocols provided in the Company’s Investment Advisory Agreement
were followed with respect to the sale of the Projects from Amber to INPP, including the establishment of separate buy-side and sell-side
teams within Amber.
TRANSACTIONS WITH DIRECTORS
Shares acquired by Directors in the year are disclosed below:
Number of New
Ordinary Shares
Director
Year ended
31 December
2021
Year ended
31 December
2020
Mike Gerrard – 22,330
Julia Bond 24,072 5,358
Sally Ann David 30,303 –
Meriel Lenfestey – 9,979
John Le Poidevin 30,303 –
Claire Whittet 1,654 3,460
Giles Frost 27,567 26,276
Total purchased 113,89 9 67,4 0 3
Remuneration paid to the Non-Executive Directors is disclosed on page 68. Directors received dividends on total shares held as disclosed on
page 68, in accordance with the approved dividends detailed under note 15.
18. CONTINGENT LIABILITIES AND COMMITMENTS
As at 31 December 2021 the Group has committed funding of up to c.£44.7 million (December 2020: c.£46.8 million), which includes
committed investment amounts as noted in the Strategic Report on page 23, and a deferred commitment of £14.5 million for BeNEX
(December 2020: £18.2 million) which is due to be settled from future returns generated by BeNEX.
There were no contingent liabilities at the date of this report.
CONTINUED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
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Annual Report and financial statements 2021
OVERVIEW STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
107
19. EVENTS AFTER THE BALANCE SHEET DATE
In March 2022, the Company reached preferred bidder status for Moray East OFTO. The Company expects to make an investment of up to
£75 million later in the year.
20. OTHER MANDATORY DISCLOSURES
NEW STANDARDS THAT THE GROUP HAS APPLIED FROM 1 JANUARY 2021
Standards and amendments to standards applicable to the Group that became effective during the period are listed below. These have no
material impact on the reported performance or financial statements of the Group.
– Interest Rate Benchmark Reform – Phase 2 – Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 (1 January 2021).
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.
TheGroup 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.
– Annual improvements to IFRS Standards 2018-2020 (1 January 2022).
UNCONSOLIDATED SUBSIDIARIES
A list of the significant investments in unconsolidated subsidiaries, including the name, country of incorporation as at 31 December 2021 and
proportion of ownership is shown below:
Name
Place of
incorporation
(or registration)
and operation
Proportion of
ownership
interest
%
Abingdon Limited Partnership UK 100
Aggregator PLC UK 100
Access Justice Durham Limited Canada 100
AKS Betriebs GmbH & Co. KG Germany 98
Arden Partnership (Derby) Limited UK 50
Arden Partnership (Lincolnshire) Limited UK 50
Arden Partnership (Leicester) Limited UK 50
BBPP Alberta Schools Limited Canada 100
Blackburn with Darwen Phase 1 Limited UK 100
Blackburn with Darwen Phase 2 Limited UK 100
BPSL No. 2 Limited Partnership UK 100
Building Schools for the Future Investments LLP UK 100
Calderdale Schools Partnership UK 100
CHP Unit Trust Australia 100
Derby City BSF Limited UK 90
Derbyshire Courts Limited Partnership UK 100
Derbyshire Schools UK 100
Derbyshire Schools Phase Two Partnership UK 100
Essex Schools Limited UK 100
Future Ealing Phase 1 Limited UK 80
4 Futures Phase 1 Limited UK 90
4 Futures Phase 2 Limited UK 90
Hertfordshire Schools Building Partnership Phase 1 Limited UK 100
H&W Courts Limited Partnership UK 100
INPP Infrastructure Germany GmbH & Co. KG Germany 100
Inspire Partnership Limited Partnership UK 100
IPP CCC Limited Partnership Ireland 100
Inspiredspaces Durham (Project Co 1) Limited UK 91
International Public Partnerships Limited
Annual Report and financial statements 2021
108
FINANCIAL STATEMENTS
Name
Place of
incorporation
(or registration)
and operation
Proportion of
ownership
interest
%
Kent PFI (Project Co 1) Limited UK 58
Inspiredspaces Nottingham (Project Co 1) Limited UK 82
Inspiredspaces Nottingham (Project Co 2) Limited UK 82
Inspiredspaces STaG (Project Co 1) Limited UK 9 0.1
Inspiredspaces STaG (Project Co 2) Limited UK 90.1
Inspiredspaces Wolverhampton (Project Co 1) Limited UK 100
Inspiredspaces Wolverhampton (Project Co 2) Limited UK 100
Transform Islington (Phase 1) Limited UK 90
Transform Islington (Phase 2) Limited UK 90
IPP (Moray Schools) Holdings Limited UK 100
LCV Project Trust Australia 100
Lewisham Schools for the Future SPV Limited UK 90
Lewisham Schools for the Future SPV 2 Limited UK 90
Lewisham Schools for the Future SPV 3 Limited UK 90
Lewisham Schools for the Future SPV 4 Limited UK 81
Maesteg School Partnership UK 100
Norfolk Limited Partnership UK 100
Northampton Schools Limited Partnership UK 100
Northern Diabolo N.V. Belgium 100
Oldham BSF Limited UK 99
OPP Hobro Tinglysningsret A/S Denmark 66.7
OPP Ørstedskolen A/S Denmark 66.7
OPP Vildbjerg Skole A/S Denmark 66.7
OPP Randers P-Hus A/A Denmark 66.7
PSBP Midlands Limited UK 92.5
Pinnacle Healthcare (OAHS) Trust Australia 100
Plot B Partnership UK 100
St Thomas More School Partnership UK 100
PPP Solutions (Long Bay) Partnership Australia 100
PPP Solutions (Showgrounds) Trust Australia 100
Strathclyde Limited Partnership UK 100
TH Schools Limited Partnership UK 100
TC Robin Rigg OFTO Limited UK 100
TC Barrow OFTO Limited UK 100
TC Gunfleet Sands OFTO Limited UK 100
TC Ormonde OFTO Limited UK 100
TC Lincs OFTO Limited UK 100
TC Westermost Rough OFTO Limited UK 100
TC Dudgeon OFTO PLC UK 100
TC Beatrice OFTO Limited UK 100
TC Rampion OFTO Limited UK 100
The entities listed above in aggregate represent 58.2% (December 2020: 58.1%) 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.
CONTINUED
20. OTHER MANDATORY DISCLOSURES CONTINUED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
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Annual Report and financial statements 2021
OVERVIEW STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
109
20. OTHER MANDATORY DISCLOSURES CONTINUED
CONSOLIDATED SUBSIDIARIES
The subsidiary undertakings of the Company, all of which have been included in these consolidated financial statements are as follows:
Name
Place of
incorporation
(or registration)
and operation
Proportion of
ownership
interest
%
International Public Partnerships Limited Partnership UK 100
International Public Partnerships Lux 1 Sarl Luxembourg 100
International Public Partnerships Lux 2 Sarl Luxembourg 100
IPP Bond Limited UK 100
IPP Holdings 1 Limited UK 100
IPP Investments UK Limited UK 100
IPP Investments Limited Partnership UK 100
21. INVESTMENTS
The Group holds 142 investments across energy transmission, education, transport, health, courts, wastewater, 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 Country
Status at
31 December 2021
%
Risk Capital
Owned by the
Group
1
Investment end
UK
UK PPP Assets
Calderdale Schools UK Operational 100.0 April 2030
Derbyshire Schools Phase Two UK Operational 100.0 February 2032
Northamptonshire Schools UK Operational 100.0 December 2037
Derbyshire Courts UK Operational 100.0 August 2028
Derbyshire Schools Phase One UK Operational 100.0 April 2029
North Wales Police HQ UK Operational 100.0 December 2028
St Thomas More Schools UK Operational 100.0 April 2028
Tower Hamlets Schools UK Operational 100.0 August 2027
Norfolk Police HQ UK Operational 100.0 December 2036
Strathclyde Police Training Centre UK Operational 100.0
2
September 2026
Hereford & Worcester Courts UK Operational 100.0
2
September 2025
Abingdon Police Station UK Operational 100.0 April 2030
Bootle Government Offices UK Operational 100.0 December 2022
Maesteg Schools UK Operational 100.0 July 2033
Moray Schools UK Operational 100.0 February 2042
Liverpool Library UK Operational 100.0 November 2037
Three Shires – Derbyshire UK Operational 50.0 October 2037
Three Shires – Leicestershire UK Operational 50.0 June 2037
Three Shires – Lincolnshire UK Operational 50.0 May 3028
Townlands Hospital UK Operational 100.0 November 2041
Priority Schools Building Aggregator Programme
Batch 1 – Schools in North East England UK Operational 0.0
2
August 2040
Batch 2 – Schools in Hertfordshire,
Luton and Reading UK Operational 0.0
2
November 2040
Batch 3 – Schools in North West of England UK Operational 0.0
2
August 2041
Batch 4 – Schools in the Midlands Region UK Operational 92.5
2
December 2041
Batch 5 – Schools in Yorkshire UK Operational 0.0
2
September 2041
OFTOs
Robin Rigg OFTO UK Operational 100.0
2
March 2031
International Public Partnerships Limited
Annual Report and financial statements 2021
110
FINANCIAL STATEMENTS
Investment Name Country
Status at
31 December 2021
%
Risk Capital
Owned by the
Group
1
Investment end
Gunfleet Sands OFTO UK Operational 100.0
2
July 2031
Barrow OFTO UK Operational 100.0
2
March 2030
Ormonde OFTO UK Operational 100.0
2
July 2032
Lincs OFTO UK Operational 100.0 November 2034
Westermost Rough OFTO UK Operational 100.0 February 2036
Dudgeon OFTO UK Operational 100.0 November 2038
Beatrice OFTO UK Operational 100.0 April 2045
Rampion OFTO UK Operational 100.0 November 2041
Building Schools for the Future Portfolio
Minority Shareholdings in 22
Building Schools for the Future Projects UK Operational Various Various
Blackburn with Darwen Phase One UK Operational 100.0 September 2036
Blackburn with Darwen Phase Two UK Operational 100.0 September 2039
Derby City UK Operational 90.0 August 2037
Durham Schools UK Operational 91.0 January 2036
Ealing Schools Phase One UK Operational 80.0 March 2038
Essex Phase Two UK Operational 100.0 December 2036
Hertfordshire Schools Phase One UK Operational 100.0 August 2037
Islington Phase One UK Operational 90.0 August 2034
Islington Phase Two UK Operational 90.0 March 2039
Lewisham Phase 1 UK Operational 90.0 December 2034
Lewisham Phase 2 UK Operational 90.0 August 2037
Lewisham Phase 3 UK Operational 90.0 August 2037
Lewisham Phase 4 UK Operational 81.0 March 2038
Oldham Schools UK Operational 99.0 August 2037
Tameside Schools One UK Operational 46.0 August 2036
Tameside Schools Two UK Operational 46.0 August 2037
Nottingham Schools One UK Operational 82.0 August 2034
Nottingham Schools Two UK Operational 82.0 August 2038
South Tyneside and Gateshead Schools One UK Operational 90.1 October 2034
South Tyneside and Gateshead Schools Two UK Operational 90.1 September 2036
Southwark Phase One UK Operational 90.0 January 2036
Southwark Phase Two UK Operational 90.0 December 2036
Wolverhampton Schools Phase One UK Operational 100.0 September 2037
Wolverhampton Schools Phase Two UK Operational 100.0 August 2040
Kent Schools UK Operational 58.0 August 2035
NHS LIFT Portfolio
Beckenham Hospital UK Operational 49.8 December 2033
Garland Road Health Centre UK Operational 49.8 December 2031
Alexandra Avenue Primary Care Centre, Monks Park Health Centre
(two projects) UK Operational 49.8 June 2031
Gem Centre Bentley Bridge, Phoenix Centre (two projects) UK Operational 49.8 December 2030
Sudbury Health Centre UK Operational 49.8 November 2032
Mt Vernon UK Operational 49.8 December 2033
Lakeside UK Operational 49.8 November 2032
Fishponds Primary Care Centre, Hampton House Health Centre (two
projects) UK Operational 33.4 January 2031
CONTINUED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
21. INVESTMENTS CONTINUED
International Public Partnerships Limited
Annual Report and financial statements 2021
OVERVIEW STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
111
Investment Name Country
Status at
31 December 2021
%
Risk Capital
Owned by the
Group
1
Investment end
Shirehampton Primary Care Centre, Whitchurch Primary Care Centre
(two projects) UK Operational 33.4 May 2032
Blackbird Leys Health Centre, East Oxford Care Centre (two projects) UK Operational 33.4 May 2031
Brierley Hill UK Operational 34.3 April 2035
Ridge Hill Learning Disabilities Centre, Stourbridge Health & Social
Care Centre (two projects) UK Operational 34.3 October 2031
Harrow NRC (three projects) UK Operational 49.8 June 2034
Goscote Palliative Care Centre UK Operational 49.8 November 2035
South Bristol Community Hospital UK Operational 33.4 February 2042
East London LIFT Project One (four projects) UK Operational 30.0 October 2030
East London LIFT Project Two (three projects) UK Operational 30.0 April 2033
East London LIFT Project Three (Newby Place) UK Operational 30.0 May 2037
East London LIFT Project Four (two projects) UK Operational 30.0 August 2036
Eltham Community Hospital UK Operational 49.8 January 2040
Other UK
Angel Trains UK Operational 10.0 December 2058
Tideway UK Construction 15.99 March 2150
Cadent UK Operational 7.25 June 2069
National Digital Infrastructure Fund UK Operational 45.0 July 2027
Australia
Royal Melbourne Showgrounds Australia Operational 100.0 August 2031
Long Bay Forensic & Prisons Hospital Project Australia Operational 100.0 July 2034
Reliance Rail Australia Operational 33.0 February 2044
Royal Children’s Hospital Australia Operational 100.0 December 2036
Orange Hospital Australia Operational 100.0 December 2035
NSW Schools Australia Operational 25.0 December 2035
Gold Coast Rapid Transport Australia Operational 30.0 May 2029
Victoria Schools Two Australia Operational 100.0 December 2042
Flinders University Australia Construction 100.0 March 2049
North America
Alberta Schools Canada Operational 100.0 June 2040
Durham Courts Canada Operational 100.0 November 2039
US Military Housing US Operational 0.0
2
October 2052
Europe (ex UK)
Diabolo Rail Link Belgium Operational 100.0 June 2047
Dublin Courts Ireland Operational 100.0 February 2035
BeNEX Germany Operational 100.0 December 2049
Federal German Ministry of Education and Research Headquarters Germany Operational 98.0 July 2041
Pforzheim Schools Germany Operational 98.0 September 2039
Offenbach Police Centre Germany Construction 45.0 June 2050
Brescia Hospital Italy Operational 37.0 November 2021
Hobro Court Denmark Operational 66.7 December 2027
Randers Hospital Parking Facility Denmark Operational 66.7 April 2041
Ørsted School Denmark Operational 66.7 June 2038
Vildbjerg School Denmark Operational 66.7 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.
21. INVESTMENTS CONTINUED
International Public Partnerships Limited
Annual Report and financial statements 2021
112
FINANCIAL STATEMENTS
AGM
The Company’s Annual General Meeting
AIC
Association of Investment Companies
AFML
Amber Fund Management Limited, a member of the Amber Group
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
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
ASCE
American Society of Civil Engineers
AVERAGE NAV
Average of published NAVs for the relevant periods
BEPS
Base Erosion and Profit Shifting
BSF
Building schools for future projects
CASH DIVIDEND COVER
Non-GAAP measure. Cash dividend payments to investors covered
by the net operating cash flow before capital activity. This measure
shows the sustainability of the dividend payments made by the
Company. Net operating cash flows before capital activity include net
repayments from Investments at Fair Value through profit and loss
and finance costs paid and exclude investment transaction costs
when compared to net cash inflows from operations as disclosed in
the statutory cash flow statement in the financial statements
CDF
The Company’s corporate debt facility
CMA
Competition and Markets Authority
CPI
Consumer Price Index
CPIH
CPI including owner occupied housing costs
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
ESG
Environmental, Social and Governance
EU TAXONOMY
EU Taxonomy for Sustainable Activities
FCA
Financial Conduct Authority
FRC
The Financial Reporting Council
GAV
Gross asset value
GDNs
Gas distribution networks
GFSC
The Guernsey Financial Services Commission
GLOSSARY
INCLUDING ALTERNATIVE PERFORMANCE MEASURES
International Public Partnerships Limited
Annual Report and financial statements 2021
OVERVIEW STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
113
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
HMRB
Flinders University Health and Medical Research Building
IAA
Investment Advisory Agreement
IFRS
International Financial Reporting Standards
INTERNATIONAL PUBLIC PARTNERSHIPS
The ‘Company’, ‘INPP’, the ‘Group’ (where including
consolidatedentities)
INVESTMENT ADVISER
Amber (see above)
IPO
Initial public offering
IRR
The internal rate of return
HUNT
Amber’s long-term investor, US Group, Hunt Companies LLC
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 31
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 29
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
OECD
Organisation for Economic Co-operation and Development
OFTO
Offshore Electricity Transmission project
PFI
Projects and private finance initiative
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
PwC
The Company’s auditors PricewaterhouseCoopers CI LLP
International Public Partnerships Limited
Annual Report and financial statements 2021
114
FINANCIAL STATEMENTS
RNS
Regulatory news service
RPI
UK Retail Price Index
SCOPE 1 EMISSIONS
Direct emissions from owned or controlled sources
SCOPE 2 EMISSIONS
Indirect emissions from the generation of purchased energy
SCOPE 3 EMISSIONS
All indirect emissions (not included in Scope 2) that occur in the value
chain of the reporting company, including both upstream and
downstream emissions
SDGs
Sustainable Development Goals
SDR
The proposed UK Sustainability Disclosure Requirements
SFDR
The EU Sustainable Finance Disclosure Regulation
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
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
INCLUDING ALTERNATIVE PERFORMANCE MEASURES
GLOSSARY
CONTINUED
International Public Partnerships Limited
Annual Report and financial statements 2021
OVERVIEW STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
115
INVESTMENT ADVISER INDEPENDENT AUDITOR CORPORATE BROKERS
Amber Fund Management Limited
3 More London Riverside
London
SE1 2AQ
PricewaterhouseCoopers CI LLP
PO Box 321
Royal Bank Place
1 Glategny Esplanade
St Peter Port
Guernsey
Channel Islands
GY1 4ND
Numis Securities Limited
45 Gresham Street
London
EC2V 7BF
REGISTERED OFFICE LEGAL ADVISER PUBLIC RELATIONS
c/o Ocorian Administration
(Guernsey) Limited
PO Box 286
Floor 2, Trafalgar Court
Les Banques
Guernsey
Channel Islands
GY1 4LY
Carey Olsen
PO Box 98, Carey House
Les Banques
Guernsey
Channel Islands
GY1 4BZ
FTI Consulting
200 Aldersgate
Aldersgate Street
London
EC1A 4HD
ADMINISTRATOR AND
COMPANY SECRETARY CORPORATE BANKER
Ocorian Administration (Guernsey) Limited
PO Box 286
Floor 2, Trafalgar Court
Les Banques
Guernsey
Channel Islands
GY1 4LY
Royal Bank of Scotland International
1 Glategny Esplanade
St Peter Port
Guernsey
Channel Islands
GY1 4BQ
KEY CONTACTS
International Public Partnerships Limited
Annual Report and financial statements 2021
116
FINANCIAL STATEMENTS
NOTES
Printed by a CarbonNeutral
®
company, certified to
ISO 14001 environmental management system.
100% of all dry waste associated with
this production has been recycled.
This publication is printed on an FSC
®
certified
paper, manufactured at a mill that has ISO 14001
environmental standard accreditation.
The paper is Carbon Balanced with World Land
Trust, an international conservation charity, who
offset carbon emissions through the purchase
and preservation of high conservation value land.
Through protecting standing forests, under threat
of clearance, carbon is locked-in, that would
otherwise be released.
These protected forests are then able to continue
absorbing carbon from the atmosphere, referred to
as REDD (Reduced Emissions from Deforestation
and forest Degradation). This is now recognised as
one of the most cost-effective and swiftest ways
to arrest the rise in atmospheric CO2e and global
warming effects. Additional to the carbon benefits
is the flora and fauna this land preserves, including
several species identified at risk of extinction on
the IUCN Red List of Threatened Species.
CBP00019082504183028
International Public Partnerships Limited
c/o Ocorian Administration (Guernsey) Limited
PO Box 286
Tel: +44 1481 742 742
WWW.INTERNATIONALPUBLICPARTNERSHIPS.COM
International Public Partnerships Limited Annual Report and financial statements 2021