TIDMINPP
RNS Number : 6248I
International Public Partnership Ld
01 September 2016
1 September 2016
INTERNATIONAL PUBLIC PARTNERSHIPS LIMITED
HALF YEAR RESULTS FOR THE SIX MONTHSED 30 JUNE 2016
International Public Partnerships Limited ("INPP"), the listed
infrastructure investment company which invests internationally in
public infrastructure projects, today announces half year results
for the six months ended 30 June 2016.
Financial Highlights (as at 30 June 2016 unless otherwise
stated)
-- Continued Net Asset Value ('NAV') growth over the half year
of 6.3% to GBP1,371.4 (31 December 2015: GBP1,290.2 million) with
NAV per share over the same period increasing 6.1% to 138.2 pence
(31 December 2015: 130.2 pence)(1)
-- Half year 2016 fully covered cash dividend of 3.325 pence per
share declared (30 June 2015: 3.225 pence per share)(2)
-- Minimum target dividend for 2016 financial year of 6.65 pence
per share and 2017 of 6.82 pence per share, an average annual
increase of c.2.5%(3)
-- IFRS profit before tax of GBP109.6 million (30 June 2015: GBP38.4 million)
-- Total Shareholder Return since listing in 2006 of 139.2%,
compared to 55.6% on the FTSE All Share over that same
period(4)
-- Following robust portfolio growth, new investments and a
significantly oversubscribed GBP125 million capital raise in July
2016, c.36% increase in market capitalisation to GBP1.5 billion (30
June 2015: GBP1.1 billion)
Rupert Dorey, Chairman of International Public Partnerships
Limited, said: "Predictable, growing returns continue to
characterise our financial performance as the Company delivers
further value growth over the first half of 2016."
"The significantly oversubscribed capital raise following the
half year end demonstrates the continued demand and underlying
value of our portfolio and the pipeline assets in which we are
well-positioned to invest. The UK and global infrastructure market
continues to provide diversified investment opportunities as we
maintain our focus on the early phases of governments' procurement
processes where we are a proven participant in the structuring and
risk management of pipeline projects."
"We remain confident in the pipeline of both PFI/PPP and
regulated assets and will continue to deploy our tried and tested
approach to active asset management of our existing portfolio,
which remains fundamental to our long-term success. With this, we
look forward to maintaining our commitment to delivering durable,
low-risk and inflation-linked returns to our shareholders."
Portfolio Performance
-- Total of over GBP60 million in five investments and
commitments in the electricity transmission, regulated utility,
education and transport infrastructure sectors, enhancing
diversification and maturity of the portfolio
-- Portfolio return of 12.6% on a compounded annualised basis
-- Continued investment into the GBP4.2 billion Thames Tideway
project, taking the total so far invested to some GBP93.9 million
with an additional GBP116.1 million committed
-- Completed GBP26.8 million investment into the sixth UK
offshore transmission project, Westermost Rough, marking the
Company's leading role in the sector
-- Following 30 June 2016, invested GBP72.3 million in a schools portfolio
-- Maximised pre-emptive rights to make value-enhancing
follow-on investments in education and transport portfolio, in UK's
Building Schools for Future and Australia's Gold Coast Light Rail
projects
Outlook
-- Outlook for the UK and global infrastructure sector continues to be buoyant
-- Demand for assets in both the primary PPP/PFI space and
regulated industries, and the associated stable and
inflation-linked distributions the Company's investment in these
generate, likely to remain high
-- Strategic focus remains on sourcing off-market primary
investments through the Investment Adviser
1 See Interim Report and Financial Statements for the six months
ended 30 June 2016 for further details on NAV methodology.
2 The forecast date for payment of the half year dividend is 3
November 2016.
3 Future profit forecast and dividends cannot be guaranteed.
Projections are based on the current individual asset financial
models and may vary in the future.
(4) Source: Bloomberg. Share price plus dividends assumed to be
reinvested.
S.
INPP will be holding an analyst presentation and investor
conference call at 9.30am on the day of announcement (1 September
2016).
Investors and analysts wishing to join the conference call
should dial +44(0)20 3043 2002 and use the confirmation code
4950811.
A copy of the results presentation can be downloaded from the
Company's website:
www.internationalpublicpartnerships.com
http://www.rns-pdf.londonstockexchange.com/rns/6248I_-2016-8-31.pdf
Amber Infrastructure +44 (0)20 7939
Erica Sibree 0558
+44 (0)20 3727
1046
FTI Consulting +44 (0)7703 330
Ed Berry 199
About International Public Partnerships:
International Public Partnerships ('INPP') is a listed
infrastructure investment company which invests in global public
infrastructure projects developed under the public private
partnerships ('PPP'), private finance initiative ('PFI'), regulated
asset and other similar procurement methods.
Listed in 2006, INPP is a long-term investor in 122 social and
transport infrastructure projects, including schools, hospitals,
courts, police headquarters, transport, utility and transmission
projects in the U.K., Europe, Australia and North America. INPP
seeks to provide its shareholders with both a long-term yield and
capital growth through investment across both construction and
operational phases typically of 25-40 year concessions.
Amber Infrastructure Group ('Amber') is the Investment Advisor
to INPP and consists around 90 dedicated staff who manage, advise
on and originate projects for INPP.
Visit the INPP website at
www.internationalpublicpartnerships.com for more information.
International Public Partnerships Limited
Interim Report and Financial Statements for the six months ended
30 June 2016
Registered number: 45241
www.internationalpublicpartnerships.com
Note: Page references in this announcement refer to the full
formatted Interim Financial Report and Financial Statements for the
period ended 30 June 2016 that can be found on the Company's
website. Certain charts cannot be reproduced for the RNS format and
can also be seen in the PDF version of this document available on
the Company's website.
Key Points
Net Asset Value
- Net Asset Value ('NAV')(1) per share of 138.2 pence as at 30
June 2016 (31 December 2015: 130.2 pence)
- NAV of GBP1,371.4 million as at 30 June 2016, up GBP81.2
million (31 December 2015: GBP1,290.2 million )
Shareholder Returns
- 2016 half year fully covered cash dividend(2) of 3.325 pence
per share(3) (30 June 2015: 3.225 pence per share)
- Two year forward looking fully covered minimum cash dividend
target(4) for the years ended 31 December 2016 and 2017 of 6.65 and
6.82 pence per share respectively - maintaining a long-term average
increase of c.2.5% per annum
- Significant degree of long-term inflation linkage within the
portfolio with a 0.75% per annum projected increase in return for a
1% increase over anticipated average portfolio inflation(5)
- Total Shareholder Return since listing in 2006 to 30 June 2016
of 139.2% compared to 55.6% on the FTSE All Share over that same
period or on an annualised basis 9.5% compared to 4.7%
(respectively)(6)
Earnings
- Profit before tax of GBP109.6 million for the six months ended
30 June 2016 (30 June 2015: GBP38.4 million
Highlights
- GBP60.0 million of additional investments or commitments made
during the period and a further GBP91.2 invested or committed since
30 June 2016
- Strong pipeline of investment opportunities emerging including
payments to support the Company's commitment to Thames Tideway
Tunnel, one of the UK's largest Infrastructure projects
- Majority owned investments represent 70.8% of portfolio
providing high level of asset control
- Underlying investments with external debt(7) represent 85.9%
of the investment portfolio, 14.1% of the Company's assets have no
external debt(8)
(1) The methodology used to determine investment fair value is
incorporated within the Net Asset Value ('NAV') as described in
detail on page 10.
(2) Cash dividend payments to investors are paid from net
operating cash flow (after taking into account financing costs) as
detailed on page 16.
(3) The forecast date for payment of the full year dividend is November 2016.
(4) Future profit projection and dividends cannot be guaranteed.
Projections are based on current estimates and may vary in
future.
(5) See pages 15 and 16 for information relating to the Company's use of sensitivity analysis.
(6) Source: Bloomberg. Share price plus dividends assumed to be reinvested.
(7) Represents investments where debt has been provided by an external lender.
(8) Represents investments where the Company owns the entire capital structure.
Company Overview
International Public Partnerships Limited (the 'Company'), in
accordance with its Investment Policy, invests in equity,
subordinated/mezzanine debt and senior loans to entities owning or
operating infrastructure concessions, assets or related
businesses.
Investments include schools, courthouses, health facilities,
police stations, and other public sector buildings, rail
operations, rolling stock leasing entities, waste water and
offshore electricity transmission asset owning entities. The
Company's investments are located in the UK, Europe, Australia and
North America.
Whilst the Company is able to invest in a variety of
infrastructure projects, to date it has primarily invested in
entities holding physical infrastructure and associated services
which are regulated or procured under Public Private Partnerships
('PPP')/Private Finance Initiative ('PFI') and similar public
procurement processes.
Features of International Public Partnerships Limited and its
investment portfolio are:
Portfolio
- Geographically diversified with a portfolio across eight
countries in a variety of sectors
- A focus on yielding operational investments but with an
element 'in construction' offering prospects for future capital
appreciation
- A significant degree of inflation linkage to investment
returns - a 1% per annum increase in the anticipated rate of
inflation across the portfolio would imply a 0.75% per annum
increase in return across the portfolio
- The Investment Adviser has historical success in originating
and developing new 'primary market' investment opportunities in new
sectors with low risks relative to returns
- A high degree of management and control of underlying
investments to support sustained performance
- Access to a pool of pre-emptive and other preferred rights to
increase investment in assets that have proven performance within
the existing portfolio
- Operational performance and income from underlying investments
is predominantly founded on asset availability, not demand, usage
or other non-controllable variables
- A significant portion 10.9% of the portfolio is invested in
secured senior debt (where no other debt ranks in preference to the
Company's investment in the asset)
Shareholder Returns
- Strong track record of delivering consistent dividend growth
and capital appreciation
- Total Shareholder Return since listing in 2006 to 30 June 2016
of 9.5% on an annualised basis(1)
- Share liquidity through listing and trading on the London
Stock Exchange
- Target internal rate of return equal to or greater than 8% per
annum set at the time of initial public offering in 2006
Governance
- Experienced independent leadership and strong corporate
governance
- Long-term alignment of interest with the Investment Adviser
and asset manager
Market Information
- Member of the FTSE 250 and FTSE All Share indices
- Listed since November 2006 with an initial market
capitalisation of GBP300 million and current market capitalisation
of GBP1.51 billion as at 30 June 2016 (31 December 2015: GBP1.38
billion)
- 992.6 million shares in issue as at 30 June 2016 (31 December
2015: 990.6 million)
- The Company's shares are eligible for ISA/PEPs and SIPPs
transfers
- The Company's shares are excluded from the Financial Conduct
Authority restrictions which apply to non-mainstream investment
products and can therefore be recommended by independent financial
advisers to their clients
Investment Adviser Fees
- Competitive fee structure
- For investments bearing construction risk: 1.2% per annum of
gross asset value ('GAV')
- For fully operational assets:
-- 1.2% per annum of the GAV (excluding uncommitted cash from
capital raisings) up to GBP750 million
-- 1.0% per annum where GAV (excluding uncommitted cash from
capital raisings) is between GBP750 million and GBP1.5 billion
-- 0.9% per annum where GAV (excluding uncommitted cash from
capital raisings) value exceeds GBP1.5 billion
- 1.5% asset origination fee of the value of new investments to
cover acquisition due diligence and more time/cost intensive
primary market new origination activities
- Investment Adviser bears the risk of abortive transaction
origination costs
- No incentive or performance fees
- Further details can be found in the Company's 2015 Annual
Report on pages 12 and 13
(1) Source: Bloomberg. Share price plus dividends assumed to be
reinvested.
Key Portfolio Facts
As at 30 June 2015
Sector Breakdown
Energy transmission 29%
--------------------- ----
Education 22%
--------------------- ----
Transport 20%
--------------------- ----
Health 7%
--------------------- ----
Courts 6%
--------------------- ----
Waste Water 6%
--------------------- ----
Police Authority 3%
--------------------- ----
Military
Housing 3%
--------------------- ----
Other 4%
122 investments in infrastructure projects across a variety of
sectors.
Geographic Split
UK 70%
----------- ----
Belgium 12%
----------- ----
Australia 7%
----------- ----
Germany 4%
----------- ----
Canada 3%
----------- ----
US 3%
----------- ----
Ireland 1%
----------- ----
Italy <1%
Invested in selected jurisdictions which meant the Company's
risk and return requirements.
Mode of Acquisition/Asset Status
Construction 10%
-------------- ----
Operational 90%
-------------- ----
Primary
Investor(1) 88%
-------------- ----
Later Stage
Investor(2) 12%
Early stage investor to maximise capital growth
opportunities.
Investment Type
Risk capital only(3) 86%
---------------------- ----
Company owns Risk
Capital and Senior
Debt 14%
Invested across the capital structure taking into account
appropriate risks to returns.
Project Ownership
100% 66%
--------- ----
50%-100% 5%
--------- ----
<50% 29%
Preference to hold majority stakes.
Investment Life
<20 years 52%
----------- ----
20 - 30
years 24%
----------- ----
>30 years 24%
Weighted average portfolio life of 28 years(4)
Information provided in charts above is based on 31 December
2015 portfolio investment fair value. Unless otherwise stated the
Company and its subsidiaries hold investments in equity,
subordinated debt and senior loans made to entities owning or
operating infrastructure concessions, assets or related businesses
most of which are investment subsidiaries.
(1) Primary Investor - asset developed or originated by the
Investment Adviser or predecessor team in the primary market as a
new investment opportunity.
(2) Later Stage Investor - asset acquired from a third party
investor in the secondary market.
(3) Risk Capital - includes both project level equity and
subordinated debt.
(4) Once the Company has fully invested in the Tideway project
the average investment life will, other things being equal, be c.40
years. Twenty-eight years represents the current weighted average
investment life based on the GBP76.0m invested in Tideway as at 30
June 2016.
Top Ten Investments
Status % Investment % Investment
at % Holding Fair Fair
30 at Value Value
Name of June 30 June 30 June 30 June
Project Location Sector 2016 2016 2016 2016
------------------ ------------------- --------------- --------------- ------------- ------------- -------------
100%
Lincs Offshore Lincolnshire, Energy Risk
Transmission England Transmission Operational Capital(1) 13.0% 16.3%
------------------ ------------------- --------------- --------------- ------------- ------------- -------------
100%
Diabolo Brussels, Risk
Rail Link(2) Belgium Transport Operational Capital(1) 11.7% 14.1%
================== =================== =============== =============== ============= ============= =============
100%
Risk
Capital(1)
Ormonde and 100%
Offshore Cumbria, Energy senior
Transmission England Transmission Operational debt 9.9% 11.4%
------------------ ------------------- --------------- --------------- ------------- ------------- -------------
London,
Thames Tideway United Waste Under 16% Risk
Tunnel(2) Kingdom Water Construction Capital(1) 6.4% 11%
------------------ ------------------- --------------- --------------- ------------- ------------- -------------
Various,
United 5% Risk
Angel Trains(2) Kingdom Transport Operational Capital(1) 5.0% 4.9%
------------------ ------------------- --------------- --------------- ------------- ------------- -------------
100%
Royal Children's Victoria, Risk
Hospital Australia Health Operational Capital(1) 3.2% 3.4%
------------------ ------------------- --------------- --------------- ------------- ------------- -------------
Various, 100%
US Military United Military Risk
Housing(2) States Housing Operational Capital(1) 2.7% 2.7%
------------------ ------------------- --------------- --------------- ------------- ------------- -------------
Various, 49% Risk
BeNEX Rail Germany Transport Operational Capital(1) 2.7% 2.9%
------------------ ------------------- --------------- --------------- ------------- ------------- -------------
100%
Northampton Northamptonshire, Risk
Schools England Education Operational Capital(1) 2.6% 2.7%
------------------ ------------------- --------------- --------------- ------------- ------------- -------------
100%
Risk
Capital(1)
Hereford and 100%
& Worcester Worcestershire, senior
Courts England Courts Operational debt 2.4% 2.7%
------------------ ------------------- --------------- --------------- ------------- ------------- -------------
(1) Risk Capital includes both project level equity and
subordinated debt.
(2) These projects contain revenues which are not solely
dependent on availability but also include an element of linkage to
other factors such as passenger numbers, rolling stock releasing
assumptions, occupancy and/or are regulated assets. All other
investments receive entirely availability based revenues.
Note that investment contribution to the portfolio is calculated
on a drawn cash basis and does not take into account amounts
committed through letters of credit etc. Further information about
each of the investments in the Company's portfolio is available on
the Company's website.
Significant movements in the Company's portfolio for the period
ended 30 June 2016 can be found on pages 19 and 20 of this
Report.
Chairman's Letter
Dear Shareholders,
It is very pleasing to be able to report to you again that your
Company continued to perform strongly - the six months to June 2016
saw very robust underlying returns from the existing portfolio. We
were also fortunate in being able to bring a number of new
investments into the portfolio during the period, adding
incremental value to your shareholding.
The combination of portfolio growth, new investment and the
subscription of new capital saw the Company's market capitalisation
reach over GBP1.5 billion shortly after the close of the half year,
up from GBP1.1 billion at the equivalent time last year.
Dividend Growth
In line with its stated dividend target of 6.65 pence per share
for the 2016 financial year, the Company declared a dividend of
3.325 pence per share for the six months to 30 June 2016. This
represents c.3.1% growth over the prior corresponding period and is
consistent with the c.2.5% average annual dividend growth that has
been delivered to investors since the Company's inception over nine
years ago. The ability to deliver consistent and growing income to
investors is at the heart of the Company's investment strategy and
we appreciate its importance to investors in increasingly volatile
market conditions.
The Board has once again published a minimum dividend target,
being 6.65 pence per share for 2016, and guidance of 6.82 pence per
share for the 2017 dividend, an average increase of c.2.5% per
annum, to give additional clarity to shareholders of our future
intentions.(1)
(1) Future profit projection and dividends cannot be guaranteed.
Projections are based on current estimates and may vary in
future.
Operational and Portfolio Performance
The Company's portfolio of assets continued to perform well with
revenues and cash receipts in line with management forecasts and
levels of satisfaction remaining high amongst our public sector
clients. As a result the cash flow and valuation performance of the
Company's existing portfolio remained very healthy. Net Asset Value
growth was strong during the period, increasing 6.3% to GBP1,371.4
million or 6.1% to 138.2 pence on a NAV per share basis.
The existing portfolio has continued to benefit from strong
asset management of investments which we see as fundamental to the
Company's overall long-term success. This approach not only
encompasses larger-scale project issues such as ensuring that major
construction schemes or project variations are tracking to schedule
and budget, but the effective management of day-to-day
relationships, such as ensuring that the head teachers in our
schools are satisfied with the facility services being delivered
and the terms of the concession contracts are being fulfilled.
Investment Activity and Capital Raising
Demand for infrastructure investment continues apace not only in
the UK but internationally. The Company is well positioned and
continues to prefer to focus its attention on the early phases of
governments' procurement processes where it can be an active
participant in the structuring and risk management of a project
thereby deriving the best outcome for our investors from a
project's inception. This is distinct from those whose focus is
mainly to acquire investments in the secondary market where,
typically, because of the competitive auction process, price is the
key determinant and the project's investment parameters are
dictated by the preceding owner/s. We believe our ability to
originate and structure transactions so that the Company is an
early stage investor into the majority of its investments is a
major differentiating factor which creates real added value for our
shareholders.
In this period we made investments and commitments to five
infrastructure investments in the electricity transmission,
regulated utility, education and transport infrastructure sectors
totalling over GBP60.0 million. Additional commitments or
investments of GBP91.2 million have also been made by the Company
into additional infrastructure projects in the months since the end
of the half year.
The largest investment during the period was the Company's
commitment to the Westermost Rough offshore transmission project,
where GBP26.8 million was invested. This is the Company's sixth
such investment into what we believe to be one of the most
attractive sectors in the UK at the current time.
The Company also continued to invest into the GBP4.2 billion
Thames Tideway Project which will deliver a 25 kilometre
'super-sewer' under the River Thames in London. As at the date of
this report the Company had invested some GBP76.0 million, with an
additional GBP134.0 million committed by way of letter of credit to
be drawn down during the construction phase of the project over the
next year and a half.
The capital required to fund these new investments came from a
mix of the Company's existing cash resources, its corporate debt
facility and the proceeds from share issuance in the previous
period.
The Company also conducted a capital raising in the first week
of July 2016. Despite the turbulent market conditions that followed
the Brexit decision, the offer closed significantly oversubscribed
and the Company was able to enlarge the amount raised from the
initial target of GBP75 million to GBP125 million. Pleasingly the
placement was concluded at a very narrow discount to the market
price on the day the raising was announced and was supported by a
range of existing and new investors.
This new capital was immediately used to reduce the drawn
balance of the Company's revolving credit facility and to invest
into committed investment opportunities. We would like to thank all
shareholders who participated in the offer for their support and
welcome all of our new shareholders to the register.
Corporate Governance and Regulation
The Board has closely monitored market and political reactions
following the referendum in respect of UK European Union (EU)
Membership on 23 June 2016. While the decision to leave the EU will
inevitably lead to uncertainty and associated market-related
volatility (including but not limited to currency, credit and stock
markets) the full impact of 'Brexit' is extremely difficult to
forecast. We will continue to monitor the outcome and potential
impacts.
We do however note that in our opinion the Company's current
investments are not likely to be impacted in the long-term to a
significant degree by Brexit as the counterparties to the
concessions in which we invest will continue to use and require our
services. Moreover there are no 'Brexit-related' clauses that would
lead to the cessation of our concession agreements. Finally, in the
context of the uncertainty created by the decision, the demand for
assets in which the Company invests and the associated stable and
inflation-linked distributions generated, is likely to continue to
be high and we see this as broadly positive for the Company and its
investor base.
The OECD proposals aimed at limiting the tax deductibility of
interest charges on related and third party debt remain of
particular relevance to the infrastructure sector. In May 2016,
following the announcements made in the 2016 Budget, Her Majesty's
Treasury invited a further consultation on the proposed regulations
for corporate interest deductibility in the UK. The Company and its
Investment Adviser have, in conjunction with industry participants
and forums, submitted responses in this consultation. We are
encouraged by movements in the latest proposals towards attempting
to avoid unintended consequences on the infrastructure sector,
however until detailed rules are finalised both in the UK and in
other jurisdictions there remains a degree of uncertainty over any
potential future impact on the Company. We will continue to work
with our professional advisers and engage with industry groups as
well as the relevant authorities throughout the consultation and
implementation stage with an aim to mitigate unintended
consequences where possible.
As reported in the 2015 Annual Report, in addition to its usual
review of risks, the Board considered in more detail the
cyber-risks that the Company may face - an increasingly topical
area of risk for many businesses. The Board commissioned a review
of the Company's security protocols in this respect which has found
that controls are fit for purpose for the Company.
Going Concern
We have reviewed comprehensive cash flow forecasts, which are
based on market data and past experience, and continue to believe,
based on those forecasts and an assessment of the Group's committed
banking facilities and available headroom, that it is appropriate
to prepare the financial statements of the Group on the going
concern basis.
In arriving at our conclusion that the Group has adequate
financial resources we were mindful that at the date of this report
the Group has unrestricted cash balances of GBP49.5 million,
restricted cash balances available for investments of GBP26.6
million and undrawn banking facilities of GBP158.4 million.
Forecasts indicate continuing full compliance with associated
banking covenants. Further details can be found on page 21.
Outlook
Despite uncertainty in some of the markets in which we operate
the Company remains confident in its ability and that of its
Investment Adviser to continue to identify and execute new
investments in core markets to strengthen the portfolio further.
This includes both infrastructure assets within the primary PPP/PFI
space and regulated infrastructure assets.
Where new investment opportunities do arise the Company will
continue to be selective in those acquisitions which it brings into
the portfolio to ensure that they bring long-term value to
shareholders.
Finally, and notwithstanding the comments above and the
opportunities listed in more detail in the Financial and Operating
Review, it should be noted that the Company's projected performance
is not dependent upon making future investment commitments in order
to deliver its projected returns. These can be delivered in the
Company's view from its existing assets. Further investment
opportunities will, first and foremost, be judged based on whether
they add value and quality to the Company's existing portfolio.
Rupert Dorey
31 August 2016
Chairman
Financial and Operating Review
Key Performance Indicators
The Key Objectives of the Company are set out below and ten
priorities have been identified to assist in meeting these. In
order to assess annual performance in meeting these objectives the
Company reviews semi-annually its performance against the following
Key Performance Indicators ('KPIs'). The KPIs and the relative
performance for the six months to 30 June 2016 are summarised below
and further details of each of these elements are provided in the
sections that follow:
Key Objectives
Investor Returns
Key Key Performance Six months to 30 June
Objectives Indicator 2016 Performance
------------- ========================================================== ===========================================================
Deliver
sustainable
long-term
returns * Maintain and enhance distributions to shareholders * Achieved targeted fully covered cash dividend of
to 3.325 pence/share, a 3.1% increase on HY 2015
shareholders dividend
Focus on
providing
shareholders
with
predictable,
and where
possible
growing
dividends
Deliver
capital * Total shareholder return * Achieved. The total shareholder return since IPO is
value 139.2%, or 9.5% on an annualised basis
enhancement
where
possible * NAV and NAV pence/share
* NAV of GBP1,371.4 million and NAV per share of 138.2
pence an increase of 6.3% and 6.1%
Strategic Priorities
1. Active Asset Management
Strategic Key Performance Six months to 30 June
Priorities Indicator 2016 Performance
------------- ------------------------------------------------------------- -------------------------------------------------------------
1 Focus on
delivery
of
anticipated * Availability for all controlled investments at 98% or * Achieved
returns from above
existing
investments
* Met HY 2016 net revenue generation and dividend goals
Actively * Returns from investments in line with expectations
manage
investments
to ensure
that
they meet
financial
and other
targets
------------- ------------------------------------------------------------- -------------------------------------------------------------
2 Maintain * Achieved
high * Performance deductions below 3% for all projects
levels of
public
sector
satisfaction
and asset
performance
------------- ------------------------------------------------------------- -------------------------------------------------------------
3 Deliver
additional * Number of change requests from existing contracts * Around 340 variation requests processed representing
value from c. GBP4.3 million of the additional works at the
existing project level
assets
through * Management of investments in the course of
management construction projects in line with overall delivery
of timetable * Construction works on projects in line with project
construction timetables
risk and
delivery
of
operational
improvements
to meet
client
requirements
------------- ------------------------------------------------------------- -------------------------------------------------------------
2. Value-focused Portfolio Development
Strategic Key Performance Six months to June 2016
Priorities Indicator Performance
--- ----------------- ------------------------------------------------------------ ------------------------------------------------------------
4 Through
relationships * Value enhancing follow-on investments * Increased stake in Wolverhampton Phase Two Building
with Schools for the Future project up to 82%
co-shareholders
and pre-emptive
rights, where * Follow-on investment in Gold Coast Light Rail project
applicable,
increase
individual
investment
holdings to
100% where
beneficial
--- ----------------- ------------------------------------------------------------ ------------------------------------------------------------
5 Make additional
acquisitions * Value of additional investments acquired off-market * All investments in the period were acquired outside
where they secondary market auction processes
can be acquired
on or off-market
at prospective
returns that
are beneficial
in risk/return
terms
--- ----------------- ------------------------------------------------------------ ------------------------------------------------------------
6 Enhance
prospects * Number of investments in construction * 4 projects currently in construction phase
for capital representing 9.8% of NAV
growth by
investing
in construction
phase assets
where available
--- ----------------- ------------------------------------------------------------ ------------------------------------------------------------
7 Identify
complementary * Value of investments in complementary investment * Continued investment into regulated water investment,
investment sectors Tideway
sectors within
the Company's
investment
policy offering
better returns
with a similar
risk profile
--- ----------------- ------------------------------------------------------------ ------------------------------------------------------------
8 Take advantage
of * Number of new opportunities in international markets * Committed c.GBP3.8 million investment into extension
infrastructure of the Gold Coast Light Rail project in Australia
opportunities
internationally
where
investments
have an
appropriate
risk profile
and contractual
structures
are reliably
enforceable
to enhance
diversification
--- ----------------- ------------------------------------------------------------ ------------------------------------------------------------
9 Undertake
continuing * Improvement of risk/return, inflation linkage, return * Investments, notably Tideway, significantly enhanced
review of , the average duration of the portfolio. Once fully
portfolio diversification characteristics invested in 2018 the weighted average portfolio
composition duration will be c.40 years.
to ensure
suitable
blend of
risk/return,
inflation
linkage,
yield versus
capital
characteristics,
level of
diversification
and
opportunistic
enhancements
--- ----------------- ------------------------------------------------------------ ------------------------------------------------------------
3. Efficient Financial Management
Strategic Key Performance Six months to 30 June
Priorities Indicator 2016 Performance
--- ----------------- ------------------------------------------------------------ ------------------------------------------------------------
10 Provide
efficient * Dividends paid to investors covered by operating cash * Dividends paid to investors 1.3 times covered by net
management flow operating cash flow(1)
of cash holdings
and debt
facilities
available for * New investments made from available cash (after
investment payment of dividend) in priority to use of corporate * All investments in the period funded through excess
and appropriate debt cash(2) before utilising the corporate debt facility
hedging policies
* Competitive cash deposit rates * Benchmarked market cash rates and re-allocated based
on risk/return profile where possible
* Use of appropriate hedging strategies * Foreign exchange forward contracts in place at the
balance sheet date to mitigate short-term foreign
exchange cash flow volatility
--- ----------------- ------------------------------------------------------------ ------------------------------------------------------------
(1) Cash dividends to shareholders are paid from net operating
cash flow (including financing costs) before non-recurring
operating costs.
(2) Residual cash after payment of dividend and corporate costs
over the next twelve months.
Performance against key objectives during the year - Investor
Returns
Profits and Distributions
Profit before tax for the six months to 30 June 2016 was
GBP109.6 million (30 June 2015: GBP38.4 million) driven largely by
the net change in fair value of investments, with earnings per
share of 11.14 pence (30 June 2015: 4.71 pence).
Income from portfolio investments (investment income) including
fair value movements, dividends and interest in the period was
impacted accordingly, rising to GBP124.5 million (30 June 2015:
GBP47.0 million). These returns were partially offset by operating
expenses (including finance costs) of GBP10.7 million (30 June
2015: GBP9.5 million) and adverse movements on foreign currency
contracts of GBP5.1m (30 June 2015: gain of GBP0.1m)
These results allowed the Company to deliver a dividend of 3.325
pence per share for the six months to 30 June 2016 (30 June 2015:
3.225 pence per share)
Total Shareholder Return
The Company's Total Shareholder Return (share price growth plus
reinvested distributions) for investors since the IPO of the
Company in November 2006 to 30 June 2016 has been 139.2%, compared
to a total return on the FTSE All-Share index over the same period
of 55.6% or 9.5% and 4.7% (respectively) on an annualised basis(1)
. The Company has exhibited relatively low levels of volatility
compared to the market, as evidenced by the graph below which shows
the Company's share price since IPO against the price performance
of the major FTSE indices and the Company's NAV.
INPP Share Price Performance
[Chart can be found in PDF version of this document on the
Company's website.]
Net Asset Valuation
The Company reported a 6.3% increase in NAV to GBP1,371.4
million at 30 June 2016 up from GBP1,290.2 million at 31 December
2015. This represented an increase of 6.1% of NAV per share to
138.2 pence per share from 130.2 pence per share at 31 December
2015.
The build-up of NAV is derived from a discounted cash flow
calculation to determine the fair value of investments plus the
value of cash and other net assets held within the Company's
consolidated group.
The key drivers of the change to the NAV between 31 December
2015 and 30 June 2016 are highlighted in the graph and described in
more detail below.
(1) Bloomberg - share price appreciation plus income.
Net Asset Value Movement (GBPm)
[Chart can be found in PDF version of this document on the
Company's website.]
Over the six months to 30 June 2016, government bond yields
decreased in all countries the Company holds investments in,
resulting in a positive impact on the NAV. This was partly offset
by an increase in project premiums to ensure the project valuations
continue to reflect current market pricing.
Sterling weakened considerably against the Australian, Canadian
and United States' Dollars and the Euro over the half year to 30
June 2016, particularly after the announcement of the 'Brexit'
decision, and this had a positive impact on the NAV. The most
significant foreign exchange impact was seen in the valuation of
the Company's Euro denominated investments.
Cash distributions were GBP29.2 million during the period and
represent the cash elements of the dividend paid to shareholders in
respect of the second half of the 2015 financial year.
The NAV Return of GBP37.8 million captures the following:
- Unwinding of the discount factor - the movement of the
valuation date and the receipt of forecast distributions;
- Updated project forecasts - refinement of project model and
macroeconomic assumptions to reflect current expectations of future
cash flows and ensure that cash can be extracted from the
underlying investments as early as reasonably possible; and
- Movements in the Company's working capital position.
Investment Valuation
Forecast future cash flows
The Company's investments are expected to exhibit (and
historically have exhibited) predictable cash flows as the Company
has a large degree of visibility over expected income from its
current investments. The chart below sets out the Company's
expectation for the evolution of investment receipts from its
current portfolio (over the remaining life of current
investments).
The majority of the receipts over the life of the concessions
are investment income in the form of dividends or interest and
principal payments from senior and subordinated debt
investments.
The Company generally invests in infrastructure entities with
finite lives (determined by concession or licence terms). As the
remaining life of each of the Company's investments reduces, the
Company's receipts in respect of that investment will represent
return of capital as well as income. The line in the chart overleaf
illustrates how, in the event that the Company never acquires any
additional assets, nor raises any additional capital and other
things being equal, the value of the Company's portfolio would
reduce to zero over time(1) . Equally however, any future
acquisitions (or disposals) or changes to the projected cash flows
of any investment (or the assumptions upon which they are based)
will change this projection from time to time (although it can be
expected to retain the same general amortising profile).
(1) The chart has been updated from previously published
versions and now presents Investments at Fair Value i.e. the
underlying value of the assets rather than NAV for fairer
presentation.
INPP Forecast Cash Flow Profile and Portfolio Valuation
[Chart can be found in PDF version of this document on the
Company's website.]
Portfolio Performance and Return
The Company's investment portfolio is reviewed semi-annually by
the Investment Adviser, and presented for approval by the
Directors. The Directors' valuation of the portfolio, Investments
at Fair Value, as at 30 June 2016 was GBP1,352.4 million, an
increase of 12.6% since 31 December 2015. Investments at Fair Value
Movements (GBPm)
Investments at Fair Value Movements
[Chart can be found in PDF version of this document on the
Company's website.]
The Portfolio Return of GBP49.2 million captures the
following:
- Unwinding of the discount factor - the movement of the
valuation date and the receipt of forecast distributions; and
- Updated project forecasts - refinement of project model and
macroeconomic assumptions to reflect current expectations of future
cash flows and ensure that cash can be extracted from the
underlying investments as early as reasonably possible.
In addition there was:
- A net reduction in discount rates across all jurisdictions in
which the Company holds investments, leading to a GBP34.3 million
increase in portfolio value;
- A reduction of GBP3.1 million following a reduction in the
long-term Australian deposit rate assumptions and a one year delay
in the step-up to the long-term deposit rate assumptions for all
jurisdictions; and
- An increase of GBP43.1 million due to a significant weakening
of Sterling against all four currencies the Company has exposure
to.
The remaining movements relate to investments and the funding of
affiliated entities totalling GBP74.0 million1 and project
distributions of GBP46.2 million.
(1) Represents GBP56.2m of cash investments and GBP17.8m of
funds advanced to affiliated entities to facilitate the Tideway
investment immediately following the balance sheet date.
Macroeconomic assumptions
The Company reviews the macroeconomic assumptions underlying its
forecasts on a regular basis and, following a thorough market
assessment during the period, certain adjustments have been made to
some of the assumptions used to derive the Company's portfolio
valuation.
The key assumptions used as the basis for deriving the Company's
portfolio valuation are summarised in the following table with
further details provided in note 12. Across the portfolio the
weighted average long-term inflation assumption as at 31 December
2015 was 2.57% (2014: 2.55%) and the weighted average deposit rate
assumption was 3.11% (2014: 3.47%). The Net Asset Valuation Section
above provides further details on the impact of these assumptions
on the valuation during the period.
30 June 2016 31 December 30 June 2015
Variable Basis 2015
-------------------- --------------- ------------------------- ------------------------- -------------------------
Inflation
UK 2.75% 2.75% 2.75%
Australia 2.50% 2.50% 2.50%
1.00% in 1.00% in 1.00% in 2016;
2016 then 2016 then then 2.00%
Europe 2.00% 2.00%
Canada 2.00% 2.00% 2.00%
US(4) N/A N/A N/A
================== ================= ------------------------- ------------------------- -------------------------
Long -term
Deposit Rates(1)
UK 3.00% 3.00% 3.00%
Australia 3.00% 4.50% 4.50%
Europe 3.00% 3.00% 3.00%
Canada 3.00% 3.00% 3.00%
US(4) N/A N/A N/A
-------------------- --------------- ------------------------- ------------------------- -------------------------
Foreign Exchange
GBP/AUD 1.91 2.13 2.15
GBP/CAD 1.76 2.02 1.33
GBP/EUR 1.14 1.28 1.95
GBP/USD(4) 1.36 1.49 N/A
-------------------- --------------- ------------------------- ------------------------- -------------------------
Tax Rate(2)
UK 18.00%-20.00%(3) 18.00%-20.00%(3) 20.00%
Australia 30.00% 30.00% 30.00%
Europe Various (12.50%-33.99%) Various (12.50%-33.99%) Various (12.50%-33.99%)
Canada Various (26.50%-27.00%) Various (26.50%-27.00%) Various (25.00%-26.50%)
US(4) N/A N/A N/A
---------------------- ------------- ------------------------- ------------------------- -------------------------
(1) The 30 June 2016 portfolio valuation assumes actual current
deposit rates are maintained until 31 December 2019 before
adjusting to the long-term rates noted in the table above.
(2) Corporation tax rates are only updated once they have been
substantively enacted.
(3) 20.00% until 31 March 2017, 19.00% from 1 April 2017 until
31 March 2020 and 18.00% from 1 April 2020.
(4) The Company made its first US denominated investment during
2015. It had no USD exposure prior to this time. The investment is
in fully yielding subordinated debt instruments and therefore not
directly impacted by inflation, deposit and tax rates.
Discount rates
The discount rate used for valuing each investment is based on
the appropriate long-term government bond yield and a risk premium.
The risk premium takes into account risks and opportunities
associated with each project (including location, phase of
operation/construction etc.).
The majority of the Company's portfolio (85.9%) is comprised of
investments where the Company only holds the Risk Capital in the
underlying projects. The remainder of the portfolio (14.1%) is
comprised of investments where the Company holds both the Risk
Capital and the senior debt. In order 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 across all investments including senior debt
interests.
The current discount rates used by the Company are provided in
the table. These rates need to be considered against the
assumptions and projections upon which the Company's anticipated
cash flows are based.
Care needs to be exercised if the Company's average discount
rates are to be compared with those of similar companies. In the
Company's view comparisons of average discount rates between
competitor investment portfolios or funds is only meaningful if
there is a comparable level of confidence in the quality of
forecast cash flows (and assumptions) the rates are applied to; the
risk and return characteristics of different investment portfolios
are understood; and the depth and quality of asset management
employed to manage risk and deliver expected returns are identical
across the compared portfolios. As such assumptions are unlikely to
be homogenous, and a focus on average discount rates without an
assessment of these and other factors could be misleading.
Movement
31 December
2015 -
30 June 31 December 30 June 30 June
Metric 2016 2015 2015 2016
----------------------------- -------- ------------ -------- -------------
Weighted Average Government
Bond Rate (Nominal)
- portfolio basis
- Risk Capital and
senior debt 2.00% 2.31% 2.12% (0.31%)
----------------------------- -------- ------------ -------- -------------
Weighted Average Project
Premium over Government
Bond Rate - Risk Capital
and senior debt (Nominal) 5.37% 5.22% 5.17% (0.15%)
----------------------------- -------- ------------ -------- -------------
Weighted Average Discount
rate
- Portfolio basis
- Risk Capital and
senior debt 7.37% 7.53% 7.29% (0.16%)
----------------------------- -------- ------------ -------- -------------
Weighted Average Discount
rate
- Risk Capital only(1) 7.88% 8.09% 7.83% (0.21%)
----------------------------- -------- ------------ -------- -------------
NAV per share 138.2p 130.2p 128.6p 8.0p
----------------------------- -------- ------------ -------- -------------
(1) Risk Capital includes both project level equity and
subordinated debt.
Government bond rates
In the table above the Company has provided an analysis of the
weighted average government bond rate used in calculating the
discount rate. It should be noted that the nominal (i.e.
non-inflation linked) bond rate has been used in this calculation.
The Company considers, however, that investors may also find a
comparison with inflation adjusted government bond rates
beneficial. This is the case due to the significant level of
inflation linkage inherent in the Company's anticipated cash
flows.
Movement
30 June 31 December (December 2015
2016 2015 - June 2016)
------------------ ------------------ ------------------
Country Nominal Real Nominal Real Nominal Real
------------------- -------- -------- -------- -------- -------- --------
UK 2.05% (0.89%) 2.33% (0.76%) (0.28%) (0.13%)
------------------- -------- -------- -------- -------- -------- --------
Australia 2.96% 0.92% 3.29% 1.00% (0.33%) (0.08%)
------------------- -------- -------- -------- -------- -------- --------
Europe(1) 1.35% (0.49%) 1.73% (0.14%) (0.38%) (0.35%)
------------------- -------- -------- -------- -------- -------- --------
Canada 1.96% 0.50% 2.20% 0.55% (0.24%) (0.05%)
------------------- -------- -------- -------- -------- -------- --------
US 2.52% 0.89% 2.99% 1.18% (0.47%) (0.29%)
------------------- -------- -------- -------- -------- -------- --------
Portfolio
weighted average 2.00% (0.61%) 2.31% (0.44%) (0.31%) (0.17%)
------------------- -------- -------- -------- -------- -------- --------
Real (i.e. inflation adjusted) bond rates are included in the
table below. Using these real rates on a weighted average basis
leads to a 'real' portfolio rate of (0.61%) with the difference
between the 'real' and 'nominal' rates reflecting in theory the
implied rates of future expected inflation. In some countries this
is higher than those currently being assumed to calculate the
Company's NAV. This information is provided to enable investors to
make approximate comparisons of the projected return of the Company
with that available from government index linked bonds. It should
be noted that any such comparison can only be estimated due in part
to the fact that the Company's cash flows are not fully linked to
inflation and the Company's cash flows already assume a core level
of inflation as set out in the section headed Macroeconomic
assumptions on page 13.
(1) Includes Belgium, Germany, Ireland, and Italy. Note
estimates only for Belgium and Ireland as no index linked bonds
available.
Portfolio level assumptions underlying NAV calculation
The Company is aware that there are subtle differences in
approach to the valuation of portfolios of investments among
different infrastructure funds. To clarify the Company's position
in this regard its key cash flow inputs and broad valuation
principles include that:
- Key macroeconomic variables (outlined in the section above)
continue to be applicable
- The contracts under which payments are made to the Company and
its subsidiaries remain on track and are not terminated before
their contractual expiry date
- Where deductions are suffered under such contracts they are
fully passed down to subcontractors
- Where possible lifecycle costs/risks are not borne by the
Company but are passed down to a third party such as a facilities
management contractor
- Cash flows from and to the Company's subsidiaries and the
infrastructure asset owning entities in which it has invested will
be made and are received at the times anticipated
- Where assets are in construction they are either completed on
time or any costs of delay are borne by the contractors not the
Company
- Where the operating costs of the Company or the infrastructure
asset owning entities in which it has invested are fixed by
contract such contracts are performed, and where such costs are not
fixed, that they remain within projected budgets
- Where the Company or the infrastructure asset owning entities
in which it has invested owns the residual property value in an
asset that the projected amount for this value is realised
Impact of Changes in Key Macroeconomic Variables to 30 June 2016
NAV 138.2p per Share
[Chart can be found in PDF version of this document on the
Company's website.]
Discount rates
The Company's approach to determining the discount rate is
described in detail above. Assuming all other things are equal, a
reduction of 1% to the underlying project discount rates would
increase the 30 June 2016 NAV per share by 16.3 pence. Should the
underlying project discount rates increase by 1% the NAV per share
would decrease by 13.8 pence.
Inflation
In an environment where investors are increasingly focused on
achieving long-term real rates of return on their investments,
inflation protection is an important consideration for the Company.
At 31 December 2015, the majority of assets in the portfolio had
some degree of inflation linkage and, in aggregate, the weighted
return of the portfolio would be expected to increase by 1% per
annum in response to a 0.75% per annum inflation increase across
the whole portfolio over the currently assumed rates.
Where actual inflation is higher or lower than the assumed
levels, it can be expected to impact on the Company's actual future
cash flow in a correspondingly positive or negative manner other
things being equal. If the underlying project inflation rates were
to increase by 1% per annum evenly across the portfolio there would
be an 11.4 pence increase to the NAV per share. Conversely, if the
rates were to decrease by 1% per annum there would be a 10.1 pence
decrease to the NAV per share.
Forecasting the impact of possible future inflation/deflation on
projected returns and NAV in isolation cannot be relied on as an
accurate guide to the future performance of the Company as actual
inflation is unlikely to follow any of these scenarios exactly and
in any case, many other factors and variables will combine to
determine what actual future returns are available. The analysis
provided above should therefore be treated as being indicative only
and not as providing any form of profit or dividend forecast.
Foreign exchange
The Company has a geographically diverse portfolio and therefore
revenues are subject to foreign exchange rate risk. Should the
assumed exchange rates increase by 10% per annum this could be
anticipated to lead to a 4.0 pence increase in the NAV per share
while a 10% per annum reduction in the exchange rates would result
in a 4.0 pence decrease in NAV per share. Short-term fluctuation in
foreign exchange rates are managed through currency forward
contracts.
Deposit rates
The long-term weighted average deposit rate assumption across
the portfolio is 3.00% 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 the portfolio. During the period the Company reduced the
deposit rates it was assuming for its Australian assets from 4.50%
to 3.00%. Taking this slight change into account and all else being
equal, a 1% per annum increase in the underlying deposit rates
could be anticipated to lead to a 1.5 pence increase in the NAV per
share and a 1% per annum decrease in deposit rate to a 1.4 pence
reduction in the NAV per share.
Tax rates
The Company has a geographically diverse portfolio and therefore
post-tax investment cash inflows are impacted by tax rates across
all relevant jurisdictions. Should the assumed tax rates increase
by 1% per annum this could be anticipated to lead to a 0.8 pence
decrease in the NAV per share while a 1% per annum reduction in the
tax rates could be anticipated to lead to a 0.8 pence increase in
NAV per share.
Under UK group tax loss relief rules, losses within the UK group
companies can be, subject to UK tax law, offset against taxable
profits in other UK group companies (including controlled project
entities). This group tax loss relief can reduce the overall tax
charge across the portfolio and potentially reduce taxable profits
substantially below the levels currently modelled by the Company.
The Company has taken a conservative approach to the valuation of
future tax losses and, to date, has not incorporated these into the
NAV.
Project lifecycle spend
Over a project's lifecycle there is a process of renewal
required to keep the physical asset fit for use and at the standard
required of it under the agreement with the occupying public sector
body. The proportion of total cost that is lifecycle spend will
depend on the nature of the asset. In order to enhance the
certainty around cash flows, around 93.53% of the Investments at
Fair Value comprise investments that have been 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 any changes to the Company's lifecycle cost profile
is relatively small. A 10% increase in lifecycle costs would lead
to a 0.6 pence reduction in NAV per share. A 10% decrease in
lifecycle costs would lead to a 0.6 pence increase in NAV per
share.
Under UK group tax loss relief rules, losses within the UK group
companies can be, subject to UK tax law, offset against taxable
profits in other UK group companies (including controlled project
entities). This group tax loss relief can reduce the overall tax
charge across the portfolio and potentially reduce taxable profits
substantially below the levels currently modelled by the Company.
The Company has taken a conservative approach to the valuation of
future tax losses and, to date, has not incorporated these into the
NAV.
Cash flow movements in the period
Six months Six months Year to
to to 31 December
30 June 30 June 2015
Summary of consolidated 2016 2015 GBP million
cash flow GBP million GBP million
---------------------------------- ------------- ------------- -------------
Opening cash balance 72.4 29.4 29.4
Cash from investments 46.2 37.8 76.0
Operating costs (recurring) (7.7) (6.8) (13.7)
Net financing costs (1.2) (1.1) (3.5)
---------------------------------- ------------- ------------- -------------
Net cash before non-recurring
operating costs 37.3 29.9 58.8
---------------------------------- ------------- ------------- -------------
Non-recurring operating
costs (1.0) (1.5) (2.8)
---------------------------------- ------------- ------------- -------------
Net cash flow from operations(1) 36.3 28.4 56.0
---------------------------------- ------------- ------------- -------------
Cost of new investments (56.2) (42.7) (143.1)
Net drawdown/(repayment)of
corporate debt facility 23.7 25.0 (16.3)
Proceeds of capital raisings
(net of costs) - - 195.0
Distributions paid (29.2) (23.8) (48.6)
Funds advanced to affiliated
entities (17.8) - -
---------------------------------- ------------- ------------- -------------
Net cash at period end 29.2 16.3 72.4
---------------------------------- ------------- ------------- -------------
(1) Net cashflows from operations are detailed further in the
financial statements on page 30.
The Company's net cash reduced by GBP43.2 million from 31
December 2015 to GBP29.2 million reflecting new investments as well
as dividends paid, offset by positive operating cash inflows and
drawdowns on the corporate debt facility.
Cash inflows from the Company's portfolio of investments
increased by GBP8.4 million to in comparison with the corresponding
period in 2015. The increase can be attributed to both the ongoing
maturity of the Company's assets and the positive impact of recent
investments.
Recurring operating costs increased from GBP6.8 million to
GBP7.7 million at 30 June 2016 as a result of higher management
fees (in line with the increase to the Company's NAV) and other
cost movements, as outlined in the accompanying table. Net
financing costs are in line with the comparable period in 2015
since the majority of cash outflows associated with the higher
drawn balance at 30 June 2015 were incurred in the second half of
the year. Non-recurring operating costs in the period to 30 June
2016 relate principally to one-off transaction costs incurred on
new investments.
New investments in the period are detailed in note 12 of the
financial statements and were funded from a mix of the Company's
existing cash resources, its corporate debt facilities and the
proceeds from share issuance. To ensure the Company satisfied its
commitment to invest GBP17.8 million into the Tideway project on 1
July 2016, cash was drawn on the corporate debt facility and
transferred prior to the balance sheet date. This transfer is shown
as "funds advanced to affiliated entities".
Dividends paid in the period of GBP29.2 million (30 June 2015:
GBP23.8 million) were in respect of the six-month period ended 31
December 2015.
Corporate expenses and ongoing charges
A breakdown of corporate operating costs paid in the six months
to 30 June is provided below
Six months
to Year to
Six months to 30 June 31 December
30 June 2016 2015 2015
Corporate Expenses GBP million GBP million GBP million
-------------------- ---------------- ------------- -------------
Management fees (7.0) (6.2) (12.5)
-------------------- ---------------- ------------- -------------
Audit fees (0.2) (0.1) (0.2)
-------------------- ---------------- ------------- -------------
Directors' fees (0.1) (0.1) (0.2)
-------------------- ---------------- ------------- -------------
Other running
costs (0.4) (0.4) (0.8)
-------------------- ---------------- ------------- -------------
Operating costs
(ongoing) (7.7) (6.8) (13.7)
-------------------- ---------------- ------------- -------------
Six months Six months
to Year to to
30 June 31 December 30 June
2016 2015 2015
Ongoing Charges GBP million GBP million GBP million
------------------------------- ------------------------------ ------------- -------------
Annualised Ongoing Charges(1) (15.4) (13.7) (13.7)
------------------------------- ------------------------------ ------------- -------------
Average NAV(2) 1,330.8 1,143.3 1,069.9
------------------------------- ------------------------------ ------------- -------------
Ongoing Charges (1.16%) (1.20%) (1.28%)
------------------------------- ------------------------------ ------------- -------------
The increase in management fees paid to the Investment Adviser
is in line with the growth in managed investments and the growth of
the Company's portfolio.
(1) The Ongoing Charges ratio was prepared in accordance with
the Association of Investment Companies' ('AIC') recommended
methodology, noting this excludes non-recurring costs
(2) Average of published NAVs for the relevant period.
The Board seeks to mitigate and manage risks relating to the
Company through continual review, policy setting and enforcement of
contractual obligations. It also regularly monitors the investment
environment and the management of the Group's portfolio.
The Company's approach to risk is set out in the Risk Report of
the 31 December 2015 Annual Report and Financial Statements (pages
36-44), the Risk Report includes an overview of the principle risks
and their mitigation. Risk Factors are also detailed further in the
Company's last Prospectus (the Placing, Open Offer and Offer for
Subscription and Placing Programme Prospectus published on 19
October 2015). These risks and uncertainties are expected to remain
relevant to the Company for the next six months of its financial
year and include (but are not limited to):
Inflation risk - Revenues and expenditures of project entities
with respect to infrastructure assets are generally partially or
wholly subject to indexation and an assumption is made that
inflation will increase at a long-term rate. The Group's ability to
meet targets may be adversely or positively impacted by
inflation;
Foreign exchange risk - The Group has exposures to foreign
currencies and therefore exposure to exchange rate fluctuations
Credit and counterparty risks - The risk that a counterparty
will default on its contractual obligations resulting in financial
loss to the Group;
Liquidity risk - The ability to successfully access suitable
financial resources in the debt, equity and related financial
markets;
Contract risk - The ability of counterparties to operate
contracts to the detriment of the Company and the risk of default
under contract whether by the Company, its subsidiaries or it or
their counterparties; and
Other external risks - Includes the political and regulatory
risks (including tax and accounting policies and practices)
associated with the Company and its projects and changes in the
competitive environment which may have an adverse impact on the
Group. In particular, actions that may be taken in light of the
OECD's Action plan on Base Erosion and Profit Shifting ('BEPS') may
lead to fundamental changes to international tax structures and may
have knock on consequences for domestic standards as well.
The Board considers and reviews the risks that the Company is
exposed to on a regular basis.
Performance against Strategic Priorities - 1. Active Asset
Management
Investment cash flow received from the Company's portfolio of
122 investments has continued to perform in line with the Company's
expectations. Ensuring that the Company's assets are available for
use and are performing in accordance with contractual expectations
is a critical task for the Company and its service providers.
The Investment Adviser, on behalf of the Company, closely
monitors the relationship between service providers and public
sector clients. It is actively involved in the ongoing management
of assets to ensure that performance standards are being met. In
addition to these day-to-day activities, the Investment Adviser
works with public sector clients on assignments as they arise.
These capabilities were tested in March when the Company's
investment in the Diabolo Rail project was closed due to the
horrifying terrorist activities at the Belgium National Airport,
Zaventem, to which the project is linked. While our facilities were
largely unaffected physically, as would be expected in such
circumstances, rail services to the airport were suspended while
security personnel and the government focussed on the atrocity.
Following this the Investment Manager has worked with the Airport
and other local authorities to reinstate services to the airport as
quickly as possible. Although it is a short time since the
incident, passengers have continued to use the service and the
Company does not expect there to be any significant impact on the
financial position of the project.
During the first half of 2016, our public sector clients
commissioned c 340 variations resulting in over GBP4.3 million of
additional works at the project level. All variations were overseen
by the Investment Adviser as part of the day-to-day asset
management activities it undertakes in conjunction with the project
facilities manager and the public sector client. Variations ranged
in size from a few hundred pounds to over GBP1 million and
demonstrate the value and flexibility of PFI/PPP contracts to
respond to the changing requirements of public sector clients.
Construction work continues on the New Schools PPP Project in
Australia (Victorian Schools 2). The Project comprises 15 new build
schools across twelve different green-field sites in outer
metropolitan Melbourne. Construction on the project is split into
two tranches with the first eight schools due to be completed by 1
January 2017 and the remainder by 1 January 2018. Overall progress
is on schedule, with the design submissions for the Tranche 1
schools nearly complete, construction well advanced and design
submissions for Tranche 2 underway.
Enabling works on the Thames Tideway Tunnel ('Tideway')
continued during the period, preparing the 24 sites across London
for the driving of the tunnel itself, with the most prominent piece
of work taking place in the foreshore by Blackfriars Bridge.
Pleasingly during the period main works construction has started
slightly earlier than planned.
The Gold Coast Stage 2 project which will link the existing
light rail system with the local heavy rail network and provide
users with direct access to Brisbane has commenced. Design work is
underway along with early enabling works.
Projects under construction as at 30 June 2016, all of which are
currently on schedule for operational commencement are set out in
the table below.
Construction Defects % of Fair
Completion Completion Value
Asset Location Date Year Status of Investment
---------------------- ----------- -------------- ------------- ------------- ---------------
Priority School
Building Aggregator
Programme - five
batches UK 2018 2019 On Schedule 3.32%
---------------------- ----------- -------------- ------------- ------------- ---------------
Thames Tideway
Tunnel(1) UK 2024 2027 On Schedule 6.40%
---------------------- ----------- -------------- ------------- ------------- ---------------
Victoria Schools
PPP Project(1) Australia 2018 2019 On Schedule 0.04%
---------------------- ----------- -------------- ------------- ------------- ---------------
Gold Coast Light
Rail Stage Two(1) Australia 2018 2019 On Schedule 0.01%
---------------------- ----------- -------------- ------------- ------------- ---------------
(1) Project is currently funded via a letter of credit.
Investment will be made at construction completion or, in the case
of Tideway, over the course of construction.
Performance against Strategic Priorities - 2. Value-focused
Portfolio Development
During the six months to 30 June 2016 the Company made further
investment or commitments of GBP60.0 million across five projects.
The projects acquired were either sourced by the Investment Adviser
from project inception (i.e. in response to an initial government
procurement process) or were acquired by way of further investment
into the Company's existing assets. These methods of procurement
remain the Company's preferred route to market as they necessarily
avoid investment in the open secondary market which remains very
competitive. Details of acquisitions are provided below.
Acquisition/ Operational Investment/ Acquisition
Asset Location Divestment Status Commitment date
------------------ --------------- ------------- ------------------- ------------ ------------
Westermost Yorkshire, Acquisition Operational GBP26.8 4 February
Rough OFTO UK million 2016
------------------ --------------- ------------- ------------------- ------------ ------------
Thames Tideway London, Acquisition Under construction GBP17.1 1 April
Tunnel UK million 2016
------------------ --------------- ------------- ------------------- ------------ ------------
Priority Midlands, Acquisition Under construction GBP5.1 26 April
School Building UK million 2016
Aggregator
Programme
- Batch
5
------------------ --------------- ------------- ------------------- ------------ ------------
Wolverhampton Wolverhampton, Acquisition Operational GBP7.2 29 June
BSF UK million 2016
------------------ --------------- ------------- ------------------- ------------ ------------
Gold Coast Gold Coast, Acquisition Under Construction GBP3.8 28 April
Light Rail Australia million 2016
------------------ --------------- ------------- ------------------- ------------ ------------
Post 30
June 2016
------------------ --------------- ------------- ------------------- ------------ ------------
Thames Tideway London, Acquisition Under construction GBP17.8 1 July
Tunnel UK million 2016
------------------ --------------- ------------- ------------------- ------------ ------------
Halton Place Cheshire, Acquisition Operational GBP1.1 27 July
Building UK million 2016
Schools
for the
Future
------------------ --------------- ------------- ------------------- ------------ ------------
Building Various Acquisition Operational GBP72.3 22 August
Schools million 2016
for the
Future Portfolio
------------------ --------------- ------------- ------------------- ------------ ------------
Westermost Rough offshore transmission project ('OFTO')
In February 2016, Transmission Capital Partners, the consortium
comprising the Company, Amber Infrastructure and Transmission
Investment reached financial close for the long-term license and
operation of its sixth UK offshore transmission project, Westermost
Rough OFTO.
The Company made a GBP26.8 million investment for 100% of the
equity and subordinated debt of the OFTO. The OFTO will connect a
windfarm containing 35 turbines generating 6MW located 8km off the
coast of Yorkshire to the onshore grid network, providing enough
electricity to power around 150,000 UK homes.
Thames Tideway Tunnel
In the six months to 30 June 2016 the Company invested GBP17.1
million into the Tideway project making a further GBP17.8 million
contribution following the period end. As at the date of this
report the Company had an additional c.GBP116.1 million to be
invested by early 2018 (currently supported by a letter of credit)
of which c.GBP35.2 million is expected to be committed during the
remainder of 2016.
As discussed above, during the period Tideway made good progress
towards commencement of construction and Tideway recently announced
a 35-year GBP700 million loan with the European Investment Bank in
addition to the GBP1 billion in funding already in place.
Priority Schools Building Programme 'Aggregator'
During the period the Company invested GBP5.1 million into the
fifth and final batch of schools being delivered through the
Priority Schools Building Programme ('PSBP').
These projects use an innovative financing model based upon the
establishment of a funding vehicle known as the 'Aggregator'. One
of the key features of the Aggregator is the ability to warehouse
loans and thereby aggregate total financing requirements across all
five schools batches. The Aggregator is financed by a Consortium
including the Company along with Aviva Investors and the European
Investment Bank providing senior debt.
Additional investment in Wolverhampton Building Schools for the
Future ('BSF') project
During the period, the Company acquired an additional 72%
investment in the Wolverhampton BSF concession, growing the
Company's existing 10% investment in the project to 82%.
The Company invested GBP7.2 million in the project with two
secondary schools, Heath Park Academy in the Fallings Park area and
St. Matthias School in the Wardle area of Wolverhampton. Both
schools are a mixture of new build and refurbished pre-existing
buildings. Upon completion, the schools will provide greatly
enhanced education facilities for over 2,000 secondary school
students. The project was acquired from Carillion Private
Finance.
Additional investment in Gold Coast Light Rail project
The Company committed to make a further approximately AUD$7
million (c.GBP3.8 million) investment into a 7.3km extension to the
Gold Coast Light Rail project in Queensland, Australia. The
commitment is supported by a letter of credit provided by the
Company.
The Company secured a 26.7% equity stake in the extension
alongside Plenary Group, Marubeni Group, Palisade, Keolis and Aveng
Group. Construction is expected to reach completion at the end of
2017, with operations commencing in early 2018 in time for the
opening of the Gold Coast Commonwealth Games in April.
Halton Place Building Schools for the Future
In July, following the half year end, the Company purchased a
22.5% share of the subordinated debt and equity cashflows of HTP
Grange Limited, a Building Schools for the Future (BSF) project
located in Halton, Cheshire for GBP1.1 million.
Building Schools for the Future portfolio
Following the half year end, in July the Company committed to
invest up to GBP72.3 million to acquire investment interests in a
total of ten schemes. The investment opportunity was secured
through pre-emption rights that INPP gained as part of its
ownership of Building Schools for the Future Investments LLP
("BSFI"). INPP acquired BSFI from the Department of Education and
Partnerships UK in August 2011.
Owing to its established position in UK education
infrastructure, the Company already holds 10% interests in seven of
the Balfour Beatty's investments in question, and as a result of
the transaction will increase its stake to 90% in each scheme
post-acquisition. The Company will at the same time acquire new
interests in a further three BSF schemes previously under Balfour
Beatty's ownership.
Performance against Strategic Priorities - 3. Efficient
Financial Management
The Company seeks to generate dividends to investors that are
paid from operating cash flow. For the six months ended 30 June
2016 the cash dividend paid to investors was 1.3 times covered by
net operating cash flow and the Company remains confident that it
will be able to grow dividends in the future.
The Company continued to make use of its GBP300 million
corporate debt facility in the period, drawing GBP23.7 million in
cash as short term funding for the investment in BSF Wolverhampton
2 and to finance its commitment to invest GBP17.8 million in the
Tideway project on 1 July 2016.
In July 2016 the Group successfully raised GBP125 million of
additional capital which was used in part to repay the cash drawn
balance outstanding on the corporate debt facility. As at the date
of this report, the corporate debt facility was GBPnil cash drawn,
GBP141.6 million was issued as letters of credit and GBP158.4
million remained undrawn or unutilised and available for investment
in new and existing projects until May 2018. The facility is
forecast to continue in full compliance with the associated banking
covenants. In addition, at the date of this report, the Group had
cash balances of GBP76.1million available for future investment.
The Company also continues to fully cover costs and distributions
from underlying cash flows from investments.
It remains the Company's policy not to have long-term corporate
level debt and it is anticipated that to the extent that the
corporate facility is drawn to fund acquisitions, this would be a
short-term arrangement and equity funding, by means of a capital
raising, would be sought to repay outstanding debt as soon as
practicable. The corporate debt facility is currently subject to
renewal in May 2018.
Outlook
Current Market Environment and Future Opportunities
Overall the Company continues to have a positive market outlook.
Despite the uncertainties surrounding Brexit, Government support
for private sector investment in infrastructure in the UK and other
jurisdictions in which the Company operates continues to feature as
a high public priority. Competition continues to be very high for
freely marketable operational assets which are trading in the
secondary market resulting in continued price inflation for those
investors having to purchase in this way. As we have highlighted to
you before, the Company's focus continues to be either on
investments originated directly from the public sector rather than
via the secondary market; or through the secondary market but
usually only where the Company has an in-built competitive
advantage through holding pre-existing pre-emption rights.
In addition rather than see pricing pressure in the unrestricted
secondary market as a negative we are in fact encouraged as these
transactions provide us with a great deal of comfort around the
value of the Company's existing assets and the market's appetite
for infrastructure more generally including being a firmly
established class of investment asset in its own right.
Currently, the Investment Adviser has identified a significant
investment pipeline for the Company. In addition to these potential
investments the Company and its Investment Adviser have a larger
number of transactions under review, which are at an earlier stage
of development.
Current Pipeline
Overall, the Company remains positive about its prospects, both
in terms of the performance of its existing investments and the
opportunity to add high quality investments to the portfolio during
the remainder of 2016.
In addition to the commitment to Tideway, the Investment Adviser
has a pipeline of other potential investment opportunities that are
at an earlier stage of development, which subject to further review
and will be progressed as investment opportunities for the Company.
Key areas of current activity within the Company and/or its
Investment Adviser (or associates) include:
- Continued activities in the area of UK offshore
transmission
- Enhanced access to US P3 opportunities, particularly through
the relationship with Amber/Hunt
- Other UK and European primary investment opportunities (for
instance in the healthcare and judicial sectors)
- Acquisition of additional investments in projects where the
Company already has an investment. Typically these will arise under
pre-emption and similar rights
- The growing range of opportunities in Northern Europe,
Australia and New Zealand which conform to the existing risk
profile within the Company's portfolio
- Appropriately priced proposals from third parties seeking to
dispose of projects meeting the Company's investment criteria which
have synergies with the Company's existing portfolio
Selected specific current opportunities identified by the
Investment Adviser are outlined in the table below.
Notwithstanding the projects listed above, it should be noted
that the Company's performance is not dependent upon making
additional investments in order to deliver its projected returns.
Further investment opportunities will be judged by their
anticipated contribution to overall portfolio returns.
Other/medium-term opportunities
----------------------------------------------------------------------
Regulated UK c. GBP250 million(3) Perpetual The Company
assets is involved
in a number
of potential
bids for such
investments
---------- --- ---------------------- ----------- ----------------
OFTO's UK c. GBP37.5 million(3) 20 years INPP expects
to continue
to bid these
projects
---------- --- ---------------------- ----------- ----------------
Broadband UK c. GBP50 million 20 years + Opportunities
networks - GBP100 million(3) being reviewed
---------- --- ---------------------- ----------- ----------------
(1) This project has reached financial close and the Company is
committed to invest up to a further c.GBP116.1m. Residual
commitment funded by letter of credit.
(2) Represents the estimated current unaudited capital value of
the project and includes both debt and equity.
(3) Represents current estimated total future investment
commitment by the Company.
Estimated
Investment Expected
Current Opportunity/Project Concession
Projects Location Capital Value Length Project Status
--------------- ---------- --------------------- ------------ ------------------------
Thames Tideway UK c. GBP116.1 120 years The Company is
Tunnel million investment part of the Bazalgette
commitment consortium awarded
remaining(1) licence to own
and finance project.
Investment in
phases until
early 2018
--------------- ---------- --------------------- ------------ ------------------------
HUB framework UK c. GBP127 c. 25 years INPP is preferred
projects million(2) investor under
the
Hub framework
for various Scottish
social infrastructure
projects
--------------- ---------- --------------------- ------------ ------------------------
Police Centre Germany c. GBP6 million(3) 32.5 years Preferred bidder
--------------- ---------- --------------------- ------------ ------------------------
Transport Australia c. GBP40 million(2) c. 28 years Potential refinancing
transaction
--------------- ---------- --------------------- ------------ ------------------------
Military US c. GBP17 million(3) c. 36 years Opportunity being
Housing pursued
--------------- ---------- --------------------- ------------ ------------------------
Education UK c. GBP2 million c. 20 years Further Building
- GBP20 million(3) Schools for Future
opportunities
--------------- ---------- --------------------- ------------ ------------------------
The above represents potential opportunities currently under
review by the Investment Adviser (and its associates) including
current bids, preferred bidder opportunities and the estimated
value of opportunities to acquire additional investments including
under pre-emption/first refusal rights. There is no certainty these
will translate to actual investment opportunities for the Company.
The value referenced in relation to the pre-emption opportunities
represents the estimated potential investment value which reflects
the current estimate of the total likely acquisition value at that
time. In relation to opportunities where the current estimated
gross value of the relevant project is given (which includes an
estimate of both debt and equity), the estimates provided are not
necessarily indicative of the eventual acquisition price for, or
the value of, any interest that may be acquired.
Rupert Dorey John Whittle
31 August 2016 31 AUgust 2016
Chairman Director
Board of Directors
The table below details all Directors of the Company at the date
of this report.
Background and Experience
Rupert John Whittle(1) John Le John Stares(1) Claire Whittet(1) Giles
Dorey(1) Senior Poidevin(1) Chairman, Chairman, Frost
Chairman Independent Risk Sub-Committee Management
Chairman, Director Chairman, Engagement
Investment Chairman, Nomination Committee
Committee Risk and and Remuneration
Audit Committee Committee
Aged 56 Aged 61, Aged 46, Aged 65 Aged 61 Aged 53,
and a John is and a resident and a resident and a resident resident
resident a resident of Guernsey, of Guernsey of Guernsey, in the
of Guernsey, of Guernsey. John has since 2001, Claire has United
Rupert John is over 20 John has nearly 40 Kingdom,
has over a Chartered years of over 40 years' experience Giles
30 years Accountant business years business in the banking is a founder
of experience and holds experience. experience. industry. and Director
in financial the Institute Claire became of Amber
markets, of Directors John is Before a Director and has
including Diploma a Fellow moving of Rothschild worked
17 years in Company of the to Guernsey Bank International in the
at CSFB Direction. Institute John worked Limited infrastructure
where John holds of Chartered for 23 in 2003 investments
he specialised non-executive Accountants years as and was sector
in credit positions in England a management latterly for over
related on a number and Wales consultant Managing 20 years.
products. of other and a former with Accenture Director Giles
boards. partner where he and Co-Head qualified
Rupert's of BDO held a of the bank as a solicitor
expertise John was LLP, where wide variety and a Director and partner
was principally previously as Head of leadership of Rothschild in the
in the Finance of Consumer roles. Bank (CI) law firm
areas Director Markets, Ltd until Wilde
of debt of Close he developed He currently May 2016 Sapte
distribution, Fund Services, an extensive holds when she (now Dentons).
origination a large breadth non-executive became a
and trading, independent of experience positions Non-Executive Giles
where fund and knowledge on the Director is a Director
he held administrator. across boards of the former. of Amber
a number the leisure of several Claire started Infrastructure
of senior Prior to and retail other companies. her career Group
positions moving sectors at Bank Holdings
at CSFB, to Guernsey, in the John is of Scotland Limited,
including John was UK and a Fellow and was the ultimate
Fixed at Price overseas. of the subsequently holding
income Waterhouse Institute Global Head company
Credit in London John is of Chartered of Private of the
product before a non-executive Accountants Client Credit Investment
coordinator embarking on several in England at Bank Adviser
for European on a career plc boards and Wales, of Bermuda. to the
offices in business and chairs a member Company
and head services, a number of the Claire is and various
of UK predominantly of Audit Worshipful a Non-Executive of its
Credit telecoms. Committees. Company Director subsidiaries.
and Rates of Management on a number
Sales. Consultants of other
and a Freeman listed funds,
Since of the is an ACIB
2005 Rupert City of member of
has been London. the Chartered
a Non-Executive Institute
Director of Bankers
for a in Scotland,
number a member
of Hedge of the Chartered
Funds, Insurance
Private Institute,
Equity a Chartered
& Infrastructure Banker,
Funds. a member
of the Institute
He is of Directors
a member and holds
of the the Institute
Institute of Directors
of Directors. Diploma
in Company
Direction.
Date of
Appointment
2 August 6 August 1 January 28 August 10 September 2 August
2006 2009 2016 2013 2012 2006
(1) All of the Independent Directors are members of all
committees
Directors' Responsibilities Statement
The Directors are responsible for preparing the Half-yearly
Financial Report in accordance with applicable law and regulations.
The Directors confirm to the best of their knowledge:
The condensed set of financial statements have been prepared in
accordance with IAS 34 'Interim Financial Reporting';
The interim financial and operating review includes a fair
review of the information required by DTR 4.2.7R (indication of
important events during the first six months and description of
principal risks and uncertainties for the remaining six months of
the year); and
The interim financial and operating review includes a fair
review of the information required by DTR 4.2.8R (disclosure of
related parties' transactions and changes therein).
By order of the Board
Rupert Dorey John Whittle
31 August 2016 31 August 2016
Chairman Director
Report to International Public Partnerships Limited
Introduction
We have been engaged by the Company to review the condensed set
of financial statements in the half-yearly Financial Report for the
six months ended 30 June 2016 which comprises the Condensed
Consolidated Statement of Comprehensive Income, the Condensed
Consolidated Statement of Changes in Equity, the Condensed
Consolidated Balance Sheet, the Condensed Consolidated Cash Flow
Statement and the related Notes 1 to 20. We have read the other
information contained in the half yearly financial report and
considered whether it contains any apparent misstatements or
material inconsistencies with the information in the condensed set
of financial statements.
This report is made solely to the company in accordance with
guidance contained in International Standard on Review Engagements
2410 (UK and Ireland) "Review of Interim Financial Information
Performed by the Independent Auditor of the Entity" issued by the
Auditing Practices Board. To the fullest extent permitted by law,
we do not accept or assume responsibility to anyone other than the
company, for our work, for this report, or for the conclusions we
have formed.
Directors' Responsibilities
The half-yearly Financial Report is the responsibility of, and
has been approved by, the Directors. The Directors are responsible
for preparing the half-yearly Financial Report in accordance with
the Disclosure and Transparency Rules of the United Kingdom's
Financial Conduct Authority.
As disclosed in Note 1, the Annual Financial Statements of the
Company are prepared in accordance with IFRS as adopted by the
European Union. The condensed set of financial statements included
in this half-yearly Financial Report has been prepared in
accordance with International Accounting Standard 34, "Interim
Financial Reporting", as adopted by the European Union.
Our Responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the Half-yearly
Financial Report based on our review.
Scope of Review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity" issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK and Ireland) and consequently does not enable us to
obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do
not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly Financial Report for the six months ended 30
June 2016 is not prepared, in all material respects, in accordance
with International Accounting Standard 34 as adopted by the
European Union and the Disclosure and Transparency Rules of the
United Kingdom's Financial Conduct Authority.
Ernst & Young LLP
Guernsey
31 August 2016
Condensed Consolidated Statement of Comprehensive Income
(unaudited)
Six months ended 30 June 2016
Six months Six months
ended ended
30 June 30 June
2016 2015
Notes GBP'000s GBP'000s
----------------------------------- ----- ---------- ----------
Interest income 4 26,041 20,707
Dividend income 4 4,832 9,595
Net change in fair value of
investments at fair value through
profit or loss 4 93,669 16,649
------------------------------------ ----- ---------- ----------
Total investment income 124,542 46,951
Other operating (expense) /
income 5 (4,264) 980
------------------------------------ ----- ---------- ----------
Total income 120,278 47,931
Management costs 6,17 (7,439) (6,485)
Administrative expenses (538) (552)
Transaction costs 7,17 (844) (644)
Directors' fees (134) (115)
------------------------------------ ----- ---------- ----------
Total expenses (8,955) (7,796)
------------------------------------ ----- ---------- ----------
Profit before finance costs
and tax 111,323 40,135
Finance costs 8 (1,748) (1,730)
------------------------------------ ----- ---------- ----------
Profit before tax 109,575 38,405
Tax credit 9 818 1,011
------------------------------------ ----- ---------- ----------
Profit for the period 110,393 39,416
------------------------------------ ----- ---------- ----------
Earnings per share
From continuing operations
Basic and diluted (pence) 10 11.14 4.71
------------------------------------ ----- ---------- ----------
All results are from continuing operations in the period.
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
period (2015: nil). The profit for the period represents the Total
Comprehensive Income for the period.
Condensed Consolidated Statement of Changes in Equity
(unaudited)
Six months ended 30 June 2016
Other
Share distributable Retained
Notes capital reserve earnings Total
GBP'000s GBP'000s GBP'000s GBP'000s
------------------------ ------ --------- --------------- ---------- ----------
Balance at 31 December
2015 825,362 182,481 282,359 1,290,202
Total comprehensive
income - - 110,393 110,393
Issue of ordinary
shares 15 2,775 - - 2,775
Distributions in
the period 15 - - (31,948) (31,948)
------------------------ ------ --------- --------------- ---------- ----------
Balance at 30 June
2016 828,137 182,481 360,804 1,371,422
------------------------ ------ --------- --------------- ---------- ----------
Other
Share distributable Retained
capital reserve earnings Total
GBP'000s GBP'000s GBP'000s GBP'000s
------------------------ --------- --------------- ---------- ----------
Balance at 31 December
2014 625,289 182,481 254,298 1,062,068
Total comprehensive
income - - 39,416 39,416
Issue of ordinary
shares 2,521 - - 2,521
Distributions in
the period - - (26,338) (26,338)
------------------------- --------- --------------- ---------- ----------
Balance at 30 June
2015 627,810 182,481 267,376 1,077,667
------------------------- --------- --------------- ---------- ----------
Condensed Consolidated Balance Sheet (unaudited)
As at 30 June 2016
30 June 31 December
2016 2015
Notes GBP'000s GBP'000s
--------------------------------- ------- --------- -----------
Non-current assets
Investments at fair value
through profit or loss 11 1,352,393 1,201,107
--------------------------------- ------- --------- -----------
Total non-current assets 1,352,393 1,201,107
--------------------------------- ------- --------- -----------
Current assets
Trade and other receivables 11,13 25,253 23,099
Cash and cash equivalents 11 29,175 72,391
Derivative financial instruments 11 - 1,719
--------------------------------- ------- --------- -----------
Total current assets 54,428 97,209
--------------------------------- ------- --------- -----------
Total assets 1,406,821 1,298,316
--------------------------------- ------- --------- -----------
Current liabilities
Trade and other payables 11,14 8,377 8,114
Derivative financial instruments 11 3,367 -
--------------------------------- ------- --------- -----------
Total current liabilities 11,744 8,114
--------------------------------- ------- --------- -----------
Non-current liabilities
Bank loans 8,11 23,655 -
--------------------------------- ------- --------- -----------
Total non-current liabilities 23,655 -
--------------------------------- ------- --------- -----------
Total liabilities 35,399 8,114
--------------------------------- ------- --------- -----------
Net assets 1,371,422 1,290,202
--------------------------------- ------- --------- -----------
Equity
Share capital 15 828,137 825,362
Other distributable reserve 15 182,481 182,481
Retained earnings 15 360,804 282,359
--------------------------------- ------- --------- -----------
Equity attributable to
equity holders of the
parent 1,371,422 1,290,202
--------------------------------- ------- --------- -----------
Net assets per share (pence
per share) 16 138.2 130.2
--------------------------------- ------- --------- -----------
The financial statements were approved by the Board of Directors
on 31 August 2016.
They were signed on its behalf by:
Rupert Dorey John Whittle
31 August 2016 31 August 2016
Chairman Director
Six months Six months
ended ended
30 June 30 June
2016 2015
Notes GBP'000s GBP'000s
------------------------------------ -------- ----------- -----------
Profit from operations 110,393 39,416
Adjusted for:
Gain on investments at fair value
through profit or loss 4 (93,669) (16,649)
Unrealised exchange (gain) /
loss (596) 112
Finance costs 8 1,748 1,730
Net income tax credit 9 (818) (1,011)
Fair value movement on derivative
financial instruments 5 5,086 (68)
Working capital adjustments
Increase in receivables (1,661) (1,304)
Increase / (decrease) in payables 263 (112)
------------------------------------ -------- ----------- -----------
20,746 22,114
Income tax received(1) (54) -
------------------------------------ -------- ----------- -----------
Net cash inflow from operations(2) 20,692 22,114
------------------------------------ -------- ----------- -----------
Investing Activities
Acquisition of investments at
fair value through profit or
loss 12 (56,162) (42,695)
Funds advanced to affiliated
entities(3) (17,849) -
Net repayments from investments
at fair value through profit
or loss 16,393 7,313
------------------------------------ -------- ----------- -----------
Net cash outflow from investing
activities (57,618) (35,382)
------------------------------------ -------- ----------- -----------
Financing Activities
Dividends paid 15 (29,173) (23,817)
Finance costs paid (1,225) (727)
Net loan drawdowns 8,11 23,655 24,980
------------------------------------ -------- ----------- -----------
Net cash (outflow) / inflow from
financing activities (6,743) 436
------------------------------------ -------- ----------- -----------
Net decrease in cash and cash
equivalents (43,669) (12,832)
Cash and cash equivalents at
beginning of period 72,391 29,391
Exchange gain / (loss) on cash
and cash equivalents 453 (270)
------------------------------------ -------- ----------- -----------
Cash and cash equivalents at
end of period(4) 29,175 16,289
------------------------------------ -------- ----------- -----------
Condensed Consolidated Cash Flow Statement (unaudited)
Six months ended 30 June 2016
(1) Cashflows received from unconsolidated subsidiary entities
in respect of surrender of tax losses.
(2) Net cash inflows from operations as disclosed in the
Financial and Operating review of GBP36.3m includes net repayments
from investments at fair value through profit and loss of GBP16.4m,
exchange gains and losses on cash and cash equivalents of GBP0.5m
and finance costs paid of GBP1.2m, reconciling back to the figure
shown above.
(3) Includes GBP17.8 million of funds advanced to affiliated
entities to facilitate Tideway investment immediately following the
balance sheet date. Further details are provided in note 11.4.
(4) Includes restricted cash of GBPnil (June 2015: GBPnil) which
can only be utilised for new investments.
Notes to the Condensed set of Financial Statements
(unaudited)
Six months ended 30 June 2016
1. Basis of Preparation
International Public Partnerships Limited is a closed ended
authorised investment company incorporated in Guernsey under The
Companies (Guernsey) Law, 2008. The address of the registered
office is given in the inside back cover. The nature of the Group's
operations and its principal activities are set out in pages 2 to
4.
These financial statements are presented in pounds Sterling as
this is the currency of the primary economic environment in which
the Group ('Parent and consolidated subsidiary entities') operates
and represents the functional currency of the Parent and all values
are rounded to the nearest (GBP'000), except when otherwise
indicated.
The financial information for the year ended 31 December 2015
included in this Half-yearly Financial Report is derived from the
31 December 2015 Annual Report and Financial Statements and does
not constitute statutory accounts as defined in The Companies
(Guernsey) Law, 2008. The auditors reported on those accounts:
their report was unqualified, did not draw attention to any matters
by way of emphasis, and did not contain a statement under section
263 (2) and (3) of The Companies (Guernsey) Law, 2008.
Accounting policies
The annual financial statements of International Public
Partnerships Limited are prepared in accordance with International
Financial Reporting Standards ('IFRS') as adopted by the European
Union. The set of condensed consolidated financial statements
included in this Half-yearly Financial Report have been prepared in
accordance with International Accounting Standard 34 - 'Interim
Financial Reporting' as adopted by the European Union and should be
read in conjunction with the consolidated financial statements for
the year ended 31 December 2015, as they provide an update of
previously reported information.
The same accounting policies, presentation and methods of
computation are followed in this set of condensed financial
statements as applied in the Group's latest annual audited
financial statements for the year ended 31 December 2015. The new
and revised IFRS and interpretations becoming effective in the
period have had no impact on the accounting policies of the
Group.
As disclosed in the annual financial statements for the year
ended 31 December 2015, the Directors determined that International
Public Partnerships Limited is an investment entity as defined by
IFRS 10 on the basis that:
a) it obtains funds from one or more investor(s) for the purpose
of providing those investor(s) with investment management
services;
b) it commits to its investors that its business purpose is to
invest funds solely for returns from capital appreciation,
investment income, or both; and
c) it measures and evaluates the performance of substantially
all of its investments on a fair value basis.
Accordingly, these condensed consolidated 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.
Subsidiaries that do not provide investment-related services are
required to be measured at fair value through profit or loss in
accordance with IAS 39 Financial Instruments: Recognition and
Measurement.
Going concern
The Directors have reviewed comprehensive cash flow forecasts
prepared by management. Based on those forecasts and an assessment
of the Group's ('Parent and consolidated subsidiary entities')
committed banking facilities, they have concluded that it is
appropriate to prepare the 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 at the date of
this report the Group has unrestricted cash balances of GBP49.5
million, restricted cash balances available for investments of
GBP26.6 million and the Company's corporate debt facility of GBP300
million. Following the 30 June 2016 balance sheet date, in July
2016 the Group successfully raised GBP125 million of additional
capital which was used in part to repay the cash drawn balance
outstanding on the corporate debt facility. As at the date of this
report, the corporate debt facility was GBPnil cash drawn, GBP141.6
million was issued as letters of credit and GBP158.4 million
remained undrawn or unutillised and available for investment in new
and existing projects until May 2018. The facility is forecast to
continue in full compliance with the associated banking covenants.
The Company also continues to fully cover costs and distributions
from underlying cash flows from investments.
2. Significant Judgements and Estimates
Service entities and consolidation group
Following the adoption of IFRS 10 Investment Entity Amendments,
the condensed consolidated financial statements incorporate the
financial statements of the Company and service entities controlled
by the Company up to 30 June 2016. Typically a service entity
provides management services, strategic advice and financial
support to investee entities. Judgment is therefore required in
assessing which entities meet these definitional requirements. The
Directors have reviewed and assessed the criteria applied in the
assessment of services entities based on the guidance in place as
at 30 June 2016 and are satisfied with the resulting
conclusion.
Fair valuation of investments at fair value through profit or
loss
Fair values are determined using the income approach which
discounts the expected cash flows at a rate appropriate to the risk
profile of each asset. In determining the discount rate and
relevant long-term government bond yields, tax risks, specific
risks and the evidence of recent transactions are considered.
Details of the valuation process and key sensitivities are provided
in note 11.
3. Segmental Reporting
Based on a review of information provided to the chief operating
decision makers, the Group has identified four reportable segments
based on the geographical risk within the Group. The factors used
to identify the Group's reportable segments are centred on the risk
free rates and the maturity of the Infrastructure sector
(particularly PFI/PPP) within each region. Further, foreign
exchange and political risk are identified, as these also determine
where resources are allocated. Management has concluded that the
Group is currently organised into four reportable segments being
UK, Europe (non UK), North America and Australia.
Six months ended 30 June 2016
---------- ----------------------------------------------
Europe North
UK Non UK America Australia Total
GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s
----------------------- ---------- ---------- ---------- ---------- ----------
Segmental results
Dividend and interest
income 22,191 3,396 3,053 2,233 30,873
Fair value gain
on investments 44,069 27,115 10,788 11,697 93,669
----------------------- ---------- ---------- ---------- ---------- ----------
Total investment
income 66,260 30,511 13,841 13,930 124,542
----------------------- ---------- ---------- ---------- ---------- ----------
Reporting segment
profit(1) 56,374 28,851 12,870 12,298 110,393
----------------------- ---------- ---------- ---------- ---------- ----------
Segmental financial
position
Investments at
fair value 953,469 227,916 77,375 93,633 1,352,393
Current assets 54,428 - - - 54,428
----------------------- ---------- ---------- ---------- ---------- ----------
Total assets 1,007,897 227,916 77,375 93,633 1,406,821
Total liabilities (35,399) - - - (35,399)
----------------------- ---------- ---------- ---------- ---------- ----------
Net assets 972,498 227,916 77,375 93,633 1,371,422
----------------------- ---------- ---------- ---------- ---------- ----------
(1) Reporting segment results are stated net of operational costs including management fees.
Six months ended 30 June 2015
---------- ----------------------------------------------
Europe North
UK Non UK America Australia Total
GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s
------------------------ ---------- ---------- ---------- ---------- ----------
Segmental results
Dividend and interest
income 23,761 3,345 869 2,327 30,302
Fair value gain/(loss)
on investments 40,049 (16,282) (1,354) (5,764) 16,649
------------------------ ---------- ---------- ---------- ---------- ----------
Total investment
income/(loss) 63,810 (12,937) (485) (3,437) 46,951
------------------------ ---------- ---------- ---------- ---------- ----------
Reporting segment
profit/(loss)(1) 55,963 (13,206) (360) (2,981) 39,416
------------------------ ---------- ---------- ---------- ---------- ----------
Segmental financial
position
Investments at
fair value 767,779 194,409 37,131 85,653 1,084,972
Current assets 41,307 - - - 41,307
------------------------ ---------- ---------- ---------- ---------- ----------
Total assets 809,086 194,409 37,131 85,653 1,126,279
Total liabilities (48,612) - - - (48,612)
------------------------ ---------- ---------- ---------- ---------- ----------
Net assets 760,474 194,409 37,131 85,653 1,077,667
------------------------ ---------- ---------- ---------- ---------- ----------
Revenue from investee entities, representing more than 10% of
the Group's interest and dividend income approximates GBP6.0
million (June 2015: GBP9.8 million). Segmental profits in Europe,
North America and Australia have increased in the period in part
due to the impact of foreign exchange movements following the UK
referendum on membership of the European Union in June 2016.
4. Investment Income
Six months Six months
ended ended
30 June 2016 30 June 2015
GBP'000s GBP'000s
-------------------------------------- ------------- -------------
Interest income
Interest on investments 26,009 20,689
Interest on bank deposits 32 18
-------------------------------------- ------------- -------------
Total interest income 26,041 20,707
-------------------------------------- ------------- -------------
Dividend income 4,832 9,595
Net change in fair value of financial
assets (excluding derivatives)
at fair value through profit or
loss 93,669 16,649
-------------------------------------- ------------- -------------
Total investment income 124,542 46,951
-------------------------------------- ------------- -------------
All dividend income and interest income has resulted from
transactions with unconsolidated subsidiary entities. Gains on
investments at fair value through profit or loss also relate to
investments in unconsolidated subsidiaries. Gains on valuations in
the period are driven primarily by favourable movements in foreign
denominated assets and reductions in government bond yields.
No disposals were carried out in the six months ended 30 June
2016 or the six months ended 30 June 2015.
5. Other Operating (Expense) / Income
Six months Six months
ended ended
30 June 2016 30 June 2015
GBP'000s GBP'000s
----------------------------------- ------------- -------------
Fair value (loss)/gain on foreign
exchange contracts (5,086) 68
Gain on foreign exchange movements 822 912
----------------------------------- ------------- -------------
Total other (expense) / income (4,264) 980
----------------------------------- ------------- -------------
Fair value movements above represent unrealised gains and losses
on foreign exchange contracts. Foreign exchange movements represent
unrealised gains made on foreign denominated cash and receivable
balances held by the Group and realised gains or losses made on
foreign exchange trades.
6. Management Costs
Six months Six months
ended ended
30 June 2016 30 June 2015
GBP'000s GBP'000s
----------------------- ------------- -------------
Base fee (note 17) 7,439 6,485
----------------------- ------------- -------------
Total management costs 7,439 6,485
----------------------- ------------- -------------
7. Transaction Costs
Six months Six months
ended ended
30 June 2016 30 June 2015
GBP'000s GBP'000s
----------------------------- ------------- -------------
Investment advisory costs 844 640
Legal and professional costs - 4
----------------------------- ------------- -------------
Total transaction costs 844 644
----------------------------- ------------- -------------
Details of investment advisory costs paid are provided in note
17.
8. Finance Costs
Six months Six months
ended ended
30 June 2016 30 June 2015
GBP'000s GBP'000s
---------------------------------- ------------- -------------
Commitment fees and other charges 1,251 1,350
Issue cost amortisation 497 380
---------------------------------- ------------- -------------
Total finance costs 1,748 1,730
---------------------------------- ------------- -------------
The Group currently has available a corporate debt facility of
GBP300 million provided by Royal Bank of Scotland and National
Australia Bank Limited. As at 30 June 2016, the cash drawn balance
on the corporate debt facility was GBP23.7 million(1) . The
drawdowns on the facility are in the form of cash drawdowns and
issuance of letters of credit. Cash drawdowns are used to fund the
investments and the letter of credit drawdowns are used to back the
Group's commitment to a future pipeline of cash investments.
The interest rate margin on the corporate debt facility is 175
basis points over Libor. The loan facility matures in May 2018 and
is secured over the assets of the Group.
(1) At 30 June 2016, GBP23.7 million of the corporate debt
facility was cash drawn, GBP159.4 million was issued as letters of
credit and GBP116.9 million remained undrawn or unutilised.
9. Tax
Six months Six months
ended ended
30 June 2016 30 June
GBP'000s 2015
GBP'000s
------------------------------------ -------------- ------------
Current tax:
UK corporation tax credit - current
period (898) (1,081)
Overseas tax - current period 80 70
------------------------------------ -------------- ------------
Tax credit for the period (818) (1,011)
------------------------------------ -------------- ------------
Six months Six months
ended ended
30 June 2016 30 June
GBP'000s 2015
GBP'000s
----------------------------------- ------------- ----------
Profit before tax 109,575 38,405
----------------------------------- ------------- ----------
Expected tax on profit at Guernsey
income tax rate - 0% (2015: 0%) - -
Application of overseas tax rates 80 70
Group tax losses surrendered to
unconsolidated investee entities (898) (1,081)
----------------------------------- ------------- ----------
Tax credit for the period (818) (1,011)
----------------------------------- ------------- ----------
Reconciliation of effective tax rate
The income tax credit above does not represent the full tax
position of the entire Group as the investment returns received by
the Company are net of tax payable at the underlying investee
entity level. In accordance with the IFRS 10 investment entity
amendments, underlying investment entity tax is not consolidated
within these financial statements. Total forecasted corporation tax
payable by the Group's underlying investments is GBP753 million
over their full concession lives.
10. Earnings Per Share
The calculation of basic and diluted earnings per share is based
on the following data:
Six months Six months
ended ended
30 June 2016 30 June
GBP'000s 2015
GBP'000s
------------------------------------ ------------- -----------
Earnings for the purposes of basic
and diluted earnings per share
being
net profit attributable to equity
holders of the parent 110,393 39,416
------------------------------------ ------------- -----------
Number of shares Number Number
Weighted average number of Ordinary
Shares for the purposes of basic
and diluted earnings per share 991,001,925 836,373,591
------------------------------------ ------------- -----------
Basic and diluted (pence) 11.14 4.71
------------------------------------ ------------- -----------
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 at the
point of execution of the contracts. 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 IAS 39 'Financial
Instruments: Recognition and Measurement'. 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
30 June 2016 2015
GBP'000s GBP'000s
--------------------------------- ------------ -----------
Investments at fair value
through profit and loss(1) 1,352,393 1,201,107
Financial asset loans and
receivables
Trade and other receivables 25,253 23,099
Cash and cash equivalents 29,175 72,391
Derivative financial instruments
Currency swaps - 1,719
--------------------------------- ------------ -----------
Total financial assets 1,406,821 1,298,316
--------------------------------- ------------ -----------
(1) Includes fair value of investments in associates amounting
to GBP2.3 million (2015: GBP2.0 million). Movements in the period
represent additional fair value gains offset by net repayments from
investments.
11.2 Financial liabilities
31 December
30 June 2016 2015
GBP'000s GBP'000s
--------------------------------- ------------ -------------
Financial liabilities at
amortised cost
Trade and other payables 8,377 8,114
Bank loans 23,655 -
Derivative financial instruments
Currency swaps 3,367 -
--------------------------------- ------------ -------------
Total financial liabilities 35,399 8,114
--------------------------------- ------------ -------------
The carrying value of all financial assets and liabilities are
considered to approximate their fair value.
11.3 Financial risk and management objectives
The Group's objective in managing risk is the creation and
protection of shareholder value. Risk is inherent in the Group's
activities, but it is managed through a process of ongoing
identification, measurement and monitoring, subject to risk limits
and other controls. The process of risk management is critical to
the Group's continuing profitability. 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 Group's Investment Adviser is
responsible for identifying and controlling risks. The Board of
Directors supervises the Investment Adviser and is ultimately
responsible for the overall risk management of the Group.
The Group's risk management framework and approach is set out
within the Strategic Report in the 31 December 2015 annual
financial statements.
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 losses are disclosed in the fair value hierarchy section
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 over the long term. Where
inflation is at levels below the assumed levels, 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 investee
entities are either hedged through interest rate swap arrangements
or are fixed rate loans. 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. The Group's corporate facility is unhedged on the basis
it is utilised as an investment bridging facility and 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 at underlying investment level is included within the
fair value of investment. Sensitivity analysis showing the impact
of variations in the interest income deposit rate on fair value of
investment is shown in section 11.5.
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 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
30 June 2016 2015
GBP'000s GBP'000s
---------------------------------- ------------ -----------
Cash
Euro 628 871
Canadian Dollar 1,285 1,107
Australian Dollar 12 11
US Dollar 1,865 3
---------------------------------- ------------ -----------
3,790 1,992
Current receivables
Euro receivables 386 393
US Dollar receivables 235 -
---------------------------------- ------------ -----------
621 393
Investments at fair value through
profit or loss
Euro 227,916 202,968
Canadian Dollar 40,888 34,819
Australian Dollar 93,633 85,370
US Dollar 36,487 32,204
---------------------------------- ------------ -----------
398,924 355,361
---------------------------------- ------------ -----------
Total 403,335 357,746
---------------------------------- ------------ -----------
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.
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 only with
creditworthy counterparties at the underlying entity level. PFI/PPP
and similar concessions are entered into with government, quasi
government, other public or equivalent low risk bodies.
Liquidity risk
Liquidity risk is defined as the risk that the Group would
encounter difficulty in meeting obligations 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 redemption of capital
rights. The Group manages liquidity risk by maintaining adequate
cash reserves, banking facilities and reserve borrowing facilities
and by continuously monitoring the forecast and actual cash flows.
Cash flow forecasts assume full availability of underlying
infrastructure to the public sector entities. Failure to maintain
assets available for use or operating in accordance with
pre-determined performance standards may entitle the public sector
to stop (wholly or partially) paying the 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. Contractual mechanisms also allow for significant
pass-down of unavailability and performance risk to
sub-contractors.
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, currency forward contracts and
investments at fair value through profit or loss. As at 30 June
2016, the Group's Level 2 financial instruments include currency
forward contracts amounting to a liability of GBP3.4 million
(December 2015: asset of GBP1.7 million). Financial instruments
classified as Level 2 have been valued using models whose inputs
are observable in an active market (spot exchange rates, yield
curves, interest rate curves). Valuations based on observable
inputs include financial instruments such as swaps and forward
contracts which are valued using market standard pricing techniques
where all the inputs to the market standard pricing models are
observable.
Level 3:
This category consists of investments in equity and loan
instruments in underlying unconsolidated subsidiary entities and
affiliates which are classified at fair value through profit or
loss. At 30 June 2016, the fair value of financial instruments
classified within Level 3 totalled GBP1,352.4 million (December
2015: GBP1,201.1 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 of
the Company. The valuation of unlisted equity and debt investments
is performed on a quarterly basis by the Investment Adviser and
reviewed by the senior members of the Investment Adviser. The
valuations are also subject to quality assurance procedures
performed by the Investment Adviser. The Investment Adviser
verifies the major inputs applied in the latest valuation by
agreeing the information in the valuation computation to relevant
project financial models and market information. In addition, the
accuracy of the computation is tested. The latest valuation is also
compared with the valuations in the preceding semi-annual and
annual reporting periods. The senior members of the Investment
Adviser consider the appropriateness of the valuation methods and
inputs. On a quarterly basis, after the checks above have been
performed the Investment Adviser presents the valuation results to
the Audit and Risk Committee. This includes a discussion of the
major assumptions used in the valuations, with an emphasis on the
more significant investments. Any changes in valuation methods and
assumptions are discussed and agreed with the Company's Audit and
Risk Committee.
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.
Projected net future cash flows
Cash flow forecasts for each underlying investment are generated
through detailed project specific financial models. Financial
models forecast the project related cash flows for the full term of
the underlying service concession. 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 estimation. These models also forecast the
dividend, shareholder loan interest payments, capital repayments
and senior debt repayments (where applicable) expected from the
underlying investments. Key macroeconomic inputs and assumptions
utilised in projecting the Group's net future cash flows
include:
Europe
UK Non UK North America Australia
------------------ ------------- --------------- ----------------- -------------
1% in 2016;
2% there
Inflation 2.75% after 2.00% 2.50%
Long-term 20.00% 12.50% - 26.50% -
tax - 18.00% 33.99% 27.00% 30.00%
Foreign exchange
rates N/A 1.14 1.36-1.76 1.91
Long-term
deposit rates 3.00% 3.00% 3.00% 3.00%
------------------ ------------- --------------- ----------------- -------------
Discount rate
The discount rate used for valuation of each investment is the
aggregate of the following:
- The six-month average yield on a government bond with a
remaining maturity matched as closely to the remaining life of the
project as possible, issued by the national government for the
location of the asset ('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; and
- A further adjustment reflective of market-based transaction
valuation evidence for similar assets.
Over the period, the weighted average government bond yield
decreased by 0.31%. This was offset by a 0.15% increase in the
weighted average project premium to reflect current market
pricing.
30 June 31 December
Valuation Methodology 2016 2015 Movement
----------------------------- ---------- -------------- ---------
Weighted Average Government
Bond Rate 2.00% 2.31% (0.31%)
Weighted Average Project
Premium 5.37% 5.22% 0.15%
----------------------------- ---------- -------------- ---------
Weighted Average Discount
Rate 7.37% 7.53% (0.16%)
----------------------------- ---------- -------------- ---------
Weighted Average Discount
Rate(1) 7.88% 8.09% (0.21%)
----------------------------- ---------- -------------- ---------
(1) Weighted average discount rate on Risk Capital only (equity
and subordinated debt).
Reconciliation of Level 3 fair value 30 June 2016
measurements of financial assets: GBP'000s
------------------------------------------ ---------------------------
Balance at 1 January 2016 1,201,107
Additional investments during the
period 56,161
Net repayments during the period (16,393)
Funds advanced to affiliated entities(1) 17,849
Net change in fair value of investments
at fair value through profit or loss 93,669
------------------------------------------ ---------------------------
Balance at 30 June 2016 1,352,393
------------------------------------------ ---------------------------
(1) Represents funds advanced to affiliated entities to
facilitate Tideway investment immediately following the balance
sheet date.
11.5 Sensitivity analysis
The valuation requires management to make certain assumptions in
relation to unobservable inputs to the model, the significant
assumptions along with sensitivity analysis are provided below:
Weighted Change in Change in
average fair value fair value
rate applied of investment of investment
Significant in base Sensitivity GBP'000's Sensitivity GBP'000's
assumptions case valuations factor factor
---------------- -------------------- --------------- ------------------ --------------- ------------------
Discount rate 7.37% +1.00% (137,181) -1.00% 161,854
---------------- -------------------- --------------- ------------------ --------------- ------------------
Inflation
rate (overall) 2.56% +1.00% 112,940 -1.00% (99,945)
UK 2.75% +1.00% 68,043 -1.00% (59,321)
Europe 2.00% +1.00% 32,031 -1.00% (26,685)
North America 2.00% +1.00% 1,083 -1.00% (956)
Australia 2.50% +1.00% 11,783 -1.00% (12,983)
---------------- -------------------- --------------- ------------------ --------------- ------------------
FX rate n/a +10.00% 39,936 -10.00% (39,944)
---------------- -------------------- --------------- ------------------ --------------- ------------------
Tax rate 21.67% +1.00% (7,974) -1.00% 8,002
---------------- -------------------- --------------- ------------------ --------------- ------------------
Deposit rate 3.00% +1.00% 14,569 -1.00% (13,856)
---------------- -------------------- --------------- ------------------ --------------- ------------------
12. Investment Acquisitions
Date of Consideration % Ownership
acquisition Description GBP'000's post acquisition
-------------- ------------------------------------ -------------- ------------------
The Group acquired 100% of
the equity and subordinated
04 February debt of the Westermost Rough
2016 offshore transmission project. 26,837 100%
The Group funded a further
tranche of investment in
01 April the Thames Tideway Tunnel
2016 Project. 17,122 15.99%
The Group invested in its
fifth batch of funding via
the Aggregator Vehicle PLC
into various PF2 schools
procured under the UK governments
26 April Priority Schools Building
2016 Programme. 5,054 100%
The Group made a follow on
investment for an additional
72% interest in the Wolverhampton
29 June phase two Building Schools
2016 for the Future project. 7,149 82%
-------------- ------------------------------------ -------------- ------------------
Total capital spend on new acquisitions
during the period 56,162
---------------------------------------------------- -------------- ------------------
13. Trade and Other Receivables
31 December
30 June 2016 2015
GBP'000s GBP'000s
---------------------------- ------------ -------------
Accrued interest receivable 19,184 17,363
Other debtors 6,069 5,736
---------------------------- ------------ -------------
Total transaction costs 25,253 23,099
---------------------------- ------------ -------------
Other debtors included GBP5.1 million (2015: GBP4.3 million) of
receivables from unconsolidated subsidiary entities for surrender
of Group tax losses.
14. Trade and Other Payables
31 December
30 June 2016 2015
GBP'000s GBP'000s
------------------------------- ------------ -----------
Accrued management fee 7,439 6,987
Other creditors and accruals 938 1,127
------------------------------- ------------ -----------
Total trade and other payables 8,377 8,114
------------------------------- ------------ -----------
15. Share Capital and Reserves
31 December
30 June 2016 2015
shares shares
Share capital '000's '000's
--------------------------------------- ------------ -----------
In issue 1 January 990,634 836,159
Issued for cash - 150,573
Issued as a scrip dividend alternative 1,969 3,902
---------------------------------------- ------------ -----------
Closing shares in issue - fully
paid 992,603 990,634
---------------------------------------- ------------ -----------
30 June 31 December
2016 2015
GBP'000's GBP'000's
---------------------------------------- ---------- -----------
Opening balance 825,362 625,289
---------------------------------------- ---------- -----------
Issued for cash (excluding issue
costs) - 197,996
Issued as a scrip dividend alternative 2,775 5,211
---------------------------------------- ---------- -----------
Total share capital issued in the
period 2,775 203,207
---------------------------------------- ---------- -----------
Costs on issue of Ordinary Shares - (3,134)
---------------------------------------- ---------- -----------
Closing balance 828,137 825,362
---------------------------------------- ---------- -----------
At present, the Company has one class of Ordinary Shares which
carry no right to fixed income.
On 27 May 2016, 1,969,282 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
2015.
Other distributable reserve
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 in order to provide a distributable reserve
to repurchase its shares if and when it is considered beneficial to
do so by the Directors. Following court approval, the distributable
reserve account was created. The balance in the distributable
reserve account as at 30 June 2016 is GBP182.5 million (December
2015: GBP182.5 million).
Retained earnings
30 June 31 December
2016 2015
Retained earnings GBP'000's GBP'000's
-------------------------- ---------- -----------
Opening balance 282,359 254,298
Net profit for the period 110,393 81,859
Dividends paid(1) (31,948) (53,798)
-------------------------- ---------- -----------
Closing balance 360,804 282,359
-------------------------- ---------- -----------
(1) Includes scrip element of GBP2.8 million in 2016 (2015:
GBP5.2 million).
Distributions
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 2015.
The Board approved an interim distribution of 3.325 pence per
share (six months to June 2015: 3.225 pence per share).
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 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 on-going expenses and dividend
payments.
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 risks associated with each
class of capital.
16. Net Assets per Share
30 June 31 December
2016 2015
GBP'000's GBP'000's
--------------------------------------- ----------- -----------
Net assets attributable to equity
holders of the parent 1,371,422 1,290,202
---------------------------------------- ----------- -----------
Number Number
--------------------------------------- ----------- -----------
Number of shares
Ordinary shares outstanding at the
end of the period 992,603,319 990,634,037
---------------------------------------- ----------- -----------
Net assets per share (pence per share) 138.2 130.2
---------------------------------------- ----------- -----------
17. Related Party Transactions
During the period, Group companies entered into certain
transactions with related parties that were not members of the
Group but were 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 is a subsidiary company of Amber Infrastructure Group
Holdings Limited ('Amber Group'), in which Mr G Frost is a Director
and also a shareholder.
Mr G Frost is also a Director of International Public
Partnerships Limited (the 'Company'); International Public
Partnerships Lux 1 Sarl; (a wholly owned subsidiary of the
Company); and the majority of 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 for Mr G Frost's directorship of the Company
are paid to his employer, Amber Infrastructure Limited.
The amounts of the transactions in the period that were related
party transactions are set out in the table below:
Amounts owing
Related party to related parties
expense in the in the Balance
Income Statement Sheet
------------------------ -----------------------
For the
six months For the
to 30 six months At At
June to 30 June 30 June 31 December
2016 2015 2016 2015
GBP'000s GBP'000s GBP'000s GBP'000s
------------------------- ----------- ----------- --------- ------------
International Public
Partnerships GP Limited 7,439 6,485 7,439 6,987
Amber Fund Management
Limited(1) 844 640 184 231
------------------------- ----------- ----------- --------- ------------
Total 8,283 7,125 7,623 7,218
------------------------- ----------- ----------- --------- ------------
(1) Represents amounts paid to related parties to acquire or
make investments or advisory fees associated with investments which
are subsequently recorded in the balance sheet.
Investment advisory fee / profit share payable during the period
is 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 GBP750 million;
- 1.0% per annum where GAV (excluding uncommitted cash from
capital raisings) is between GBP750 million and GBP1.5 billion;
- 0.9% per annum where GAV (excluding uncommitted cash from
capital raisings) value exceeds GBP1.5 billion.
Investment advisory 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
ten years from the date of the IAA.
As at 30 June 2016, Amber Infrastructure held 8,002,379 (June
2015: 8,002,379) shares in the Company. The shares held by the
Investment Adviser in the Company helps further strengthen the
alignment of interests between the two parties.
Transactions with Directors
Claire Whittet acquired an additional 1,144 shares in the
six-month period ended 30 June 2016. None of the other Directors
acquired any additional shares in the Company during the
period.
18. Contingent Liabilities and commitments
As at 30 June 2016, the Group has committed investments
supported by letters of credit amounting to GBP159.4 million which
were drawn on the Group's corporate debt facility.
There were no contingent liabilities at the date of this
report.
19. Events after Balance Sheet Date
Date Description
------------ ---------------------------------------------
01 July 2016 The Group continued funding its investment
commitments as part of the Bazalgette
consortium into the Tideway project.
From the interim balance sheet date to
the date of this report, the Group invested
GBP17.8 million in line with the Tideway
investment schedule.
14 July 2016 The Group raised GBP125 million through
its Placing and Offer for Subscription
of 83,612,040 Ordinary shares at an issue
price per share of 149.5p.
27 July 2016 The Group acquired an interest in the
Halton BSF project. GBP1.1 million was
invested for a 22.5% interest in the
equity and subordinated debt of the project.
22 August The Group invested GBP72.3 million to
2016 acquire interests in ten Building Schools
for the Future (BSF) projects
------------ ---------------------------------------------
20. Other Mandatory Disclosures
New standards that the Group has applied from 1 January 2016
Standards and amendments to standards that became effective
during the period are listed below. These have no material impact
on the reported performance or financial statements of the
Group.
- Amendments to IFRS 11: Accounting for Acquisitions of
interests in Joint operations (1 January 2016).
- Amendments to IFRS 10, IFRS 12 and IAS 28: Investment
entities: Applying the Consolidation Exception (1 January
2016).
- Annual Improvements to IFRSs 2012-2014 Cycle (1 January
2016).
- Amendments to IAS 1 Disclosure Initiative (1 January
2016).
Unconsolidated subsidiaries
A list of the significant investments in unconsolidated
subsidiaries, including the name, country of incorporation as at 30
June 2016 and proportion of ownership is shown below:
Place of incorporation Proportion
(or registration) of ownership
Name and operation interest %
-------------------------------------- ----------------------- -------------
Abingdon Limited Partnership UK 100
Aggregator PLC UK 100
Access Justice Durham Limited Canada 100
AKS Betriebs GmbH & Co. KG Germany 98
BBPP Alberta Schools Limited Canada 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
Derbyshire Courts Limited Partnership UK 100
Derbyshire Schools UK 100
Derbyshire Schools Phase Two
Partnership 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
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 90
Inspiredspaces STaG (Project
Co 2) Limited UK 90
Inspiredspaces Wolverhampton
(Project Co 1) Limited UK 82
Inspiredspaces Wolverhampton
(Project Co 2) Limited UK 82
IPP (Moray Schools) Holdings
Limited UK 100
Maesteg School Partnership UK 100
Norfolk Limited Partnership UK 100
Northampton Schools Limited
Partnership UK 100
Northern Diabolo N.V. Belgium 100
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
-------------------------------------- ----------------------- -------------
The entities listed above in aggregate represent 83.1% (December
2015: 85.7%) of investments at fair value through profit or loss.
The remaining fair value is driven from joint ventures, associate
interests and minority stakes held by the Group.
Consolidated subsidiaries
The principal subsidiary undertakings of the Company, all of
which have been included in these consolidated financial statements
are as follows:
Place of Proportion
incorporation of ownership
(or registration) interest
Name and operation %
------------------------------------ ------------------- -------------
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 Investments Limited Partnership UK 100
------------------------------------ ------------------- -------------
Contacts
Investment Adviser Auditor Corporate Brokers
Amber Fund Management Ernst & Young Numis Securities
Limited LLP Limited
1(st) Floor Royal Chambers The London Stock
Two London Bridge St Julian's Avenue Exchange Building
London St Peter Port 10 Paternoster
SE1 9RA Guernsey Square
Channel Island London
GY1 4AF EC4M 7LT
Registered Office Legal Adviser Public Relations
Heritage Hall Carey Olsen FTI Consulting
PO Box 225, Le Marchant PO Box 98, Carey 200 Aldersgate
Street House Aldersgate Street
St Peter Port Les Banques London
Guernsey Guernsey EC1A 4HD
Channel Islands Channel Islands
GY1 4HY GY1 4BZ
Administrator and
Company Secretary Corporate Banker
Heritage International Royal Bank of
Fund Managers Limited Scotland International
Heritage Hall 1 Glategny Esplanade
PO Box 225, Le Marchant St Peter Port
Street Guernsey
St Peter Port Channel Islands
Guernsey GY1 4BQ
Channel Islands
GY1 4HY
This information is provided by RNS
The company news service from the London Stock Exchange
END
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