TIDMBBGI
RNS Number : 6964U
BBGI Global Infrastructure S.A.
30 March 2023
30 March 2023
BBGI Global Infrastructure S.A.
(the "Company")
Annual Results for financial year ended 31 December 2022
The information contained within this Announcement is deemed by
the Company to constitute inside information. Upon the publication
of this Announcement via a Regulatory Information Service this
inside information is now considered to be in the public
domain.
BBGI ANNUAL REPORT 2022
bb-gi.com
"Our purpose is to deliver social infrastructure for healthier,
safer and more connected societies, while creating sustainable
value for all stakeholders"
Our vision: We invest to serve and connect people.
Our values:
Trusted to deliver.
Dependable partner.
Investor with impact.
Present-focused, future-ready.
About BBGI
BBGI Global Infrastructure S.A. (BBGI, the 'Company', and
together with its consolidated subsidiaries, the 'Group') is a
global infrastructure investment company helping to provide the
responsible capital required to build and maintain critical social
infrastructure ([i]) .
From hospitals to schools, to affordable housing and safer
roads, we partner with the public sector to deliver social
infrastructure that forms the building blocks of local economies,
while creating sustainable value for all stakeholders.
Financial Highlights [ii]
GBP1,069.2 million 149.9pps 9.1%
Investment Basis NAV NAV per share Annualised total
up 6.7% as at 31 December up 6.6% as at 31 NAV return per share
2022 December 2022 FY 2021: 8.8%
(31 December 2021 GBP1,001.6 (31 December 2021:
million) 140.7pps)
0.5 per cent 0. 87% 1.47x
High-quality inflation Ongoing charges Cash dividend cover
linkage (31 December 2021: FY 2021: 1.31x
FY 2021: 0.4 per cent 0.86%)
---------------------- ----------------------
7.48pps [iii] 7.93pps 8.40pps
2022 dividend declared 2023 target dividend 2024 target dividend
per share +6% +6%
---------------------- ----------------------
Portfolio Highlights
-- Strong operational performance of our globally diversified
portfolio of 56 high-quality, 100 per cent availability-style
infrastructure assets.
-- Contracted high-quality inflation linkage of 0.5 per cent
[iv] resulting in a GBP76 million increase in NAV.
-- Robust portfolio performance has enabled an upward revision
of previously announced dividend targets for 2023 and 2024.
-- Cash receipts ahead of expectations, with no material lockups
or defaults.
-- Consistently high level of asset availability rate of 99.9
per cent maintained.
-- Net debt position on an Investment Basis of GBP26.3 million,
with GBP57.5 million drawn under the revolving credit facility
('RCF').
-- Discount rate increased from 6.6 per cent to 6.9 per cent,
reflecting an equity risk premium of c. 3.1 per cent.
-- Published Net Zero Plan for BBGI and for our Portfolio
Companies.
-- Two new availability-style investments totalling GBP64
million.
-- Attractive pipeline of availability-style investments in
Europe, North America, and Australia, maximising the benefits of
strategic investment partnerships with leading contractors.
-- Socially beneficial investment under SFDR's Article 8.
Portfolio at a Glance
The fundamentals
Based on portfolio value as at 31 December 2022.
Investment type
100 per cent availability-style [v] revenue stream.
Investment type
======================== ========= ======== =======
Availability-style revenue
assets 100%
Regulated assets -
Demand-Based assets -
100%
Investment status
Low-risk operational portfolio.
Investment status
====================== ======== =========== ========
Operations 99.5%
Construction 0.5%
100%
Geographical split
Geographically diversified in stable developed countries.
Geographic split
==================== =====
Canada 35%
UK 32%
Continental Europe 12%
US 11%
Australia 10%
100%
Sector split
Well-diversified sector exposure with large allocation to
lower-risk availability-style road and bridge investments.
Sector split
==================================== =====
Transport 53%
Healthcare 20%
Blue light and modern correctional
facilities 12%
Education 9%
Affordable housing 3%
Clean energy 2%
Other 1%
100%
Investment life
Long investment life with 49 per cent of portfolio by value with
a duration of greater than or equal to 20 years; weighted average
life of 20.2 years. Average portfolio debt maturity of 16.3
years.
Investment life
================== =====
>=25 years 24%
>=20 years and
<25 years 25%
>=10 years and
<20 years 45%
<10 years 6%
100%
Top-five investments
Well-diversified portfolio with no major single asset
exposure.
Top-five investments
============================= ========= ====== =======
Ohio River Bridges
(US) 11%
Golden Ears Bridge
(Canada) 10%
Northern Territory Secure
Facilities (Australia) 5%
Victoria Correctional Facilities
(Australia) 4%
A1/A6 Motorway (Netherlands) 4%
Next five largest investments 16%
Remaining investments 50%
100%
Investment ownership
79 per cent of assets by value in the portfolio are 50 per cent
owned or greater.
Investment ownership
======================= =====
100% 45%
>=75% and <100% 7%
>=50% and <75% 27%
<50% 21%
100%
Country rating
All assets located in countries with ratings between AA and AAA
[vi] .
Country rating
================= =====
AAA 57%
AA+ 11%
AA 32%
100%
Projected portfolio cash flow
The Company's underlying assets generate a consistent and
long-term stream of cash flows for the portfolio, extending up to
2051. These cash flows are predictable, owing to the involvement of
government or government-backed counterparties and the contractual
nature of the agreements. Additionally, the index-linked provisions
offer an attractive inflation linkage of approximately 0.5 per
cent, contributing GBP76 million to the Net Asset Value (NAV)
during the year.
The investments made over the year to 31 December 2022
contributed positively to stable long-term cash flows. Based on
current estimates, and if there were to be no further acquisitions,
the existing portfolio is forecasted to enter into the capital
repayment phase in September 2040, after which cash inflows from
the portfolio would be paid to the Company's shareholders as
capital and the portfolio valuation will reduce as assets reach the
end of their concession term.
As at 31 December 2022, BBGI had a weighted average portfolio
life of 20.2 years, a decrease of 0.1 years compared with 31
December 2021. By prioritising the acquisition of assets with a
long residual life, BBGI has been able to maintain a portfolio with
a long weighted average life, which has only slightly decreased
since our IPO in 2011.
This illustrative chart is a target only, as at 31 December
2022, and is not a profit forecast. There can be no assurance this
target will be met. The hypothetical target cash flows do not
consider any unforeseen costs, expenses or other factors that may
affect the portfolio assets and therefore the impact on the cash
flows to the Company. As such, the graph above should not in any
way be construed as forecasting the actual cash flows from the
portfolio. There are minor cash flows extending beyond 2051 but for
illustrative purposes, these are excluded from the chart above.
Chair's Statement
On behalf of the Supervisory Board, I am pleased to report a
strong financial and operational performance for 2022. Despite a
volatile geopolitical backdrop and challenging macroeconomic
environment, characterised by global increases in inflation and
interest rates and general market uncertainty, our Company has
remained resilient throughout the year; we continued to generate
predictable, high-quality inflation-linked income, increased
dividends, and secure returns for our shareholders.
Overview of strong financial and operational performance for
2022
We have continued to execute successfully on our low-risk
investment strategy, which has resulted in an NAV per share
increase of 6.6 per cent this year to 149.9 pence, cash flows ahead
of expectations, a dividend per share of 7.48 pence and strong
dividend cover of 1.47x.
This strong performance, coupled with the long-term predictable
nature of the Company's cash flows and high-quality inflation
linkage, gives us continued confidence in our progressive dividend
policy. As a result, we have revised our dividend targets for the
years 2023 and 2024, increasing the growth rate from 2 per cent to
6 per cent, ensuring our shareholders benefit from the increased
value created by our high-quality, inflation-linked portfolio.
ESG is embedded in our DNA and I am proud of BBGI's role as a
steward of critical social infrastructure. We help meet the
essential needs of communities and make a positive, long-term
impact on society and the economy. Our purpose is to focus on
delivering social infrastructure for healthier, safer, and more
connected societies, while creating sustainable value for all
stakeholders. During 2022, we continued to further embed our ESG
commitments as part of our sustainability journey.
Further strengthening our robust approach to governance
As an internally-managed investment company, having robust
controls is of key importance to securing the sound financial and
operational performance of our investments over the short and long
term.
We continue to refine our rigorous approach to governance and,
over the past year, have reviewed the annual plans for our
Committees, to ensure they continue to provide sufficient depth to
our governance process and effectiveness.
With all of our Supervisory Board members being independent
Non-Executive Directors, we continue to be compliant with all the
AIC Corporate Governance requirements on Board and Director
independence and we operate a clear division of responsibilities
between the Supervisory Board and the Management Board.
Effective engagement with our stakeholders is a major part of
our long-term success and sustainability. As part of this both I,
and the Chairs of each Committee of the Supervisory Board, make
ourselves available to speak to shareholders and to all
stakeholders more generally throughout the year.
Further enhancing our Board and increasing diversity
In 2022, we welcomed Andrew Sykes and June Aitken as new
Supervisory Board members. We have already benefitted from the
fresh perspectives they bring to the Board. Andrew Sykes has
succeeded Howard Myles as Senior Independent Director and Chair of
our Remuneration Committee. Both appointments have helped to ensure
that we have a diverse, well-balanced, and experienced Supervisory
Board and Committees, which will continue to effectively serve our
shareholders in carrying out our duties of oversight of the Company
and Management Board.
We are strongly supportive of the various initiatives and
regulatory changes to encourage greater gender and ethnic equality
in publicly listed corporate entities, including the FTSE Women
Leaders and Parker Reviews. We are proud that 60 per cent of our
Supervisory Board members are female, and that we are one of the
few FTSE 350 companies to have both a female Supervisory Board
Chair and a female Audit Committee Chair. As part of our ongoing
commitment to foster, cultivate and preserve a culture of
diversity, equity and inclusion, we keep our policies on diversity,
equity and inclusion under review.
Positive outlook
Despite the wider market volatility, we remain confident that
our high-quality, resilient, and globally diversified portfolio
will continue to deliver solid returns notwithstanding increased
economic headwinds and market uncertainty. Global mega-trends, such
as urbanisation, combined with the increased need for private
sector funding of global infrastructure investment, are positive
drivers for BBGI. The Management Board continues to use its
specialist knowledge, industry relationships and networks to source
attractive investment opportunities for our pipeline. Our internal
management structure helps to create the proper incentives for the
Management Board to focus on enhancing the value of our portfolio
and growing BBGI in an accretive and disciplined manner - our
priority is to create sustainable value for all our
stakeholders.
I would like to thank the entire BBGI team for their work in
delivering another strong year for our shareholders - despite the
challenging wider market backdrop - as well as our clients,
partners and service providers, who continue to support us in
providing a critical role in our communities.
Sarah Whitney
Chair
29 March 2023
Co-CEOs' Statement
The Company performed strongly in 2022 and continued to deliver
on our vision: to serve and connect people. We're proud of our
consistently robust performance since our IPO in 2011: our NAV per
share has increased each year for the past 11 years and we remain
confident that BBGI is well positioned to continue to deliver
sustainable attractive value for all stakeholders over the short
and long term.
Global markets in 2022 have been challenging for investors and
companies alike, yet this environment has highlighted the clear
benefits of our low-risk and defensive, availability-style
investment strategy. The volatile and uncertain economic and
geopolitical backdrop has resulted in significant global increases
in inflation, rising interest rates and potentially recessionary
environments.
Yet through our consistent, disciplined approach to active asset
management and prudent financial management, we have continued to
deliver strong financial results and robust portfolio performance
throughout the year, with cash flows ahead of expectations and
further dividend growth for our shareholders.
Our high-quality inflation linkage is forecast to deliver higher
distributions over the short term. This has enabled us to increase
our dividend targets for 2023 and 2024 to 7.93pps and 8.40pps
respectively, representing a 6 per cent increase year on year.
Furthermore, we are introducing a new dividend target for 2025 of
8.57pps.
Our priorities remain to preserve and enhance the value of our
portfolio, acting as a steward of essential infrastructure for our
public sector clients, with a strong focus on delivering positive
social impact and supporting communities and economic growth. ESG
is integrated into our business model and executive compensation is
also linked to ESG performance.
Our globally diversified infrastructure portfolio includes
education, healthcare, blue light (fire and police), affordable
housing, modern correctional facilities, clean energy and transport
assets, which all generate secure government-backed cash flows with
high-quality inflation linkage.
Highlights
Our globally diversified infrastructure portfolio of 56 assets
performed strongly:
-- Dividend of 7.48pps for the year 2022 (2021: 7.33pps).
-- Revised dividend targets of 7.93pps for 2023 and 8.40pps for 2024, representing
a 6% increase year on year, and a new dividend target of 8.57pps for
2025: all are expected to be fully cash-covered.
-- Strong cash dividend cover of 1.47x (2021: 1.31x).
-- NAV per share increased 6.6 per cent to 149.9pps (2021: 140.7pps).
-- Annualised total NAV return per share of 9.1 per cent.
-- Ongoing charges of 0.87 per cent (2021: 0.86 per cent).
-- High-quality inflation linkage of 0.5 per cent.
-- Focus on delivering social impact - SFDR Article 8.
-- High degree of climate resilience independently confirmed across the
portfolio of assets.
We would like to thank our team once again for their hard work
over the past year. Their dedication and approach are outstanding
and remain a fundamental part of our success.
Strong business model and resilient portfolio
Our robust and defensive business model exemplifies our prudent
and low-risk approach to investing, generating long-term value for
all our stakeholders. We offer investors a long-term, contracted,
stable and predictable revenue stream with high-quality inflation
linkage, underpinned by highly rated, creditworthy public sector
counterparties.
We remain the only internally managed LSE-listed equity
infrastructure investment company, which ensures that our interests
are fully aligned with those of our shareholders. We are led by
creating shareholder value first and portfolio growth second. In
2022, we again maintained the lowest comparative ongoing charge of
0.87 per cent through our efficient and cost-effective structure
[vii] .
Our core criteria for our portfolio are availability-style
assets; with government-backed counterparties; located in
highly-rated investment-grade countries with stable, well-developed
operating environments; climate resilient; and high-quality
inflation linkage.
'Availability-style' unlike 'demand-based' means that revenues
are paid provided the asset is available for use. BBGI has no
exposure to demand-based or regulated investments. At the year-end,
BBGI's investment portfolio was 99.5 per cent operational, with
only one asset under construction.
We invest in countries with credit ratings between AA and AAA,
in Australia, Canada, Germany, the Netherlands, Norway, the UK and
the US. All have stable operating environments, with independent
and proven legal systems.
Value-driven active asset management
We focus on operational performance to drive efficiencies and
generate portfolio optimisations and take a hands-on approach to
preserving and enhancing the value of our investments, delivering
well-maintained infrastructure for communities and end-users, and
stable attractive returns for shareholders. Throughout 2022, we
worked closely with our public sector clients to ensure the
continued smooth functioning of essential social infrastructure.
Building and maintaining strong client relationships is an
important part of our business, and our asset management team meets
regularly with our public sector clients.
Our active asset management activities during 2022 included
applying high-quality corporate governance frameworks, which helped
enable us to maintain our track record of no reported lock-ups or
material defaults at any of our Portfolio Companies, and generating
a consistently high asset availability rate of 99.9 per cent .
Selective acquisition strategy
We pursue growth that is accretive to shareholder value, not
just for growth's sake, and we have maintained a long-weighted,
average portfolio life of over 20.2 years. We source transactions
through our extensive industry relationships and networks and we
finance investments using our existing cash resources and RCF.
During 2022, we successfully grew and further diversified our
portfolio, while maintaining strategic discipline in our
acquisition strategy and portfolio construction. As with previous
years, we assessed considerably more investments in 2022 than we
pursued. We invested approximately GBP64.4 million in two
availability-style assets.
In February 2022, we completed our investment in the entity
responsible for delivering the 132 MW John Hart Generating Station
in Canada, which is a PPP hydroelectric power station. We are not
exposed to any power price risk. This renewable energy
infrastructure has strong environmental credentials, helping to
provide clean energy to over 80,000 homes on Vancouver Island,
British Columbia.
In September 2022, we acquired a 49 per cent equity interest in
the A7 motorway between Bordesholm and Hamburg in Germany, which
will help minimise any increase in exhaust emissions from the
higher traffic load by reducing congestion and traffic jams. We
screened both investments for ESG factors, including their
alignment with our selected UN Sustainable Development Goals
('SDGs'), and climate-change resiliency.
We continue to evaluate acquisition opportunities according to
our criteria, and take a selective and disciplined approach to
evaluating potential investment opportunities. Transaction volumes
in 2022 were impacted as we entered a 'price discovery phase'
between buyers and sellers. However, we are still seeing strong
demand from investors for long-term, stable and inflation-linked
income, and there is an attractive pipeline of acquisition
opportunities in our availability-style sector. There is also
potential to augment our portfolio with select opportunities in
adjacent sectors with the same low-risk profile, such as
investments in European primary care . This sector is very similar
to our Local Improvement Finance Trust ('LIFT') investments, where
we already own over 30 primary care facilities in England .
Valuation - high-quality inflation linkage, discount rates and
deposit rates
During 2022, inflation and interest rates have increased in all
jurisdictions where BBGI invests. The rise in long-term interest
rates had an impact on discount rates, but it has become clear that
not all asset classes perform identically in a rising interest rate
environment.
Our equity cash flows are positively linked to inflation at
approximately 0.5 per cent: if long--term inflation is one per cent
higher than our assumptions for all future periods, returns will
increase from 6.9 per cent to 7.4 per cent. In the reporting
period, the effect of actual inflation and our updated short-term
inflation forecast resulted in a GBP76 million increase in the
NAV.
We achieve this high-quality inflation linkage through
contractual indexation mechanics in our project agreements with our
public sector clients at each Portfolio Company, and update the
inflation adjustment at least annually. We pass on the indexation
mechanism to our subcontractors - on whom we rely to support our
assets' operations - and this provides an inflation cost hedge to
effectively manage our cost base.
The weighted average discount rate applied to our portfolio
increased from 6.6 per cent to 6.9 per cent, reflecting an equity
risk premium of c. 3.1 per cent over the longer-term weighted
average government bond yields. Actual and projected inflation
rates also increased and, coupled with higher actual and forecasted
deposit rates for money held on deposit at Project Company level,
have more than offset any negative effects on the NAV from rising
discount rates. The sensitivity analysis in the Valuation section
of this Annual Report illustrates the effect of this combined
movement on our NAV, in a scenario where we experience discount,
inflation, and deposit rate rises across our portfolio .
Additionally, we have included a scenario of a two-percentage point
higher inflation rate over the next three years, compared to our
forecast assumptions.
Prudent financial management
We ended the year with a net debt position of GBP26.3 million,
with GBP57.5 million cash borrowings outstanding under our GBP230
million RCF. The RCF, which has the possibility, under its
accordion tranche, to be increased by a further GBP70 million,
matures in May 2026. As a principle, we only draw on our RCF to
finance new acquisitions, giving our shareholders maximum certainty
of securing our pipeline. We manage market liquidity risk by
maintaining adequate cash and cash equivalents for day-to-day and
medium-to-long-term capital needs. Borrowings in underlying
entities are non-recourse, and - with minor exceptions only -
borrowing costs are fixed and amortising over the period of our
ownership of each respective asset, which leaves BBGI with minimal
refinancing risk.
Risk management
Our approach to risk management remains unchanged and there has
been no material movement in our risk profile over the past year.
Our portfolio is not directly impacted by the events in Ukraine or
energy price rises.
In the current macroeconomic environment, a key risk for BBGI
would be further interest rate increases and the associated impact
on discount rate and NAV, although this is expected, at least, to
be partly offset by higher than forecasted deposit rates and
inflation-linked income. For further information, please see the
sensitivity in the Valuation section and the Risk section.
While there is an elevated inflationary environment in all our
jurisdictions, we mitigate this risk in our portfolio by seeking to
match the indexation of revenues and costs.
With approximately two-thirds of our portfolio outside the UK,
BBGI is exposed to foreign-exchange volatility. We have a prudent
hedging policy aimed at mitigating foreign exchange risk and it has
worked well to limit the NAV impact from movements against
Sterling, the Group's reporting currency. We operate a four-year
portfolio distribution hedging policy, and a one-year rolling
balance sheet hedging approach. We aim to limit the impact of
foreign exchange volatility of the NAV to 3 per cent, if all
currencies move against Sterling by 10 per cent.
Environmental, Social and Governance ('ESG') progress
The landscape for responsible investment has shifted markedly
since 2011 and, as stewards of important social infrastructure
investments, we continue to evolve the reporting and monitoring of
our ESG performance, with ESG considerations fully integrated into
our business model.
We align with the Sustainable Finance Disclosure Regulation
('SFDR') Article 8 product classification, promoting social
characteristics. SFDR provides a framework for transparency for
companies that make a genuine contribution to sustainable
outcomes.
We disclose information in line with the Task Force on
Climate-Related Financial Disclosures ('TCFD') recommendations and
the UN Global Compact ('UNGC'). We also align with the UN SDGs as
an integral part of our approach to ESG. We are committed to the
UNGC's Ten Principles and are a signatory to the Net Zero Asset
Manager's Initiative . Our Portfolio Companies are also expected to
contribute to the objectives of the Paris Agreement and we are in
the process of compiling a Greenhouse Gas ('GHG') inventory for all
our Portfolio Companies, by mid-2023. This will be consistent with
the GHG Protocol, and will include Scope 1, 2 and material Scope 3
emissions.
Our published Net Zero Plan for BBGI and key goals at the
corporate level and for our Portfolio Companies includes the
following:
-- Reduce our corporate GHG emissions by 50 per cent by 2030,
embedded in our executive remuneration targets.
-- Net zero corporate GHG emissions by 2040.
-- Report Scope 1 , 2 and material Scope 3 emissions at all of
our Portfolio Companies from June 2023 onwards.
-- 70 per cent of our Portfolio Companies by value to be 'net
zero', 'aligned', or 'aligning' [viii] , by 2030, embedded in our
executive remuneration targets. This means that by 2030, 70 per
cent of our assets under management (portfolio companies by value)
will have a long-term goal to be net zero by 2050 or sooner.
Looking ahead
We are well placed to benefit from ongoing strong demand for
public infrastructure. Government debt has escalated due to
COVID-19 mitigation measures and soaring energy prices in Europe,
and the debt-to-GDP ratio and risk-free rates have risen in almost
all our jurisdictions.
Against this backdrop, the scope for government-financed
infrastructure investments is limited, and governments worldwide
are expected to seek private financial support to meet community
demand to deliver essential infrastructure.
Our strong financial and operational performance over 2022 has
reinforced the attractions of our asset class, particularly for
investors looking for stable and predictable cash flows, dividend
growth, and assets with high-quality inflation linkage and low
correlation to other asset classes.
We remain confident that our reputation as a specialist investor
in low-risk global infrastructure, and our well-established
relationships with key vendors, will allow us to continue to source
attractive and accretive investment opportunities.
In an uncertain world, we firmly believe in BBGI's ability to
continue to deliver positive and sustainable value for all
stakeholders over the short and longer term. We sincerely thank our
shareholders for their support over the past year and look forward
to the future with confidence.
Duncan Ball Frank Schramm
Co-CEO Co-CEO
29 March 2023
On behalf of the Management Board
Our Investment Strategy
BBGI provides access to a globally diversified portfolio of
infrastructure investments, which generate long-term and
sustainable returns and serve a critical social purpose in their
local communities.
BBGI's portfolio is well-diversified across sectors in
education, healthcare, blue light (fire and police), affordable
housing, modern correctional facilities, clean energy and transport
infrastructure assets. Our business model is built on four
strategic pillars: (i) low risk, (ii) globally diversified, (iii)
strong ESG approach and (iv) internally managed.
Low-risk
-- Availability-style investment strategy.
-- Secure, public sector-backed contracted revenues.
-- Stable, predictable cash flows, with high-quality inflation
linkage and progressive long-term dividend growth.
Globally diversified
-- Focus on highly rated investment grade countries.
-- Stable, well-developed operating environments.
-- A global portfolio, serving society through supporting local communities.
Strong ESG approach
-- ESG fully integrated into the business model.
-- Focus on delivering positive social impact - SFDR Article 8
([ix]) - and high degree of climate resilience.
-- Executive compensation linked to ESG performance.
Internally managed
-- In-house management team focused on delivering shareholder
value first, portfolio growth second.
-- Management interests aligned with those of shareholders.
-- Strong pricing discipline and portfolio management.
-- Lowest comparative ongoing charges [x] .
Consistent delivery of objectives
1 - Robust shareholder returns
2 - Low correlation to other asset classes
3 - Sustainable growth
Operating Model
We follow a proven operating model based on three principles:
value-driven active asset management, prudent financial management
and a selective acquisition strategy to preserve and create value,
achieve portfolio growth and ensure ESG considerations are embedded
in our processes. These operational pillars are fundamental to our
success.
We ensure stable operational performance through an active asset
management approach, where we actively seek to preserve value and,
where possible, identify and incorporate value enhancements over
the lifetime of the assets under our ownership. Our approach aims
to reduce costs to our public sector clients and asset end-users,
and to enhance the operational efficiency of each asset. It also
allows us to generate a high level of asset availability,
underpinning the social purpose of our portfolio.
Our prudent financial management focuses on efficient cash and
corporate cost management and implementing our foreign exchange
hedging strategy. Our portfolio's wide geographical diversification
results in exposure to multiple currencies. We actively seek to
manage geographical concentration and mitigate foreign exchange
risk.
We pursue a selective acquisition strategy, so our Management
Board's focus remains within its area of expertise, and we uphold
the strategic pillars defined by our investment proposition. We
actively seek acquisitions with long-term, predictable and
inflation-protection characteristics that support the portfolio's
contracted, high-quality, inflation linkage of 0.5 per cent.
Value-driven active asset management
We pursue a standardised approach across our portfolio to
preserve value, to derive operational and value enhancements, and
to improve customer experience including:
-- Strong client relationships, by prioritising regular meetings
to achieve high rates of client satisfaction.
-- Focused asset management, to ensure distributions are on time, and on or above budget.
-- Focused cost management and portfolio-wide cost-saving
initiatives, to leverage economies of scale or outperform the base
case, such as portfolio insurance and standardised management
contracts for Portfolio Companies, and lifecycle cost reviews.
-- Comprehensive monitoring, to ensure we fulfil our contractual obligations.
-- Detailed climate risk assessments and ESG KPI tracking tool,
which includes over 100 KPIs and questions, and evaluates the
governance and non-financial performance of each of our
investments.
-- Maintaining high availability levels by proactively managing
any issues, including site visits to all significant
investments.
-- Reviewing Portfolio Company debt facilities and investigating
potential refinancing benefits.
-- Measured exposure to construction risk to support NAV uplift
by de-risking assets over the construction period.
Prudent financial management
We focus on cash performance at both the asset and portfolio
level to drive efficiencies, including:
-- Progressive future dividend growth, underpinned by
high-quality inflation linkage and strong portfolio
distributions.
-- Low ongoing charges through our efficient and cost-effective internal management structure.
-- Managing and mitigating foreign exchange risk through our
hedging strategy: hedging forecast portfolio distributions, balance
sheet hedging through foreign exchange forward contracts, and
borrowing in non-Sterling currencies.
-- Euro-denominated running costs, which provide a natural hedge
against Euro-denominated portfolio distributions.
-- Efficient treasury management system for cash in the
underlying Portfolio Companies to maximise interest income on
deposits.
-- Maintaining modest cash balances at the corporate level to
limit cash drag, facilitated through access to the RCF.
Selective acquisition strategy and strategic investment
partnership
We maintain strategic discipline in our acquisition strategy and
portfolio composition to ensure we pursue growth that builds
shareholder value, not just for growth's sake, including:
-- Broad industry relationships throughout multiple geographies.
-- Pre-emption rights to acquire co-shareholders' interests.
-- Visible pipeline through a North American strategic partnership.
-- Global exposure to benefit from geographical diversification.
-- Robust framework embedding ESG principles into investment due diligence.
-- Revolving corporate debt facility to support transaction execution.
-- Focus on the Management Board's core areas of expertise.
We continue to leverage strong relationships with leading
construction companies to source potential pipeline investments,
which support our low-risk and globally diversified investment
strategy.
Typically, these contractors have secured the mandate to design
and build new assets but continue to look to divest financially
after the construction period has finished - thereafter often
maintaining facility management contracts through a long-term
partnership. BBGI is an attractive partner for several reasons:
-- Our cost of capital is typically lower than construction
companies, so involving BBGI can make the bid more competitive.
-- We are a long-term investor with a publicly-listed status,
which is attractive to government and government-backed
counterparties.
-- We are considered a reliable source of liquidity should a
construction partner decide to sell.
-- Having a financial partner is a prerequisite for some
construction companies so they can avoid consolidating the
Portfolio Company debt onto the balance sheet of their parent
company.
-- We have extensive asset credentials and a strong track
record, which can assist with the shortlisting process for new
projects.
Portfolio Review
Portfolio summary
The Company's investments as at 31 December 2022 consisted of
interests in 56 high-quality, availability-style social
infrastructure assets, 99.5 per cent of which are fully operational
(by portfolio value). The portfolio has no exposure to demand-based
or regulated investments, and is diversified across sectors in
education, healthcare, blue light (fire and police), affordable
housing, modern correctional facilities, clean energy and transport
infrastructure assets.
Located in the UK, North America, Australia and Continental
Europe, all Portfolio Companies are in stable, well-developed and
highly-rated investment grade countries.
Portfolio breakdown*
For portfolio statistics, refer to the Portfolio at a Glance
section of this Annual Report.
No. Asset Country Percentage
holding
%
1 A1/A6 Motorway Netherlands 37.1
--------------------------------- ------------ -----------
2 A7 Motorway Germany 49
--------------------------------- ------------ -----------
Aberdeen Western Peripheral
3 Route UK 33.3
--------------------------------- ------------ -----------
4 Avon & Somerset Police HQ UK 100
--------------------------------- ------------ -----------
5 Ayrshire and Arran Hospital UK 100
--------------------------------- ------------ -----------
Barking Dagenham & Havering
6 (LIFT) UK 60
--------------------------------- ------------ -----------
7 Bedford Schools UK 100
--------------------------------- ------------ -----------
8 Belfast Metropolitan College UK 100
--------------------------------- ------------ -----------
9 Burg Correctional Facility Germany 90
--------------------------------- ------------ -----------
10 Canada Line Canada 26.7
--------------------------------- ------------ -----------
11 Champlain Bridge Canada 25
--------------------------------- ------------ -----------
12 Clackmannanshire Schools UK 100
--------------------------------- ------------ -----------
13 Cologne Schools Germany 50
--------------------------------- ------------ -----------
14 Coventry Schools UK 100
--------------------------------- ------------ -----------
15 E18 Motorway Norway 100
--------------------------------- ------------ -----------
16 East Down Colleges UK 100
--------------------------------- ------------ -----------
17 Frankfurt Schools Germany 50
--------------------------------- ------------ -----------
Fürst Wrede Military
18 Base Germany 50
--------------------------------- ------------ -----------
19 Gloucester Royal Hospital UK 50
--------------------------------- ------------ -----------
20 Golden Ears Bridge Canada 100
--------------------------------- ------------ -----------
21 Highway 104 Canada 50
--------------------------------- ------------ -----------
22 John Hart Generating Station Canada 80
--------------------------------- ------------ -----------
23 Kelowna and Vernon Hospital Canada 100
--------------------------------- ------------ -----------
24 Kent Schools UK 50
--------------------------------- ------------ -----------
25 Kicking Horse Canyon Canada 50
--------------------------------- ------------ -----------
26 Lagan College UK 100
--------------------------------- ------------ -----------
27 Lisburn College UK 100
--------------------------------- ------------ -----------
Liverpool & Sefton Clinics
28 (LIFT) UK 60
--------------------------------- ------------ -----------
29 M1 Westlink UK 100
--------------------------------- ------------ -----------
30 M80 Motorway UK 50
--------------------------------- ------------ -----------
McGill University Health
31 Centre Canada 40
--------------------------------- ------------ -----------
32 Mersey Care Hospital UK 79.6
--------------------------------- ------------ -----------
33 Mersey Gateway Bridge UK 37.5
--------------------------------- ------------ -----------
34 N18 Motorway Netherlands 52
--------------------------------- ------------ -----------
35 North Commuter Parkway Canada 50
--------------------------------- ------------ -----------
36 North East Stoney Trail Canada 100
--------------------------------- ------------ -----------
North London Estates Partnership
37 (LIFT) UK 60
--------------------------------- ------------ -----------
38 North West Fire and Rescue UK 100
--------------------------------- ------------ -----------
39 North West Regional College UK 100
--------------------------------- ------------ -----------
Northwest Anthony Henday
40 Drive Canada 50
--------------------------------- ------------ -----------
Northern Territory Secure
41 Facilities Australia 100
--------------------------------- ------------ -----------
42 Ohio River Bridges US 66.7
--------------------------------- ------------ -----------
Poplar Affordable Housing
43 & Recreational Centres UK 100
--------------------------------- ------------ -----------
44 Restigouche Hospital Centre Canada 80
--------------------------------- ------------ -----------
45 Rodenkirchen Schools Germany 50
--------------------------------- ------------ -----------
46 Royal Women's Hospital Australia 100
--------------------------------- ------------ -----------
47 Scottish Borders Schools UK 100
--------------------------------- ------------ -----------
48 South East Stoney Trail Canada 40
--------------------------------- ------------ -----------
49 Stanton Territorial Hospital Canada 100
--------------------------------- ------------ -----------
50 Stoke & Staffs Rescue Service UK 85
--------------------------------- ------------ -----------
51 Tor Bank School UK 100
--------------------------------- ------------ -----------
52 Unna Administrative Centre Germany 90
--------------------------------- ------------ -----------
53 Victoria Correctional Facilities Australia 100
--------------------------------- ------------ -----------
54 Westland Town Hall Netherlands 100
--------------------------------- ------------ -----------
55 William R. Bennett Bridge Canada 80
--------------------------------- ------------ -----------
56 Women's College Hospital Canada 100
--------------------------------- ------------ -----------
*In alphabetical order
Operating model in action
Preserving and enhancing value through active asset
management
During 2022, the portfolio value increased by approximately
GBP148 million [xi] from the rebased value, driven largely by the
net effect of actual inflation and a change in the short-term
forecast for inflation and deposit rates forecast, the positive net
effect of foreign exchange and the portfolio performance resulting
from our hands-on active asset management approach.
Our active value-driven approach to asset management and the
robustness of our portfolio meant that the availability level of
the Company's assets was recorded at approximately 99.9 per cent
and any deductions were either borne by third-party facility
management companies and road operators, or were part of planned
expenditures.
There were no material lock-ups or default events reported
during the year and we are very proud of this achievement.
High-quality inflation linkage
During the year, BBGI's strong financial and operational
performance was partly due to inflation exceeding forecast
assumptions in all regions where the Company is active. The total
inflation effect was GBP76 million, with shareholders benefitting
from BBGI's high-quality cash flow correlation with inflation
linkage at 0.5 per cent, especially in a rising interest rate
environment.
BBGI has a portfolio of 56 availability-style assets with
government or government-backed counterparties, which have
contractual income streams. The obligations of these contracts are
underpinned by Project Agreements, with each agreement being unique
but generally following a standard approach. Project Agreements
typically include either partial or full indexation to an
appropriate inflation factor to compensate for increasing costs
over the life of the concession.
The Portfolio Companies enter into facilities management and
operating subcontracts that mirror the inflation arrangements
contained in the Project Agreement. In the UK, Project Agreements
tend to have a Retail Price Index ('RPI') adjustment factor, while
other regions commonly use Consumer Price Index ('CPI') indexation.
However, some Project Agreements have bespoke inflation indexes
that reflect expected operations and maintenance costs.
The extent of a Portfolio Company's linkage to inflation is
determined by the portion of income and costs linked to inflation.
In most cases, cash flows are positively inflation-linked as the
indexation of revenues is greater than the indexation of
expenses.
The high-quality and defensive nature of the Company's inflation
linkage are underpinned by:
Contractual increases: The adjustment for inflation is a
contractual component of the 100 per cent availability-style cash
flows for each Portfolio Company, and is supported by creditworthy
government or government-backed counterparties in AA to AAA-rated
countries. The Company does not invest in demand-based assets.
Although such assets may seem to offer a strong theoretical
inflation linkage (e.g. the ability to raise prices in response to
an increase in CPI), they are likely still subject to changes in
elasticity of demand. Toll roads and student accommodation projects
are examples of such assets, which may have the potential to
increase prices in response to an increase in CPI, but may be
hindered by market demand from increasing revenue, while costs may
simultaneously rise.
Protection against rising costs: The Company transfers the
indexation mechanism to its subcontractors, who are crucial in
supporting the operations of our assets. This arrangement serves as
an inflation cost hedge, which helps the Company to efficiently
control its cost base. Similarly, in most cases, the risk of energy
costs increases rests with the public sector client or has been
passed down to the subcontractor.
Not dependent on regulatory review: The inflation adjustment is
automatic and contractual and is not subject to regulatory review.
Once the relevant reference factor is published, the adjustment is
mechanical.
Portfolio approach: The Company's inflation linkage comes from
diverse Portfolio Companies in different countries.
Prudent financial management
Our assets performed well during the reporting period with cash
receipts during the year ahead of business plan . This robust
performance and the confidence in the business model allowed the
Company to achieve its dividend target of 7.48pps for 2022,
increase our dividend targets of 7.93pps and 8.40pps for 2023 and
2024 respectively, as well as introduce a new dividend target of
8.57pps for 2025.
Cash receipts during the year allowed the Company to achieve a
strong dividend cover of 1.47x. The predictable nature of our cash
flows allows for high visibility for future dividends, and
therefore gives us the confidence to revise our dividend targets
and extend our dividend guidance to 2025, with dividends expected
to be fully cash covered.
During the year, we continued to implement our hedging strategy,
which seeks to hedge 100 per cent of projected non-Sterling and
non-Euro portfolio distributions over the next four years.
Additionally, in November 2022, we executed balance sheet hedges to
limit our NAV exposure to fluctuations in foreign exchange
rates.
The Company has efficient cash management in place which aims to
avoid cash drag. This includes using the proven financing
methodology of drawing on its RCF before raising new equity to
repay the temporary debt. The committed amount of the RCF is GBP230
million, which matures in May 2026. Furthermore, there is the
possibility to increase the quantum to GBP300 million by means of
an accordion provision. This enables the Company to execute larger
acquisitions in an efficient manner and to be a trusted and repeat
partner in its key markets.
With GBP57.5 million drawn under the RCF, the net debt position
on an Investment Basis as at 31 December 2022 was GBP26.3
million.
Selective acquisition strategy
Successful acquisitions
During the year, we continued to pursue a selective acquisition
strategy, investing approximately GBP64.4 million, including
interests in two new projects both of which earn availability-based
revenue in return for providing essential public services. This
disciplined approach demonstrates the Management Board's commitment
to avoiding style drift and evidences how BBGI's strong industry
relationships and nimble operating model continue to realise a
pipeline of acquisition opportunities, with the Management Board
having assessed many more potential opportunities than those
acquired. Although the Company received invitations to bid on
several transactions over the year, the Management Board declined
opportunities that were not accretive in terms of inflation
linkage, yield or residual life.
The two new investments were:
-- John Hart Generating Station Replacement Project (Canada): In
February 2022, BBGI completed the acquisition of an investment in
InPower BC General Partnership, the entity responsible for
delivering the John Hart Generating Station Replacement Project
(John Hart Generating Station), an investment delivered through the
existing strategic partnership between the Company and SNC-Lavalin
Group Inc. The PPP consists of the design, construction, financing,
maintenance and rehabilitation of a new three-turbine, 132 MW
hydroelectric power generation station on the Campbell River,
British Columbia, including a three generating unit underground
powerhouse, 2.1 kilometres of water passage tunnels and a water
bypass system to protect downstream fish habitat. The acquisition
price was approximately GBP24 million.
Service commencement was achieved in 2019 and the concession
runs until 2033. The asset is classified as availability-style
under the investment policy of the Company. The investment is not
subject to demand or power price risk. Availability payments are
received from the British Columbia Hydro & Power Authority
(rated AA/Aaa by DBRS Morningstar and Moody's respectively), a
Crown corporation wholly-owned by the Government of British
Columbia. The station generates clean and reliable energy for over
80,000 homes.
-- A7 Motorway (Germany): In September 2022, BBGI completed the
acquisition of a 49 per cent interest in Via Solutions Nord GmbH
& Co. KG, the project company for the A7 motorway PPP near
Hamburg in Germany. The asset is classified as availability-based
under the investment policy of the Company and aligns with BBGI's
ESG principles.
The project consists of the design, construction, financing,
operation, maintenance and rehabilitation of 65 kilometre widening
of a section of the A7 motorway between Neumünster and Hamburg. The
project includes 11 interchanges, six parking facilities and four
rest areas, various civil engineering structures and a 550-metre
noise enclosure tunnel. Availability payments are received from
Federal Republic of Germany, represented by the Free City of
Hamburg and the Federal State of Schleswig-Holstein, rated AAA/Aaa
by S&P and Moody's respectively. Construction completion was
achieved in December 2019 and the concession runs until 2044.
The increased efficiency of the A7 motorway will help to
minimise any increase in exhaust emissions from the higher traffic
load by reducing congestion and traffic jams and is expected to
achieve a consistent traffic flow and uniform driving speeds.
Environmental impact assessments (EIA) have been performed. During
the EIA procedure, all potentially affected Natura 2000 sites,
habitats and species have been analysed, including habitats and
species placed beyond Natura 2000 sites.
Both projects acquired during the year add to the portfolio's
diversification across multiple social infrastructure sectors where
the demand for private sector investment remains high.
Strategic investment partnerships
We continue to leverage strong relationships with leading
construction companies to source a potential pipeline, which
supports our low-risk and globally diversified investment
strategy.
Typically, contractors active in the sector have secured the
mandate to design and build new assets but often look to divest
financially after the construction period has finished - thereafter
often maintaining facility management contracts through a long-term
partnership. There are several reasons why BBGI is an appealing
partner:
-- We possess a substantial asset portfolio and a robust performance history.
-- As a long-term investor with a publicly-listed status, we are
an attractive option for government and government-backed
counterparties.
-- We are recognised as a trustworthy source of liquidity if a
construction partner decides to sell in the future.
One notable relationship is the North American strategic
partnership with SNC-Lavalin, which covers four availability-based
assets. More details of the projects covered by the pipeline
agreement are provided in the Market Trends and Pipeline section of
this Annual Report.
Avoiding style drift
As competition to acquire availability-style assets at
attractive valuations remains robust, the Company's Management
Board consciously works to avoid 'style drift'. This refers to the
practice of moving up the risk spectrum, particularly where pricing
does not accurately reflect inherent risks, both to find investible
assets and to deliver the targeted returns to investors.
The Management Board has made the conscious decision to avoid
investing in infrastructure transactions with a demand-based
revenue stream, which are typically highly correlated to Gross
Domestic Product ('GDP') or subject to uncertainty due to
regulatory review periods and political interventions.
We continue to pursue essential social infrastructure assets,
which match our low-risk, globally diversified investment strategy
and unwavering ESG principles. BBGI has investments in LIFT assets,
where BBGI typically owns the land and buildings, and availability
payments are fully linked to RPI. We will continue to seek out
opportunities to expand and diversify our portfolio of essential
social infrastructure by exploring investments with similar
features of long-term and inflation-linked revenues tied to public
sector counterparties or related to the public sector, whether
through long-term concessions or direct asset ownership.
Although this disciplined strategy may occasionally result in
periods of slower portfolio growth, we are confident the benefits,
such as dependable and consistent income and returns with low
volatility, justify its continued implementation. By adhering to
our area of expertise, we offer a less complex business
proposition, which should result in fewer surprises, and a more
predictable and stable return for our shareholders.
Supply chain monitoring
The Management Board continually reviews the potential
concentration risk of operations and maintenance ('O&M')
contractors that provide counterparty services to the Company's
assets. The table illustrates the level of O&M contractor
exposure as a percentage of portfolio value ([xii]) at 31 December
2022.
O&M Contractors
==================================== ======= =====
Portfolio Company in-house 13%
SNC-Lavalin O&M Inc 10%
Capilano Highway Services 10%
Cushman and Wakefield 6%
Black & McDonald 6%
Integral FM 5%
Honeywell 5%
Hochtief Solutions
AG 4%
Carmacks Maintenance Services 4%
Graham AM 3%
Intertoll Ltd. 3%
BEAR Scotland 3%
Guildmore Ltd. 3%
Amey Community Ltd. 3%
Galliford Try FM 3%
Remaining investments 19%
100%
The Management Board has not identified any significant risk
exposure and remains comfortable with the current contractor
allocation. The Company benefits from a diverse contractor base and
supply chain, with no concentrated exposure, and is supported by a
strict supply chain monitoring policy. We regularly monitor the
performance of subcontractors and have risk mitigation measures in
place to deal with any supply chain issues.
We are pleased to confirm that we have not recorded any material
adverse supply chain issues during the year.
Construction defects
The Company routinely monitors the quality of its assets to
identify any construction defects early on and, where necessary, to
implement the appropriate remediation measures.
The responsibility for, and the cost of remediation and related
deductions falls to the relevant construction subcontractor on each
asset, subject to statutory limitation periods. This is a key
component of the Company's effective counterparty risk
management.
Latent defects risk was mitigated during the year with 60 per
cent of portfolio value covered by either limitation or warranty
periods and there were no material defects reported on any of the
Company's portfolio assets.
Latent defects limitations / Warranty
period remaining
========================================== =====
Expired 40%
Within 1 year 8%
1-2 years 11%
2-5 years 20%
5-10 years 15%
10+ years 6%
100%
Portfolio Snapshot - Top Five Assets
Our five largest assets
1) Ohio River Bridges:
-- Type: Availability-style
-- Status: Operational
-- Equity holding (per cent) BBGI: 66.7 per cent
-- Total investment volume: US$1.175 billion
-- Financial close/operational: March 2013/December 2016
-- Concession period: 35 years (post-construction) ending in 2051
The project includes a 760-metre cable-stay bridge; a 500-metre
long twin vehicular tunnel and 2.25 kilometres of associated
six-lane interstate highway, with more than 21 bridges and multiple
roundabout style interchanges. The asset greatly improves
connectivity, public safety and economic growth, which benefits
residents, businesses and visitors in the Southern Indiana region,
particularly for road-users travelling to and from the state of
Kentucky.
In October 2021, a US$528 million green bond offering was
completed to refinance its existing indebtedness. This transaction
allowed the Portfolio Company to optimise its financing costs over
the remaining term of the contract thereby further strengthening
its financing structure, while also benefiting the public sector
client through a reduction in future service payments. Recent
environmental initiatives include installing solar panels on the
O&M buildings, a commitment to transitioning its fleet of
vehicles to reduced-emission and electric-powered, pollinator
habitats and other wildlife conservation initiatives, and an
organisation-wide recycling programme, to name a few.
2) Golden Ears Bridge:
-- Type: Availability-style
-- Status: Operational
-- Equity holding ( per cent ) BBGI: 100 per cent
-- Total investment volume (debt and equity): C$1.1 billion
-- Financial close/operational: March 2006/June 2009
-- Concession period: 32 years (post construction) ending in 2041
Golden Ears Bridge represented the largest private financing for
a greenfield PPP in Canada at the time of its launch. The project
involves the design, build, financing, operation and maintenance of
the Golden Ears Bridge in Vancouver, which is a 1-kilometre,
six-lane road that spans the Fraser River and connects Maple Ridge
and Pitt Meadows to Langley and Surrey. The road opened in March
2009 and includes more than 3.5 kilometres of ramps, viaducts,
minor bridges and underpasses, and more than 13 kilometres of
mainline roadway; a large part of which has been landscaped.
The project has brought close to C$1 billion in
construction-related activity to the area, while commuters using
the bridge now save up to 40 minutes per peak-hour round-trip from
Maple Ridge to Langley. In coordination with the asset operator, we
have implemented an LED conversion for all project lighting, which
has delivered annual energy savings in excess of 380,000 kWh and
has reduced carbon dioxide emissions at a rate of 273 metric tons
per year.
3) Northern Territory Secure Facilities:
-- Type: Availability-style
-- Status: Operational
-- Equity holding ( per cent ) BBGI: 100 per cent
-- Total investment volume (debt and equity): A$620 million
-- Financial close/operational: October 2011/November 2014
-- Concession period: 30 years (post-construction) ending in 2044
Located near Darwin, Northern Territory (the 'Territory'), the
project involves the design, build, financing, operation and
maintenance of three separate centres including: a 1,000-bed
multi-classification male and female correctional centre, a 30-bed
secure mental health and behavioural management centre (the first
of its kind in the Territory), and a 48-bed supported accommodation
and programme centre for community-based offenders.
The latter is designed to support the Australian Government's
goals of enhanced rehabilitation, education and reduced reoffending
rates in the Territory.
The asset is one of the largest social infrastructure projects
in the Territory and is the largest PPP ever procured to date. BBGI
acquired its initial 50 per cent interest in the asset while it was
still in construction and subsequently acquired the remaining 50
per cent stake in July 2015.
4) Victoria Correctional Facilities
-- Type: Availability-style
-- Status: Operational
-- Equity holding ( per cent ) BBGI: 100 per cent
-- Total investment volume: A$244.5 million
-- Financial close/operational: January 2004/March 2006
-- Concession period: 25 years (post-construction) ending in 2031
Victoria Correctional Facilities is an availability-based PPP
asset entailing the design, finance, construction and operation of
two correctional facilities for the State of Victoria, Australia
(the 'State'). The first facility, Metropolitan Remand Centre,
accommodates up to 1,000 male offenders and is located
approximately 20 kilometres from Melbourne city centre. The second,
smaller facility is the Marngoneet Correctional Centre that houses
up to 550 male offenders and is located approximately 65 kilometres
from Melbourne city centre. The operational period is 25 years and
runs until 2031.
A substantial augmentation was requested by the State to
reinforce the facility and this completed in June 2018.
The Project is currently undertaking a material expansion of its
accommodation (276 beds) and associated infrastructure across both
facilities. The Portfolio Company is managing the delivery of the
works, which are expected to be complete by Q2 2024.
5) A1/A6 motorway
-- Type: Availability-style
-- Status: Operational
-- Equity holding ( per cent ) BBGI: 37.14 per cent
-- Total investment volume (debt and equity): EUR727.4 million
-- Financial close/operational: February 2013/June 2017
-- Concession period: 25 years (post-construction) ending in 2042
At the time of its launch, the A1/A6 Motorway project
represented one of the largest greenfield PPP projects in the
Netherlands and forms part of the wider Schiphol - Amsterdam -
Almere (SAA) corridor. The project is for the design, construction,
financing, and maintenance of 18 kilometres of the A1 and A6
motorways to the south of Amsterdam and involves re-routing and
widening of the A1 (to 2 x 5 lanes and 2 reversible lanes),
reconstruction of two major interchanges, expansion of the A6 (to 4
x 2 lanes and 2 reversible lanes) and the construction of various
new bridges, an aqueduct and the longest free span railway bridge
in Europe, as well as demolition of the old part of the A1.
The project forms part of a wider programme of five connected
and adjacent projects, which together provide for significant extra
road traffic capacity, reduced journey times and improved
accessibility of the north flank of the economical heart of the
Netherlands around Amsterdam. As a result, the liveability of the
area has been improved significantly. In 2020, SAAone replaced all
traditional street lighting, more than 2,000 fixtures in total with
LED lighting, making the infrastructure more maintenance-friendly,
more sustainable and more reliable than traditional lighting.
Moreover, it decreases the CO(2) -footprint of the project by at
least 350 tons per year.
Market Trends and Pipeline
2023 and beyond
By many measures, 2022 was a difficult year, characterised by
rising inflation worldwide, the end of lenient monetary policies,
supply chain interruptions, and the conflict in Ukraine. These
occurrences led global markets towards a downward trend, and the
associated challenges persist into 2023.
While this environment may discourage investor confidence, we
remain optimistic about our resilient and defensive business model,
low-risk investment strategy and the markets in which we operate.
As interest rates rise from historic lows, combined with inflation
concerns and general uncertainty, the stability, inflation linkage
and resilience associated with availability-style social
infrastructure investments have ensured that it remains an
attractive asset class.
Competition for these availability-style assets varies between
markets. Availability-style social infrastructure remains an
appealing sector to many investors, however it can be difficult for
new entrants with big ambitions to deploy meaningful amounts of
equity quickly since the typical transaction size is often smaller
than other infrastructure investment opportunities, and individual
asset sales are more common than large portfolio transactions. With
a well-established platform, specialist skills, strong industry
relationships and a reputation among sellers of transacting
successfully, BBGI has been able to grow its portfolio from 19
assets at IPO to 56, whilst maintaining pricing discipline, and
expects to be able to continue to do so in 2023 and beyond, subject
to market conditions.
Across BBGI's target markets, infrastructure under-investment
remains a prevalent issue. Public finance budget constraints
require the private sector's involvement in providing the necessary
funding and expertise to construct, maintain, and operate critical
infrastructure assets. Many governments have ambitious plans to
make significant infrastructure commitments that will generate
employment, rejuvenate communities, transition to a low-carbon
economy, and act as a stimulus for economic recovery. In the
regions where we operate, there is a consistent baseline of new
investment opportunities, and we anticipate this trend will
continue.
At the same time, construction companies continue to consider
the divestments of availability-based infrastructure investments
they hold. This could be to recycle capital into new opportunities
after a project reached construction completion or in response to
capital needs in other parts of their business due to economic
challenges. BBGI has well-established relationships with most major
construction companies in the sector and this continues to be a
good source of new investments.
As a result of this trend, BBGI completed two transactions with
construction companies and PPP developers in 2022 and we anticipate
that there will be further investment opportunities in 2023.
Our key markets offer a generally robust set of opportunities
for availability-style transactions, which are likely to arise from
various sources, including:
-- A strategic partnership in North America with SNC-Lavalin, which has already led to the acquisition of six
assets since 2017, along with
a formal pipeline agreement covering four additional assets with a value of c.C$200 million. In this
arrangement, BBGI has the option
but not the obligation to transact.
-- Ongoing bids for various secondary transactions, such as EU transportation and social opportunities.
-- Soliciting off-market transactions through BBGI's extensive network of market participants in Australia,
Europe, and North America.
-- Acquisition of accretive equity interests from co-shareholders in existing assets.
-- Participation in competitive sale processes, particularly to test pricing assumptions.
-- Selective participation in primary investment opportunities and bids on new availability-style assets as
part of public sector procurement
processes.
We will continue to source opportunities to further diversify
and expand our essential social infrastructure portfolio by
considering investment opportunities with similar characteristics
of low-risk, availability-style, long-term and inflation-linked
revenues with public sector counterparties or a link to the public
sector, whether through long-dated concessions or direct ownership
of assets, with a strong approach to ESG.
Canada
Canada remains one of the most productive PPP markets globally,
and it is also one of the Company's most established and stable
markets. Nearly 300 assets in Canada have been procured under the
PPP model, with a total value of over C$140 billion for assets
currently in operation or under construction, including hospitals,
education, courthouses, and transport assets.
In 2022, ten PPP transactions worth US$4.62 billion reached
financial close in Canada, down from twelve transactions worth
US$5.11 billion in 2021. Ontario has the largest pipeline of
opportunities, as confirmed by its November 2022 market update,
which emphasises its commitment to modernising public assets in the
province, such as hospitals, highways, public transit, children's
treatment centres, and correctional facilities. Infrastructure
Ontario's plans include 26 projects in pre-procurement and 13 in
active procurement, with a total estimated contract value of C$60
billion. The list also contains 16 government-announced projects in
the early stages of planning and defining the project's scope,
timing, and delivery model.
Although other provinces have smaller programmes, they are still
promising. With 16 assets in Canada, BBGI is well-positioned to
take part in an appealing primary pipeline or be a highly credible
purchaser and manager of secondary assets when they become
operational. We anticipate there will continue to be a diverse
range of availability-style social infrastructure investment
opportunities for BBGI to consider in 2023 and 2024, as assets
developed over the past few years become operational and may come
to market.
Additionally, the Company benefits from its North American
strategic partnership with SNC-Lavalin, which covers four assets.
We anticipate that the pipeline agreement could result in
additional investment opportunities of over C$200 million over the
next few years, all of which will be evaluated on a case-by-case
basis.
Formal pipeline assets
Asset Sector Estimated Concession length
Asset Capital after construction
Value(1) completion
Confederation Line (Ottawa, Rail C$3.2 billion 30 years
ON)
-------------- --------------- --------------------
Eglinton Crosstown LRT (Toronto, Rail C$9.1 billion 30 years
ON)
-------------- --------------- --------------------
Highway 407 East Extension Phase Road C$1.2 billion 30 years
I (ON)
-------------- --------------- --------------------
Champlain Bridge (Montreal, Road & Bridge C$3.2 billion 30 years
QC)
-------------- --------------- --------------------
[1] Includes both debt and equity.
UK and Ireland
Private capital has been essential to the maintenance and
development of the UK's existing infrastructure, as well as the
financing of new greenfield projects. The UK has one of the world's
most established and attractive infrastructure markets for private
investors, and the PFI market has grown significantly over the past
few decades.
PFI was a method used by the UK Government to finance public
infrastructure projects such as schools, hospitals, and roads. Over
700 PFI projects were signed in the UK between the early 1990s and
the introduction of its successor, PF2, in 2012. However, PF2 was
only used for a few projects before being discontinued in 2018, and
the UK government is exploring alternative ways to finance public
infrastructure projects.
This has meant that the greenfield infrastructure investment
pipeline has been relatively subdued, although stronger in some
areas (such as Wales) and sectors (such as water projects).
Although there will not be a UK-wide replacement for the PFI or PF2
model, Wales has recently closed several private finance projects
under its new Mutual Investment Model - including the widening of
the A465 motorway and its 21st Century Schools programme. With
Mutual Investment Model projects, the Welsh Government takes up to
a 20 per cent stake in the special purpose company, providing the
Government with a greater stake in the project's success and
greater accountability. The UK Government is also developing new
revenue support models and considering how existing models such as
the Regulated Asset Base model and Contracts for Difference can be
applied in new areas. It remains open to new ideas from the
market.
Despite the decline in greenfield PPP procurement, the UK
Government remains committed to major infrastructure investment,
particularly in health, education, science, and defence, with plans
to invest over GBP600 billion over the next five years. Private
investment will also play a critical role in supporting the UK's
net zero 2050 ambitions and in the green industrial revolution,
with key sectors including energy transition, electric vehicle
charging infrastructure, and fibre optic broadband.
We remain optimistic that PFI and PF2 deal flow will be replaced
by next generation transaction procurement models with similar
attributes and risk and return profiles to the traditional PFI
procurement model.
The Company is committed to finding essential social
infrastructure assets that fit our low-risk, availability-style,
globally diversified investment strategy, and strong approach to
ESG. As existing investors in Local Improvement Finance Trust
assets, BBGI has title to the land and building for the significant
majority of these LIFT assets and the availability payments are
fully indexed with RPI.
We believe there may be interesting acquisition opportunities
and pipeline for these types of primary care infrastructure assets
in the UK and Ireland.
We continue to seek opportunities to expand our essential social
infrastructure portfolio in the UK and Ireland, looking for
investments with similar long-term and inflation-linked revenue
streams with public sector counterparties or a link to the public
sector. This may include long-term concessions or direct ownership
of assets. We aim to diversify our portfolio while focusing on our
low-risk and availability-based investment strategy, and ensuring
our investments align with our strong ESG approach.
US
Since 2015, the US PPP market has experienced steady growth with
more than 125 greenfield PPP deals reaching financial close and a
total deal value exceeding US$60 billion. In 2022, the US PPP
market hit a record with US$22 billion in projects reaching
financial close. In 2021, the US ranked as the second-largest
greenfield PPP market globally by deal value, with 26 greenfield
PPP transactions reaching financial close for a total value of US$6
billion.
Historically, US municipalities and states have been less
receptive to PPPs as the US procurement system is less structured
and lacks a centralised and unified body. However, an increasing
number of state legislatures are making PPPs more acceptable, and
higher education institutions are turning to PPP agreements for a
broader range of projects.
With the passing of the US$1.2 trillion Infrastructure
Investment and Jobs Act (IIJA) in November 2021, this could act as
a catalyst for more PPP investment in the US. The IIJA includes
US$550 billion in new funding to rebuild roads and bridges, clean
water infrastructure resilience, EV charging infrastructure,
broadband, and more. The IIJA also expands how states and
localities may use Private Activity Bonds (PAB) to help finance
projects involving private investment, such as carbon capture and
broadband access.
A recent study by White & Case and Acuris Studios [xiii]
found that 86 per cent of public authorities interviewed agreed
that PPPs were the preferred way to deliver infrastructure
projects. There is optimism that an attractive pipeline of
infrastructure projects will emerge over time.
Continental Europe
While many European countries have slowed down their PPP
programmes, others are pushing ahead. Overall, Continental European
infrastructure markets remain active with certain countries
offering a pipeline of new assets as well as secondary
opportunities. We believe these markets are likely to provide
attractive investment opportunities over the medium term.
Belgium
Though Belgium has had an active PPP pipeline, the number and
value of closed projects has declined in recent years. Over the
past two years, a large schools package, Antwerp Prison and Ghent
R4 all reached financial close. The relative infancy of the Belgian
PPP market continues to hinder secondary activity, but we
anticipate increase activity following construction completion of
some of the recent projects.
Germany
In Germany, the federal government has shown a positive attitude
towards the use of PPPs and some projects are expected to come to
the market in the short to medium term.
With seven existing assets in Germany including our first road
investment made in September 2022 in the A7 Motorway, strong
credentials, and German language skills among our senior executive
and asset management teams, BBGI is well positioned to consider any
upcoming opportunities.
Netherlands
Over the past decade, the Netherlands has established itself as
a dependable market for social infrastructure investment,
consistently delivering a sizeable stream of deals that have
attracted significant international developers and financiers.
Despite the absence of a centralised PPP authority or a
comprehensive legislative framework for PPPs, the Central
Government Real Estate Agency (Rijksvastgoedbedrijf) has taken
charge of all large PPP housing projects for the central government
and its agencies. These projects include court buildings,
hospitals, correctional facilities, government offices, and
museums. Decentralised authorities, such as provinces and
municipalities, also manage PPP projects related to social,
healthcare, or public institution accommodation.
Rijkswaterstaat is responsible for major infrastructural PPP
projects, such as motor highways, floodgates, and tunnels.
Since 2017, the Dutch PPP market has experienced a slowdown,
with the Government completing its road PPP pipeline in June 2018,
which was previously a crucial source of greenfield investment.
Nevertheless, in August 2021, Rijkswaterstaat revealed it had
engaged a team of advisers, including Deloitte, EY, PwC, Rebel, and
Turner & Townsend, to provide financial and economic guidance
for future PPP projects.
With Dutch language skills among our asset management team, and
significant investments in the A1/A6 and N18 motorways in the
Netherlands as well as a civic facility in Westland, BBGI is well
positioned in the Dutch secondary market for social
infrastructure.
Australia
Over the last decade, Australia has been very active in the
development of social infrastructure projects. Each state and
territory have appointed a lead government agency to implement PPP
policies. Infrastructure Australia provides advice on Australia's
infrastructure priorities.
Although the market dipped in 2020 due to COVID-19, it recovered
quickly and 2021 and 2022 were both record years in terms of total
transaction value - reflected by the Australian Government's
historic A$110 billion infrastructure commitment.
PPPs in Australia have been very active with the establishment
of the National PPP Policy Framework in 2008. In 2021, closed PPP
projects reached A$27 billion and in 2022 a new record was set with
more than A$37 billion in PPP projects closed. Since January 2015,
over 30 greenfield PPP projects have closed.
The transport sector has traditionally dominated the nation's
PPP market. Since 2015, more than 85 per cent of deal value from
greenfield transactions has come from the transport sector. Twelve
greenfield social infrastructure deals have closed since 2015, with
a value of A$7.5 billion.
Healthcare is the most active sub-sector at A$5.0 billion,
including notable deals such as the A$1.8 billion Footscray
Hospital Redevelopment in Victoria.
New South Wales and Victoria, the two biggest states, are each
spending A$90 billion over four years on major projects. There may
be some later investment opportunities in Queensland connected to
Brisbane winning the 2032 Summer Olympics. In addition to the
aforementioned primary opportunities, we expect some construction
companies and investors may look to sell equity in projects once
the construction is completed and the assets have been
de-risked.
BBGI has three large operational assets in Australia and will
continue to monitor the market for both primary and secondary
opportunities.
Growth outlook
Over the last decade, BBGI has been able to grow its portfolio
consistently, while maintaining price discipline and a selective
and disciplined approach to evaluating potential investment
opportunities. We expect this trend to continue into 2023 and
beyond. We expect our growth to come predominantly from secondary
market opportunities and in certain cases from primary bidding
opportunities.
Operating and Financial Review
The Management Board is pleased to present the Operating and
Financial Review for the year ended 31 December 2022.
Highlights and Key Performance Indicators
Refer to the Financial Highlights section for a summary of the
Year in Numbers for 2022. Certain key performance indicators
('KPIs') for the past five years are outlined below:
KPI Target Dec-18 Dec-19 Dec-20 Dec-21 Dec-22 Commentary
-------------------------------------------------------- --------- --------- -------- --------- ------
Dividends (paid or declared) Progressive long-term dividend growth in pence per share 6.75 7.00 7.18 7.33 7.48 Achieved
Targets:
7.93pps
for 2023,
8.40pps
for 2024
and
8.57pps
for 2025
--------------------------------------- -------------------------------------------------------- --------- --------- -------- --------- ------ ----------
NAV per share Positive NAV per share growth 2.8% 2.0% 1.2% 2.1% 6.6% Achieved
--------------------------------------- -------------------------------------------------------- --------- --------- -------- --------- ------ ----------
Annualised total shareholder return
since IPO 7% to 8% on IPO issue price of GBP1 per share 11.2% 11.3% 11.0% 10.4% 8.8% Achieved
--------------------------------------- -------------------------------------------------------- --------- --------- -------- --------- ------ ----------
Ongoing charge Competitive cost position 0.93% 0.88% 0.86% 0.86% 0.87% Achieved
--------------------------------------- -------------------------------------------------------- --------- --------- -------- --------- ------ ----------
Cash dividend cover >1.0x 1.50x 1.30x 1.27x 1.31x 1.47x Achieved
--------------------------------------- -------------------------------------------------------- --------- --------- -------- --------- ------ ----------
Refinancing risk
(as a percentage of portfolio) Minimise refinancing risk 7% 6% 7% 6% 5% Achieved
--------------------------------------- -------------------------------------------------------- --------- --------- -------- --------- ------ ----------
Asset availability > 98% asset availability Yes Yes Yes Yes Yes Achieved
--------------------------------------- -------------------------------------------------------- --------- --------- -------- --------- ------ ----------
Single asset concentration risk To be less than 25% of portfolio at time of acquisition 11% (GEB) 10% (GEB) 9% (GEB) 11% (ORB) 11% Achieved
(as a percentage of portfolio value) (ORB)
--------------------------------------- -------------------------------------------------------- --------- --------- -------- --------- ------ ----------
Availability-style assets (as a
percentage of portfolio) Maximise availability-based assets 100% 100% 100% 100% 100% Achieved
--------------------------------------- -------------------------------------------------------- --------- --------- -------- --------- ------ ----------
Asset Management
Cash performance
The Company's portfolio of 56 availability-style infrastructure
investments continued to perform well during the year with cash
flows ahead of forecast and the underlying financial models.
Construction exposure
The Company's investment policy is to invest principally in
assets that are operational and have completed construction.
Accordingly, investment in construction assets will be limited to
25 per cent of the portfolio value. The rationale for this approach
is to be able to produce a stable dividend for our shareholders,
while gaining exposure to the potential NAV uplift that occurs when
assets move from a successful construction stage to the operational
stage. The Company has demonstrated that it can manage such assets
during the construction period and its successful transition into a
stable operational asset.
The Management Board believes that the Company's ability to meet
its dividend targets is not compromised by having some construction
exposure.
As at 31 December 2022, approximately 99.5 per cent of the
assets were operational with only one project, Highway 104 in Nova
Scotia, Canada, under construction, with completion expected in
2023.
Investment performance
Returns track record
The share price closed the year at 156.6pps, representing a 4.5
per cent premium to the NAV per share at the year-end.
The total NAV return per share since IPO to 31 December 2022 was
160.9 per cent or 9.1 per cent on an annualised basis. TSR since
IPO to 31 December 2022 was 152.6 per cent or 8.8 per cent on an
annualised basis and exceeds the 7 per cent to 8 per cent IRR
target on IPO issue price of GBP1 per share.
We believe a key benefit of the portfolio is the high-quality
cash flows derived from long-term availability-style government or
government-backed contracts with high-quality inflation linkages.
As a result, portfolio performance has been largely uncorrelated to
the many wider macroeconomic factors that may cause market
volatility in other sectors. Against the FTSE All-Share, the
Company has shown a low ten-year correlation of 25.8 per cent and a
beta of 0.24 ([xiv]) .
Distribution policy
Distributions on ordinary shares are planned to be paid twice a
year, normally in respect of the six months ended 30 June and the
six months ended 31 December.
Dividends
In April 2022, the Company paid a second interim dividend of
3.665pps for the period 1 July 2021 to 31 December 2021. The 2022
interim dividend of 3.74pps for the period 1 January to 30 June
2022 was paid on 20 October 2022. In February 2023, subsequent to
the year-end, the Company declared a second interim dividend of
3.74pps in respect of the six-month period ended 31 December 2022.
This resulted in a total dividend of 7.48pps for the year ended 31
December 2022.
We are reaffirming our progressive dividend policy with revised
target dividends of 7.93pps and 8.40pps for 2023 and 2024,
respectively. We are also introducing a new dividend target for
2025 of 8.57pps.
Proven progressive dividend policy
-- Average annual dividend increases of 3.1 per cent from 2012 to 2022
-- FY 2023 revised upwards to 7.93pps ([xv]) , a 6.0 per cent increase
-- FY 2024 revised upwards to 8.40pps 15 a 6.0 per cent increase
-- FY 2025 new target dividend of 8.57pps 15 a 2.0 per cent increase
Investor communications
The Company places great importance on communication with its
shareholders and welcomes their views. We intend to remain at the
forefront of disclosure and transparency in our sector, and
therefore the Management Board and, where required, the Supervisory
Board regularly review the level and quality of the information
that the Company makes public.
The Company formally reports twice a year through its Annual and
Interim Reports. Other Company information is provided through the
Company's website and through market announcements. At Shareholder
General Meetings, each share is entitled to one vote, all votes
validly cast at such meetings (including by proxy) are counted, and
the Company announces the results on the day of the relevant
meeting.
The Management and Supervisory Boards are keen to develop and
maintain positive relationships with the Company's shareholders. As
part of this process, immediately following release of the Annual
and Interim Reports at the end of March and August each year, the
Co-CEOs present the Company's results to market analysts and
subsequently conduct investor roadshows and offer shareholder
meetings to discuss the results, explain the ongoing strategy of
the Company, and receive feedback.
Outside of these formal meetings, feedback from investors is
received by the Management Board and the Corporate Brokers and,
together with the feedback from results meetings, is reported to
the Supervisory Board. Throughout the year, the Co-CEOs have made
themselves available to shareholders and key sector analysts, for
discussion of key issues and expectations around Company
performance. The Co-CEOs intend to continue to be available to meet
with shareholders periodically to facilitate an open two-way
communication on the development of the Company. Shareholders may
contact members of both the Management and Supervisory Boards at
the registered office of the Company, the address for which can be
found on the final page of the Annual Report or on the Company's
website at www.bb-gi.com .
While shareholder engagement is typically conducted by the
Co-CEOs, the Chair of the Supervisory Board and Chairs of each
committee, make themselves available throughout the year to
understand shareholder views on governance and performance.
In 2021 we undertook a comprehensive materiality assessment
among our employees, shareholders, clients, partners and
subcontractors to identify ten material topics influencing our ESG
strategy. These ten topics have informed key ESG commitments and
KPIs that we are now tracking to ensure incremental progress in our
delivery of positive stakeholder outcomes. A progress update of
each KPI is provided annually in our ESG report.
Given this level of engagement with shareholders and other
stakeholders, the Management and Supervisory Boards consider that
they meet the requirements of AIC Code of Corporate Governance
Principle 5D.
Share capital
The issued share capital of the Company is 713,331,077 ordinary
shares of no-par value. All of the issued ordinary shares rank pari
passu. During the year ended 31 December 2022, the Company issued
1,205,272 ordinary shares.
Voting rights
There are no special voting rights, restrictions or other rights
attached to any of the ordinary shares. There are no restrictions
on the voting rights attaching to ordinary shares.
Discount management
The Management Board will actively monitor any discount to the
NAV per share at which the ordinary shares may trade and will
report to the Supervisory Board on any such discount and to the
extent appropriate propose actions to mitigate this.
Purchase of ordinary shares by the Company in the market
In order to assist in the narrowing of any discount to the NAV
at which the ordinary shares may trade from time to time and/or to
reduce discount volatility, the Company may, subject to shareholder
approval:
-- Make market purchases of up to 14.99 per cent annually of its
issued ordinary shares.
-- Make tender offers for ordinary shares.
No shares have been bought back during the year ended 31
December 2022. The most recent authority to purchase ordinary
shares, which may be held in treasury or subsequently cancelled,
was granted to the Company on 29 April 2022. This authority expires
on the date of the next Annual General Meeting ('AGM') to be held
on 28 April 2023, at which point the Company will propose to renew
its authority to buy back ordinary shares.
Continuation vote
The Company's Articles of Association ('Articles') require the
Boards to offer a continuation vote to the Company's shareholders
at every second AGM to allow the Company to continue in its current
form. On 30 April 2021, at the Company's AGM, the shareholders
voted unanimously for the continuation of the Company. In
accordance with the Articles, a further continuation vote will be
offered to shareholders at the AGM due to be held on 28 April
2023.
Valuation
The Management Board is responsible for carrying out the fair
market valuation of the Company's investments, which it then
presents to the Supervisory Board for consideration as part of its
approval of the Annual and Interim Reports. The valuation is
undertaken on a six-monthly basis as at 30 June and 31 December
each year, and is reviewed by an independent third-party valuation
expert.
The Company's investments are principally non-market traded
investments with predictable long-term availability-style revenue;
therefore, the valuation is determined using the discounted cash
flow methodology. The Company makes forecast assumptions for key
macroeconomic factors that impact the cash flow forecasts of
investments such as inflation rates and deposit rates, and we
adjust for any enacted changes in taxation rates during the
reporting period. Our assumptions are based on market data,
publicly available economic forecasts, and long-term historical
averages. In addition, we exercise judgement in assessing the
expected future cash flows from each investment based on the
detailed financial models produced by each Portfolio Company,
adjusting these financial models where necessary to reflect the
Company's assumptions as well as any specific cash flow
assumptions. The Company's consolidated valuation is a
sum-of-the-parts valuation with no further adjustments made to
reflect scale, scarcity or diversification of the overall
portfolio.
The fair value of each investment is then derived from the
application of an appropriate discount rate, alongside contracted
foreign exchange rates or reporting period-end foreign exchange
rates, and withholding taxes (as applicable). The discount rate
applied takes into consideration risks associated with the
investment, including the phase of the investment (construction,
ramp-up or stable operation), investment-specific risks and
opportunities, as well as country-specific factors. The Company
uses judgement in determining the appropriate discount rates. This
judgement is based on the Company's knowledge of the market,
considering information obtained from its investment and bidding
activities, benchmark analysis with comparable companies and
sectors, discussions with advisers in the relevant markets, and
publicly available information. As government bond yields have
increased significantly in 2022, there was limited transactional
market data available in the second half of 2022. BBGI has
therefore complemented its market-based approach for this reporting
period by using the capital asset pricing model where government
risk free rates plus an equity risk premium are used to calculate
discount rates. This method is used as a reasonability check to our
market-based approach.
The valuation methodology remains unchanged from previous
reporting periods.
A breakdown of the movements in the NAV is shown in the chart
below.
NAV movement 31 December 2021 to 31 December 2022
The NAV at 31 December 2022 was GBP1,069.2 million (31 December
2021: GBP1,001.6 million), representing an increase of 6.7 per
cent.
NAV movement 31 December 2021 to 31 December GBP million
2022
NAV at 31 December 2021 1,001.6
================================================ ===========
Deduct: other net assets at 31 December 2021(i) (26.4)
------------------------------------------------ -----------
Portfolio value at 31 December 2021 975.2
================================================ ===========
Acquisitions(ii) 64.4
================================================ ===========
Distributions from investments(iii) (93.5)
------------------------------------------------ -----------
Rebased opening portfolio value at 1 January
2022 946.1
================================================ ===========
Portfolio return(iv) 81.5
================================================ ===========
Change in market discount rate (28.5)
================================================ ===========
Change in macroeconomic assumptions 60.7
================================================ ===========
Foreign exchange net movement(v) 37.1
------------------------------------------------ -----------
Portfolio value at 31 December 2022 1,097.0
================================================ ===========
Other net liabilities at 31 December 2022(i) (27.9)
NAV at 31 December 2022 1,069.2
-----------
(i) These figures represent the net assets of the Group after
excluding the investments at fair value through profit or loss
('Investments at FVPL') and the net position on currency hedging
instruments. Refer to the Pro Forma Balance Sheet in the Financial
Results section of this Annual Report for further breakdown.
(ii) Refer to the Portfolio Review section of this Annual Report
for further details on acquisitions during the year.
(iii) While distributions from Investments at FVPL reduce the
portfolio value, there is no impact on the Company's NAV as the
effect of the reduction in the portfolio value is offset by the
receipt of cash at the consolidated Group level. Distributions in
the above graph are shown net of withholding tax.
(iv) Portfolio Return comprises the unwinding of the discount
rate, portfolio performance, the net effect of actual inflation,
and updated operating assumptions to reflect current
expectations.
(v) Includes the net asset from balance sheet hedging of GBP2.9
million. Under IFRS, this net asset is recorded separately as a
derivative financial asset in the Consolidated Statement of
Financial Position.
Key drivers for NAV change
The rebased opening portfolio value, after considering
acquisitions in the reporting period of GBP64.4 million and cash
distributions from investments of (GBP93.5) million was GBP946.1
million.
Portfolio return comprises the unwinding of the discount rate,
portfolio performance, the net effect of actual inflation, and
updated operating assumptions:
During the year, the Company recognised an GBP81.5 million
portfolio return, representing an 8.1 per cent increase in the NAV
from the unwinding of discount rates, the net effect of actual
inflation and portfolio performance to reflect current expectations
based on the Company's hands-on active asset management. As the
Company moves closer to forecasted investment distribution dates,
the time value of those cash flows increases on a net present value
basis and this effect is called unwinding.
Change in macroeconomic assumptions:
During the year, the Company recognised an increase in the
portfolio value of GBP60.7 million, or a 6.1 per cent increase in
the NAV, resulting from changes in macroeconomic assumptions. The
main drivers were an increase in the short-term inflation and
deposit rates of GBP75.1 million, which were partially offset by a
provision for additional taxes of c. GBP12.5 million , likely to be
realised based on expected change in interest limitation rules.
[xvi]
Short-term inflation is forecast to remain at an elevated level
compared to long-term assumptions and as a result, we believe it
appropriate to incorporate a two-year short-term inflation forecast
assumption in our operational jurisdictions.
In total, the combined effect of revised short-term inflation
forecasts and the update of actual inflation (included in Portfolio
Return, above) resulted in a GBP76.2 million, or a 7.6 per cent
increase in NAV, and this demonstrates the contracted high-quality
inflation linkage of our investment proposition. See also the
Alternative Performance Measures section for further details on our
inflation linkage.
Short-term deposit rates have risen in conjunction with the
increase in underlying benchmark rates and are expected to remain
at elevated levels in most jurisdictions. We also believe it
appropriate to update some of our long-term deposit rate
assumptions to reflect the current rate environment. The effect of
revised deposit rate assumptions resulted in a GBP15.8 million, or
a 1.6 per cent increase in NAV.
Foreign exchange:
The forecasted distributions from investments are converted to
Sterling at either the contracted foreign exchange rate, for 100
per cent of non-Sterling and non-Euro denominated cash flows
forecast to be received over the next four years on an annual
rolling basis, or at the closing foreign exchange rate for the
unhedged future cash flows.
A significant proportion of the Company's underlying investments
are denominated in currencies other than Sterling. The Company
maintains its accounts, prepares the valuation, and pays dividends
in Sterling. Accordingly, fluctuations in exchange rates between
Sterling and the relevant local currencies will affect the value of
the Company's underlying investments.
During the year ended 31 December 2022, the depreciation of
Sterling (GBP) against the Canadian Dollar (CAD), Australian Dollar
(AUD), the Euro (EUR), and the US Dollar (USD), and the slight
appreciation of Sterling against the Norwegian Krone (NOK)
accounted for a net increase in the portfolio value of GBP37.1
million, which includes the unrealised result from the Company's
balance sheet hedging. Since IPO in December 2011, the net
cumulative effect of foreign exchange movements on the portfolio
value, after considering the effect of balance sheet hedging, has
been an increase of GBP11.9 million, or 1.1 per cent of the 31
December 2022 NAV.
The table below shows the closing exchange rates, which were
used to convert unhedged future cash flows into the reporting
currency at 31 December 2022.
GBP/ Valuation impact FX rates as FX rates as FX rate
of of change
31 December 31 December
2022 2021
AUD Positive 1.7743 1.8607 4.64%
================== ============= ============= ========
CAD Positive 1.6386 1.7159 4.50%
================== ============= ============= ========
EUR Positive 1.1298 1.1912 5.15%
================== ============= ============= ========
NOK Negative 11.9150 11.9114 (0.03%)
================== ============= ============= ========
USD Positive 1.2097 1.3512 10.47%
================== ============= ============= ========
Although the closing rate is the required conversion rate to use
for the unhedged future cash flows, it is not necessarily
representative of future exchange rates as it reflects a specific
point in time.
The Group uses forward currency swaps to (i) hedge 100 per cent
of forecasted cash flows over the next four years on an annual
rolling basis and (ii) to implement balance sheet hedging in order
to limit the decrease in the NAV to approximately three per cent,
for a ten per cent adverse movement in foreign exchange rates.
([xvii]) This is achieved by hedging a portion of the non-Sterling
and non-Euro portfolio value. ([xviii]) The effect of the Company's
hedging strategy can also be expressed as a theoretical or implicit
portfolio allocation to Sterling exposure. In other words, on an
unhedged basis, the portfolio allocation to Sterling exposure at 31
December 2022 would need to be approximately 74 per cent to obtain
the same NAV sensitivity to a ten per cent adverse change in
foreign exchange rates, as shown in the Foreign Exchange
Sensitivity table below.
Macroeconomic events
The quality and predictability of portfolio cash flows has come
into sharper focus given uncertainty in the markets generally and
continued elevated inflation levels in particular. Against this
backdrop, the Company is well-positioned through its contracted
high-quality inflation linkage, which is achieved through annually
updated contractual indexation in the Company's project
agreements.
Additionally, there has been no material adverse effect on the
portfolio valuation resulting from the war in Ukraine. This is
primarily as a result of the Company holding a low-risk, 100 per
cent availability-style portfolio, coupled with strong stakeholder
collaboration.
Discount rates
The market for availability-style transactions continued to be
competitive with discount rates, based on our market observations,
remaining largely stable during the first half of 2022. During the
second half of 2022, the number of availability-style transactions
slowed materially in part due to the changing macroeconomic
environment. As transactional data is limited, the Company
complemented its market-based approach for this reporting period by
using the capital asset pricing model where government risk free
rates plus an equity risk premium are used to calculate discount
rates. This analysis is used as a plausibility check for our
market-based approach. While there is no direct correlation between
government bond yields and the risk premium on the one hand and
market discount rates on the other, the equity risk premium is a
useful additional data point. As at 31 December 2022, the risk
premium is 310 basis points over the weighted average government
bond yield of 380 basis points. The Company believes that a risk
premium in the range of 250 to 350 basis points is appropriate for
the low-risk availability style assets in our portfolio. This is
supported by an announcement of the German Network Agency, which
calculated equity risk premium for regulated gas and assets of
around 3 per cent. As it is generally accepted that PPP/PFI assets
have a lower risk profile than regulated assets, on this basis the
risk premium for PPP/PFI assets should be generally around the 3
per cent mark.
Going forward, the Company believes that investment demand in
the availability-style social infrastructure providing long-term
predictable inflation-linked characteristics will remain
strong.
Based on data from transactional activity, benchmark analysis
with comparable companies and sectors, discussions with advisers in
the relevant markets, publicly available information gathered over
the year and equity risk premium over government bond yields, we
have increased the weighted average discount rate to 6.9 per cent
(31 December 2021: 6.6 per cent). This methodology calculates the
weighted average based on the value of each investment in
proportion to the total portfolio value, i.e. based on the net
present value of their respective future cash flows.
Specific discount rates consider risks associated with the
investment including the phase the investment is in, such as
construction, ramp-up or stable operation, investment-specific
risks and opportunities, as well as country-specific factors. We
apply a risk premium for investments in construction to reflect the
higher-risk inherent in the construction phase of any investment's
lifecycle. Currently, the portfolio has one investment in
construction, Highway 104, which represents approximately 0.5 per
cent of the overall portfolio value. Construction is expected to be
completed in 2023. We have also applied a risk premium or discount
to a limited number of other investments to reflect the individual
situations. For example, adjustments have been applied to acute
hospitals in the UK, where a risk premium of 50bps continues to be
applied. The only UK acute hospital in the portfolio is Gloucester
Royal Hospital, which represents less than one per cent of the
overall NAV. This risk premium reflects the continued situation in
the UK where some public health clients are under cost pressure and
are actively looking for cost savings including deductions. To
date, BBGI has not been affected.
Macroeconomic assumptions
Apart from the discount rates, we use the following assumptions
('Assumptions') for the cash flows:
31 December 2022 31 December 2021
Inflation UK(i) RPI/CPIH 13.4% (actual) for 2022; 2.75% / 2.00%
5.8% for 2023 then 2.75%
(RPI) / 2.0% (CPIH)
================== ========================== ========================
Canada 6.3% (actual) for 2022; 2.00% / 2.35%
4.0% for 2023; 2.3% for
2024 then 2.0%
================== ========================== ========================
8.0% for 2022; 4.75% for
2023 3.25% for 2024 then
Australia 2.5% 2.50%
================================== ========================== ========================
8.4% for 2022; 6.3% for
Germany/ 2023; 3.4% for 2024 then
Netherlands(ii) 2.0% 2.00%
================================== ========================== ========================
5.9% (actual) for 2022;
Norway(ii) 4.9% for 2023 then 2.25% 2.25%
================================== ========================== ========================
6.5% (actual) for 2022;
US 3.4% for 2023 then 2.5% 2.50%
================================== ========================== ========================
Deposit UK 2.00% to 2024, then 1.50% 0.00% to 2023, then
rates (p.a.) 1.00%
================== ========================== ========================
Canada 3.50% to 2024, then 1.75% 0.50% to 2023, then
1.50%
================== ========================== ========================
Australia 3.25% to 2024, then 3.00% 0.25% to 2023, then
2.00%
================== ========================== ========================
Germany/ 0.50% to 2024, then 1.0% 0.00% to 2023, then
Netherlands 0.50%
================== ========================== ========================
Norway 2.00% to 2024, then 2.00% 0.00% to 2023, then
2.00%
================== ========================== ========================
US 3.75% to 2024, then 1.50% 0.00% to 2023, then
1.50%
================== ========================== ========================
Corporate UK 19.00% until March 2023 19.0% to Q1 2023,
tax rates then 25% then 25.0%
(p.a.)
================== ========================== ========================
Canada(iii) 23.00% / 26.50% / 27.00% 23.0% / 26.5% /
/ 29.00% 27.0% / 29.0%
================== ========================== ========================
Australia 30.00% 30.0%
================================== ========================== ========================
Germany(iv) 15.83% (incl. solidarity 15.8% (incl. solidarity
charge) charge)
================== ========================== ========================
Netherlands 25.80% 25.8%
================================== ========================== ========================
Norway 22.00% 22.0%
================================== ========================== ========================
US 21.00% 21.0%
================================== ========================== ========================
(i) On 25 November 2020, the UK Government announced the phasing
out of RPI after 2030 to be replaced with CPIH; the Company's UK
portfolio indexation factor changes from RPI to CPIH beginning on 1
January 2031.
(ii) CPI indexation only. Where investments are subject to a
basket of indices, a projection for non-CPI indices is used.
(iii) Individual tax rates vary among Canadian Provinces:
Alberta; Ontario, Quebec, Northwest Territory; Saskatchewan,
British Columbia; New Brunswick.
(iv) Individual local trade tax rates are considered in addition
to the tax rate above.
Sensitivities
Discount rate sensitivity
The weighted average discount rate applied to the Company's
portfolio of investments is the single most important judgement and
variable.
The following table shows the sensitivity of the NAV to a change
in the discount rate.
Change in NAV 31 December
Discount rate sensitivity (i) 2022
( GBP87.1 ) million, i.e.
Increase by 1% to c. 7.9% ( 8.1 ) %
=========================
GBP100.7 million, i.e.
Decrease by 1% to c. 5.9% 9.4%
=========================
(i) Based on the weighted average rate of 6.9 per cent.
Inflation has increased in all jurisdictions across BBGI's
geographies and interest rates have risen from historical lows. In
the event long-term interest rates rise substantially further, this
is likely to affect discount rates, and as a result, negatively
impact portfolio valuation.
Combined sensitivity: inflation, deposit rates and discount
rates
It is reasonable to assume that if discount rates increase, then
deposit rates and inflation would also be affected. To illustrate
the effect of this combined movement on the Company's NAV, a
scenario was created assuming a one percentage point increase in
the weighted average discount rate to 7.9 per cent, and a one
percentage point increase in both deposit and inflation above the
macroeconomic assumptions.
Combined sensitivity: inflation, deposit rates Change in NAV 31 December
and discount rates 2022
( GBP22.8 ) million, i.e.
Increase by 1% ( 2.1 ) %
=========================
Inflation sensitivity
The Company's investments are contractually entitled to receive
availability-style revenue streams from public sector clients,
which are typically adjusted every year for inflation. Facilities
management subcontractors for accommodation investments and
operating and maintenance subcontractors for transport investments
have similar indexation arrangements. The portfolio cash flows are
positively linked with inflation (e.g. RPI, CPI, or a basket of
indices).
This inflation linkage is achieved through contractual
indexation mechanics in the various project agreements with the
public sector clients at the Portfolio Companies and the inflation
adjustment updated at least annually.
Inflation sensitivity
The table below shows the sensitivity of the NAV to a change in
inflation rates compared to the long-term assumptions in the table
above:
Inflation sensitivity Change in NAV 31 December
2022
GBP51.5 million, i.e.
Inflation +1% 4.8%
=========================
( GBP45.5 ) million, i.e.
Inflation -1% ( 4.3 ) %
=========================
Short-term inflation sensitivity
It is reasonable to assume that inflation could be elevated for
the short-term before diminishing. To illustrate the effect of
persistent higher short-term inflation on the Company's NAV, three
scenarios were created assuming inflation is two percentage points
above our assumptions for the next one, three and five years .
Short-term inflation sensitivity Change in NAV 31 December
2022
GBP12.0 million, i.e.
Inflation +2% for one year 1.1%
=========================
GBP52.6 million, i.e.
Inflation +2% for three years 4.9%
=========================
GBP65.6 million, i.e.
Inflation +2% for five years 6.1%
=========================
Foreign exchange sensitivity
As described above, a significant proportion of the Company's
underlying investments are denominated in currencies other than
Sterling.
The following table shows the sensitivity of the NAV to a change
in foreign exchange rates:
Change in NAV 31 December
Foreign exchange sensitivity (i) 2022
-------------------------
( GBP23.7 ) million,
Increase by 10% i.e. ( 2.2 ) %
=========================
GBP31.5 million, i.e.
Decrease by 10% 2.9%
=========================
(i) Sensitivity in comparison to the spot foreign exchange rates
at 31 December 2022 and considering the contractual and natural
hedges in place, derived by applying a 10 per cent increase or
decrease to the Sterling/foreign currency rate.
Deposit rate sensitivity
Portfolio Companies typically have cash deposits that are
required to be maintained as part of the senior debt funding
requirements (e.g. six-month debt service reserve accounts and
maintenance reserve accounts). BBGI's proportionate interest in the
total deposits held by the Portfolio Companies exceed GBP400
million. The asset cash flows are positively correlated with the
deposit rates.
The table below shows the sensitivity of the NAV to a percentage
point change in long-term deposit rates compared to the long-term
assumptions in the table above :
Change in NAV 31 December
Deposit rate sensitivity 2022
GBP20.7 million, i.e.
Deposit rate +1% 1.9%
=========================
( GBP20.7 ) million,
Deposit rate -1% i.e. ( 1.9 ) %
=========================
Lifecycle costs sensitivity
Lifecycle costs are the cost of planned interventions or
replacing material parts of an asset to maintain it over the
concession term. They involve larger items that are not covered by
routine maintenance and, for roads, it will include items such as
replacement of asphalt, rehabilitation of surfaces, or replacement
of electromechanical equipment. Lifecycle obligations are generally
passed down to the facility maintenance provider, with the
exception of transportation investments, where these obligations
are typically retained by the Portfolio Company.
Of the 56 investments in the portfolio at year-end, 20
investments retain the lifecycle obligations. The remaining 36
investments have this obligation passed down to the
subcontractor.
The table below shows the sensitivity of the NAV to a change in
lifecycle costs:
Lifecycle costs sensitivity (i) Change in NAV 31 December
2022
( GBP26.0 ) million,
Increase by 10% i.e. ( 2.4 ) %
=========================
GBP23.5 million, i.e.
Decrease by 10% 2.2%
=========================
(i) Sensitivity applied to the 20 investments in the portfolio
that retain the lifecycle obligation i.e. the obligation is not
passed down to the subcontractor.
Corporate tax rate sensitivity
The profits of each Portfolio Company are subject to corporation
tax in the country where the Portfolio Company is located.
The table below shows the sensitivity of the NAV to a change in
corporate tax rates compared to the assumptions in the table
above:
Change in NAV 31 December
Corporate tax rate sensitivity 2022
( GBP11.2 ) million,
Tax rate +1% i.e. ( 1.0 ) %
=========================
GBP11.0 million, i.e.
Tax rate -1% 1.0%
=========================
Refinancing: senior debt rate sensitivity
Assumptions are used where a refinancing of senior debt is
required for an investment during the remaining investment
concession term. There is a risk that such assumptions may not be
achieved.
The table below shows the sensitivity of the NAV to a one
percentage point increase to the forecasted debt rate.
Change in NAV 31 December
Senior debt refinancing sensitivity 2022
(GBP 9.1 ) million, i.e.
Debt rate +1% ( 0.8 )%
=========================
Gross Domestic Product sensitivity
Our portfolio is not sensitive to GDP.
The principal risks faced by the Group and the mitigants in
place are outlined in the Risk section.
Key Portfolio Company and portfolio cash flow Assumptions
underlying the NAV calculation include:
-- Discount rates and the Assumptions, as set out above, continue to be applicable.
-- The updated financial models used for the valuation
accurately reflect the terms of all agreements relating to the
Portfolio Companies and represent a fair and reasonable estimation
of future cash flows accruing to the Portfolio Companies.
-- Cash flows from and to the Portfolio Companies are received
and made at the times anticipated.
-- Non-UK investments are valued in local currency and converted
to Sterling at either the period-end spot foreign exchange rates or
the contracted foreign exchange rate.
-- Where the operating costs of the Portfolio Companies are
contractually fixed, such contracts are performed, and where such
costs are not fixed, they remain within the current forecasts in
the valuation models.
-- Where lifecycle costs/risks are borne by the Portfolio
Companies, they remain in line with current forecasts in the
valuation models.
-- Contractual payments to the Portfolio Companies remain on
track and contracts with public sector or public sector backed
counterparties are not terminated before their contractual expiry
date.
-- Any deductions or abatements during the operations period of
Portfolio Companies are passed down to subcontractors under
contractual arrangements or are part of the planned (lifecycle)
forecasts.
-- Changes to the concession period for certain investments are realised.
-- In cases where the Portfolio Companies have contracts which
are in the construction phase, they are either completed on time or
any delay costs are borne by the construction contractors.
-- Enacted tax or regulatory changes, or forecast changes with a
high probability, on or prior to this reporting period-end with a
future effect materially impacting cash flow forecasts, are
reflected in the financial models.
In forming the above assessments, BBGI uses its judgement and
works with our Portfolio Company management teams, as well as using
due diligence information from, or working with, suitably qualified
third parties such as technical, legal, tax and insurance
advisers.
Financial Results
The Consolidated Financial Statements of the Group for the year
ended 31 December 2022 are in the Financial Statements section of
this Annual Report.
Basis of accounting
We have prepared the Group's Consolidated Financial Statements
in accordance with International Financial Reporting Standards
('IFRS') as adopted by the European Union ('EU'). In accordance
with IFRS, the Company qualifies as an Investment Entity and, as
such, does not consolidate its investments in subsidiaries that
qualify as investments at fair value through profit or loss.
Certain subsidiaries that are not Investments at FVPL, but instead
provide investment-related services or activities that relate to
the investment activities of the Group, are consolidated. As an
Investment Entity, the Company recognises distributions from
Investments at FVPL as a reduction in their carrying value. These
distributions reduce the estimated future cash flows which are used
to determine the fair value of the Investments at FVPL. The
accounting principles applied are in line with those principles
applied in the prior year reporting.
Income and costs
Year ended Year ended
Pro forma Income Statement 31 Dec 22 31 Dec 21
Investment Basis GBP million GBP million
================================== ============ ============
Income from Investments at FVPL 137.6 73.6
Other operating income 0.1 0.7
================================== ============ ============
Operating income 137.7 74.3
================================== ============ ============
Administrative expenses (11.7) (10.2)
Other operating expenses (1.5) (1.5)
Net finance result (2.0) (1.9)
Profit before tax 122.5 60.7
Tax expense - net (3.5) (2.7)
================================== ============ ============
Profit for the year 119.0 58.0
================================== ============ ============
Other comprehensive loss (0.5) (0.6)
================================== ============ ============
Total comprehensive income 118.5 57.4
================================== ============ ============
Basic earnings per share (pence) 16.7 8.47
================================== ============ ============
During the year, the Group recognised income from Investments at
FVPL of GBP137.6 million (31 December 2021: GBP73.6 million). This
income from Investments at FVPL is made up of a combination of the
positive effect of inflation and deposit interest rate increases,
the net effect of foreign exchange on the portfolio value, the
unwinding of discount and value enhancements. Further detail on the
income generated by the Group's Investments at FVPL is provided in
the Valuation section of this Annual Report.
During the year, the Company recognised a net loss of GBP10.6
million on balance sheet hedging and GBP11.3 million on cash flow
hedging (31 December 2021: GBP0.8 million net loss on balance sheet
hedging and GBP1.0 million net loss on cash flow hedging). The net
result of balance sheet and cash flow hedging is included in the
income from Investments at FVPL.
Administrative expenses include personnel expenses, legal and
professional fees, and office and administration expenses. See
further detail in the Group Level Corporate Cost analysis
below.
Profit for the year ended 31 December 2022 increased by 105.2
per cent to GBP119.0 million (31 December 2021: GBP58.0
million).
Group Level Corporate Cost Analysis
The table below is prepared on an accrual basis.
Year ended Year ended
31 Dec 22 31 Dec 21
Corporate costs GBP million GBP million
============================= ============ ============
Net finance result 2.0 2.0
Personnel expenses 7.9 6.9
Legal and professional fees 2.6 2.5
Office and administration 1.2 0.8
Acquisition-related costs 0.6 1.5
Taxes 3.5 2.7
============================= ============ ============
Corporate costs 17.8 16.4
============================= ============ ============
The net finance result for the year was GBP2.0 million (31
December 2021: GBP2.0 million) and reflects borrowing costs,
commitment fees and other fees relating to the Group's RCF. At 31
December 2022, the Group had GBP57.5 million of borrowings
outstanding under the RCF.
Personnel expenses for the year were GBP7.9 million (31 December
2021: GBP6.9 million) with the increase driven largely by inflation
adjustments to staff salaries and movements in foreign exchange
rates.
Acquisition-related costs incurred during the year amounted to
GBP0.6 million (31 December 2021: GBP1.5 million), which include
unsuccessful bid costs amounting to less than GBP0.1 million (31
December 2021: GBP0.7 million).
Ongoing Charges
The Ongoing Charges ('OGC') percentage presented in the table
below is prepared in accordance with the AIC recommended
methodology, latest update published in April 2022.
Ongoing Charges Information Year ended Year ended
31 Dec 31 Dec
22 21
GBP million GBP million
----------------------------------------------------- ------------- -------------
Ongoing Charges (using AIC recommended methodology) 0.87% 0.86%
----------------------------------------------------- ------------- -------------
In accordance with the AIC recommended methodology, fees that
are linked to investment performance could be viewed as analogous
to performance fees paid by externally managed investment companies
and should therefore be excluded from the principal OGC
calculation.
Fees directly linked to investment performance recorded in 2022
as a percentage of average NAV were 0.09 per cent (2021: 0.10 per
cent). Combined, the aggregate of Ongoing Charges plus investment
performance fees was 0.96 per cent in the year (2021: 0.96 per
cent).
For the year ended 31 December 2022, and in line with AIC
recommendations, certain non-recurring costs were excluded from the
Ongoing charges, most notably acquisition-related advisory costs of
GBP0.6 million, taxes of GBP3.5 million and the net finance result
of GBP2.0 million.
The table below provides a reconciliation of Ongoing Charges and
the Ongoing Charges Percentage to the administration expenses under
IFRS.
Year ended Year ended
31 Dec 22 31 Dec 21
GBP million GBP million
(except (except
%) %)
================================================================== ============= =============
Administration expenses to 31 December 11.7 10.2
Less: Non-recurring costs as per AIC guidelines
Non-recurring professional and external advisory
costs (0.6) (0.2)
Personnel costs related to acquisition or non-recurring (0.8) (0.9)
Compensation linked to investment performance (1.0) (1.0)
Other non-recurring costs - -
================================================================== ============= =============
Ongoing charges(i) 9.3 8.3
Divided by:
Average undiluted Investment Basis NAV for 2022
(average of 31
December 2022: GBP1,069.2 million and 30 June
2022: GBP1,068.7 million) 1,069.0 959.9
================================================================== ============= =============
Ongoing Charges percentage (i) 0.87% 0.86%
================================================================== ============= =============
(i) Figures reported are based on actual results rather than the
rounded figures presented in this table.
Cash flows
The table below summarises the sources and uses of cash and cash
equivalents for the Group.
Year ended Year ended
31 Dec 31 Dec
22 21
GBP million GBP million
================================================= ============ ============
Distributions from Investments at FVPL(i) 96.3 75.1
Net cash used in operating activities (20.3) (12.1)
Additional Investments at FVPL and other assets (64.5) (79.2)
Realised hedging loss on investing activities (12.6) (1.6)
Net cash flows from financing activities 3.8 24.3
Impact of foreign exchange gain/(loss) on cash
and cash equivalents 1.5 (0.2)
================================================= ============ ============
Net cash inflow 4.2 6.3
================================================= ============ ============
(i) Distributions in the above table are shown gross of
withholding tax. The associated withholding tax outflow is included
in 'Net cash flows used in operating activities'.
The performance of the Group's portfolio of investments
continued to be strong during the year, with gross distributions
coming in ahead of business plan, up 28.2 per cent on a comparative
basis.
Cash dividends paid during the year ended 31 December 2022
amounted to GBP51.7 million, an increase of GBP3.7 million on the
previous year.
Refer to the Consolidated Statement of Cash Flows for further
details on cash flows during the year ended 31 December 2022.
Cash dividend cover
For the year ended 31 December 2022, the Group achieved a cash
dividend cover ratio of 1.47x (year ended 31 December 2021: 1.31x)
calculated as follows:
31 Dec 31 Dec
2022 GBP 2021 GBP
million million
(except (except
ratio) ratio)
=================================================== ========== ==========
Distributions from Investments at FVPL 96.3 75.1
Less: Net cash flows used in operating activities (20.3) (12.1)
Net distributions 76.0 63.0
Divided by: Cash dividends paid 51.7 48.0
=================================================== ========== ==========
Cash dividend cover (ratio) 1.47x 1.31x
=================================================== ========== ==========
The strong cash dividend coverage for the year was underpinned
by BBGI's contracted, high-quality inflation-linked portfolio cash
flows. Furthermore, the Company received additional distributions
during the year that were outside of the contracted cash flows,
including the proceeds from the completion of an opportunistic
refinancing and a tax refund, which was not forecasted in the
reporting period.
Pro Forma Balance Sheet
Investment Investment
Basis (i) Basis (i)
GBP million GBP million
============================== ============ ============
Investments at FVPL 1,097.0 975.2
Trade and other receivables 0.9 1.0
Other assets and liabilities
(net) (2.4) (2.4)
Net cash (debt) (26.3) 26.9
Derivative financial asset
(liability) - net - 0.9
============================== ============ ============
NAV attributable to ordinary
shares 1,069.2 1,001.6
============================== ============ ============
(i) Represents the value of the Group's total assets less the
value of its total liabilities under the Investment Basis NAV. The
Investment Basis NAV represents the residual interest of the
shareholders in the Group, after all the liabilities of the Group,
if any, have been settled.
As at 31 December 2022, the Group has 56 availability-style
Investments at FVPL (31 December 2021: 54), with cash and cash
equivalents amounting to GBP31.2 million (GBP26.9 million as at 31
December 2021).
A reconciliation of net cash (debt) as compared to net
borrowings is as follows:
31 Dec 31 Dec
22 21
GBP million GBP million
=============================================== ============ ============
Cash and cash equivalent 31.2 26.9
=============================================== ============ ============
Loans and borrowings (56.4) (0.2)
Unamortised debt issue costs/RCF related fees (1.1) 0.2
Outstanding loan drawdown (57.5) -
Net cash (debt) (26.3) 26.9
=============================================== ============ ============
Three-year comparative of Investment Basis 31 Dec 31 Dec
NAV 22 31 Dec 21 20
============================================ ======== ========= ======
NAV (millions) 1,069.2 1,001.6 916.0
NAV per share (pence) 149.9 140.7 137.8
============================================ ======== ========= ======
The Investment Basis NAV increased by 6.7 per cent to GBP1,069.2
million at 31 December 2022 (31 December 2021: GBP1,001.6 million),
and by 6.6 per cent on an Investment Basis NAV per share basis. The
Investment Basis NAV per share is calculated by dividing the
Investment Basis NAV by the number of Company shares issued and
outstanding at the end of the reporting period. This information
presents the residual claim of each shareholder to the net assets
of the Group.
Alternative Performance Measures ('APM')
APM is understood as a financial measure of historical or future
financial performance, financial position, or cash flows, other
than a financial measure defined or specified under IFRS. The Group
reports a selection of APM as summarised in the table below and as
used throughout this Annual Report. The Management Board believes
that these APM provide additional information that may be useful to
the users of this Annual Report.
The APM presented here should supplement the information
presented in the Financial Statement section of this Annual Report.
The APM used are not measures of performance or liquidity under
IFRS and should not be considered in isolation or as a substitute
for measures of profit, or as an indicator of the Group's operating
performance or cash flows from operating activities, as determined
in accordance with IFRS.
31 December 31 December
APM Explanation 2022 2021
========================= ========================================== ============ ================
On a compounded annual growth
rate basis. This represents the
steady state annual growth rate
based on the NAV per share at
Annualised total 31 December 2022 assuming dividends
NAV return per declared since IPO in December
share 2011 have been reinvested. [xix] 9.1% 8.8%
On a compounded annual growth
rate basis. This represents the
steady state annual growth rate
based on share price as at 31
December 2022, assuming dividends
declared since IPO in December
2011 have been reinvested. Investment
Annualised Total performance can be assessed by
Shareholder Return comparing this figure to the
Since IPO ('Annualised 7 per cent to 8 per cent TSR
TSR') target set at IPO. 8.8% 10.4%
Calculated as a percentage of
actual availability payments
received, as a percentage of
scheduled availability fee payments.
The Company targets a rate in
excess of 98 per cent. A high
asset availability rate can be
viewed as a proxy to strong underlying
Asset availability asset performance. 99.9% 99.9%
The cash dividend cover ratio
is a multiple that divides the
total net cash generated in the
period (available for distribution
to investors) by the total cash
dividends paid in the period
based on the cash flow from operating
activities under IFRS. A high
cash dividend cover ratio reduces
the risk that the Group will
Cash dividend not be able to continue making
cover ratio fully covered dividend payments. 1.47x 1.31x
Represents the contractual, index-linked
provisions, which adjust annually
to provide a positive and high-quality
link to inflation. The measure
represents the increase in portfolio
returns if inflation is one percentage
point higher than our modelled
assumptions for all future periods.
Under current assumptions, the
expected portfolio return would
increase from 6.9 per cent to
7.4 per cent for a one percentage
point increase to our inflation
Inflation linkage assumptions. 0.5% 0.4%
Net cash (debt) This amount, when considered GBP(26.3) GBP26.9 million
in conjunction with the available million
commitment under the Group's
RCF (unutilised RCF amount of
GBP171.4 million as at 31 December
2022), is an indicator of the
Group's ability to meet financial
commitments, to pay dividends,
and to undertake acquisitions.
Represents the estimated reduction
or drag on shareholder returns
as a result of recurring operational
expenses incurred in managing
the Group's consolidated entities,
and provides an indication of
the level of recurring costs
likely to be incurred in managing
Ongoing charges the Group in the future. 0.87% 0.86%
Target dividend Represents the forward-looking 7.93 for 7.48 for 2022
target dividend per share. These 2023 8.40 7.63 for 2023
are targets only and are not for 2024 and 7.78 for
a profit forecast. There can and 8.57 2024
be no assurance that these targets for 2025
will be met or that the Company
will make any distribution at
all.
Calculated using the FTSE All-Share,
ten-year data representing the
ten years preceding 31 December
2022. This performance measure
demonstrates the level of volatility
of the Company's shares in comparison
Ten-year beta to the wider equity market. 0.24 0.18
The TSR combines share price
appreciation and dividends paid
since IPO in December 2011 to
represent the total return to
the shareholder expressed as
a percentage. This is based on
Total Shareholder share price at 31 December 2022
Return since and after adding back dividends
IPO ('TSR') paid or declared since IPO. 152.6% 171%
Represents the weighted average,
by value, of the remaining individual
project concession lengths. Calculated
by reference to the existing
portfolio at 31 December 2022,
Weighted average assuming no future portfolio
portfolio life additions. 20.2 20.3
========================= ========================================== ============ ================
Reconciliation of Investment Basis to IFRS
Reconciliation of Consolidated Income Statement
31 December 2022 31 December 2021
====================================== ======================================
Investment Consolidated Investment Consolidated
Basis Adjust IFRS Basis Adjust IFRS
GBP GBP GBP
million million GBP million GBP million million GBP million
=================================== =========== ========== ============= ============ ========= =============
Income from Investments at
FVPL 137.6 21.9 159.5 75.4 - 75.4
Other operating income 0.1 - 0.1 0.8 - 0.8
=================================== =========== ========== ============= ============ ========= =============
Operating income 137.7 21.9 159.6 76.2 - 76.2
Administrative expenses (11.7) - (11.7) (10.2) - (10.2)
Other operating expenses (1.5) (11.3)(i) (12.8) (2.5) - (2.5)
Net finance result (2.0) - (2.0) (2.0) - (2.0)
Net loss on balance sheet
hedging - (10.6)(i) (10.6) (0.8) - (0.8)
=================================== =========== ========== ============= ============ ========= =============
- 60.6 60.6
Profit before tax 122.5 - 122.5 60.7 - 60.7
Tax expense - net (3.5) - (3.5) (2.7) - (2.7)
=================================== =========== ========== ============= ============ ========= =============
75.4 75.4
Profit from continuing operations 119.0 - 119.0 58.0 - 58.0
=================================== =========== ========== ============= ============ ========= =============
(i) For further clarity, commencing the year ended 31 December
2022, the Income from Investments at FVPL now includes the net
effect of the foreign exchange hedging contracts. In prior years,
the effect of the foreign exchange hedging contracts was presented
separately under 'Other operating income/expenses' and under 'Net
gain/(loss) on balance sheet hedging.
Reconciliation of Consolidated Statement of Financial
Position
31 December 2022 31 December 2021
====================================== ======================================
Investment Consolidated Investment Consolidated
Basis Adjust(i) IFRS Basis Adjust IFRS
GBP GBP GBP
million million GBP million GBP million million GBP million
============================== =========== ========== ============= ============ ========= =============
Investments at FVPL 1,097.0 5.8 1,102.8 975.2 - 975.2
Trade and other receivables 0.9 - 0.9 1.0 - 1.0
Other net liabilities (2.4) - (2.4) (2.4) - (2.4)
Net cash (debt) (26.3) - (26.3) 26.9 - 26.9
Derivative financial asset
(liability) - (5.8) (5.8) 0.9 (1.1) (0.2)
============================== =========== ========== ============= ============ ========= =============
NAV attributable to ordinary
shares 1,069.2 - 1,069.2 1,001.6 (1.1) 1,000.5
============================== =========== ========== ============= ============ ========= =============
(i) Under IFRS, unrealised positions on foreign exchange hedging
contracts are reported separately under derivative financial asset
(liability).
Risk
We follow a risk-based approach to internal controls. Our risk
management function facilitates the Management Board's duty to
effectively govern and manage the risks we face. Given the nature
of our assets and our interaction with the capital markets, we do
not operate in a risk-free environment. In an uncertain
environment, we take proactive action to address risks, and to
achieve our business and investment objectives.
We identify, analyse, assess, report, and manage all material
risks, and aim to identify risks we face as early as possible, so
we can minimise their impact.
We classify risks into the following risk categories:
-- Market risks
-- Credit risks
-- Counterparty risks
-- Liquidity risks
-- Operational risks
-- Sustainability risks
We analyse all identified risks during the risk reporting
process to understand the range of possible impacts on BBGI. By
undertaking this risk review, we can determine material risks to
analyse and respond to, and risks that require no further
attention. This gives the Management Board a universal
interpretation of risk.
Our risk management function performs a risk assessment to
determine the likelihood that a predefined event will occur and any
subsequent impact; it also estimates risk levels for a particular
situation, compares these against benchmarks or standards, and
determines an acceptable level of risk.
In the risk profile all identified risks are classified
according to risk type, in line with the risk categories above. For
material risks identified, BBGI's risk manager advises on key risk
indicators to include in the risk profile and suggests appropriate
quantitative and qualitative limits to mitigate the potential
impact of those risks, which are discussed and approved by the
Management Board before being formally included in the Risk
Profile.
We have assessed inherent risk and have applied relevant
mitigating factors to arrive at a remaining residual risk that the
Management Board deems manageable or acceptable.
This following table summarises our material risks, but is not
an exhaustive list of all the potential risks BBGI faces.
Previously reported risks in relation to COVID-19 and SONIA
transition have been removed and others have been updated. There
may be other unknown risks, or those regarded as less material,
that could, in the future, materially impact our performance, our
assets, and our capital resources.
Risk description Risk mitigation
MARKET RISKS
Volatility We use a discounted BBGI primarily uses a market-based valuation
of discount cash flow methodology to determine a base discount rate for
rates to value our portfolio steady-state, operational investments,
of investments. Higher and we use our judgement in arriving
discount rates may at the appropriate discount rates . We
have a negative impact may apply adjustments to the base rate
on valuation and to reflect variances from the average
the ultimate rate benchmark when we determine investment-specific
of return realised characteristics and risk profile.
by our investors, Government bond yields have increased
while lower discount significantly in 2022 coupled with the
rates may have a fact that there was limited transactional
positive impact. market data available in the second half
Our most important of 2022. BBGI has therefore complemented
judgement and variable its market-based approach by additionally
is the discount rate using the capital asset pricing model
we apply to our portfolio where risk free rates plus an equity
of investments. Appropriate risk premium are used to calculate discount
discount rates are rates. This method is used as a plausibility
key to deriving a check for our market-based approach.
fair and reasonable Our NAV is sensitivity-tested periodically
portfolio valuation. for changes in discount rates.
Changes in market Inflation rates are positively linked
rates of interest to the NAV. An increase in discount rates
(in particular, government due to increased interest rates coincides
bond yields) may currently with significantly higher inflation
impact the discount rates. Higher actual and revised short-term
rate used to value forecasted inflation rates offset, partially
our future projected at least, increased discount rates in
cash flows, and thus our portfolio valuation calculation.
our valuation. In Interest rate increases also have a positive
the event long-term impact on interest earned on cash deposits
interest rates rise at our Portfolio Companies , which additionally
substantially further, mitigates a portfolio value reduction
this is likely to arising from increased discount rates.
affect discount rates. An increase in long-dated government
bond yields will not necessarily result
in an equivalent increase in discount
rates. Long-dated government bond yields
have largely trended downwards since
BBGI's IPO in 20 11 , but the market
discount rate applied to secondary transactions
has not followed in lockstep.
We have provided a sensitivity analysis
in the valuation section of this report
in relation to discount rates applied
to our portfolio of investments.
------------------------------------ ------------------------------------------------------
Foreign exchange A significant proportion Currency-hedging arrangements for portfolio
of our underlying distributions denominated in Australian
investments - 68 Dollar, Canadian Dollar, Norwegian Krone
per cent of the portfolio and US Dollar are in place for a rolling
value at 31 December period of four years to mitigate some
2022 - are denominated foreign exchange risk.
in currencies other In addition to cash flow hedging, we
than Sterling. also hedge a portion of the non-Sterling,
We maintain our financial non-Euro portfolio value, and aim to
statements, prepare reduce NAV sensitivity to approximately
the portfolio valuation, three per cent for a 10 per cent adverse
and pay dividends foreign exchange movement.
in Sterling. Euro-denominated fund running costs currently
There is a risk that provide a natural hedge against the Euro-denominated
fluctuations in exchange portfolio distributions.
rates between Sterling Furthermore, the ability to draw on the
and relevant local RCF in the currency of the underlying
currencies will adversely asset distributions provides an additional
affect the value hedging alternative.
of our underlying BBGI has investments in five currencies
investments, distributions other than Sterling, resulting in some
and the ultimate natural diversification among underlying
rate of return realised currencies.
by our investors. A sensitivity analysis is provided in
the v aluation section of this report
in relation to foreign exchange rates.
------------------------------------ ------------------------------------------------------
Interest Our performance may Our Portfolio Companies have sought to
and deposit be adversely affected hedge substantially all their floating
rates by changes in interest rate interest liabilities against changes
rates. BBGI has an in underlying interest rates with interest
exposure to interest rate swaps.
rates through borrowings At the Group level, we maintain deposits
under the RCF, debt at low levels and only raise capital
at the Portfolio when there is a clear strategy for deploying
Company level and proceeds.
cash deposits. A sensitivity analysis is provided in
The Portfolio Companies the valuation section of this r eport
typically have some in relation to deposit rates and changes
cash reserves and in the senior debt rate of the Portfolio
deposits. From a Companies.
financial modelling
perspective, we assume
that deposits can
be placed at a forecast
rate, which varies
depending on country.
If deposit rates
exceed or fall below
projections for short-term
and long-term rates,
the effect on investment
returns will depend
on the amount of
deposits.
------------------------------------ ------------------------------------------------------
Inflation We have observed A scenario of persistent high inflation
inflationary pressure across our jurisdictions presents the
across all our jurisdictions. risk of declining real returns to investors.
Our valuation and We typically mitigate inflation risk
the ultimate rate for our Portfolio Companies to some extent
of return realised by seeking to match the indexation of
by our investors the revenues to the indexation of the
may be adversely operational cost.
or positively affected It is also important to note that BBGI's
by lower or higher equity cash flows are positively linked
than expected inflation. to inflation.
Prolonged periods A sensitivity analysis is provided in
of deflation could the valuation section of this r eport
result in defaults in relation to inflation rates of the
under Portfolio Company Portfolio Companies.
loan arrangements. However, the level of inflation linkage
The revenues and across the investments held varies and
expenditure of our is inconsistent. The consequences of
Portfolio Companies higher or lower levels of inflation than
developed under availability-style that assumed by the Company, will not
schemes are often be uniform across our investments.
partly or wholly
subject to indexation.
From a financial
modelling perspective,
an assumption is
usually made that
inflation will increase
at an assumed rate
(which may vary depending
on country). The
effect on investment
returns, if inflation
exceeds or falls
below the projections
for this rate, typically
depends on how each
Portfolio Company's
costs are affected
by inflation, and
any unitary charge
indexation provisions
agreed with the client
on any investment.
------------------------------------ ------------------------------------------------------
Changes to There is a continued Certain risks, such as changes to corporation
tax legislation, risk that enacted tax rates (including due to fiscal constraints),
treaties, changes in tax law, cannot be prevented or mitigated.
and rates tax rates and global We value our Portfolio Companies based
tax initiatives, on enacted tax rates. Our management
including the OECD's team works closely with our global tax
recommendations in advisers, and is briefed periodically
relation to base on relevant tax developments.
erosion and profit We are monitoring the evolution of draft
shifting or tax treaty legislation for excessive interest and
eligibility, could financing expenses limitation ('EIFEL')
have an adverse effect rules in Canada and similar developments
on our cash flows, in Australia, and any potential impact
and reduce investors' on our investments.
returns. The draft EIFEL rules aim to limit the
deduction of 'interest and financing
expenses' to a fixed percentage of earnings
before interest, tax, depreciation, and
amortisation for Canadian income tax
purposes. The private sector made significant
submissions to the Department of Finance
on the proposed legislation.
Following a review of submissions and
open consultations with the private sector,
the Department of Finance released a
revised draft of the legislation in November
2022. This revised draft provides for
an exemption for third-party debt financing
on PPP type projects, similar to the
public benefit entity concept in the
UK.
Additionally, in Australia, expected
amendments to the existing thin capitalisation
rules in order limit interest deductions
are likely to have an adverse NAV impact.
Overall, these new rules are expected
to result in a decrease in NAV of c.
GBP12.5 million, which has been reflected
in the December 2022 valuation.
Generally, BBGI has a globally diversified
portfolio of assets, thereby reducing
the tax concentration risk of any one
country.
A sensitivity analysis in relation to
tax rates of the Portfolio Companies
is provided in the valuation section
of this r eport.
------------------------------------ ------------------------------------------------------
Lifecycle During the life of Of the 56 assets in the BBGI portfolio,
or operational an investment, components 20 Portfolio Companies retain the lifecycle
cost risk of our assets (such obligations. The remaining 36 assets
as asphalt or concrete have this obligation passed down to the
for roads and bridges; subcontractor.
or roofs and air Each Portfolio Company forecasts , models,
handling plants for and provides for the timing and costs
buildings) are likely of such replacements or refurbishments.
to need to be replaced This is based on internal or external
or undergo a major technical advi c e to assist in forecasting
refurbishment. of lifecycle timings, scope of work and
There is a risk that costs.
the actual cost of As part of acquisition due diligence,
replacement or refurbishment we review budgeted costs and assess their
of these lifecycle adequacy.
obligations will A sensitivity analysis is provided in
be greater than the the valuation section of this r eport
forecasted cost, in relation to lifecycle costs.
or that the timing The risk of insurance cost increases
of the intervention is partly mitigated by a contractual
may be earlier than premium risk-sharing mechanism with certain
forecast. public sector clients. For other Portfolio
There is also the Companies, the risk is borne entirely
general risk that by the public sector client but for a
costs may be higher limited number of Portfolio Companies
than budgeted. This there is no mitigation available.
typically relates
to insurance costs
and management service
contracts.
------------------------------------ ------------------------------------------------------
COUNTERPARTY RISKS
Failure of The risk of a subcontractor For assets under construction (c. 0.5
subcontractor service failure, per cent of the portfolio value), there
performance poor performance are several mitigants and steps we take
or credit or subcontractor to manage this risk:
risk (construction insolvency, which * A construction joint venture with two or more
contractors, is sufficiently serious counterparties is typically jointly and severally
facility managers, to cause a Portfolio liable: if one party fails, the other is obligated to
operation, Company to terminate take over the obligations.
and maintenance or to be required
contractors) by the client or
lenders to terminate * We perform a contractor replacement analysis as part
a subcontract. of our initial investment due diligence. Most
There may be a loss subcontractors of our investments are well
of revenue during established, with several competing providers.
the time taken to Therefore, we expect that a pool of potential
find a replacement replacement supplier counterparties is available if a
subcontractor. The service counterparty fails, although not necessarily
replacement subcontractor at the same cost.
may also levy a surcharge
to assume the subcontract,
or charge more to * Construction subcontractors are typically required by
provide the services. lenders to provide a robust security package, often
consisting of letters of credit, parent company
guarantees or performance bonding.
The latter two mitigants are also in
place for investments once they become
operational. However, any liability of
subcontractors is typically capped at
contractually agreed amounts.
Other mitigants during operations include:
* Periodic benchmarking of defined soft facility
services on some investments.
* A diversified group of subcontractors, with no
substantial concentration risk.
* Ongoing subcontractor monitoring for our investments,
as well as contingency plans as appropriate, to
ensure we mitigate the risk of counterparty failure.
------------------------------ ----------------------------------------------------------------
LIQUIDITY RISKS
Access to There is a risk that The need to issue new equity capital
capital a disruption to the primarily relates to the repayment of
equity markets could drawings under the RCF.
lead to an inability The Board and our Company's brokers regularly
to raise new capital. assess market sentiment.
Such a disruption Our RCF expires in May 2026. The Management
could limit our ability Board can seek to refinance the RCF to
to grow and our ability extend its maturity and reduce the near-term
to repay debt drawn requirement to repay drawings, though
under our RCF. we do not intend to be drawn for substantial
To the extent that periods of time.
we do not have cash
reserves pending
investment, we expect
to bridge finance
further investments
using the RCF.
Although we have
had an RCF since
July 2012 (subsequently
refinanced), we cannot
guarantee this will
always be the case,
or that we will be
able to issue further
shares in the market.
------------------------------ ----------------------------------------------------------------
Premium or The risk of share To assist BBGI in managing any share
discount to price volatility, price premiums or discounts to NAV, we
NAV or trading at a discount can make annual market purchases of up
to NAV, leading to to 14.99 per cent of the ordinary shares
lower returns to in issue.
shareholders. We offer a continuation vote to shareholders
every two years; the next will be proposed
at our Annual General Meeting on 28 April
2023.
The Management Board meets regularly
with shareholders and receives regular
briefings from our Company's brokers
to manage investor relations.
------------------------------ ----------------------------------------------------------------
OPERATIONAL RISKS
Poor investment There is a risk that BBGI has developed a robust asset acquisition
due diligence errors may be made due diligence process. Our typical due
in the assumptions, diligence includes model, legal, tax,
calculations, or technical, anti-money laundering, ESG,
methodology during sustainability and insurance reviews.
an acquisition due
diligence process.
In such circumstances,
the figures and/or
the returns generated
by the Portfolio
Company and the ultimate
rate of return realised
by our investors
may be lower than
those estimated or
projected.
------------------------------ ----------------------------------------------------------------
Valuation The most significant Our portfolio valuation is prepared semi-annually
risk of material by an experienced internal team, overseen
misstatement in our by our Management Board.
financial statements Furthermore, the valuation is reviewed
is the fair valuation by an independent, third-party valuation
of the investment expert, and is also reviewed and audited
portfolio, the discount by the Company's external auditor.
rates we apply, and All key assumptions used in the valuation
key assumptions when process are in the valuation report,
valuing these investments. some of which are subject to sensitivity
There is a risk that testing.
errors may be made However, sensitivity testing has its
in the assumptions, limitations: it cannot provide a comprehensive
calculations or methodology assessment of every risk we face and
used in a periodic should be considered accordingly.
valuation process.
Financial models,
either for the Group
or our underlying
Portfolio Companies,
may also contain
errors, or incorrect
inputs, resulting
in inaccurate projections
of distributions.
These could adversely
impact the valuation
on individual investments
and the overall assessment
of our financial
position.
------------------------------ ----------------------------------------------------------------
Construction The risk of certain In general, Portfolio Companies can submit
defects operational costs claims against construction subcontractors
in relation to construction for defects in the design, construction,
defects lies with or commissioning of project assets. This
the Portfolio Company. 'right to claim' applies for a pre-determined
period following the completion of construction
('statutory limitations period'), and
this may differ between jurisdictions.
If disputes arise, an arbitration or
court process may be used. Once the statutory
limitations period has ended, the remediation
of construction defects identified after
this point typically fall to the Portfolio
Company itself, and thus become the risk
of the Portfolio Company. In addition,
there may be other situations where the
risk would lie with the Portfolio Company,
for example where a subcontractor becomes
insolvent, and may no longer be able
to fulfil its obligations to correct
these defects.
------------------------------ ----------------------------------------------------------------
Change in Different laws and The Management Board seeks regular briefings
law or regulation regulations apply from its legal and tax advisers to stay
in the countries abreast of impending or possible changes
where BBGI and our in law.
Portfolio Companies Change in law provisions are included
are located. There in some contracts, thus providing further
is a risk that changes mitigation.
in laws and regulations BBGI has a globally diversified portfolio
may have an adverse of assets, thereby reducing the Group's
effect on the performance exposure to changes in any single country.
of the underlying
investment, which
will then affect
the cash flows derived
from the investments
and/or the valuation
of the investments.
------------------------------ ----------------------------------------------------------------
Failing IT A breach of data BBGI has taken several measures to reduce
systems or security could occur the risk of a cyber-attack, and we outline
cyber-attacks by accident or as a few below.
a result of an external We have outsourced the hosting of our
cyber-attack. A cyber-attack IT platform to an industry specialist.
could affect our In doing so, we benefit from access to
IT systems or those IT security experts, with our platform
of our Portfolio monitored by an advanced IT security
Companies, causing system. This approach would be less cost-effective
theft, loss of data, if our IT infrastructure was maintained
or damage to the onsite.
infrastructure's Every year, we engage an external expert
control systems and to carry out an intrusion test on our
equipment. IT platform to identify and patch any
The threat of cyber-attack vulnerabilities.
means that businesses We perform business continuity tests,
can no longer afford carry out disaster recovery tests every
to be reactive. A year, and our employees periodically
cyber-attack could undergo cyber security training.
affect not only BBGI's In a typical PPP structure, public sector
reputation, but could clients have their own IT systems. However,
also have legal, the majority of our Portfolio Companies
financial, and operational do not maintain their own IT systems.
repercussions for Instead, subcontractors of a Portfolio
the Group. Company (such as management service providers,
facility maintenance contractors for
accommodation assets, and maintenance
contractors for transport assets) will
have their own IT systems, which will
likely house data relating to a project.
In a typical PPP structure, such as those
in BBGI's portfolio, risks are passed
down to subcontractors by the Portfolio
Company.
However, any liability is capped to contractually
agreed amounts, including risks relating
to design and construction, warranties
for IT systems (such as a warranty that
the system will meet specifications requiring
it to meet robust security requirements),
and the risk of a cyber-attack interrupting
the provision of services to a project.
------------------------------ ----------------------------------------------------------------
Voluntary There remains a risk The Management Board believes there are
termination that public sector mitigants or deterrents to the risk of
clients of our Portfolio voluntary termination of contracts:
Companies choose * In cases where debt or bond facilities were agreed
to exercise their when interest rates were higher than current levels
right to voluntarily interest rate swaps remain largely 'out of the money'
terminate the contracts. for our Portfolio Companies, and any public body
When this happens, wishing to terminate a contract in the current
the public sector interest rate environment would also need to cover
is typically contractually the cost of the swap breakage fee.
obliged to pay compensation
on termination to
equity holders, debt * Our Portfolio Company equity investors would,
providers, and other depending on the particular contractual provisions,
parties. depending also need to be compensated, as well as the public
on the circumstances. sector being required to budget for the ongoing
While provisions provision of the service.
vary between contracts,
they generally ensure
that our investors
are paid either market
value for their equity
interests, or a value
to achieve the originally
projected IRR, and
in these cases, where
the compensation
amount is less than
current valuation
levels, we would
suffer a material
loss.
------------------------------ ----------------------------------------------------------------
SUSTAINABILITY
RISKS
-------------------- ------------------------------ ----------------------------------------------------------------
Sustainability Sustainability risk We seek to integrate and appraise material
risk has been defined sustainability risks into our processes
in Article 2(22) in several ways:
of the Sustainable * Alongside traditional financial criteria, we
Financial Disclosure systematically consider whether - and to what extent
Regulation as 'an - financially material sustainability risks might
environmental, social meaningfully impact our investments.
or governance event
or condition that,
if it occurs, could * In 2021 and 2022, we undertook a formal portfolio
cause an actual or climate risk assessment to better understand the
potential material impact of climate risk on BBGI. The findings
negative impact on demonstrate a high degree of climate resilience
the value of the across our asset portfolio, both today and under
investment'. different climate warming scenarios.
For example, climate
change can give rise
to a range of sustainability * Although climate change is projected to increase
risks. physical risk impacts across our portfolio, many of
Financial risks from our assets, due to the vital services they provide,
climate change can have been designed and constructed in consideration
arise through two of potential physical risk impacts, and are
primary channels: inherently more resilient to climate change.
(i) physical risk,
from abrupt and acute
weather events, or * We typically mitigate events arising from adverse
chronic longer-term climate change through insurance coverage, pass-down
shifts in climate to subcontractors and public sector client relief
patterns, each causing events. However, in severe cases , adverse climate
disruptions to businesses change events could lead to early termination of
and economic activities concession agreements and compensation payments,
(and the value of which are materially lower than our valuation.
investments in them);
and
(ii) transition risk, * Aligned with our SFDR Article 8 product
from a shift to low classification, our focused approach of investing in
carbon and climate core social infrastructure assets that serve society
resilient policies, should mitigate sustainability risk linked to a
laws and technologies social event or condition
and changes in societal
attitudes. Failure
to acknowledge climate
change may also alienate
certain investors
and reduce our access
to capital.
All sustainability
risks can be broken
down into physical
and transition risks,
which could both
impact the performance
of an asset or of
BBGI itself, and
have a material negative
impact on investment
returns.
For example, infringements
of human rights could
have a significant
impact on the financial
performance of an
investment.
------------------------------ ----------------------------------------------------------------
Environment, Social and Governance
As the ESG Committee, we are pleased to report on the progress
made by the Company and by our 56 Portfolio Companies. We
approached 2022 mindful of the ever-evolving nature of ESG
frameworks and regulations, and the challenges of data collection.
We take pride in the close engagement we have maintained with each
of our assets. We continue to focus our efforts to make
improvements in key areas such as GHG emissions monitoring and
reduction, climate-risk assessments, health and safety standards,
biodiversity and human rights. Our ESG strategy is underpinned by a
culture of robust governance and stringent compliance, promoting
accountability and transparency, with a focus on delivering
positive outcomes for all stakeholders.
Sustainability Highlights
Our purpose is to deliver social infrastructure for healthier,
safer and more connected societies, while creating sustainable
value for all stakeholders.
Our portfolio is focused on creating long-term positive impacts
for society, by investing in infrastructure assets that provide
citizens with access to essential services, such as: health,
education, security, clean energy, social housing, public services
and safe transportation. The sustainable and resilient portfolio of
56 social infrastructure investments that we manage is aligned with
our SFDR Article 8 classification, where we promote social
characteristics in combination with good governance practices.
To support our SFDR-related social investment objective, each of
our investments is aligned with at least one of six focused SDGs
where we can make the greatest contribution. By maintaining social
infrastructure assets for our public sector clients, our portfolio
aims to:
-- Facilitate education, healthcare and well-being of local communities (SDG 3 and 4).
-- Provide access to affordable housing (SDG 11).
-- Support safe and accessible travel on roads and public transport (SDG 9 and 11).
-- Facilitate access to public services, provide safety to local
populations and promote the rule of law (SDG 16).
-- Connecting communities through reliable transportation
networks and support the transition to renewable energy sources
(SDG 9).
-- Remaining resilient and capable of sustaining potential
damages caused by climate change (SDG 13).
While we are proud to provide well-maintained infrastructure
that serves society, we recognise that building and operating
physical assets such as schools, hospital, roads and hydroelectric
plants can harm the environment, impact surrounding biodiversity
and are subject to climate hazards. As stewards of these assets,
our public sector clients entrust us with safeguarding them during
our concession period. Our ESG approach systematically integrates:
greenhouse gas emissions monitoring, climate-risk assessment, and
initiatives to restore natural ecosystems, so that our portfolio
does not significantly harm other environmental objectives.
Duncan Ball Frank Schramm
Co-CEO Co-CEO
29 March 2023
On behalf of the ESG Committee
Strategic ESG -- ESG fully integrated in strategy and business model.
integration -- Management remuneration tied to ESG targets within
both STIP and LTIP awards. -- 100 per cent of staff
received ESG training.
====================== ===============================================================
Social characteristics -- Portfolio aligned with the social investment objective
in combination of our SFDR Article 8 product. -- 100 per cent of
with good governance our investments align with at least one of SDGs 3,
4, 9, 11 or 16 and have a 'do no significant harm'
objective aligned to SDG 13. -- Social safeguards
screening based on UN Global Compact Ten Principles.
====================== ===============================================================
ESG monitoring -- Continuous engagement with all Portfolio Companies
and strong ESG oversight. -- All Portfolio Companies
completed a 100+ questions proprietary ESG KPI survey.
-- 75 per cent of our assets have a sustainability
certification.
====================== ===============================================================
Climate resilient -- Voluntary disclosures aligned with TCFD. -- Portfolio
portfolio demonstrates a high degree of climate resilience.
-- Climate risk scores shared with over 98 per cent
of Portfolio Companies' boards and 80 per cent of
clients.
====================== ===============================================================
Net zero -- Net zero targets for our Corporate and Financed
emissions. [xx] -- Certified as carbon neutral for
Corporate Emissions Scope 1, 2 and 3. -- Financed
emissions (Portfolio Companies) to be disclosed in
June 2023.
====================== ===============================================================
External ratings -- UN PRI signatory: 5/5 stars (Investment & Stewardship
policy); UN PRI signatory: 4/5 stars (Direct Infrastructure).
-- Sustainalytics ESG Risk Rating 2021: negligible
(8.3). -- ISS Corporate ESG Rating 2022: Prime B-
(Decile Rank: 1).
====================== ===============================================================
Contribution to Sustainable Development Goals
The SDGs inform our entire ESG and social impact management
process. Specifically, our investment strategy seeks to create
measurable impacts facilitated by our investments and future
acquisitions.
The SDGs are used to assess, measure and monitor that we keep
investing beyond mere alignment and make a verifiable contribution
to positive social and environmental outcomes. We acknowledge that
through our direct operations and investment portfolio we can also
create negative impacts and we address some of these impacts in the
relevant sections of this report.
Our social infrastructure investment strategy is focused on six
SDGs and creates real-world outcomes from the portfolio we invest
in:
Sustainable Sustainability Impacts
Development indicators
Goals
Create Target 41 healthcare c. 600,000 c. 4 Hospitals, mental-health
positive 3 facilities m(2) managed million clinics and primary
social Good health 26 fire c. 33,000 patients healthcare
outcomes and well-being stations m(2) managed c. 800,000 centres provide access
to healthcare delivery
for c. four million
patients
per year and over 2,400
beds. Fire stations
provide
c. 800,000 people with
protection against
fire-related
injuries and fatalities
and mitigation of air,
water and soil pollution
caused by fire
incidents.
Fire stations also play
a critical role as part
of a first responders'
network, supporting
local
populations.
-------------------- ------------------- -------------- ------------ -------------------------
Target 33 schools c. 430 c. 36,000 Schools and colleges
4 and colleges ,000 m(2) pupils provide c. 36,000 pupils
Quality managed with access to primary,
education secondary and adult
education
in an effective learning
environment.
-------------------- ------------------- -------------- ------------ -------------------------
Target 19 roads c. 2,800 c. 290 Roads and bridges
9 and bridges single-lane million provide
Industry, kms operated vehicles local population with
innovation reliable and resilient
and infrastructure One hydroelectric 132 MW transport, and reduce
generation installed travel times for c. 290
station million vehicles a year.
The maintenance of road
networks is necessary
c. 80,000 and aims for a reliable
homes and safe access,
reducing
traffic congestion, and
decreasing greenhouse
gas emissions by
reducing
transit times.
Maintaining
road elements,
signalling,
surfacing, and other
security measures is
crucial for a safe
journey.
Hydroelectric power
station
supports the access to
clean and reliable
electricity
for over 80,000 homes,
while providing flood
control and domestic
water supply.
-------------------- ------------------- -------------- ------------ -------------------------
Target One fully c. 39 kms c. 32 Urban rail transport
11 Sustainable electric million is a safe and
cities and public passengers sustainable
communities transit c. 17,000 means of public
line m(2) / transport
100 units for c. 32 million
Three passengers
affordable c. 200 per year, given the
residential people fully
housing autonomous nature of
and Two the transit system,
community which
centres is powered by
electricity.
Residential housing
units
support the access to
affordable housing for
c. 200 people per year,
complemented by sport
and leisure centres for
the local community.
-------------------- ------------------- -------------- ------------ -------------------------
Target Four police c. 16,000 c. 1.5 Police stations promote
16 Peace, stations m(2) managed million the rule of law and
justice c. 190,000 people provide
and strong Three m(2) managed safety for c. 1.5
institutions modern million
correctional 37,000 c. 2,500 people per year.
facilities m(2) managed detainees
Two public Modern correctional
administration justice
buildings facilities promote the
c. 500,000 rule of law and are a
people necessary link in the
functioning of judicial
systems for c. 2,500
detainees a year. Public
administration buildings
provide c. 500,000
people
with access to public
services.
-------------------- ------------------- -------------- ------------ -------------------------
Do no significant Target 100 per 56 assets 100 per cent of assets
harm 13 cent of screened for resilience
Climate the portfolio and adaptative capacity
action to climate related
hazards
and natural disasters.
-------------------- ------------------- ---------------------------- -------------------------
Case study: Creating lasting positive impact through initiatives
for local vulnerable and disadvantaged people and communities in or
around our Liverpool & Sefton Clinics
BBGI and its partners have worked together for several years to
support initiatives that aim to create a positive impact on
vulnerable and disadvantaged communities in and around their
Liverpool & Sefton Clinics. These clinics are part of the LIFT
programme, established in 2001 by the UK Government, creating
long-term public-private sector partnerships that provide better
healthcare and social care facilities for local communities.
To make their buildings an integral part of their communities,
Liverpool & Sefton Clinics have in the past provided spaces for
community groups and fundraising activities. In recent years, the
Portfolio Company established a foundation with a dedicated budget
to support initiatives that benefit local communities and create a
lasting impact.
In 2022, BBGI proudly collaborated with Liverpool & Sefton
Clinics to fund and provide space at the Kensington Health Centre
for the 'Liverpool Through Our Lens' photography programme, which
enabled vulnerable and disadvantaged people to enjoy specially
adapted photography lessons. The programme was delivered in
partnership with Community Integrated Care (CIC is one of UK's
largest and most successful social care charities) and Liverpool's
Open Eye Gallery, a recognised expert on socially engaged
photography. The participants of the programme were volunteers with
some of the biggest health and social issues from CIC's Inclusive
Volunteering Programme, each supported by a carer/worker to ensure
their individual needs were met.
The photography programme ran from October to early November
2022, coinciding with the World Gymnastics Championships held in
Liverpool. This programme enabled the volunteers to engage
socially, access and explore their community, and learn new life
skills and passions. The participants created stunning photographs
of the city that were displayed for a week at a professional
gallery in the Fan Zone at the Championships, attended by
approximately 50,000 people. Participants also had the opportunity
to see the games, meet gymnasts, manage the gallery display, and
participate in a wider supplementary programme of inclusive
activities at the World Gymnastics Championships.
The photographs were also exhibited to approximately 5,000
people at the Rugby League World Cup and will be permanently
displayed at the Kensington Health Centre. The programme made a
lasting positive impact on the lives of 30 people in need, giving
them new skills and inspiring them to be more active and engaged.
The programme is an excellent example of how public-private
partnerships can provide a positive impact on local communities,
supporting individuals and organisations in achieving their
goals.
Ian Tayler, Director at BBGI said: "Based on the success of this
amazing programme, it will progress further throughout 2023,
building on the positive impact provided to this group of
volunteers. We are also continuing to explore how we can deliver
similar community initiatives based out of our other health
centres."
John Hughes, Director of Partnerships and Communities at CIC,
commented: "Much more than learning how to use a camera, the
project inspires independence, encouraging people to go out and
visit their city and share their photography experiences with the
group and carrying this skill on for the rest of their lives."
Nuria Rovira Terradas, Assistant Creative Producer at Open Eye
Gallery, said: "It's been great to see the volunteers grow in their
confidence as they learn more skills and share their photographs
and experiences with other people. Every photograph tells a
powerful story, but it's the stories behind the lens that have the
greatest impact."
Stakeholder Engagement
As stewards of important social infrastructure investments,
there are many stakeholders impacted by our actions: users of the
infrastructure, communities living in the vicinity of our assets,
our staff, investors, public sector clients, subcontractors, the
environment, and society at large. We take this responsibility
seriously.
Our stakeholders increasingly expect us to consider and act on a
broad range of sustainability issues. We are guided by our values
of good governance, and our responsible mindset drives what we do
both at the corporate level and Portfolio Companies' level. We
expect all our staff and executives to always engage with our
stakeholders while keeping these guiding principles in mind.
We have summarised below BBGI's general engagement approach with
its key stakeholders, representing the main groups that benefit,
are influenced by, or interact with our business activities. In
addition, in 2021, we performed a comprehensive materiality
assessment (AA10000 Stakeholder Engagement Standard) to identify
the most material sustainability issues that are priorities for our
stakeholders and where the impact of our operations is most
significant. As part of this assessment, we engaged with key
internal and external stakeholders. Our stakeholder engagement
focused on our employees, investors, clients, partners and
subcontractors. The ten most material topics define our ESG
framework, each tracked by a performance indicator and more
information is provided in our 2022 ESG report.
As a member of the AIC, BBGI acknowledges Provision 5 of the AIC
Code's expectation for all members to comply with the continuing
requirement under Section 172(1) CA2006 for boards to take
stakeholder interests into account, and to report how they have
done so when performing their duties. Details of how we adopt the
spirit of those provisions and consider our stakeholders are
outlined below:
Who are the Company's key What actions are the What are the types of How has this stakeholder
stakeholders? Why are these Company taking to build and engagement and the metrics impacted upon, and been
stakeholders important? maintain strong used by management, to taken into consideration in
relationships with its key monitor and assess the board decision-making
stakeholders? relationships with process?
stakeholders?
Our people Our people are Our relatively flat - Annual and mid-year - Feedback from the
the driving force behind hierarchy allows our assessments - Direct individual assessments are
our purpose. They are well talented people to be liaison with the Management regularly discussed by the
positioned to empowered to successfully Board - Regular meetings Management Board
bring their expertise to deliver - Well defined expectations - Adjusted our teleworking
our clients, subcontractors our purpose. We promote an and targets, including ESG policy in response,
and partners and deliver inclusive work environment targets for all executives allowing our people to
the results where all people are - Regular better balance their
expected by our investors. treated equally training - Training metrics work and personal lives,
and supported to achieve - Whistleblower hotline improving their well-being
their potential. and job satisfaction.
---------------------------- ---------------------------- ----------------------------
Our public sector clients We aim to build trust by - Regular client meetings - - Meetings with our clients
Satisfied public sector delivering well-maintained Service quality feedback - drives our asset management
clients are critical to our and safe social Sharing results of our approach and feeds directly
business model. infrastructure facilities climate risk into our
and services such that our monitoring - Ongoing decision-making process;
public sector clients are reporting - Net Promoter lessons learned from one
satisfied. Score survey asset are adapted and
applied across the
portfolio. - Examples
include early initiatives
to implement LED lighting
and solar panels
on some of our assets,
providing a sound business
case and encouraging
further adoption on
other assets.
---------------------------- ---------------------------- ----------------------------
Our subcontractors Our Our Portfolio Companies - Sub-contractor monitoring - Enhancing our monitoring
long-term subcontractors collaborate with the - ESG onboarding - Annual of ESG practices across all
are critical to ensure that subcontractors and strive ESG KPI survey - Ongoing portfolio companies and
we provide our to develop mutually ESG engagement their supply
public sector clients with beneficial long-term topics and joint chain through pre-existing
operational and available relationships. initiatives channels, such as the ESG
assets. We monitor our KPI survey. - Additionally,
subcontractors the Company
to ensure that they conduct led a series of webinars
their business according to for our subcontractors to
the high standards of assist them in the process
ethics and integrity of gathering
that we expect. GHG-related data. That data
will assist us in our goal
to deliver positive ESG
impacts.
---------------------------- ---------------------------- ----------------------------
Our communities and users We maintain critical social - Client satisfaction - Supporting projects that
The positive experience of infrastructure assets upon discussed at corporate and benefit the communities
the people who use our which people rely on a Portfolio Companies' level living near to our assets.
assets and the daily basis. - Partnership, - In 2022, our
communities who live near sponsorship and donations - Portfolio Companies donated
to our assets are vital to Community engagement GBP150,000 to local
ensuring our success as a initiatives charities, and offered
responsible various employees
global infrastructure volunteering.
investment company. - Please refer to the case
study on Liverpool and
Sefton Health Centres for
one such example.
---------------------------- ---------------------------- ----------------------------
Our investors Our investors Our goal is to generate - Investor relations - Focused engagement with
provide capital, feedback long-term, predictable, and activities, including selected ESG ratings
on our business model, and inflation-linked returns meetings, roadshows and providers to ensure
help shape for our investors. discussions with senior shareholders have accurate
our future plans. We measure progress against executives - Close and up-to-date insights
key KPIs. interactions and feedback into BBGI's ESG credentials
with our Corporate Brokers - The Board continually
- Annual General Meeting keep under review
- Annual Report - ESG the returns we offer to our
Report - Website investors, along with our
ability to continue to
deliver those
returns. This forms the
basis of discussions when
determining dividends. -
The roadshows provide
the Co-CEOs with an
opportunity to speak
directly with our
investors, including on the
topic
of ESG, to better
understand their
expectations of us.
---------------------------- ---------------------------- ----------------------------
Sustainable Finance Disclosure Regulation
The EU Sustainable Finance Disclosure Regulation ('SFDR') is a
set of regulations that aim to increase transparency and
standardisation of disclosures within financial markets. SFDR aims
to ensure that investors can make informed decisions and have a
clear understanding of the sustainability characteristics of the
financial products in which they invest. We welcome this
legislation because the financial sector can make an important
contribution to a more sustainable economy.
BBGI promotes social characteristics. In accordance with its
Article 8 SFDR classification, a minimum proportion of 75 per cent
of our investments qualify as sustainable investments with a social
objective, while 100 per cent of our investments do not
significantly harm any environmental or social objective and follow
good governance practices.
In 2022, BBGI updated its sustainability-related disclosures to
comply with SFDR Level II requirements.
BBGI has disclosed how we consider the social characteristics of
any potential acquisitions when making our investment decisions, as
well as the extent to which each asset is aligned with at least one
of our six focused SDGs. We also have disclosed the methodology
used to assess the social characteristics of our investments, how
they do no significant harm to any other environmental objective
and promote good governance practices. This includes any indicators
or metrics used, and how they are integrated into investment
decisions. In addition, we have provided more detailed information
on how we engage with Portfolio Companies on sustainability issues,
and the extent of sustainability risk considerations influence our
remuneration policies.
-- The Pre-contractual disclosure for SFDR specifically address
the Company's disclosure obligations under Article 8 of SFDR,
supplemented by Commission Delegated Regulation (EU) 2022/1288 of 6
April 2022 and Commission Delegated Regulation (EU) 2023/363 of 31
October 2022.
-- The Entity level, sustainability risks and principal adverse
impacts disclosure for SFDR specifically address the Company's
disclosure obligations under Articles 3, 4, 5, 6, and 7 of
SFDR.
-- The Product level disclosure for the SFDR specifically
address the Fund's disclosure obligations under Article 10 of SFDR,
supplemented by Commission Delegated Regulation (EU) 2022/1288 of 6
April 2022.
-- The Periodic disclosure for SFDR specifically address the
Company's disclosure obligations under Article 11 of SFDR,
supplemented by Commission Delegated Regulation (EU) 2022/1288 of 6
April 2022 and Commission Delegated Regulation (EU) 2023/363 of 31
October 2022. A copy of the Periodic disclosure is available
at:
www.bb-gi.com/esg/sustainability-related-disclosures/sfdr/periodic-disclosure/2022
For BBGI's SFDR disclosures, please visit the dedicated
Sustainability-related disclosures page in the ESG section of our
website; www.bb-gi.com/esg/sustainability-related-disclosures/
.
As of June 2023, there will be a requirement to disclose our
consideration of principal adverse indicators through the
disclosure of a Statement on principal adverse impacts of
investment decisions on sustainability factors, which we will make
available on our website.
Pathway to net zero
We remain committed to achieving our net zero ambitions and
supporting our portfolio companies in their transition to be net
zero emissions by 2040.
During the year, we continued to explore net zero measurement
frameworks and considered how to best apply them to BBGI's asset
class. There is no one-size-fits-all solution to the climate
challenge, and the nature of each business dictates the specific
goals and path taken. Our pathway to net zero will not be linear,
but we remain committed to reporting on the progress against our
targets as we work towards the ambitions of the Paris
Agreement.
Net zero targets
BBGI's corporate targets to reach net zero emissions by 2040
align to the Science Based Targets initiative ('SBTi') framework
dedicated to Small and Medium Enterprises ('SMEs'). As signatories
to the Net Zero Asset Managers Initiative ('NZAM'), BBGI's targets
to reach net zero emissions across our portfolio by 2050 or sooner
were set in line with the Paris Aligned Investment Initiative
('PAII') Net Zero Investment Framework ('NZIF') and the specific
guidance for the Infrastructure sector, following a 1.5degC
reduction pathway.
While the guidance and tools to assess financed emissions and
track progress towards net zero will evolve, we recognise our
responsibility to ensure GHG emissions are fully and adequately
accounted for across our operations ('Corporate Emissions') and
Portfolio Companies' emissions ('Financed Emissions'). Our targets
were validated and approved by the Institutional Investors Group on
Climate Change (IIGCC) in March 2023.
Emissions profile
The most significant source of GHG emissions comes from our
Financed Emissions. While our own Corporate Emissions have
negligible impact compared with those of our Portfolio Companies,
we recognise our responsibility to ensure our own business
operations are fully accounted for.
Engagement
To achieve the decarbonation of our portfolio, our greatest
leverage is through engagement with our key stakeholders. The main
driver for achieving Financed Emissions reduction targets will come
from the increasing alignment of Portfolio Companies with net zero
pathways. BBGI rarely has operational control at its Portfolio
Companies, so the achievement of the targets and objectives
ultimately relies on shared ambitions and collaboration with our
public sector clients.
Remuneration tied to net zero targets
The Management Board has remuneration targets tied to GHG
emission reduction pathways. Having our executive team consider
climate change in their decision-making process is an effective and
transparent incentive for meeting long-term objectives. In 2022
additional remuneration targets for the Management Board were
introduced tied to targets related to our Portfolio Companies. 20
per cent of LTIP remuneration is now tied to ESG targets.
Climate solutions
Investing in climate solutions that provide tangible reductions
in emissions, and which are mitigation solutions to climate change
is another real opportunity to achieve our targets. Our long-term
and forward-looking approach to portfolio diversifications led us
to invest in a renewable energy infrastructure asset in 2022.
Carbon neutrality and offsetting
BBGI has been carbon neutral since 2021 and will maintain its
carbon neutrality going forward . Corporate emissions for 2019 and
2020, which were calculated in 2021, were retrospectively offset by
planting trees and purchasing verified offsets. Our GHG emissions
have been independently verified each year since our 2019
inventory. BBGI is a certified CO(2) Assessed organisation.
Despite all our efforts to join the collective efforts to reduce
GHG emissions, some emissions will remain unabatable. A successful
approach to net zero is to actively reduce our footprint where
possible, and compensate unavoidable emissions with credible
nature-based removal solutions, until technological solutions
become more viable. As a general principle, we do not use purchased
offsets at the portfolio level to achieve our decarbonisation
goals. We also do not offset emissions in one part of our portfolio
through accounting for avoided emissions in another part. When
using offsets, it is only where there are no technologically or
financially viable alternatives to eliminate emissions.
BBGI's success in achieving its net zero pathway will continue
to evolve, along with the progresses made by all other participants
in the industry. We commit to keeping our net zero targets a
strategic priority, in order to support global decarbonisation
goals, protect societies from uncertainties ahead and build a more
resilient economy.
Find out more in our ESG Report.
Biodiversity
As investors, we recognise that most negative impacts on
biodiversity are locked in and mitigated when the project is built.
Encouraging nature-based restoration measures during expansion and
operation phases can be effective.
Our assets are built in compliance with local regulations and
various nature preservation measures are in place such as:
-- Noise and pollution reduction measures.
-- Designs to minimise impacts on local species' natural habitats.
-- Wildlife crossing corridors.
During the concession period, we focus on promoting restoration
efforts to improve degraded or removed ecosystems that act as
natural carbon sinks and can improve resilience to climate-related
damages, such as:
-- Habitats for indigenous species (i.e. bat boxes, insect
hotels, beehives, wild bee hotels, fish ladders).
-- Expansion of green spaces in urban areas (i.e. planting
indigenous tree species, shrubs and flower meadows).
As part of our standard set of policies, we have also started to
roll out a biodiversity policy across our portfolio since 2021,
which 93 per cent of our Portfolio Companies currently have
implemented.
Case study: Supporting the growth in bee populations and
improving biodiversity across our assets
BBGI is committed to increasing the creation of suitable new and
improved nesting and feeding areas for bees at many of our assets,
which are vital sources of habitat and food for bee species. These
initiatives help to grow bee and insect populations and increase
biodiversity. We have good support from our public sector clients
for our initiatives.
BBGI has access to large extensions of land alongside its
transport projects, which lend themselves perfectly to creating new
bee habitats, and we have launched such initiatives at some of our
transport projects. Examples of such initiatives include the E18
motorway (Norway), Northwest Anthony Henday (Edmonton, Canada),
Northeast Stoney Trail (Calgary, Canada), and Golden Ears Bridge
(Vancouver, Canada). Additionally, some of our social assets
initiated the creation of bee hotels on their roofs or surrounding
areas, being Rodenkirchen schools (Cologne, Germany) and Liverpool
& Sefton clinics (Liverpool area, UK). Altogether, these
initiatives have already created approximately 150 bee habitats,
which are homes to c. 10 million bees.
A critical factor in the success of restoring bee numbers and
habitats is the creation, improvement and growth of surrounding
vegetation for them to feed. Across our assets approximately 200
acres were set aside and planted with wildflowers and forage areas.
Examples of such initiatives include: wild flowers field planted on
one of Rodenkirchern school's rooftops. At E18 the green areas
around the road are mowed only once in late summer, resulting in
increasing wildflowers and their density. Along North East Stoney
Trail and Northwest Anthony Henday we created approximately 80
hectares of ponds, drawing wildlife and vegetation back to the
area, allowing native vegetation and birds to flourish.
The 125 beehives at E18 produce on average six metric tonnes of
wild flower honey, and 2022 was an exceptional year with
approximately 11 metric tonnes produced. BBGI works with a local
beekeeper, who manages the hives. The honey is collected and
packaged to meet local health standards, with donations made to a
local food bank in Luxembourg.
Trond Heia, Director E18 Portfolio Company, said: "We are proud
to support the expansion of nesting and feeding areas for bees and
insects. Based on the success from these initiatives, we plan to
share our learnings across BBGI and explore the feasibility of
implementing similar programmes in other locations".
Climate-related risks
We remain committed to aligning our business with the TCFD
recommendations, and over the past year, we have made progress in
several areas related to climate strategy, risk management, and
metrics and targets. These initiatives include:
-- Deepening our understanding of our portfolio's risk exposure
through a deep dive analysis of 20 assets with the highest risk
exposure or strategic importance to us.
-- Conducting a sensitivity analysis on each asset, integrating
site-level mitigation already in place and engineering of our
assets to refine modelled physical risk severities and financial
impacts.
-- Quantifying the revised risk exposure to each asset and the portfolio as a whole.
-- Starting a GHG inventory across all our Portfolio Companies,
to assess BBGI's Financed Emissions, in line with the GHG
Protocol.
-- Producing a bespoke climate factsheet for each asset,
providing a summary of the overview risk exposure and the key
driving perils identified.
-- Sharing climate factsheets with public sector clients with
the objective of a collective action through influence and
stewardship where necessary (e.g. mitigation, risk transfer).
-- Setting net zero targets in line with science-based targets
to achieve global net zero emissions by 2050, or sooner.
-- Expanding the use of metrics and targets, including those
related to GHG emissions, into our Management Boards' remuneration
targets.
-- Publishing our Net Zero Plan, which focuses on reducing our
carbon footprint in our Corporate and Financed Emissions.
-- Formalising our internal ESG due diligence process to
identify and evaluate material climate risks and opportunities for
all new acquisitions.
TCFD Disclosures
As the Company is considered an investment trust it does not
fall in the scope of the Financial Conduct Authority's ('FCA')
requirement for commercial companies with a premium listing to make
TCFD disclosures. Notwithstanding this exemption, the Management
Board recognises the importance of the TCFD and its related
disclosures and has, as a result, taken the voluntary decision to
report against the TCFD recommendations.
In the following section we report the progress we have made
across each of TCFD's four pillars: Governance; Strategy; Risk
Management; and Metrics and Targets. We have made material
improvements towards assessing our climate-related risks and
opportunities, embedding stronger climate governance and risk
management and developing a robust awareness of risk metrics and
targets we can use to monitor and track progress.
We are pleased to present our third voluntary disclosure against
all 11 of the recommended TCFD disclosures
Governance
TCFD Recommendation Progress to date
1 Describe the Our Supervisory Board and Management Board recognise
Board's oversight the importance of climate-related risks and opportunities.
of climate-related The Management Board has established an executive-led
risks and opportunities. ESG Committee as a sub-committee, comprising the
Co-CEOs, the CFO, the ESG/Sustainability Director
and the Corporate Secretary to govern all climate
and ESG-related activities. The Management Board
considers climate-related issues when setting strategy,
considering new investment opportunities, approving
annual budgets, monitoring performance metrics and
targets and approving climate change-related disclosures.
The Supervisory Board's constituted Remuneration
Committee designs reward structures for our Management
Board to foster long-term value-creation and reinforce
the organisation's ability to achieve its climate
change goals and targets. In 2022, the Remuneration
Committee added additional ESG targets to the LTIP
award which, since 2021, has contained objectives
related to reducing GHG emissions. More details on
our remuneration policy are provided in the Remuneration
Report section of our Annual Report.
2 Describe management's The ESG Committee meets at least quarterly, in relation
role in assessing to environmental matters and reviews both the climate-related
and managing risks facing the Company and its GHG emissions reductions
climate-related targets. The Risk Manager and the Management Board
risks and opportunities. ensure that any risks/opportunities can be addressed
through the Company strategy, risk management procedure
and responsible investment approach. Our ESG Committee
is led by our dedicated ESG Director, and, together
with the Management Board, maintains our ongoing
commitment to manage the dual impacts of both physical
risk events on our assets and the transition towards
becoming a low-carbon business. The Management Board's
roles covers the following areas: - The investment
decisions incorporate ESG and climate-related risks
and opportunities assessments during the due diligence
phase for new acquisitions. All existing and all
new investment opportunities are screened for climate
risks and ESG factors. - The Risk Management Function
assesses the firm's exposures across all risks compared
with its stated risk appetite, including the long-term
consequences of climate change along our asset's
concession periods. - Corporate governance obligations
and oversight responsibilities in relation to climate-related
risks and the review of the Company's approach to
disclosures, including those relating to climate
change. - The Compliance Function undertakes an internal
compliance monitoring programme, including our policies
relating to sustainability including climate change.
Full responsibilities of our ESG Committee are outlined
in our ESG Committee Terms of Reference: www.bb-gi.com/esg/policies
.
Strategy
TCFD Recommendation Progress to date
3 Describe the Physical risk insights Overall, scenario analysis
climate-related has highlighted that the majority of BBGI's portfolio
risks and is very resilient to climate hazards both today and
opportunities under future climate warming scenarios. - Out of
the 56 assets modelled, only two have a high risk under
organisation a 'high emissions' scenario by 2050. The potential
has identified exposure identified from flood risk, coastal inundation
over the short, and extreme winds only extends to one specific building
medium and long within the two asset and the theoretical impact on
term. the NAV is not considered material. For both assets,
we note that our concession period terminates between
2035 and 2050, and thus we do not expect them to
have material impacts on our wider portfolio. - Under
a 'Paris-Aligned' scenario there are no assets with
a high-risk exposure across the same timeline. -
All 20 of BBGI's top 20 assets have a low or very
low risk exposure today and in 2050 under 'Paris-Aligned'
and 'High emissions' scenarios once existing resilience
and mitigation measures are considered. - The risk
profile of BBGI's portfolio remains constant for
52 assets over the next 30 years; the climate risk
profile of BBGI's portfolio remains relatively constant
for most assets, particularly when overlaying our
concession periods, which do not extend beyond 2051
for any asset. - Beyond 2051, the period when our
concessions end and assets revert to public sector
clients, climate risk is projected to increase for
17 assets, most notably under a 'high emissions'
scenario. While BBGI will not have a financial interest
in the assets during this future period, it may create
opportunities for BBGI to propose and invest in climate
mitigation and adaptation measures. - Under a 'Paris-Aligned'
scenario BBGI may take advantage of opportunities
arising from energy transition investment plans from
the public sector, during planned retrofit interventions
or for additional investments. Our assessment considered
climate impacts over short (1-5 years), medium (5-10
years) and long-term (10+ years) time horizons up
until 2050, covering the maximum investment life
duration of our current portfolio. We note that modelling
currently only considers present-day government-funded
defence infrastructure in place. When local mitigation
measures are also considered, the exposure of our
assets to climate change may reduce further.
Transition risk insights We recognise the effects
transition risks have on our business. BBGI are working
to understand the impact transition risks will have
on the portfolio, particularly where rapid, unexpected
changes in legislation or government policy occur.
In the table below, we outline the potential impacts
of policy, technology, reputational and market risks
across the infrastructure sector. Transition risk category Industry trends Mitigating actions
Policy and legal risk We anticipate that, as We are actively seeking
Legislation enacted by society attempts to reduce ways to reduce our carbon
national and local global warming, the cost of footprint in order to align
governments to price and carbon taxation with our net
penalise will increase and zero targets. Our main
GHG emissions. potentially impact focus is on reducing
businesses. Carbon pricing Corporate and Financed
and exposure to litigation Emissions, and our Net
may also increase globally, Zero Plan provides more
encouraging businesses to details on this:
reduce their own GHG https://www.bb-gi.com/media
emissions. /2226/bbgi-net
zero-plan-dec-2022-final.pd
f.
Technology risk Disruptive Technology risks may arise To achieve our goals, we
technology changes in key across infrastructure are exploring the use of
sectors of the economy assets where changes and more sustainable and
responding to adaptations to new, environmentally friendly
changing energy needs. low-carbon materials and materials in our assets.
technologies arise. This includes low-carbon
alternatives for road
surfaces, electric
vehicles charging
infrastructure, and
energy-efficient or motion
sensor equipment.
Additionally,
we are investigating the
possibility of energy
purchase contracts
prioritising renewable
sources
of energy.
Reputational risk Investor Globally, there is We have set a target of
and client sentiment increasing focus on achieving net zero by 2050
influenced by Company's businesses to minimise or sooner. To achieve this,
actions to manage their carbon footprint. we are also
climate change risk. Reputational working with our public
risk may arise where sector clients.
companies do not take
sufficient action to
decarbonise or integrate
sustainability
across their operations.
Market risk Market Transitioning into a In order to comply with
disruption, changes in low-carbon society has investor priorities and ESG
client preferences, cost of potential implications on and sustainability
capital and valuation client and investor regulations, we report
changes as investors appetite and demand. in line with SFDR Level II
prioritise returns from requirements, make
low-carbon companies. voluntary TCFD disclosures,
and monitor future
ESG and sustainability
regulations and reporting
requirements to maintain
our compliance.
4 Describe the We are committed to ensuring our investment strategy,
impact of financial planning and decision-making accounts for
climate-related climate-related risks and opportunities, ensuring
risks and we work with our clients to consider appropriate
opportunities risk mitigation, adaptation and resilience measures
on the where necessary. In 2021-2022 we engaged with a climate
organisation's modelling specialist firm, leveraging their expertise
businesses, in climate risk, to conduct a detailed climate change
strategy and impact assessment for our entire portfolio to identify
financial and assess climate-related risks and opportunities
planning. across various climate scenarios. The results of
this in-depth exercise continue to inform our long-term
strategy and has set the foundation. During the same
period, we also commissioned an independent carbon
footprint assessments and verification of our Corporate
Scope 1, 2 and 3 GHG emissions. The results of the
quantitative climate change assessment have fed into
our Company's strategy in a number of ways. It informs
us on the type of climate risk each of our assets
is exposed to, the magnitude of that risk (from low
risk to high risk, if any) and the corresponding
reinstatement value (i.e. the potential cost of damage
from physical climate risks). There is currently
no climate-related cost forecasted in our financial
models but this may change in relation increased
insurance premiums; however, there is a degree of
contractual protection from increased insurance costs.
The screening of physical climate-related risks is
systematically embedded for each asset in the due
diligence and monitoring phases of our investment
cycle. The results of the deep dive assessments materialised
in a bespoke factsheet which we have started to share
with our public sector clients and across the Portfolio
Companies' boards, helping to raise awareness and
drive our engagement initiatives on mitigation measures
where physical risks may materialise. Our Net Zero
Plan lays the foundation of how BBGI intends to transition
to a low-carbon business as we leverage the outcomes
of the quantitative climate-change assessment to
set our targets and objectives, as well as inform
future acquisition screening and strategic portfolio
construction. Our Net Zero Plan can be found here:
https://www.bb-gi.com/media/2226/bbgi-net zero-plan-dec-2022-final.pdf
5 Describe the Portfolio-level findings from the quantitative climate
resilience of change assessment confirm a high-degree of resilience
the to climate change impacts under the various scenarios
organisation's tested. The climate modelling demonstrates that our
strategy, investment strategies focus our investments into
taking infrastructure assets which are built to the latest
into engineering standards and which, due to the long-term
consideration nature of these assets, consider the long-term effects
different of climate change when they are built. In our capacity
climate-related as an investor we are developing our resilience by
scenarios, transitioning to net zero through a mix of portfolio
including decarbonisation, engagement with key stakeholders
a 2degC or and an ESG integrated investment approach. A transition
lower to a lower carbon economy may also presents a number
scenario. of opportunities for client-supported change orders
and new investment, should the business case support
it.
Risk Management
TCFD Recommendation Progress to date
6 Describe the The Company's approach to internal controls is risk
organisation's based. All material risks are identified, analysed,
processes for assessed, reported and managed. Since outlining our
identifying goal to better improve our understanding of climate-related
and assessing risks and opportunities we have chosen to focus on
climate-related two areas: 1) embedding climate due diligence into
risks. our on boarding process for new acquisitions, and
2) better quantifying our corporate GHG emissions
footprint to support identification of future risks
as well as opportunities for engagement arising as
we develop our decarbonisation strategy. In accordance
with our commitment to executing due diligence on
new acquisitions, within six months of an asset integrating
into our portfolio we perform a systematic screening
for various risks and identification of climate-related
risks is carried out through physical risk due diligence.
A summary of the risk exposure is provided under
a 'Paris-Aligned' scenario and a 'High emissions'
scenario from today and then in decadal time steps
until 2100. The output from the screening is a bespoke
climate factsheet. To ensure our portfolio remains
resilient to climate risk, we continue to embed these
insights into our investment screening process, ensuring
physical climate risk impacts are assessed for all
new investments.
7 Describe the Climate risks identified through our climate risk
organisation's modelling are managed by our Risk Manager and the
processes for Management Board with work continuing to ensure climate
managing risk considerations are formally embedded within
climate-related risk management procedures. Recognising that climate
risks. risk cuts across both our value-driven asset management
approach and the essential infrastructure we provide
to our clients, work is ongoing to ensure climate
risks, where identified, will be shared with public
sector clients with the objective of a collective
action through influence and stewardship where necessary
(e.g. mitigation, risk transfer). It should be noted
that BBGI rarely has operational control at its Portfolio
Companies, so achieving the targets and objectives
is highly dependent on successfully influencing stakeholders
(typically our public sector clients) into taking
action. We have systematically reviewed all existing
investments for physical climate change exposure
against eight climate perils(5) through quantitative
scenario-analysis. - In Q1 2022, we conducted further
work on 20 assets performing deep dives. For each
asset, a bespoke climate factsheet was produced,
providing a summary of the risk exposure. - In Q4
2022, we extended our systematic review for physical
climate change exposure to also include our two new
acquisitions. We expect to continue this due diligence
process for all new acquisitions. By voluntarily
applying the TCFD regulatory framework, BBGI is gradually
reinforcing numerous aspects of sustainability: risk
and opportunities identification, management of climate-risk
exposure and disclosure of relevant metrics and targets.
8 Describe how Climate-related risks have been integrated into our
processes for risk management procedures. Where material climate
identifying, risks are identified, these are escalated where necessary
assessing, and to the Management Board, ensuring risks can then
managing be appropriately assessed, managed and monitored
climate-related per our risk management procedure. To ensure our
risks are portfolio remains resilient to climate risk, we will
integrated embed our findings into our investment screening
into the process which ensures physical climate risk impacts
organisation's are assessed for all new investments.
overall risk
management.
Metrics and Targets
TCFD Recommendation Progress to date
9 Disclose the Through scenario analysis conducted in 2021 and 2022,
metrics used we continue to embed enhanced physical risk metrics
by the across our risk management processes and climate-related
organisation risks and opportunities in line with our strategy.
to assess - We have quantified both physical severity risk
climate-related scores and potential projected financial impacts
risks and from 2020 to 2100 for every asset under each warming
opportunities scenario assessed. - For each time horizon and for
in line with each warming scenario, each asset is scored with
its strategy a climate risk score, on a scale from very low to
and risk very high. - For the 20 assets which have undergone
management a deep-dive assessment, we conducted a further sensitivity
process. analysis that considers all existing resilience measures
and the engineering of our assets in the climate
risk score. We recognise the importance of continually
improving both our climate scenario analysis methodology
and the metrics we use to track and monitor exposures
across our portfolio. We will review and update our
results and key metrics as necessary to ensure we
maintain an up-to-date picture of climate risk across
our investments and future acquisitions. More information
about our climate modelling methodology can be found
in the 'Climate-related risks' section of our ESG
report. BBGI is required to comply with SFDR. As
of June 2023, BBGI will disclose the following climate-related
metrics in line with SFDR Level II requirements,
as part of its Principal Adverse Impact Statement:
- GHG emissions; - Carbon footprint; - GHG intensity
of portfolio companies; - Exposure to companies active
in the fossil fuel sector; - Share of non-renewable
energy consumption and production; - Energy consumption
as per high impact climate sector; and - Breakdown
of energy consumption by type of non-renewable sources
of energy. More information about our SFDR disclosures
can be found here: https://www.bb-gi.com/esg/sustainability-related-disclosures/
10 Disclose Scope Corporate Emissions - BBGI's total market-based Corporate
1, Scope 2, Emissions are 242.53 tCO e (location-based are 240.80
and, if tCO2e). - The most significant emission source is
appropriate, flights accounting for 67 per cent of the total market-based
Scope 3 GHG Corporate Emissions. - Total market-based Corporate
emissions, and Emissions have decreased by 13.7 per cent against
the related the baseline year (2019), largely due to the reduction
risks in flights. Scope Activity 2022
Tonnes CO(2) e
---------------
Scope 1 Gas 9.90
----------------------------------------- ---------------
Scope 1 Sub Total 9.90
---------------
Scope 2 Electricity (location-based) 5.24
----------------------------------------- ---------------
Electricity (market-based) 6.98
--------------------------------------------------- ---------------
Scope 2 Sub Total (location-based) 5.24
---------------
Scope 2 Sub Total (market-based) 6.98
---------------
Scope 3 Flights 162.37
----------------------------------------- ---------------
Well-to-tank 28.12
--------------------------------------------------- ---------------
Employee commuting 13.00
--------------------------------------------------- ---------------
Computing 11.98
--------------------------------------------------- ---------------
Personal vehicles for business purposes 4.86
--------------------------------------------------- ---------------
Home-working 2.08
--------------------------------------------------- ---------------
Taxi travel 1.23
--------------------------------------------------- ---------------
Waste 0.73
--------------------------------------------------- ---------------
Hire cars 0.56
--------------------------------------------------- ---------------
Electricity transmission & distribution 0.43
--------------------------------------------------- ---------------
Paper 0.18
--------------------------------------------------- ---------------
Rail travel 0.07
--------------------------------------------------- ---------------
Water (and wastewater) 0.04
--------------------------------------------------- ---------------
Bus travel 0.02
--------------------------------------------------- ---------------
Scope 3 Sub Total 225.65
---------------
Location-based total tonnes of CO(2) e 240.80
---------------
Market-based total tonnes of CO(2) e 242.53
---------------
Financed Emissions - In 2022, we worked in direct
collaboration with our Portfolio Companies and subcontractors
to feed our proprietary ESG KPI survey with the necessary
data inventory, to adequately calculate a GHG inventory
across all our investments. - As of June 2023, we
will be disclosing annually our Portfolio Companies'
Scope 1, 2 and where relevant material Scope 3 emissions
(Financed Emissions) in line with the GHG Protocol
operational control approach. - The disclosures will
be part of our Principal Adverse Impact Statement
disclosure, in line with SFDR Level II requirements.
11 Describe the Climate-risk targets: In 2022, we performed deep
targets used dives on our assets with the greatest risk exposure
by the and those that are strategically important investments
organisation for BBGI. For 20 of our assets, a bespoke climate
to manage factsheet was produced, which we continue to utilise
climate-related when engaging with clients. To date we have shared
risks and the climate factsheet or the climate risk score in
opportunities the following circumstances: - Portfolio Company's
and performance boards: 100 per cent of projects - Public sector
against clients: 84 per cent of projects - Formal meeting
targets. with client to discuss conclusions of climate modelling
and potential joint 'next steps' - 14 per cent of
projects Net zero targets: Corporate emissions (Scope
1, 2 and 3): BBGI commits to reduce absolute Scope
1, 2 and 3 GHG emissions 50 per cent by 2030 from
a 2019 baseline and to reach net zero by 2040. BBGI
has aligned its approach with the SBTi guidance for
Private Equity Sector and the SBTi guidance for SMEs,
BBGI has not taken the steps to have its targets
officially approved as there are no applicable industry
standards for infrastructure investment at this time.
However, BBGI has used the SBTi target setting tool
to model its targets in line with SBTi approved criteria
and methods . Financed Emissions (Portfolio Companies'
Scopes 1, 2 and material Scope 3) We aim for 70 per
cent of our Financed Emissions to be 'net zero',
'aligned', or 'aligning' to net zero by 2030. This
means that by 2030, 70 per cent of AUM (portfolio
companies by value) will have a long-term goal to
be net zero by 2050 or sooner. We have a goal to
have 100 per cent of our Financed Emissions to be
'net zero' or 'aligned', by 2040. BBGI has set its
targets in line with the Paris Aligned Investment
Initiative Net Zero Investment Framework and the
specific guidance for the Infrastructure sector.
Read more on our net zero targets in our ESG Report.
Note on TCFD disclosures
The purpose of climate scenario analysis is to support an
understanding of potential future risk outcomes rather than
'predict' absolute future impacts. Current modelling takes into
account individual asset archetypes. Archetypes are used to assess
the vulnerability of different asset components to physical risk
and building-specific characteristics (e.g. a hospital's typical
building materials, number of storeys, type of construction) and
embeds present-day government-funded defence infrastructure in
place; local/site-specific mitigations have not been included
within the model due to limited data availability. With this in
mind, we recognise that scenario analysis is a gradual process to
be improved iteratively as models themselves improve and our own
asset portfolio requires it. The methodology outlined in this
Report has been structured to offer both quantitative and
qualitative perspectives on future physical risk outcomes and
enables us to repeat our analysis as necessary.
We note that while internally we have granular, component-based
outputs to support decision making and inform risk management
processes, for the purposes of simplifying our reporting here, we
have aggregated our risk scoring to the asset level. Asset-level
physical risk scores are calculated using a weighted representation
of total risk which reflects both each individual component risk
severity and its rebuild value.
Both physical and transition risk are key considerations for
BBGI. We also note that many of our investments are relatively new
and benefit from having climate change considerations incorporated
into the design and construction of the infrastructure. Many of the
financial consequences resulting from climate-related perils have
been mitigated by having insurance in place.
The results presented in this Report are based on best-available
data and judgements of subject-matter experts both internally and
externally, where required. Climate scenario models may differ in
meaningful ways from traditional macroeconomic scenarios; they are
neither forecasts nor predictions and should be used for "insights,
not numbers".
Corporate Governance
Relevant Application of European Union and Luxembourg Law
BBGI is regulated by the CSSF under Part II of the amended
Luxembourg law of 17 December 2010 on undertakings for collective
investments, and is subject to the Luxembourg amended law of 12
July 2013 on Alternative Investment Fund Managers ('AIFM Law') that
implemented the EU Alternative Investment Fund Managers Directive
('AIFMD') into national legislation.
AIFM
There have been no material changes during the year in respect
of Art. 20 Para. 2(d) of the AIFM Law that warrant further
disclosure to our shareholders.
Material risk takers
There has been no change in our material risk takers, who are
the members of the Management Board, in accordance with
Luxembourg's AIFM law of 12 July 2013.
Governance at a glance
Compliance statement
As an internally managed investment company, effective internal
controls secure the sound financial and operational performance of
our investments.
BBGI is a member of the Association of Investment Companies
('AIC') and reports against the AIC Code of Corporate Governance
(the 'AIC Code').
We have considered the Principles and Provisions of the AIC
Code, which addresses the Principles and Provisions set out in the
UK Corporate Governance Code 2018 (the 'UK Code'), and sets out
additional Provisions on issues that are of specific relevance to
BBGI as an investment company. BBGI considers that reporting
against the Principles and Provisions of the AIC Code, which has
been endorsed by the Financial Reporting Council, provides relevant
information to our shareholders.
For the most part, we have complied with the Principles and
Provisions of the AIC Code and where we do not, we have provided an
explanation. We have outlined below the specific Provisions where
we do not comply, with a section reference for an accompanying
explanation:
-- AIC Provision 17 (in relation to establishing separate
Management Engagement Committee): See Committees of the Supervisory
Board.
-- AIC Provision 23 (All directors should be subject to annual
re-election by the shareholders): See Management Board - General
section.
Biographies of Directors
Supervisory Board
Sarah Whitney
Chair, Supervisory Board and Nomination Committee
Sarah Whitney has a 35-year career advising on strategy,
corporate finance, real estate, and economic matters. Her executive
roles include Corporate Finance Partner at PwC; she set up and led
the Government & Infrastructure Team at CB Richard Ellis; and
before that was Head of Consulting & Research at DTZ Holdings
plc (now Cushman & Wakefield).
For over 20 years, Ms Whitney's career has focused on providing
consultancy services to national and local governments, investors,
and real estate companies on real estate, economic growth,
infrastructure, and investment. In her early career, she was an
investment banker advising major corporates on M&A
transactions.
Ms Whitney became Chair of the Supervisory Board on 31 July
2020. She is also Chair of the Nomination Committee.
Ms Whitney has a BSc in Economics & Politics from the
University of Bristol and is a Fellow of the Institute of Chartered
Accountants of England and Wales.
Ms Whitney serves as a non-executive director at JPMorgan Global
Growth & Income plc (where she also serves as Chair of the
Audit Committee), Tritax EuroBox plc (where she also serves as
Senior Independent Director) and Bellway plc, (where she also
serves as Senior Independent Director). She is a Member of the
Council of University College London.
Andrew Sykes
Chair, Remuneration Committee and Senior Independent
Director
Andrew Sykes has a wealth of financial services and
non-executive experience and spent 26 years of his executive career
at Schroders plc. He was Chair of SVG Capital plc from 2012 until
2017, serving on the Board from 2010. He was also Chair of Smith
& Williamson from 2013 to 2020.
He is an experienced director of UK-listed companies with deep
knowledge of the financial services sector and of Corporate
Governance requirements.
Mr Sykes holds a Master's degree in Modern Languages from Oxford
University.
Mr Sykes is currently a non-executive director and Senior
Independent Director of Intermediate Capital Group plc.
Mr Sykes additionally serves as the Deputy Chair of the
Governing Body of Winchester College.
Mr Sykes was appointed by shareholders at the Company's 2022 AGM
as a Non-Executive Director, and became Senior Independent Director
and Chair of the Remuneration Committee on 29 April 2022.
Jutta af Rosenborg
Chair, Audit Committee
Jutta af Rosenborg has extensive experience in management and
strategy from her background as an Executive and from senior
operational roles.
Ms af Rosenborg served as Chief Financial Officer, Executive
Vice President of Finance and IT, and Member of the Board of
Management at ALK-Abelló A/S until 2010. Before this, Ms af
Rosenborg worked at Chr. Hansen Holding A/S as Vice President of
Group Accounting from 2000 to 2003. From 1978 to 1992, she worked
at Deloitte, Denmark, serving international clients.
Ms af Rosenborg became a Non-Executive Director on 1 July 2018
and Chair of the Audit Committee on 31 August 2018.
Ms af Rosenborg holds an MSc in Business Economics and Auditing
from Copenhagen Business School and qualified as a state-authorised
public accountant in 1992.
Ms af Rosenborg is an experienced non-executive director of
listed companies and serves currently on three other listed
companies; RIT Capital Partners plc, Nilfisk Holding A/S and JP
Morgan European Growth & Income plc.
Chris Waples
Independent Director
Chris Waples CDir FloD has 35 years' global experience of
managing the acquisition, construction, and divestment of
infrastructure projects. Mr Waples has an extensive track record of
asset management in progressive high-profile companies, including
12 years with the John Laing Group plc where he was Executive
Director Asset Management, leading the international public-private
partnership asset portfolio across Europe, North America, and Asia
Pacific regions.
Mr Waples was a member of the executive team that oversaw the
successful GBP1 billion market capitalisation IPO of the John Laing
Group plc in February 2015. He was also Chair of the Investment
Committee, Chair of the Investment Portfolio Committee and Trustee
of the John Laing Charitable Trust. He previously served as
Managing Director of Amey plc for public and private sector
clients, leading to its acquisition by Groupo Ferrovial. Before
this, he held senior positions with Scottish Power plc and Blue
Circle plc.
Mr Waples is a Fellow and Chartered Director of the Institute of
Directors and holds a Postgraduate degree in Management Studies and
Agricultural Engineering LICG.
Mr Waples became a Non-Executive Director at BBGI on 1 May
2021.
Mr Waples does not hold any non-executive director positions at
any other listed company.
June Aitken
Independent Director
June Aitken has over 30 years of experience in global equity
markets as an institutional stockbroker. She has held numerous
senior roles at HSBC Bank plc, London, including as Global Head of
Emerging Market Equity Distribution and Head of Strategy
Management. Previously, Ms Aitken was a Managing Director at UBS
(AG), Head of Global Equity Product, and Global Head of Asian
Equities. Ms Aitken was a founding partner and investor of Osmosis
Investment Management LLP, a specialist investment manager focused
on environmental and responsible investment mandates for pension
funds and endowments globally.
Ms Aitken has been involved in establishing fund structures in
multiple jurisdictions and has previously served on a number of
financial services and fund boards.
Ms Aitken holds a degree in Politics, Philosophy and Economics
from Oxford University, is a member of the Chartered Banker
Institute and acts as a mentor to female entrepreneurs.
Ms Aitken was appointed by shareholders at BBGI's 2022 AGM as a
Non-Executive Director from 29 April 2022.
Ms Aitken is a non-executive director at CC Japan Income &
Growth Trust plc, JPMorgan Asia Growth and Income plc, Greengage
Global Holding and Schroder Income Growth Fund plc. She is Chair of
PEAL Capital Partners UK Limited.
Management Board
Duncan Ball
Co-CEO and member of the Management Board
Duncan Ball has been Co-CEO of BBGI since its inception. He was
actively involved in its IPO in 2011 and BBGI's subsequent growth
from 19 assets to 56 assets at the end of the reporting period.
Mr Ball has worked in the infrastructure sector, investment
banking and advisory business for over 30 years. As Co-CEO of BBGI,
he is responsible for BBGI's overall strategy and management. He is
one of three members of the Management Board and sits on the
Group's Investment and ESG Committees. He also is a shareholder
representative and holds directorships in key investments of
BBGI.
Frank Schramm
Co-CEO and member of the Management Board
Frank Schramm has been Co-CEO of BBGI since its inception. He
was actively involved in its IPO in 2011 and BBGI's subsequent
growth from 19 assets to 56 assets at the end of the reporting
period.
Mr Schramm has worked in the infrastructure sector, investment
banking and advisory business for over 25 years. As Co-CEO of BBGI,
he is responsible for BBGI's overall strategy and management. He is
one of three members of the Management Board and sits on the
Group's Investment and ESG Committees. He is also a shareholder
representative and holds directorships in key investments of
BBGI.
Michael Denny
CFO and member of the Management Board
Michael Denny has over 20 years' experience in corporate
finance, with a focus on the infrastructure and real estate
sectors.
He joined BBGI in early 2012, shortly after its IPO. As CFO of
the Group, he is primarily responsible for all corporate financial
matters including financial reporting, UK listing requirements,
taxation, foreign exchange hedging and regulatory compliance. Mr
Denny is a member of the Management Board and sits on the Group's
Investment and ESG Committees.
Board leadership and purpose
Our governance structure
BBGI is internally managed and operates with a two-tier
governance structure, comprising a Management Board and a
Supervisory Board. The respective responsibilities of each Board
are outlined below.
Management Board
The Management Board is responsible for managing BBGI and its
representation vis-à-vis third parties (e.g. entry into agreements
on BBGI's behalf). Its principal responsibilities lie in all our
operational management activities, including the discretionary
investment management of our investments, and setting and
implementing the Group's overall strategy. The Management Board is
ultimately responsible for implementing risk management, monitoring
operational risks and measures related to risks.
In carrying out the function of investment manager via the
Management Board, we do not engage an external investment manager
to provide investment management services. Accordingly, as
Executive Directors, none of the Management Board sit on the
Supervisory Board, nor on its formally constituted Committees.
The Management Board is also responsible for BBGI's overall
administration, including preparing our semi-annual valuations;
statutory financial statements; management accounts and our
business plan, which defines our active approach to asset
management. Given its investment manager role, the Management Board
is the primary interface for our investor relations and engages
with the Supervisory Board on our shareholders' behalf.
Supervisory Board
The duties of the Supervisory Board are:
(a) to appoint and, where relevant, dismiss members of the
Management Board;
(b) to supervise the Company's management by the Management
Board, without being authorised to interfere with the management;
and
(c) to exercise its powers attributed by our Articles,
including:
-- Supervising and monitoring the appointment of our service providers
and those of our subsidiaries.
-- Reviewing remuneration and compensation levels and structure,
and other benefits and entitlements of our Management Board officers
and BBGI employees.
----------------------------------------------------------------------
-- Considering any prospective issues, purchases, or redemptions
of shares proposed by the Management Board.
----------------------------------------------------------------------
-- Reviewing and monitoring compliance with our corporate governance
framework and financial reporting procedures.
----------------------------------------------------------------------
-- Reviewing and (if thought fit) approving interim and annual financial
statements.
----------------------------------------------------------------------
-- Providing general supervisory oversight to the Management Board
and Group operations.
----------------------------------------------------------------------
The Supervisory Board consists of independent Non-Executive
Directors and the Chair, who was considered independent at the time
of her appointment. The directors on the Management and Supervisory
Boards are accountable under the Listing Rules, as the Listing
Rules do not distinguish between different types of directors.
While BBGI's shares are listed on the Official List of the UK
Listing Authority, the Supervisory Board and the Management Board
act as one in approving any circular or corporate action where the
Listing Rules require the recommendation of the board of a
publicly-listed company (or where recommendation is customarily
given). Any responsibility applied to directors under the Listing
Rules applies to all our directors.
Stakeholder engagement
Effective engagement with our stakeholders is a key part of
realising our vision and purpose. While BBGI is a non-domiciled
publicly-listed entity on the UK London Stock Exchange, to which
the UK Companies Act 2006 (the 'CA2006') has limited application,
we recognise the value added by all our stakeholders. BBGI
acknowledges the continuing requirement under Section 172(1) CA2006
for boards of UK large or publicly-listed companies to take
stakeholder interests into account, and to report how they have
done so when performing their duties. Furthermore, as a member of
the AIC, we recognise the stated intention of the AIC Code that the
matters set out in Section 172 are reported on by all companies,
irrespective of domicile, provided this does not conflict with
local company law.
Under AIC Code Provision 3, the Co-CEOs of the Management Board
regularly engage with our major shareholders to understand their
views on significant matters. The Chairs of the Supervisory Board
and its delegated Committees are also always available to engage at
our shareholders' request.
Details of how we adopt the spirit of those provisions, consider
our stakeholders, and our commitment to generating positive and
sustainable outcomes for all our stakeholders are outlined in the
ESG section of this Annual Report .
General Meetings
2022
The AGM was held on 29 April 2022. There were no other
shareholder meetings held during the year.
2023
BBGI's next AGM will be held on Friday 28 April 2023. The Notice
of Meeting, proposed Resolutions and Explanatory Notes, and the
associated Proxy Form, will be circulated to shareholders in
accordance with the regulatory deadlines, and available on our
website.
Substantial shareholdings
As at 31 December 2022, BBGI had 713,331,077 shares in issue.
Pursuant to DTR5 of the FCA's Disclosure Guidance and Transparency
Rules, we had received notice of substantial interests (five per
cent or more) in the total voting rights of BBGI as follows, in
compliance with DTR 7.2.6R:
Name Held % of total
share capital(1)
M&G plc 59,502,903 9.42%
Schroders plc 56,304,964 8.48%
Newton Investment Management Limited 39,947,825 8.46%
Investec Wealth & Investment Limited 31,569,569 5.01%
Evelyn Partners 28,885,124 5.00%
---------- -----------------
(1) The percentage of voting rights detailed in the table above
was calculated at the time of the relevant disclosure made in
accordance with Rule 5 of the Disclosure Guidance and Transparency
Rules, and the shareholders' percentage interests in BBGI may have
changed since that date.
Board members and other interests
The Management Board members are also BBGI Management HoldCo S.à
r.l. managers. Mr Ball and Mr Schramm both hold service contracts
and Mr Denny holds a management contract in respect of BBGI
Management HoldCo S.à r.l. No other Group member held service or
management contracts during 2022. Notice periods to and from the
Company of 12 months apply for each Management Board member. No
loan has been granted to, nor any guarantee provided for the
benefit of, any director by the Company.
Ms Whitney, Mr Sykes, Ms af Rosenborg, Mr Waples and Ms Aitken
are all considered independent Board members, as they:
(i) Have not been employees of BBGI.
(ii) Have not had material business relationships with BBGI.
(iii) Have not received performance-based remuneration from BBGI.
(iv) Do not have family ties with any of BBGIs advisers, directors, or senior employees.
(v) Do not hold cross-directorships or have links with other
directors through involvement on other companies.
(vi) Do not represent a significant shareholder.
(vii) Have not served on the Board for more than nine years.
Details of Directors' holdings in BBGI's shares are disclosed in
the Remuneration Report.
Internal controls
The Management Board has established an ongoing process and
system of robust internal controls to help BBGI manage risks. We
have processes to manage risk, oversee the internal control
framework, and determine the nature and extent of principal risks
we are willing to take to achieve our long-term strategic
objectives. As well as ongoing monitoring, we review these policies
and procedures at least annually.
We recognise that effective control systems can only seek to
manage and mitigate the risks of failure to achieve business
objectives. They cannot eliminate them. By their very nature, these
procedures are unable to provide absolute assurance against
material misstatement or loss.
During 2022, our Compliance and Risk functions reviewed,
assessed, and reinforced our robust governance and risk controls
frameworks. With the general removal of COVID-19 restrictions, many
of our colleagues have resumed undertaking delegates and due
diligence process monitoring through in-person meetings and on-site
attendance at delegates' offices.
-- The Supervisory Board monitors our investment performance
against our stated objectives and reviews our activities on a
quarterly basis, to ensure that our Management Board is adhering to
our investment policy and guidelines, including clearly defined
investment criteria, return targets, risk profile and compliance
framework. During these meetings, the Management Board reports KPIs
on operating performance, cash projections, investment valuations
and corporate governance matters.
-- The Head of Compliance and Risk presents our Interim and
Annual Risk Report and quarterly Compliance Reports separately to
the Management Board and Supervisory Board, or to the Audit
Committee, with all directors of both Boards present.
-- The ESG Committee oversees the management of material ESG
activities, including climate-related issues, and reports to the
Management Board on any recommendations and proposed actions
following each Committee meeting. The ESG Committee meets at least
quarterly, and membership comprises the Co-CEOs, the CFO, the
Director ESG/Sustainability, and the Company Secretary. Through the
ESG Committee, the Management Board remains informed about the dual
risks to BBGI of transitioning to a low-carbon economy (with
associated increased regulation) and the risk of financial,
operational, and direct, physical impacts of climate change on our
portfolio assets.
We perform Internal Audit reviews as part of our triennial audit
plan, as agreed by the Management Board and Audit Committee and
communicated to the CSSF. The nature, timing, and extent of our
internal audit procedures are determined by assessing the risk
related to specific activities, and the complexity and
sophistication of our operations and systems, including how we
control information processing. The Internal Audit Summary Report
is presented to the Audit Committee in March each year and then
submitted to the CSSF.
Division of Responsibilities
Supervisory Board
General
The Supervisory Board has five Non-Executive Directors, all of
whom are independent. All Supervisory Board members are elected for
a period ending at the Company's AGM in April each year, when they
are required to retire, in accordance with the Articles. The
members can offer themselves for re-election by shareholders.
However, re-appointment is not automatic.
The Supervisory Board meets at least four times a year and
between these formal meetings, the Management Board and the
Company's corporate brokers have regular contact. Where necessary,
both Supervisory and Management Board members have access to
independent professional advice at BBGI's expense. It considers
items laid out in the Notices and Agendas of meetings, which are
formally circulated to its members before each meeting as part of
the Board papers. At each meeting, members must advise of any
potential or actual conflicts of interest before discussion.
It also meets at least quarterly to review investment
performance and associated matters, compliance and risk profile,
the performance of key service providers, investment and financial
controls, marketing and investor relations, general administration,
peer group information, industry issues and other matters relevant
to fulfil its oversight remit.
The Supervisory Board has formally established Audit,
Remuneration and Nomination Committees. Further details are below
and in each Committee Report.
Management Board
General
The Management Board comprises three members, each contractually
engaged by BBGI Management HoldCo S.à r.l., a direct consolidated
100 per cent-held BBGI subsidiary. As a result, no member is deemed
independent under AIC Code Provision 10. However, the Management
Board's functions are overseen by the Supervisory Board, which
meets the independence criteria set out in Provision 10.
While our two-tier structure is not explicitly covered by the
AIC Code, our independent Supervisory Board ensures we are
compliant with AIC Code Provision 10.
The Company's Articles require the re-election of the Management
Board's members every year by the Supervisory Board, and not by
shareholders. This does not meet the requirements of AIC Code
Provision 23, which requires that directors are subject to election
by shareholders. However, as the Management Board carries out the
role of investment manager, the Supervisory Board deems it
appropriate that it elects the members of the Management Board. The
Articles also require that the members of the Supervisory Board are
subject to annual election by shareholders, who may also dismiss
any member. We consider this procedure satisfies the requirements
of AIC Code Provision 23.
Performance evaluation and re-appointment
As stated above, the Management Board carries out the functions
of BBGI's investment manager. Management Board Directors are
appointed by the Supervisory Board for a year, and these
appointments are then renewed. Mr Ball and Mr Schramm were both
appointed on 5 October 2011 for BBGI's IPO, with Mr Denny appointed
to the Management Board on 30 April 2013.
Delegated functions
We are required to have dedicated Risk Management, Compliance,
and Internal Audit functions under AIFM Law; and each function must
be functionally and hierarchically separate from our operating unit
functions. Accordingly, we have appointed Grant Thornton Vectis as
Internal Auditor, for the year ended 31 December 2022.
Our Head of Risk and Compliance is authorised by the regulator
to perform the risk management and compliance functions, and
reports to our Management Board and Supervisory Board, or one of
its formally constituted Committees, as well as reporting to
respective Designated Board Members, who retain responsibility for
overseeing the performance of the respective functions.
Our Management Board has overall responsibility for the correct
and effective operation of the delegated functions.
Other key delegates and providers:
Central Administrative Agent, Depositary, RBC Investor Services Bank S.A
Paying Agent, Registrar and Transfer ('RBC')
Agent:
-----------------------------------------
Depository (UK): Link Market Services Trustees (Nominees)
Limited ('Link')
-----------------------------------------
Central Securities Depository: LuxCSD S.A. ('Lux CSD')
-----------------------------------------
Principal Agent: Banque Internationale à Luxembourg
S.A. ('BIL')
-----------------------------------------
Information Technology: G.I.T.S. PSF
-----------------------------------------
Our shares trade on the main market of the London Stock
Exchange. In this context, Link is our depository, receiving agent
and UK transfer agent. During 2022, and in accordance with the
Dematerialisation Law, our remaining shares issued in registered
form were converted into dematerialised form.
LuxCSD acts as the Company's EEA-based CSD. BIL acts as the
required intermediary between the Company and LuxCSD. Both LuxCSD
and BIL are classified as delegates and are subject to the
appropriate level of delegate oversight in accordance with our
delegate oversight framework.
BBGI is registered under the UK's National Private Placement
Regime ('NPPR'), allowing us to continue to market our shares in
the UK.
Board attendance
As at 31 December 2022
Name Function Independence Age Original Next Attendance at Meetings (total
appointment renewal meetings held in the year)
date
Supervisory Board Supervisory Audit Nomination Remuneration
Board Committee Committee Committee
------------------------------------------------------------------------------------------
(5) (5) ( 4 ) (5)
-------------------------------------------------- ---- ----- ------- ------------ ------------ ------------- ----------- -------------
Chair of
Supervisory
Board and
Sarah Nomination
Whitney(i) Committee Independent 59 01-May-19 28-Apr-23 5/5 3/3 4/4 5/5
---------------- ----------------- ----------------- ---- -------------- ------------ ------------ ------------- ----------- -------------
Senior
Independent
Director
and Chair
of the
Andrew Remuneration
Sykes(ii) Committee Independent 65 29-Apr-22 28-Apr-23 3/3 2/2 2/2 3/3
---------------- ----------------- ----------------- ---- -------------- ------------ ------------ ------------- ----------- -------------
Jutta
af Chair of
Rosenborg(iii) Audit Committee Independent 64 01-Jul-18 28-Apr-23 5/5 5/5 4/4 4/5
---------------- ----------------- ----------------- ---- -------------- ------------ ------------ ------------- ----------- -------------
Director
of the
Chris Supervisory
Waples Board Independent 64 01-May-21 28-Apr-23 5/5 5/5 4/4 5/5
---------------- ----------------- ----------------- ---- -------------- ------------ ------------ ------------- ----------- -------------
Director
of the
Supervisory
June Aitken(iv) Board Independent 63 29-Apr-22 28-Apr-23 3/3 2/2 2/2 2/2
---------------- ----------------- ----------------- ---- -------------- ------------ ------------ ------------- ----------- -------------
Howard Senior
Myles Independent
(v) Director Independent 73 03-Oct-11 n/a 3/3 3/3 2/2 2/2
---------------- ----------------- ----------------- ---- -------------- ------------ ------------ ------------- ----------- -------------
(i) Ms Whitney stepped down from her membership of the Audit Committee
on 29 April 2022, having attended all prior Committee meetings. Ms Whitney
continues to be invited to attend the Audit Committee meetings as an observer.
(ii) Mr Sykes was appointed with effect from 29 April 2022, and attended
all meetings held following his appointment.
(iii) Ms af Rosenborg was unable to attend one meeting of the Remuneration
Committee due to a prior engagement.
(iv) Ms Aitken was appointed with effect from 29 April 2022, and attended
all meetings held following her appointment.
(v) Mr Myles retired from the Supervisory Board and all Committee roles
on 29 April 2022, having attended all meetings held prior to his retirement.
Name Function Independence Age Original Next Attendance
appointment renewal at Meetings
date
Management Board Management
Board (20)
----------------------
Member of
the Management
Duncan Ball Board Non-independent 57 05-Oct-11 05-Oct-23 20/20
Member of
the Management
Frank Schramm Board Non-independent 54 05-Oct-11 05-Oct-23 20/20
Member of
the Management
Michael Denny Board Non-independent 45 30-Apr-13 30-Apr-23 20/20
----------------------- ------------------- --------------------- ------- ------------ ---------------- ----------------------
These tables set out the expiry dates of the current terms of
the Directors' appointments, and Committee meeting attendance. All
appointments may be renewed in accordance with the provisions of
the Company's Articles.
Audit Committee
In accordance with provision 29 of the AIC Code and the
Disclosure Guidance and Transparency Rules ('DTR') rule 7.1, the
Company has a formally constituted Audit Committee, to which the
Supervisory Board has delegated responsibility for the general
oversight and monitoring of the Company's compliance with various
financial and regulatory controls, in accordance with AIC Code and
Disclosure and Transparency Rules requirements.
The Audit Committee operated throughout 2022 in accordance with
the AIC Code and within clearly defined terms of reference, which
are regularly reviewed, including all matters indicated by DTR 7.1
and the AIC Code.
The Audit Committee reports its findings to the Supervisory
Board, identifying matters where it recommends action or
improvement. If there is a conflict between the provisions of the
AIC Code and the provisions of the law on the Audit Profession, we
comply with the provisions of the law on the Audit Profession, and
disclose any conflict.
As External Auditor, PWC attends specific Audit Committee
meetings to consider BBGI's Annual and Interim Financial
Statements, where PWC presents the conclusions of its work, and
whenever the Audit Committee considers necessary.
The Audit Committee meets at least three times per year, and
whenever the Audit Committee Chair may require. Any member of the
Audit Committee, or the External Auditor may request additional
meetings. Other Directors and third parties may be invited by the
Audit Committee to attend meetings when appropriate. Sarah Whitney,
as the Chair of the Supervisory Board is not a member of the
Committee but is invited to attend each of its scheduled
meetings.
Remuneration Committee
In accordance with AIC Code provision 37, the Company has a
formally constituted Remuneration Committee, to which the
Supervisory Board has delegated its responsibilities for
establishing the general principles of the policy for Directors'
remuneration and for setting remuneration for the Management Board,
as well as supervising the general remuneration structure and
levels for other employees.
After reviewing the levels and structure of the remuneration,
compensation and other benefits and entitlements of BBGI's
Management Board, the Remuneration Committee reports its findings
and any recommendations to the Supervisory Board.
The Remuneration Committee meets at least twice a year, and
whenever the Remuneration Committee Chair may require. Additional
meetings may be requested by any member of the Remuneration
Committee, if necessary. Other Directors and third parties may be
invited by the Remuneration Committee to attend meetings as and
when appropriate.
Nomination Committee
In accordance with AIC Code provision 22, the Company has a
formally constituted Nomination Committee, to which the Supervisory
Board has delegated its responsibilities for appointing the members
of the Management Board and the appointment of any further
Supervisory Board members.
The Nomination Committee meets to consider the renewal of the
appointments of the Management Board members (renewable annually
for one year), the appointment of new Supervisory Board members, to
review the succession plans for both the Management and Supervisory
Boards, and oversight of the annual performance evaluation of the
Supervisory Board and its formally constituted Committees.
In recruiting new directors, the Nominations Committee actively
seeks greater diversity by gender, ethnicity, nationality, and
other criteria, and is committed to selecting members based on
merit, who possess relevant and complementary skills to help BBGI
maximise stakeholder value.
The Nomination Committee meets at least two times a year, and at
other times as the Nomination Committee Chair requires, in
accordance with its Terms of Reference. If necessary, Nomination
Committee members can request additional meetings. Other Directors
and third parties may be invited by the Nomination Committee to
attend meetings when appropriate.
The Chair does not chair any Committee meeting where her
succession is discussed, in accordance with AIC Code provision
22.
Further details on the roles of each Committee and their
activities during 2022 are set out in the individual Committee
reports which form part of this Annual Report. The respective
Committee Chairs attend each Company AGM where they are available
to respond to any shareholder queries on their Committee's
activities.
Management Engagement Committee
Oversight of delegates and key service providers is highly
regulated by the Luxembourg CSSF, including formal reporting
structures, regular oversight visits and compliance monitoring
plans, in accordance with the Company's Oversight of Delegated
Activities framework. Given the Management Board's primary
involvement in the process, the internal management of the Company,
and the size of the Supervisory Board, the Supervisory Board
conducts the functions of a management engagement committee, with
Ms Whitney as Chair. As a result, we consider it unnecessary to
have a separate management engagement committee, as prescribed
under AIC Code Provision 17, as there is no material benefit to
BBGI and our shareholders.
In its role as Management Engagement Committee, the Supervisory
Board met four times in 2022 to consider, together with the
Management Board, the performance, effectiveness and
appropriateness of the ongoing appointments of our third-party
service providers under Principle H of the AIC Code. During these
meetings, the Management Board provided feedback and key findings
from any onsite meetings with third-party service providers, as
part of our programme of oversight of delegates and key service
providers.
Composition, Succession and Evaluation
We believe all Supervisory Board members have an appropriate
combination of skills, experience, and knowledge to fulfil their
obligations. They also have a breadth and diversity of experience
relevant to BBGI, and we believe any future changes to the
composition of the Supervisory Board can be managed without undue
disruption to the Company. We are unaware of any circumstances that
are likely to impair, or could appear to impair, the independence
of any of the Supervisory Board members.
Board composition, tenure, and diversity
The Nomination Committee and the Management Board regularly
review BBGI's succession plans, but ultimate decision making rests
with the Supervisory Board. As part of our structured succession
plan, Non-Executive Directors are expected to retire on a staggered
basis. Since IPO, we have recruited new Non-Executive Directors to
retain and enhance our Board's knowledge and experience. At the
conclusion of our 2022 Annual General Meeting, Mr Howard Myles
retired as a member of the Supervisory Board and each of the
Committees, including his role as Senior Independent Director and
Chair of the Remuneration Committee. He had served as an
independent Non-Executive Director since our IPO. He was replaced
by Andrew Sykes, who was appointed Non-Executive Director at the
same AGM. Mr Sykes also took on the roles of Senior Independent
Director and Chair of the Remuneration Committee. At our 2022 AGM,
our shareholders appointed Ms June Aitken as an Independent
Non-Executive Director. Both Ms Aitken and Mr Sykes are members of
each of our Committees.
Our Management and Supervisory Boards take the gender and ethnic
diversity of their composition into full consideration. We fully
acknowledge the goals of FTSE Women Leaders (formerly the
Hampton-Alexander Review on Women on Boards) and the Parker Review
on Ethnic Diversity on Boards. Female representation on our
Supervisory Board at the reporting date stood at 60 per cent ,
exceeding the FTSE Women Leaders target of at least 40 per cent
representation of women on the Boards of FTSE 350 companies. We
also meet the target set by the Parker Review for FTSE 250
companies to have at least one director from a minority ethnic
group on the Board by 2024.
We are one of the few FTSE 350 companies with both a female
Chair and Audit Committee Chair. As part of our commitment to the
FTSE Women Leaders and the Parker Review's goals, the Nomination
Committee also regularly reviews our policies on diversity, equity
and inclusion .
Our gender composition goals include our Management Board, and
their direct reports. As at 31 December 2022, our 26 colleagues
included 17 different nationalities. Given our relatively low
employee turnover and the small number employed across the Group,
the Management and Supervisory Boards are mindful of the naturally
limited opportunities to promote greater diversity of gender and
ethnicity to senior roles within BBGI, but we still take all
reasonable and practical steps to evolve diversity throughout the
Group.
Further details on Board composition, tenure, and diversity are
given in the Nomination Committee Report.
Re-election of Supervisory Board members
In accordance with the Articles, Supervisory Board members are
elected for a period ending each AGM, when they are eligible for
reappointment. All members of the Supervisory Board will offer
themselves for re-election at our forthcoming AGM in 2023 and, as a
result of the successful performance evaluation, the Supervisory
Board recommends the re-election of each of its members.
Re-election of Management Board members
The Supervisory Board evaluates the performance of the
Management Board and its Directors annually to ensure they operate
effectively and efficiently, and that the appointment of the
individual Directors is in the best interests of BBGI and its
shareholders. Satisfied with the evaluations carried out in 2022,
the Supervisory Board resolved to renew Mr Denny's appointment for
a further year with effect from 30 April 2022, and those of Mr Ball
and Mr Schramm for a further year with effect from 5 October
2022.
Administration
Incorporation and administration
The ordinary shares were created in accordance with Luxembourg
law and conform to the regulations made thereunder, have all
necessary statutory and other consents, and are duly authorised
according to, and operate in conformity with, the Articles.
Articles of Association
The Articles were originally approved and formalised before a
Luxembourg notary public on 24 November 2011. The Articles are
filed with the Luxembourg Registre de Commerce et des Sociétés and
are published in the Mémorial. The Articles may be amended in
accordance with the rules set out in article 32 of the
Articles.
A copy of the current Articles, which were most recently amended
by shareholder approval on 30 November 2020, is available for
inspection on our website. Refer to
www.bb-gi.com/investors/policies/articles-of-association/ .
Nomination Committee Report
Annual statement from Nomination Committee Chair
I am pleased to present the Nomination Committee (the
'Committee') report for the financial year ended 31 December 2022
on behalf of the Supervisory Board.
Responsibilities
The Committee and its Chair are appointed by the Supervisory
Board. Membership is confined to Independent Non-Executive
Directors. Each of the five Independent Non-Executive Directors is
a Committee Member. The Nomination Committee's responsibilities
include reviewing:
-- The renewal of the appointments of the Management Board
members (appointments are renewable annually for one year
only).
-- The composition of the Supervisory Board and the appointment
of new Supervisory Board members (subject to annual shareholder
approval).
-- Succession planning for the Management and Supervisory Boards.
-- The annual performance evaluation of the Supervisory Board
and its formally constituted Committees.
Key activities during the year
During the year, the Committee met four times, with all members
present.
Supervisory Board composition, tenure and diversity
As was reported in last year's Annual Report, in accordance with
our succession plans, Howard Myles retired as a Non-Executive
Director of the Supervisory Board and his respective Committee
appointments at the 2022 AGM, with Andrew Sykes appointed to serve
as his replacement on the Supervisory Board. Mr Sykes also succeeds
Mr Myles as Senior Independent Director, Chair of the Remuneration
Committee and as a member of the Audit and Nomination
Committees.
Ms June Aitken was also appointed at the 2022 AGM, as an
additional member of the Supervisory Board, and additionally serves
as a member of the Audit, Nomination and Remuneration Committees.
We are grateful for the support received from shareholders in
favour of their appointments, which we believe complement existing
Board members and provide us with a well-balanced and experienced
Supervisory Board and Committees, allowing us to effectively serve
our shareholders in carrying out our duties of oversight of the
Company and Management Board.
We strongly support initiatives and regulatory changes to
encourage gender and ethnic equality within publicly-listed
corporate entities, including the FTSE Women Leaders and Parker
Reviews. We believe the Supervisory Board's effectiveness is
greatly enhanced by our diversity, and are proud of having 60 per
cent female representation, as well as being one of the few FTSE
350 companies with both a female Chair of the Supervisory Board and
a female Audit Committee Chair. During the year we also achieved
the Parker Review target for FTSE 250 companies to have at least
one director from an ethnic minority background on the board, two
years ahead of the 2024 deadline. Notwithstanding any regulatory
requirements, we remain committed to ensuring that the members of
our Board and Committees bring a varied range of skills and
expertise to the benefit of the Company's stakeholders and we have
achieved this whilst also meeting these additional expectations of
diversity.
Succession planning
During the year, the Committee reviewed its former policy on the
Appointment and Tenure of the Supervisory Board Chair. Following a
reassessment of the Board's position on succession planning, we
decided to revise the existing policy and extend its application to
all members of the Supervisory Board all members. The Committee
recognises that the AIC does not explicitly preclude a director
from serving more than nine years, but states that serving over
nine years is one of several factors that could lead to a director
losing independent thinking. Separately, the Committee members
recognise market sentiment towards excessive periods of tenure
beyond nine years - the stated limit in the FCA's Corporate
Governance Code. Our Supervisory Board Tenure policy limits the
tenure of its members and the Chair to nine years from their first
appointment to the Board, although we will allow an extension of
the Chair in exceptional circumstances to facilitate an effective
succession plan and the development of a diverse Board.
The Committee reviewed the composition and membership of the
Management Board, the Supervisory Board, and their formally
constituted Committees. The Committee has determined that, with the
addition of Mr Sykes and Ms Aitken, further appointments are not
necessary.
Every year, we consider and formally discuss the issue of
succession, both at the directorship levels and below, reporting
into the Management Board. We consider existing skills and
experience, potential future departures, and key person risks, as
well as supporting and nurturing talent within the Company. Where
necessary, the Committee will engage external recruitment
consultants to assist with identifying suitable candidates. The
Management Board is tasked with the general recruitment of
colleagues, including all senior positions below Board-level, and
it regularly keeps the Committee and Supervisory Board appraised of
existing and potential future human resourcing requirements.
The process of appointing any new Directors is led by the
Nomination Committee. Our approach is to make appointments across
all levels based on the merit, and the strengths, skills and
experience that individual candidates bring to the composition and
balance of the Management and Supervisory Boards, or Company.
Annual Committee planning and member development
During the year, the Committee formalised annual commitments and
activities into an annual committee plan. This ensures individual
Committee members regularly consider all material matters, and that
the Committee allocates sufficient time to discuss any matters at
respective meetings.
The Committee also re-evaluated the induction process for new
Non-Executive Directors, referring to positive feedback on the
process from Mr Sykes and Ms Aitken. We have enhanced the NED
induction plan by expanding on the content covered during meetings
and presentations for new directors.
We maintain an internal register of training undertaken by all
colleagues and Directors. Members of the Supervisory Board are
required to provide evidence of relevant training undertaken in the
year and are additionally encouraged to take part in staff-wide
training, such as cyber-security and Anti-Money Laundering ('AML')
and Counter-Terrorism Financing ('CTF'), if they have not done
similar training externally. The Committee also reviews training
undertaken to determine the ongoing commitment and suitability of
each Supervisory Board member as an independent Non-Executive
Director of the Company. I am pleased to say that each Supervisory
Board member has undertaken training to remain up-to-date with the
latest regulatory and operational developments relevant to BBGI's
business.
Annual performance evaluation
Progress made against the actions identified by the 2021
performance evaluation of the Board's effectiveness is detailed
below:
Area of focus Actions taken
Greater ESG expertise The Supervisory Board was enlarged by one
required on the Supervisory member, and a search undertaken for an appropriately
Board skilled individual, resulting in the appointment
of June Aitken
Individual board member training undertaken
where appropriate
------------------------------------------------------
Committee work planning All Committees now have annual workplans in
place setting out the year's business.
------------------------------------------------------
During the year, the Supervisory Board conducted its own annual
evaluation, as well as that of its Chair and each of the
Committees, and considered the term and independence of each
member. Having undertaken an external evaluation in 2020, the 2022
evaluation was conducted internally. It consisted of a detailed
questionnaire covering the Supervisory Board and its Chair, and its
three Committees: the Audit Committee, the Nomination Committee,
and the Remuneration Committee. All members of the Supervisory
Board formally considered and discussed the conclusions from each
evaluation.
The 2022 evaluation concluded that the Supervisory Board and its
Committees comprise an appropriate balance of experience, skills
and knowledge to enable them to discharge their responsibilities
properly, and the Board has operated effectively throughout the
year. The new Board and Committee structure and the annual work
programmes introduced last year are functioning well, and the two
newly appointed directors benefited from the improved induction
programme. Some minor changes to the management of the Board's
business will be implemented to improve the effective working of
the Board. In the changing macroeconomic environment, the
evaluation process recognised the need to keep the Company's
strategy and risk management processes in focus.
As the Senior Independent Director, Mr Sykes evaluated my
performance as Chair of the Supervisory Board, in accordance with
provision 14 of the AIC Code, and he concluded that I continue to
perform my role effectively.
I have also evaluated the performance of each Supervisory Board
member, and concluded that each member performed their duties
effectively throughout the reporting period, and has sufficient
capacity to carry out their duties properly, with no single member
over-boarded by other directorships.
Renewal of Executive Director mandates
The Supervisory Board reviewed the performance of each
Management Board member. Each member is considered to have
performed their duties effectively, and has been reappointed for
another year.
The Committee reviewed the plans for all senior positions for
succession planning. These plans are regularly updated by the
Management Board and reviewed by the Nomination Committee at least
annually.
The year ahead
The Committee will meet regularly in 2023 to assess capacity
within the organisation, key man risk and the continuous
development of appropriate succession plans, which continue to be
key focus areas for the Management and Supervisory Boards. The
Committee will strive to achieve the best results for all
stakeholders in 2023, including the selection process for engaging
an independent third party to facilitate the external performance
evaluation process in 2023, in accordance with AIC Code provision
26, and in actioning the outcomes of the 2022 evaluation.
Approval
This Report was approved by the Board on 29 March 2023 and
signed on its behalf by:
Sarah Whitney
Nomination Committee Chair
Audit Committee Report
Annual statement from Audit Committee Chair
I am pleased to present the Audit Committee (the 'Committee')
report for the financial year ended 31 December 2022 on behalf of
the Supervisory Board .
Terms of Reference
The Committee functioned throughout 2022 according to its
defined Terms of Reference, which are prepared in accordance with
the Disclosure and Transparency Rule 7.1 and the AIC Code, which
are reviewed at each formal meeting scheduled by the Committee and
are available to view on the Company's website. Any amendments
recommended on the Terms of Reference are referred to the
Supervisory Board for approval. The roles and responsibilities of
the Committee, as set out in its Terms of Reference, are reviewed
at least annually, and consider relevant regulatory changes and
recommended best practice. There were no material amendments to the
Terms of Reference during 2022.
Committee membership
The Committee and its Chair are appointed by the Supervisory
Board. The Committee currently consists of four Independent
Non-Executive Directors, all of whom sit on the Supervisory Board,
and m embership is at all times confined to Independent
Non-Executive Directors. Ms June Aitken and Mr Andrew Sykes were
appointed as Committee members from 29 April 2022, with Mr Howard
Myles and Ms Sarah Whitney stepping down from the Committee on the
same day. Ms Whitney remains a Non-Executive Director. As Chair of
the Supervisory Board, she is invited to attend each Committee
meeting as an observer. The biographies of each Committee member
are in the Corporate Governance section of this Annual Report. The
Supervisory Board considers that at least one Committee member has
recent and relevant financial experience for the Committee to
discharge its functions effectively.
Responsibilities
The key responsibilities of the Committee include:
-- Advising the Supervisory Board on whether the Group's annual
and interim reports and financial statements, taken as a whole, are
fair, balanced, and understandable and provide the information
necessary for shareholders to assess the Group's position and
performance, business model and strategy.
-- Monitoring the integrity of the financial statements of the
Group and any formal announcements relating to the Group's
financial performance, satisfy themselves that the financial
statements are compliant with relevant accounting standards and
that any significant financial reporting issues and judgements
raised by the External Auditors are appropriately considered.
-- Reviewing the semi-annual valuations of BBGI's investment portfolio.
-- Reviewing the effectiveness of the Group's internal financial
controls and risk monitoring including consistency of accounting
policies and practices on a year-to-year basis, the Group's
internal control and risk management systems, including reviewing
the Internal Auditors' Annual Regulatory Report.
-- Reviewing and monitoring the effectiveness of the Group's
Internal Audit function, including the appointment and removal of
the third-party service provider of Internal Audit and review and
approve the tri-annual internal audit plan.
-- Formally reporting and making recommendations to the
Supervisory Board for resolutions to be put to shareholders at the
AGM, to approve the appointment, re-appointment, and removal of the
External Auditor, and keep under review their associated
remuneration and terms of engagement.
-- Reviewing and monitoring the External Auditor's independence
and objectivity and the effectiveness of the audit process, taking
into consideration relevant UK and Luxembourg professional and
regulatory requirements.
-- Ensuring implementation of a policy on non-audit services,
considering relevant guidance and legislation regarding the
provision of non-audit services by the external audit firm.
-- Reviewing the adequacy and security of the Group's
arrangements for its employees and stakeholders to raise concerns,
in confidence via BBGI's whistleblower hotline, about possible
wrongdoing in financial reporting, fraud, bribery and other
matters.
These responsibilities form the basis of the Committee's annual
work plan. The Committee is authorised to seek any information it
requires from the Management Board, and external parties and to
investigate issues or concerns as it deems appropriate. The
Committee may also obtain independent professional advice at the
Company's expense, in order to perform its duties. No independent
advice was required in 2022.
The External Auditor is invited to attend Committee meetings
where we consider the Annual and Interim Reports, and they meet the
Committee or some of its members, without representatives of the
Management Board being present. The Committee has direct access to
PwC as our External Auditor, and to members of the Management
Board, and reports its findings and recommendations to the
Supervisory Board.
Key activities during the year
At these meetings, the Committee considered, inter alia:
-- The Committee's Terms of Reference.
-- The Committee's annual plan.
-- The Semi-Annual Valuation Reports with respect to our
investment portfolio, including assumptions used, sensitivity
scenarios, External Auditor and third-party independent valuation
specialist observations.
-- Management's proposals for the interim dividends, including
any benchmarking conducted against market peers.
-- Our 2021 Annual Report, 2022 Interim Report and the
appropriateness and consistency of our accounting policies.
-- The relevance of changes to IFRS reporting standards.
-- The change in External Auditor, including PwC's terms of
appointment and remuneration, and overseeing their independence,
particularly the provision of non-audit services and legacy
services pre-dating its appointment as External Auditor.
-- The effectiveness of the audit and recommendation to the
Supervisory Board for approval of the External Auditor's plan for
the financial year and the key business risks relevant to the
audit.
-- The External Auditor's reports to the Committee.
-- Discussions with management on our existing tax structure and tax risks.
-- The introduction of more comprehensive climate-related disclosures.
-- Our overall Risk Profile and Key Risk Indicators, and the
effectiveness of our risk monitoring.
-- An annual review of the Charters and Policies relevant to the Committee.
-- The effectiveness of our Internal Auditor, the Internal
Auditor's Annual Regulatory Report for 2021 and scope of review for
the 2020-2022 triennial internal audit plan.
-- The Russian invasion of Ukraine and the potential
macroeconomic consequences, in particular the impact on interest
rates and inflation.
-- Following the revocation of most of the health measures in
relation to COVID-19 in March 2022, a reflection on the overall
non-financial impact of the pandemic, and in particular the
effectiveness of our business continuity plan throughout.
-- The effectiveness of an externally conducted cyber-security
risk assessment for BBGI and a review of controls in place and
adaptations made to mitigate the global escalation in
cyber-attacks.
-- Initial expectations around the impact and relevance of the
UK BEIS Audit and corporate governance reforms, considering our
size and UK listing.
-- The Committee, with the presence of all Supervisory Board
members, received quarterly presentations from the Head of
Compliance and Risk on the work undertaken by the Compliance
function, including;
o Discussions around our AML/CFT controls and new reporting
requirements from the Luxembourg regulator, which required support
from outgoing External Auditor.
o A look through exercise on the beneficial ownership of our
share capital in response to the significant level of sanctions
imposed by regulators on Russia and Russian-related interests.
o Whistleblowing arrangements.
o Periodic updates on the conclusion of the process to
dematerialise our share register.
Valuation of investments
During the year, the Committee discussed a range of topics with
the Management Board, the External Auditor, and the Internal
Auditor. Consistent with prior reporting periods, the Committee
concluded that the most significant risk of material misstatement
in our financial statements relates to the fair valuation of our
underlying investments.
Twice a year, the Management Board carries out a valuation of
the underlying investments, including NAV sensitivity analyses,
which are reviewed by an independent third-party valuation
expert.
Management Board members were available during the Committee
review process to respond to challenges and to provide detailed
explanations of the rationale used for the valuation of investments
and the assumptions, judgements and methodology applied.
The Committee invited the External Auditor to present and
discuss the results of its audit and review procedures. The
External Auditor, including its valuation specialist, has reviewed
and reported on the adequacy of the valuation of the underlying
investments, paying particular attention to the discount rates
applied, the macroeconomic backdrop and the key assumptions used in
deriving the fair valuation of the investments.
The External Auditor briefed the Committee on the outcome of its
controls testing and the audit procedures performed. This risk of
material misstatement is carefully considered when the Committee
reviews the Annual and Interim Financial Statements.
Following this valuation process and ensuing reviews, the
Committee concluded that the valuation process of our investments
for 2022 had been carried out appropriately, and the value of
investments was reasonable.
External Auditor independence and effectiveness
In assessing the ongoing independence of the External Auditor,
the Committee:
-- Reviewed the External Auditor's report outlining the extent
of non-audit services provided by them and related parties to the
Company and its subsidiaries.
-- Received confirmation from the External Auditor as to its
compliance with ethical requirements regarding independence and the
application of appropriate safeguards, along with the arrangements
in place to identify, manage and disclose conflicts of interest and
that it has remained independent of the Group in accordance with
Regulation (EU) No 537/2014.
-- Considered existing engagements with the External Auditor
having been entered into prior to their appointment as External
Auditor, along with associated changes in personnel to maintain
independence.
In assessing the ongoing effectiveness of the External Auditor,
the Committee considered;
-- The External Auditor's fulfilment of the agreed audit plan and variations.
-- Reports highlighting the major issues that arose during the audit.
-- Feedback from the Management Board evaluating the performance of the audit team.
-- The Financial Reporting Councils ('FRC's) Annual Report on audit quality inspections.
The Committee is satisfied PwC has acted in accordance with its
terms of engagement and that the audit process carried out by the
External Auditor remains independent, objective, and effective.
Non-audit services
The Committee considered the level of non-audit services
provided by the External Auditor. To the extent that non-audit
services are not prohibited, the Committee will continue to review
and, where appropriate, approve non-audit service engagements
performed by the External Auditor on controlled subsidiaries.
As a general principle, we will not use the External Auditor for
non-audit services, unless there is a valid and specific
justification.
For the financial year ended 31 December 2022, the External
Auditor provided us with limited non-audit services related to ESMA
Annex IV reporting. This arose as the result of a legacy engagement
pre-dating PwC's appointment as the External Auditor. Fees for this
service in 2022 amounted to c. GBP5,000. We have since performed
the production of this reporting in-house. There were no other
non-audit related fees paid to PwC during the year ended 31
December 2022.
Internal controls and risk management
The Committee review the effectiveness of the Group's internal
financial control systems.
The Committee considers the three lines of defence model to
assess the effectiveness of the internal control systems. The first
line of defence, management controls, is monitored on an ongoing
basis by the compliance and risk management functions, which make
up the second line of defence. The third line of defence is the
internal audit function.
-- Risk management: The Committee members attended the
presentation of the Annual Risk Report and the Semi-Annual Risk
Report presented by BBGI's Risk Manager. Committee members had the
opportunity to challenge the Risk Manager and members of the
Management Board, enabling an appropriate level of direct
oversight. Additionally, the Committee reviews regular risk profile
updates and related key risk indicators during the year, prepared
by the Risk Manager.
-- Compliance: The Committee members received and considered the
quarterly compliance reports prepared by BBGI's Head of Compliance,
describing the work performed by the compliance function, and
covering all compliance topics, including, but not limited to,
AML/CTF, delegate oversight, conflicts of interest, training,
regulatory watch, data protection, fraud, cyber-security,
implementation and update of policies, ESG and personal
transactions. The Management Board members and other
representatives were available to respond to the Committee members'
queries and requests for further clarification. The Head of
Compliance additionally presented the Annual Compliance Report for
the Financial Year ended 31 December 2021, required to be submitted
to the CSSF. This report was presented at a Committee meeting where
all directors, including the Supervisory Board Chair, were in
attendance.
-- Internal audit: As described in the responsibilities section
above, the Committee undertook a review of the Internal Auditor's
effectiveness, the 2021 Internal Auditor's Annual Regulatory Report
and the 2020-2022 triennial internal audit plan. As part of this
process, the Committee received a presentation from the Internal
Auditor, which covered their specific approach to engagement, a
detailed outline of their scope of work, the audit objectives and
their conclusions resulting from the 2021 engagement.
Members of the Committee are presented with the information
required to monitor the effectiveness of all three functions. For
2022, the Committee concluded that Risk Management, Compliance, and
Internal Audit had performed effectively with adequate processes in
place.
Annual Committee planning
During the year, the Committee formalised its activities into an
Annual Committee Plan. Individual Committee members deliberate all
material matters requiring the Committee's regular consideration,
and we allocate sufficient time to these issues when they are
discussed at meetings.
The adoption of the formalised Annual Committee Plan facilitates
the Committee's ability to regularly undertake further analysis of
topics of current relevance or material interest to Committee
members or the Company's stakeholders.
Cyber-security risk assessment
With two new members, and a new External Auditor, the Committee
has benefitted from fresh perspectives on the effectiveness of
existing controls for cyber-security. The Management Board has a
considerable understanding of risks within and outside the
business, and has effective controls in place and a Business
Continuity Plan to address cyber-threat risks, including additional
measures implemented during the reporting period. As a result, the
Committee considers a robust control environment is in place, and
the Management Board, through the support of external
cyber-security experts, are well informed of potential
cyber-threats and are taking appropriate action to mitigate those
risks to the extent possible.
Tax
The Committee recognise the relevance of local and global tax
initiatives to the Group, with an increasing trend for greater
transparency around tax policies and reporting requirements.
Mitigation of our tax-related risks, and the adoption of any active
policies on tax management sits with the Management Board. In 2023,
as part of its annual plan, the Committee will continue to receive
updates from the Management Board on the topic of taxation as it
impacts upon the Group.
Going concern and viability statements
Having regard to our assets and liabilities (refer to the
Consolidated Statement of Financial Position for more detail), the
Committee considered the Viability and Management Board
Responsibilities Statements, and processes and assumptions
underlying the statements, considering:
-- BBGI's investment policy and investment pipeline.
-- The long-term and contractual nature of BBGI's investments.
-- Investment reviews.
-- BBGI's risk profile and key risk indicators (including
principal risks and uncertainties) and mitigating actions put in
place.
-- Relevant financial and economic information and long-term assumptions.
-- Scenario testing.
-- Annual and semi-annual valuations of the investments.
-- Whether the Management Board has diligently carried out its responsibilities in:
o selecting suitable accounting policies and applying them
consistently.
o making judgements and estimates that are reasonable and
prudent.
o stating whether applicable accounting standards have been
followed, subject to any material departures disclosed and
explained in the financial statements.
o preparing the financial statements on a going concern basis,
unless it is inappropriate to presume that the Group will continue
in business.
o maintaining proper accounting records that disclose with
reasonable accuracy the Group's financial position and enable it to
ensure the financial statements comply with all relevant
regulations.
o safeguarding the Group's assets and taking reasonable steps
for the prevention and detection of fraud and other
irregularities.
Having considered all the above, and discussions held with the
Management Board, the Committee is satisfied the Viability
Statement and the Management Board Responsibilities Statement are
prepared on an appropriate and reasonable basis.
Regulatory environment
The Committee was kept informed of regulatory changes throughout
2022, including changes in scope or interpretation by the
regulator, and potential future developments. This monitoring and
update process is facilitated by our Regulatory Watch, maintained
by our Compliance Function and included in the regular compliance
reporting to Committee members by the Head of Compliance and Risk
and the Designated Management Board Member for Compliance.
Focus for 2023
In addition to monitoring the integrity of our financial
disclosures, the effectiveness of the internal and external audit
functions, and our response to material regulatory changes, a key
focus for the Committee during 2023 will be the continued oversight
of PwC's engagement as External Auditor.
Additionally, as part of its implemented annual plan, the
Committee will undertake further analysis of relevant topics, being
ESG and tax strategy in 2023.
Notwithstanding the official lifting of health measures and
restrictions in response to COVID-19 in March 2022, and our proven
robust business model, we will continue to monitor closely the
effectiveness of our business continuity plan and controls to
mitigate potential risks.
The Committee will also continue to evaluate the impact of
political, tax and regulatory developments in relevant geographies,
in particular developments in the UK around audit and corporate
governance reforms, and developments relating to ESG both in the UK
and Europe.
Together with all Committee members, I am available at the AGM
to respond to any shareholder questions regarding the Audit
Committee's activities.
Approval
This report was approved by the Board on 29 March 2023 and
signed on its behalf by:
Jutta af Rosenborg
Committee Chair
Remuneration Committee Report
Annual Statement from Remuneration Committee Chair
I am pleased to present the Remuneration Committee (the
'Committee') report for the financial year ended 31 December 2022
on behalf of the Supervisory Board.
Composition of the Committee
The Committee consists of a minimum of three members. The
Supervisory Board appoints Committee members and the Chair (who
cannot be the Supervisory Board Chair) and membership is confined
to independent non-executive directors.
On 29 April 2022, I was appointed as Chair of the Committee when
Howard Myles retired from the Board. June Aitken was also appointed
as a member of the Committee. Each of our five Independent
Non-Executive Directors is also a Committee member. Refer to our
biographies are in the Biographies section of this Annual
Report.
Key activities during the year
The Committee met five times during the year.
Responsibilities
The Committee is responsible for establishing the general
principles and terms of the Remuneration Policy for our Directors
and employees, and for setting the remuneration of the Management
Board and Supervisory Board, in accordance with the Principles and
Provisions of the Code, and the terms of the Remuneration
Policy.
This Remuneration Report has been prepared in compliance with
reporting obligations outlined in the relevant Luxembourg
legislation. To provide greater transparency to shareholders and
employees alike, we have again voluntarily disclosed additional
remuneration detail beyond our legal reporting obligations. We
continue to comply with the provisions of the AIC Code on
remuneration.
Performance in 2022
Despite the challenging economic environment, BBGI's portfolio
continued to perform well with no reported lock-ups in Portfolio
Companies, a strong increase in NAV per share and robust dividend
cover. Rising inflation, particularly in the second half of the
year, has highlighted the importance of high-quality inflation
linkage in the portfolio. Preserving and enhancing the value of the
portfolio was a key management focus.
BBGI's proven investment strategy and the management team's
proactive management of low-risk, inflation linked,
availability-based assets supported a 6.7 per cent increase in NAV
to GBP1,069.2 million and a 6.6 per cent increase in NAV per share
in 2022. We met our full-year dividend target of 7.48pps, an
increase of 2 per cent compared to the prior year, with strong
coverage of 1.47x.
Both the Management Board and the Supervisory Board believe that
sound ESG practices are integral to building a resilient business
and creating long-term value for our investors and other
stakeholders. Investing sustainably and responsibly in social
infrastructure is central to BBGI's business model. Most of our
employees have ESG-related targets, and the Management Board's
remuneration framework includes both LTIP and STIP metrics related
to ESG.
Further progress on ESG was made during the year, including
establishing the framework to achieve our strategic ESG objectives.
The year saw some notable milestones such as completion of the
portfolio level climate risk assessment, our designation as an
Article 8 Company under SFDR for reporting on the criteria for a
socially beneficial investment, the development of BBGI's Net Zero
Plan, and the publication of the Company's first ESG report in
March 2022.
Key decisions during the year
The Committee commissioned an independent review of BBGI's
overall remuneration framework in 2020/21 and we continued to work
within this framework in 2022.
The Committee's work in 2022 included the following key
decisions:
-- Approval of the annual Remuneration Committee cycle.
-- Approving Management Board salary increases, taking account
of the inflationary environment and the framework and approach to
pay increases for BBGI employees.
-- Assessing performance against the 2021 STIP targets and approving the outcome.
-- Formalising the assessment of the 2018 LTIP outcome.
-- Setting ESG metrics for the 2021 LTIP award and considering
the inclusion of additional ESG metrics in the 2022 LTIP award.
[xxi]
-- Reviewing and approving an increase to Supervisory Board fees.
-- Reviewing and updating the Company's Remuneration Policy.
We will carry out an independent review of the Management
Board's remuneration in 2023.
Detailed decisions of the Committee
Salary increases
The Committee reviewed Management Board salaries with effect
from 1 May 2022, considering salary levels relative to the market,
and the level of pay increases for BBGI employees. It also
considered the impact of the volatile and inflationary
macroeconomic environment on all our employees. Management Board
members were awarded a salary increase of 5 per cent for 2022,
which is below the average increase we awarded to our
employees.
Annual bonus (FY2022) outcome
For the financial year ended 31 December 2022, the Co-CEOs and
CFO were each eligible for a maximum bonus of 150 per cent of base
salary as at 31 December 2022. The Committee assessed the award of
this annual bonus against a range of stretching financial and
strategic KPIs (see further in this report) The Management Board
delivered excellent performance and progress against targets, with
the annual bonus outcomes at 100 per cent of the maximum
opportunity for the 2022 financial year. One-third of the earned
bonus will be used to purchase shares, to be held for three
years.
LTIP outcome (2019 award)
In December 2019, LTIP awards were granted to the Co-CEOs and
CFO. These equated to an award value of 150 per cent of salary for
the Co-CEOs, and EUR 100,000 for the CFO, and were based on
stretching TSR and NAV growth targets. The 2019 awards will be
released following the publication of the Company's 2022 audited
accounts, vesting at 43.1 per cent and 50 per cent of the maximum
for the Co-CEOs and CFO respectively. These reflect performance
against targets for the three-year period to 31 December 2022.
No discretion was exercised in determining the annual bonus and
incentive outcomes described above.
Supervisory Board remuneration
As Supervisory Board fees had not been changed since 2017, they
were reviewed in 2022. Following this review, the Chair's base fee
was increased to GBP80,000, and the Non-Executive Director base fee
to GBP55,000, with effect from 1 October 2022. Further details are
provided later in this report.
Andrew Sykes
Remuneration Committee Chair
29 March 2023
Remuneration at a glance
Key remuneration principles
BBGI's remuneration framework is based on the following key principles:
The objectives of the Company's Remuneration Policy are to:
* Attract and retain highly qualified executives and
employees with a history of proven success.
* Align the interests of BBGI's Management Board and
employees with shareholders' interests, executing our
investment policy and fulfilling our investment
objectives.
* Support strategy and promote our long-term
sustainable success.
* Establish performance goals that, if met, are
accretive to long-term shareholder value.
* Link compensation to performance goals and provide
meaningful rewards for achieving these goals. This
incorporates both financial and non-financial
performance indicators, including key ESG goals and
health and safety factors.
In considering Management Board remuneration during 2022, the Committee
acknowledged the principles of transparency, clarity, simplicity,
risk management, proportionality and alignment to culture.
Risk and conduct
BBGI's Remuneration Policy encourages sound and efficient management
of risks and does not encourage excessive risk-taking. The Remuneration
Policy is consistent with sound and effective risk management through:
* Implementing a sound governance structure for
establishing goals and for communicating performance
goals to colleagues to ensure transparency.
* Including financial and non-financial objectives in
performance and result assessments.
* Ensuring an appropriate mix of fixed and variable
compensation to discourage inappropriate risk-taking.
Ex-post risk adjustment mechanisms, in the form of market standard
malus and clawback arrangements, are in place for the Management
Board, who are all identified as material risk takers, in accordance
with Luxembourg's AIFM law of 12 July 2013.
In evaluating the components of variable remuneration, we consider
long-term performance, and current and future risks associated
with it, and the lifetime of the assets under management.
During the year, the Committee reviewed the remuneration policy
and its implementation, and concluded that the relevant remuneration
processes and procedures were implemented in accordance with the
policy. Furthermore, the Committee concluded that the remuneration
policy remains consistent with and promotes sound and effective
risk management, and does not encourage risk-taking, which is inconsistent
with the risk profile of BBGI.
Management Board remuneration framework summary
Element
-------------- ------------------------------------------------------------
Base salary Base salaries effective from 1 May 2022:
Co-CEOs: C$ 902,839 and EUR 596,035 ([xxii]) CFO:
EUR 381,754
-------------- ------------------------------------------------------------
Pension Co-CEOs and CFO: 15 per cent of salary (cash allowance).
and benefits The Co-CEOs receive a monthly car allowance.
-------------- ------------------------------------------------------------
Annual Co-CEOs and CFO: performance measures established
bonus (STIP) entitling beneficiaries to 50 per cent of salary
at threshold performance, 75 per cent of salary at
target and 150 per cent at maximum.
One-third of bonus is used to purchase shares to
be held for three years.
STIP is based on a balance of strategic, financial,
operational, compliance and ESG, metrics, with robust
quantitative and qualitative performance requirements
set for threshold, target, and maximum performance.
-------------- ------------------------------------------------------------
Long-Term Co-CEOs: performance measures established entitling
Incentive beneficiaries to 50 per cent of salary at threshold
Plan (LTIP) performance, 100 per cent of salary at target and
200 per cent at maximum.
CFO: threshold: 50 per cent of salary, target: 75
per cent of salary, maximum: 150 per cent of salary.
Performance is measured over three years. For the
2022 LTIP awards, 80 per cent of the award is subject
to stretching NAV Total Return targets; 10 per cent
is subject to reducing corporate GHG emissions and
10 per cent subject to progress in the implementation
of net zero targets related to BBGI's Portfolio Companies.
-------------- ------------------------------------------------------------
Shareholding All Management Board members are required to build
requirements and maintain a minimum holding of BBGI shares with
a value of 200 per cent of salary ([xxiii]) .
Post-employment shareholding requirements : Management
Board members are required to hold 100 per cent of
salary in shares for two years after leaving BBGI.
-------------- ------------------------------------------------------------
Below we have set out total remuneration for each Management
Board member for the year ending 31 December 2022 ([xxiv]) .
Single figure table - Management Board
Duncan Ball Frank Schramm Michael Denny
In Sterling (Co-CEO) (Co-CEO) (CFO)
2022 2021 2022 2021 2022 2021
Salary 553,435 495,275 500,097 484,872 320,307 310,555
Benefits 15,594 13,956 14,032 13,605 - -
Annual bonus 843,542 728,093 762,245 712,799 488,210 456,540
Pension 84,354 74,804 76,225 73,233 48,821 46,905
LTIP(1) 239,942 490,259 240,822 522,452 40,134 95,170
Other - - - - - -
Total fixed 653,384 584,035 590,354 571,709 369,128 357,460
Total variable 1,083,484 1,218,352 1,003,067 1,235,252 528,343 551,710
-------------------- ---------- ---------- ---------- ---------- -------- --------
Total remuneration 1,736,868 1,802,387 1,593,421 1,806,961 897,471 909,170
-------------------- ---------- ---------- ---------- ---------- -------- --------
(1) The 2019 LTIP vests by reference to performance in the
three-year period to 31 December 2022. The associated shares will
be released to the Management Board members following the
publication of BBGI's 2022 audited accounts.
The figures in the table above are derived from the
following:
(a) Base salary Salary earned over the year, shown in the reporting
currency of the Group (Sterling). Both Mr Denny
and Mr Schramm receive all cash entitlements in
Euro. Mr Ball receives all cash entitlements in
Canadian Dollars. The Sterling amounts are converted
using the average exchange rate for the respective
financial year. For the year ended 31 December 2022,
the relevant average exchange rates were GBP1 =
C$1.6054 and GBP1 = EUR1.1729.
(b) Benefits The taxable
value
(gross)
of benefits
received
in the
year.
These
are principally
car allowance.
-------------- -----------------------------------------------------------
(c) Annual bonus The value of the bonus earned in respect of the
(STIP) financial year: one-third will be paid in shares
and held for three years. Below we describe achievements
against the performance measures for the latest
financial year.
-------------- -----------------------------------------------------------
(d) Pension The pension figure represents the cash value of
any pension contributions, including any cash payments
in lieu of pension contributions made in the year.
-------------- -----------------------------------------------------------
(e) Long-term The value of LTIP shares vesting, calculated by
incentives the estimated number of shares that vest in respect
of the 2019 LTIP award multiplied by the average
share price over the last quarter of the year ended
31 December 2022 (GBP1.58).
-------------- -----------------------------------------------------------
Additional disclosures for the single figure table
Management Board members receive an annual base salary, payable
monthly in arrears. The Committee reviewed Management Board
salaries from 1 May 2022, considering salary levels relative to the
market and pay increases for BBGI employees generally. Executive
Directors were awarded an increase of 5.0 per cent, which is below
the average increase awarded to our employees.
Base salary
Base salary at Base salary at
31 December 2022 31 December 2021
-------------- ------------------ ------------------
Duncan Ball GBP551k GBP501k
Frank Schramm GBP528k GBP477k
Michael Denny GBP338k GBP305k
B oth Mr Denny and Mr Schramm receive salaries in Euro
(EUR381,754 and EUR596,035 respectively from 1 May 2022). Mr Ball
receives his salary in Canadian Dollars (C$902,839 from 1 May
2022). The figures in the table above are reported in Sterling, the
Group's reporting currency, and therefore, on a comparative basis,
reflect not only the base salary increase of 5.0 per cent, but also
the impact of exchange rate movements.
The combined annual base salary received by the members of the
Management Board during the year ended 31 December 2022 was
GBP1,373,839 (2021: GBP1,290,702).
Taxable benefits and pension-related benefits
The Co-CEOs received a car allowance amounting to a total amount
of GBP29,627 (2021: GBP27,561) for 2022. The Co-CEOs and the CFO
also received an annual cash payment for pension, retirement, or
similar benefits, equating to 15 per cent of their annualised base
salary as at 31 December 2022.
BBGI has less than 30 employees across six different countries
and individual pension arrangements across the team vary by
location. In Luxembourg, where most of our colleagues are located,
normal pension contributions are made up of: 8 per cent of salary
from the employer, 8 per cent of salary from the state and 8 per
cent from the employee.
STIP - annual bonus for year ended 31 December 2022
The following table summarises the STIP performance metrics and
achievements in respect of the financial year ended 31 December
2022. The maximum STIP opportunity for the Co-CEOs and the CFO is
150 per cent of base salary. The Remuneration Committee is
responsible for determining both whether the relevant financial and
non-financial performance objectives have been satisfied and the
level of award under the STIP for the relevant year. The Management
Board delivered excellent performance and progress against the
targets set at the start of the year and as a result achieved the
maximum outturn. No payment under the STIP is made if performance
is below the threshold criteria.
Assessment and performance criteria and weighting
Performance Assessment and performance achievement Weighting Outturn
measure (% of
maximum)
Threshold Target performance Maximum performance
performance (50% vesting (100% vesting
(33% vesting equating equating to 150%
equating to 75% of of base salary)
to 50% of base salary)
base salary)
------------------- ------------------------- --------------------------
Key financial
targets - * A dividend of 7.48pps was declared for 2022,
dividends representing dividend growth of 2 per cent. 15% 100%
-------------------------------------------------------------------------- ---------- ----------
Key financial
targets - * For 2022, distributions from Portfolio Companies
NAV per share exceeded forecasts, with NAV increasing by 6.7 per
cent to GBP1,069.2 million and NAV per share
increasing by 6.6 per cent to 149.9 pence.
-------------------------------------------------------------------------- ---------- ----------
* BBGI maintained the lowest comparative ongoing charge
in its sector at 0.87 per cent, through efficient and
cost-effective internal management.
* Cash management was consistently effective,
Operational maintaining appropriate cash balances, ensuring
financial robust dividend cover while also limiting potential
targets - cash drag.
ongoing charge,
cash management
and budgetary * Expenses were well controlled, with an outturn below
controls budget in line with maximum performance. 10% 100%
-------------------------------------------------------------------------- ---------- ----------
The Committee assessed the value and
quality of projects considered and
acquired during the year, in line with
the Company's strategy to grow and
diversify our portfolio while maintaining
strategic discipline. The Committee
considered BBGI's performance was strong
in:
* Investment of approximately GBP64 million during
2022, including two new projects in Canada and
Germany, which all earn availability-based revenue in
return for providing essential public services.
* All new investments screened for factors, including
climate-change resiliency and alignment with six UN
Sustainable Development Goals.
* Appropriate discipline in rejecting certain
opportunities, which did not meet BBG's strict
acquisition criteria, thereby further reinforcing the
Disciplined alignment of interest between the Company's
growth management and shareholders. 25% 100%
-------------------------------------------------------------------------- ---------- ----------
The Committee considered management
performance against key metrics including
portfolio controls; organisational
effectiveness; and project risk management.
The Committee considered that performance
continued to be very strong in the
following key areas:
* High levels of asset availability at 99.9 per cent.
* No material lockups or defaults.
Portfolio
management * 100 per cent availability-based revenue stream. 25% 100%
-------------------------------------------------------------------------- ---------- ----------
The Committee considered management's
compliance with AIFMD and other regulatory
requirements during the year. Achievements
include the following:
* Strong risk management with high-quality reporting of
regulatory risks.
* Effective oversight of key delegates.
* Full and continued compliance with AIFMD.
* Strong regulatory performance relating to FATCA, IFRS,
CSSF and UKLA.
Compliance * Proactive planning for potential future regulatory
and regulation challenges. 10% 100%
-------------------------------------------------------------------------- ---------- ----------
The Committee considered the significant
progress against the Company's ESG
objectives during the reporting period,
including the following achievements:
* Strong ratings from UN PRI on our Transparency
Report.
* Completed a climate risk assessment deep dive for all
assets. The findings from which demonstrate that the
portfolio is very resilient to climate hazards.
* BBGI's Net Zero Plan published.
* Full compliance with the Sustainable Finance
Disclosure Regulation.
* Voluntary compliance with TCFD disclosure
ESG requirements. 15% 100%
-------------------------------------------------------------------------- ---------- ----------
Overall bonus out-turn (% of maximum) 100%
---------- ----------
For 2022, awards of 150 per cent of base salary were achieved by
the Co-CEOs and CFO. One-third of the earned bonus will be settled
in shares, with the net number of shares after settling the
associated tax liability to be held for a period of three years.
The remaining STIP awards will be paid in cash after the release of
the annual results for financial year ended 31 December 2022.
During the year ended 31 December 2022, the total amount accrued in
respect of the 2022 STIP amounted to GBP2,093,997 (2021:
GBP1,897,433). Cash payments under the STIP are made in Canadian
Dollars and Euros.
LTIP - awards granted with effect during the financial year
LTIP awards of 200 per cent of base salary were granted to the
Co-CEOs in February 2023 with effect from December 2022. The CFO's
maximum LTIP award is set at 150 per cent of base salary. All
awards granted are within the approved limits under the current
LTIP Plan.
For awards issued in February 2023, 80 per cent of the
performance target will be subject to stretching Net Asset Value
('NAV') Total Return targets. NAV Total Return reflects both
capital returns generated and dividends returned to
shareholders.
20 per cent of the award will be linked to key climate-related
environmental metrics, comprising (i) 10 per cent linked to a
reduction in corporate GHG emissions (Scopes 1, 2 & 3) (against
a 2019 baseline) and (ii) 10 per cent linked to progress in the
implementation of net zero targets related to BBGI Portfolio
Companies (Financed Emissions) by value, in accordance with
published targets related to BBGI's commitments as a signatory of
the Net Zero Asset Managers Initiative.
Performance metric Threshold performance Target performance Maximum performance
---------------------------- --------------------------- --------------------------- ----------------------------
NAV growth per share +
dividends paid
(expressed as a percentage
of opening NAV )
(80% of weighting) 15% 17% 22%
ESG - percentage of GHG emissions as a percentage of 2019 baseline (at 31 December 2025)
corporate GHG emissions
(Scope 1, 2 & 3)
(10% weighting)
--------------------------------------------------------------------------------------
73% 70% 67%
--------------------------- --------------------------- ----------------------------
ESG - the implementation of The percentage of asset by value meeting the criteria for 'net zero', 'aligned' or
net zero plans across BBGI 'aligning'
assets (by value)
(10% weighting)
---------------------------- --------------------------------------------------------------------------------------
23% 26% 30%
---------------------------- ---------------------------
For the Co-CEOs, 25 per cent and 50 per cent of the maximum
award vests for threshold and target performance respectively. The
award vests in full for maximum performance.
For the CFO, 33 per cent and 50 per cent of the maximum award
vests for threshold and target performance respectively. The award
vests in full for maximum performance.
A key feature of these awards is that they will be settled
entirely in BBGI shares and not cash. All LTIP awards settled by
shares, fall under the scope of IFRS 2 'Share-Based Payments' and
its specific reporting requirements. We continue to engage Ernst
& Young to value our LTIP awards falling under the scope of
IFRS 2. Refer to Note 20 of the Consolidated Financial Statements
for further details on share-based payments.
In line with previous years, no expense was accrued for the LTIP
awards granted with effect in December 2022.
During the year ended 31 December 2022, we settled our 2018
award obligation by issuing the respective share entitlement to
each Management Board member. In total, we issued and allotted
346,203 shares by way of settlement, which equated to the net
entitlement after taxes.
As at the date of this Report, there are no amounts set aside,
needing to be set aside or accrued by the Company to provide
pension, retirement, or similar benefits to any Management Board
members.
Total basic and variable remuneration for the financial year
The total basic remuneration paid to all employees (including
Management Board) during 2022 was GBP3.37 million (2021: GBP3.15
million). The total amount accrued for cash-settled variable
remuneration at 31 December 2022 was GBP1.97 million. The total
variable remuneration paid in cash in 2022 relating to the 2021
financial year was GBP1.79 million (2021: GBP1.75 million).
Restricted share plan
We operate a restricted share plan for most employees (excluding
the Management Board members) with ordinary BBGI shares awarded,
subject to a three-year vesting period. During 2022, we recorded an
expense of GBP0.2 million (2021: GBP0.1 million) for these
restricted share awards. The primary vesting condition is continued
employment at BBGI.
Payments made to former Directors and payments for loss of
office during the year
In 2022, we made no payments for loss of office and no payments
to any former Management Board member.
Single total figure table - Supervisory Board
The Supervisory Board members are our Independent Non-Executive
Directors and they are paid a fixed quarterly fee in GBP. The
Remuneration Committee consider the Non-Executive Directors' fees
annually within the approved maximum aggregate remuneration cap, as
approved by the Company's shareholders. No member of the
Supervisory Board is entitled to vote on his or her own individual
remuneration. Supervisory Board members are not entitled to any
other fees, pension payments, incentive plans, performance-related
payments, or any other form of compensation; except for reasonable
out-of-pocket expenses and ex gratia fees, which were considered
for an exceptional or substantial increase in the members'
workload.
Single total figure of remuneration - Supervisory Board
During the year ended 31 December 2022, the Supervisory Board
received fees totalling GBP259,190 (2021: GBP220,000). The table
below outlines the fees paid in Sterling to each of the Supervisory
Board members.
Base fee Senior Non-Executive Committee Other - additional Total
Director Chair fees(1)
June
Aitken(2) 32,788 - - - - - - - 32,788 -
Howard
Myles(3) 14,835 45,000 1,648 5,000 1,648 5,000 - 5,000 18,132 60,000
Jutta af
Rosenborg 47,500 45,000 - - 5,000 5,000 - 5,000 52,500 55,000
Andrew
Sykes(4) 32,788 - 3,365 - 3,365 - - - 39,519 -
Chris
Waples 47,500 30,000 - - - - - 5,000 47,500 35,000
Sarah
Whitney 68,750 65,000 - - - - - 5,000 68,750 70,000
Total 244,162 185,000 5,014 5,000 10,014 10,000 - 20,000 259,190 220,000
----------- ---------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ---------- -------------
(1) In addition to the standard fees, each of the sitting
Directors was entitled to an additional fee in 2021 in relation to
an equity issue.
(2) June Aitken was appointed to the Supervisory Board with
effect from 29 April 2022.
(3) Howard Myles retired from the Supervisory Board with effect
from 29 April 2022.
(4) Andrew Sykes was appointed to the Supervisory Board with
effect from 29 April 2022. Mr Sykes replaced Mr Myles as Senior
Non-Executive Director and as Chair of the Remuneration
Committee.
Supervisory Board fees
Details of Supervisory Board fees are below(.)
Chair 80,000 65,000
Non-Executive Director 55,000 45,000
Senior Independent
Director(1) 5,000 5,000
Committee Chair(1) 5,000 5,000
(1) These additional fees are paid to the Senior Independent
Director, Remuneration Committee Chair and the Audit Committee
Chair.
Supervisory Board fees were unchanged since 2017. During the
year the members of the Remuneration Committee, except for Sarah
Whitney who abstained in accordance with Company's Remuneration
Policy, approved an increase in the Supervisory Board Chair fee
from GBP65,000 to GBP80,000 per annum. Furthermore, the Supervisory
Board Chair, after consultation with the Co-CEOs, approved an
increase in the base fee of the Non-Executive Directors from
GBP45,000 to GBP55,000 per annum. All fee increases were with
effect from 1 October 2022. Under this revised fee arrangement ex
gratia fees will no longer be paid to the Non-Executive Directors
for the additional work associated with equity capital raises.
The fees paid to the Supervisory Board are subject to a
shareholder approved maximum aggregate remuneration cap of
GBP400,000.
Share interests and statement of Directors' shareholdings
Total share interests as at 31 December 2022
The Directors' interests and those of their connected persons in
BBGI's ordinary shares as at 31 December 2022 are below.
Shares owned by Directors:
Duncan Ball 870,983 635,660
Michael Denny 504,004 412,415
Frank Schramm 829,184 600,000
June Aitken(1) 31,000 -
Howard Myles(2) n/a -
Jutta af Rosenborg - -
Andrew Sykes(1) 40,000 -
Chris Waples 17,321 17,321
Sarah Whitney 39,000 39,000
(1) Appointed with effect 29 April 2022.
(2) Retired from the Supervisory Board with effect 29 April
2022.
Awards under share plans:
Lapsed
or
Granted forfeited
At 31 December in the Vested in the At 31 December
Award 2021(1) year (2) in the year year 2022
--------------- ------- --------------- ---------- ------------- ----------- ---------------
Management
Board
Duncan Ball LTIP 1,866,080 697,693 (281,567) (87,578) 2,194,628
Frank Schramm LTIP 1,891,648 662,556 (300,057) (93,328) 2,160,819
Michael Denny LTIP 658,142 318,270 (54,657) (3,001) 918,774
--------------- ------- --------------- ---------- ------------- -----------
(1) Reflects maximum potential number of shares under all the
awards granted, including the 2018 award settled in May 2022.
(2) This LTIP award was announced in February 2023 with effect
in December 2022.
Shareholding guidelines:
The Committee has adopted a shareholding guideline for the
Management Board, which requires a shareholding equivalent to 200
per cent of salary. The respective Management Board members
achievement of this guideline at 31 December 2022 is summarised
below:
Percentage
Shares counting Required shareholding of shareholding
towards the guideline to achieve requirement
Management Board at 31 December 2022 (1) achieved
Duncan Ball 870,983 576,190 151.2%
Frank Schramm 829,184 576,190 143.9%
Michael Denny 504,004 375,000 134.4%
(1) Two times the revised base salary with effect from 1 May
2020 divided by the Company share price on date revised terms were
agreed. The minimum holding requirement is fixed for a period of
three years and will be reset in 2023.
Post-employment shareholding requirements : Management Board
members are required to hold shares to the value of 100 per cent of
salary for a period of two years after leaving the Company.
Other information
Advisers
Deloitte LLP is engaged to provide independent advice to the
Committee as required. Deloitte is a member of the Remuneration
Consultants Group and voluntarily operates under the Code of
Conduct in relation to executive remuneration consulting in the UK.
Deloitte LLP's fees for providing remuneration advice to the
Committee were GBP13.1k for 2022. The Committee regularly assesses
if Deloitte's appointment remains appropriate or should be put out
to tender, while considering the Remuneration Consultants' Group
Code of Conduct.
Consideration by the Directors of matters relating to Directors'
remuneration
Committee responsibilities and composition
BBGI's Remuneration Committee comprises five members: Andrew
Sykes, Sarah Whitney, Jutta af Rosenborg, June Aitken and Chris
Waples. Andrew Sykes was appointed as Remuneration Committee Chair
in April 2022, succeeding Howard Myles, who retired as a
Supervisory Board member at the conclusion of the 2022 AGM. The
Terms of Reference for the Remuneration Committee are available
here
www.bb-gi.com/investors/policies/remuneration-committee-terms-of-reference/
The Committee is responsible for establishing the general
principles of the policy for Directors' and staff remuneration and
for setting the remuneration for the Management Board and for the
Supervisory Board. In doing so, the Committee is responsible for
ensuring that the remuneration of the Management supports the
delivery of BBGI's strategic and operational goals without
encouraging undesirable risk-taking behaviour. This is achieved
through the Committee overseeing and approving all aspects of
Management Board remuneration, including development of the
remuneration policy, and monitoring pay arrangements for the wider
workforce.
There were five scheduled Committee meetings plus further ad-hoc
meetings during the year. During the year, all members of the
Committee were and remain independent, and represent a broad range
of backgrounds and experience to provide balance and diversity.
The following parties may attend Committee meetings by
invitation during the year in relation to its consideration of
matters relating to Directors' remuneration: Co-CEOs, CFO, Company
Secretary and Deloitte LLP. No Management Board member is involved
in deciding their own remuneration outcome and no attendee is
present when their own remuneration is being discussed.
Remuneration and AIFM law
In 2013, the European Securities and Markets Authority ('ESMA')
published its final guidelines on sound remuneration policies under
the AIFMD. These guidelines indicate that remuneration disclosures
may be made on a 'proportional' basis and acknowledge that the
application of proportionality may lead exceptionally to the
'disapplication' of some requirements, provided this is
reconcilable with the risk profile, risk appetite and strategy of
the AIFM and the AIFs it manages.
According to the guidelines, the different risk profiles, and
characteristics among AIFMs justify a proportionate implementation
of the remuneration principles and, where a company chooses to
disapply requirements, it must be able to explain the rationale to
a competent authority. No such requirements were disapplied by the
Company during or for 2022.
Employee remuneration
BBGI provides development opportunities for employees to build
their careers and enhance their skills. We encourage and embrace
employee diversity, equality and inclusion. We support and invest
in individuals to achieve their potential across the business.
Our remuneration components combine to ensure an appropriate and
balanced remuneration package that reflects our business units, the
job grade and professional activity, as well as market
practice.
Statement of implementation of Directors' Remuneration Policy
for the financial year commencing 1 January 2023
Base salary
Management Board salaries were reviewed with effect from 1 May
2022 and are as follows:
Duncan Ball Co-CEO GBP551k
Frank Schramm Co-CEO GBP528k
Michael Denny CFO GBP338k
The next expected review will be in May 2023. As previously
noted, b oth Mr Denny and Mr Schramm receive salaries in Euro
(EUR381,754 and EUR596,035 respectively from 1 May 2022). Mr Ball
receives his salary in Canadian Dollars (C$902,839 from 1 May
2022).
Annual bonus (STIP)
The maximum bonus opportunity for 2023 will remain at 150 per
cent of salary for the Co-CEOs and the CFO. The target opportunity
will be 50 per cent of maximum. One-third of any bonus earned will
be used to buy BBGI shares, to be held for a period of three
years.
Payment of the annual bonus is subject to stretching financial
and strategic targets, which are commercially sensitive and
therefore remain confidential. However, the Committee will disclose
an overview of the bonus performance measures and out-turns in the
2023 Directors' Remuneration Report.
LTIP
The Committee intends to recommend the grant of ongoing annual
maximum LTIP awards of 200 per cent of salary to the Co-CEOs and
150 per cent of salary to the CFO, subject to stretching NAV Total
Return and climate-related ESG targets.
Approval
This Report was approved by the Board on 29 March 2023 and
signed on its behalf by:
Andrew Sykes
Chair of the Remuneration Committee
Viability
Viability statement
As part of their ongoing process of monitoring risk, and as
required by the AIC Code Principle N and Provision 36, the
Management Board have considered BBGI's viability and prospects for
the next five years.
While the average remaining life of the portfolio of assets is
20.2 years, we continue to consider that five years is an
appropriate and acceptable length of time to consider the risks of
BBGI continuing in existence. In making this judgement, the
Management Board consider detailed information provided at Board
meetings, including:
-- BBGI's investment policy and the investment pipeline.
-- The long-term and contractual nature of BBGI's investments.
-- Investment reviews.
-- BBGI's risk profile and key risk indicators (including the
principal risks and uncertainties).
-- Relevant financial and economic information and long-term economic assumptions.
-- Scenario testing.
-- Annual and semi-annual valuations.
This judgement forms part of BBGI's overall annual risk review
process. All principal risks and uncertainties, detailed
descriptions of the areas and factors of the risks, and the
processes by which the Management Board monitors, reviews, and
assesses them, are in the Risk section of this Annual Report.
We have a robust risk and internal controls framework to reduce
the likelihood and impact of poor decision making, risk-taking
above agreed levels, and human error.
Our Management Board regularly reviews and assesses the
principal risks we face, including those that could threaten our
business model, strategy, solvency, liquidity, and future
performance. All risks we identify are assessed based on:
-- Probability or likelihood of occurrence.
-- Impact.
-- Mitigation measures .
They are then scored and ranked in accordance with remaining
residual risk and monitored on an ongoing basis by the Management
Board.
In addition to the risk management and the mitigation measures
in place, a valuation of each individual asset is carried out every
six months at each of our financial half-year and year-ends (30
June and 31 December). Such valuations are based on long-term
discounted future cash flows; themselves predominantly based on
long-term contracts and other assumptions. Together, these form a
key part of the overall viability assessment. Once complete, an
independent third-party valuer reviews each portfolio valuation,
which is also subject to audit and review by our External Auditor,
and internal challenge by our Audit Committee.
A key part of the viability assessment is analysing how our NAV
could be impacted in stressed macroeconomic scenarios. This
provides further insight into how BBGI could perform if affected by
variables and events outside the control of our Management Board
and our risk management framework. A more detailed description of
the valuations, assumptions and stress-testing applied is in the
Valuation section of the Strategic Report.
Following the assessment, the Management Board has a reasonable
expectation that BBGI will be able to continue in operation and
meet all its liabilities as they fall due, up to March 2028. This
assessment is subject to the following conditions: that the
availability of sufficient capital and market liquidity continues
to allow for the refinancing/repayment of any short-term recourse
RCF obligations that may be due; and that BBGI's investments are
not materially affected by changes to government policy, laws,
regulations, or other risks that we do not consider material or
probable.
BBGI is also subject to a biennial shareholder continuation
vote, and the next is scheduled to take place at the AGM on 28
April 2023.
Management Board Responsibilities Statement
The Management Board of the Company is responsible for ensuring
proper preparation of BBGI's Annual and Interim Reports and
financial statements for each financial period, in accordance with
applicable laws and regulations, which require it to:
-- Give a true and fair view of the assets, liabilities,
financial position and profit or loss of the Group as of and at the
end of the financial period, in accordance with International
Financial Reporting Standards as adopted by the European Union and
the Listing Rules.
-- Give a true and fair view of the development and performance
of the business and the position of the Group.
-- Give a true and fair description of the principal risks and
uncertainties the Group may encounter and put in place an
appropriate control framework designed to meet the Group's
particular needs and the risks to which it is exposed.
In addition, the Management Board is responsible for ensuring
that BBGI complies with applicable company law and other UK or
Luxembourg applicable laws and regulations.
In preparing these financial statements, the Management Board is
responsible for:
-- Selecting suitable accounting policies and applying them consistently.
-- Making judgements and estimates that are reasonable and prudent.
-- Stating whether applicable accounting standards have been
followed, subject to any material departures disclosed and
explained in the financial statements.
-- Preparing the financial statements on a going concern basis,
unless it is inappropriate to presume that the Group will continue
in business.
-- Maintaining proper accounting records that disclose with
reasonable accuracy the Groups financial position and enable it to
ensure that the financial statements comply with all relevant
regulations.
-- Safeguarding the assets of the Group and taking reasonable
steps for the prevention and detection of fraud and other
irregularities.
Management Board Responsibilities Statement
We confirm that to the best of our knowledge:
-- The financial statements have been prepared in accordance
with the applicable set of accounting standards and give a true and
fair view of the assets, liabilities, financial position and profit
or loss of the Company and Group included in the consolidation.
-- The Chair's Statement and the Report of the Management Board
('Strategic Report') include a fair review of the development and
performance of the business and the position of the Company and
Group included in the consolidation, together with a description of
the principal risks and uncertainties that it faces.
Luxembourg, 29 March 2023
Duncan Ball Frank Schramm Michael Denny
Co-CEO Co-CEO CFO
AUDIT REPORT
To the Shareholders of
BBGI Global Infrastructure S.A.
Our opinion
In our opinion, the accompanying consolidated financial
statements give a true and fair view of the consolidated financial
position of BBGI Global Infrastructure S.A. (the "Company") and its
subsidiaries (the "Group") as at 31 December 2022, and of its
consolidated financial performance and its consolidated cash flows
for the year then ended in accordance with International Financial
Reporting Standards (IFRSs) as adopted by the European Union.
What we have audited
The Group's consolidated financial statements comprise:
-- the consolidated statement of financial position as at 31 December 2022;
-- the consolidated income statement for the year then ended;
-- the consolidated statement of other comprehensive income for the year then ended;
-- the consolidated statement of changes in equity for the year then ended;
-- the consolidated statement of cash flows for the year then ended; and
-- the notes to the consolidated financial statements, which
include a summary of significant accounting policies.
Basis for opinion
We conducted our audit in accordance with the Law of 23 July
2016 on the audit profession (Law of 23 July 2016) and with
International Standards on Auditing (ISAs) as adopted for
Luxembourg by the "Commission de Surveillance du Secteur Financier"
(CSSF). Our responsibilities under the Law of 23 July 2016 and ISAs
as adopted for Luxembourg by the CSSF are further described in the
"Responsibilities of the "Réviseur d'entreprises agréé" for the
audit of the consolidated financial statements" section of our
report.
We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our opinion.
We are independent of the Group in accordance with the
International Code of Ethics for Professional Accountants,
including International Independence Standards, issued by the
International Ethics Standards Board for Accountants (IESBA Code)
as adopted for Luxembourg by the CSSF together with the ethical
requirements that are relevant to our audit of the consolidated
financial statements. We have fulfilled our other ethical
responsibilities under those ethical requirements.
Key audit matters
Key audit matters are those matters that, in our professional
judgment, were of most significance in our audit of the
consolidated financial statements of the current period. These
matters were addressed in the context of our audit of the
consolidated financial statements as a whole, and in forming our
opinion thereon, and we do not provide a separate opinion on these
matters.
Key audit matter How our audit addressed the key audit
matter
Investments at fair In assessing the valuation of investments
value through profit at fair value through profit or loss,
or loss we performed the procedures outlined
Refer to the consolidated below:
financial statements We assessed that the investments valuation
(Note 3, summary of significant policy was in compliance with the applicable
accounting policies; accounting framework.
Note 9, Investments at We understood and evaluated the design
FVPL). and implementation of key controls,
Investments at fair value including relevant information technology
through profit or loss, systems and controls, in place around
GBP 1.1 billion, is the the valuation of investments at fair
most significant balance value through profit or loss.
on the consolidated statement We tested key controls performed in
of financial position. the valuation process of investments
It consisted of availability-style in relation to the financial data included
social infrastructure in the valuation models, the "look back"
investments through public comparison of the forecast vs actual
private partnership and/or cash flows for the previous financial
public finance initiatives year, as well as other investment model
or similar procurement review controls.
models ("investments") The key controls on which we placed
generating long-term reliance for the purposes of our audit
predictable cash flows. were appropriately designed and implemented
The valuation of the and were operating effectively.
investments is determined In addition, we obtained substantive
using the discounted audit evidence over the valuation of
cash flow methodology. investments at fair value through profit
It relies on significant or loss as follows:
unobservable inputs and * We inquired into the qualification of the Management
requires significant Board and its internal valuation team and concluded
judgments from the Management that they have sufficient experience and expertise.
Board. A small change
in these assumptions
could result in a significant * We obtained the overall fair value reconciliation of
impact on the fair value opening to closing fair value and corroborated
of the investments. As significant fair value movements during the year,
a consequence, there thereby assessing the reasonableness and completeness
is an inherent risk that of the movement in fair value for the year.
the fair value of these
investments may not be
appropriate. * With the support of our own valuation experts, we
Taking this into account, assessed that the Group's valuation methodology was
coupled with the magnitude in compliance with the International Private Equity
of the amounts involved, and Venture Capital Valuation Guidelines and market
we consider this area practice based on our knowledge of the investments
as a key audit matter. held by the Group and experience of the industry in
which the Group operates.
* For a sample of assets selected via risk and
value-based targeted sampling, we assessed that the
key macroeconomic assumptions such as inflation,
deposit rates, corporate tax rates, base discount
rate setting were appropriate and/or within
acceptable ranges based on market search. We also
checked that the selected asset specific discount
rates were within acceptable ranges.
* We obtained and read the valuation report prepared by
Management's external valuation expert which
confirmed that the portfolio value prepared by the
Management Board was appropriate.
* Finally, for the entire portfolio, we obtained
external confirmation over the existence and
percentage of ownership of the investments held by
the Group.
Other information
The Management Boar d is responsible for the other information.
The other information comprises the information stated in the
annual report but does not include the consolidated financial
statements and our audit report thereon.
Our opinion on the consolidated financial statements does not
cover the other information and we do not express any form of
assurance conclusion thereon.
In connection with our audit of the consolidated financial
statements, our responsibility is to read the other information
identified above and, in doing so, consider whether the other
information is materially inconsistent with the consolidated
financial statements or our knowledge obtained in the audit, or
otherwise appears to be materially misstated. If, based on the work
we have performed, we conclude that there is a material
misstatement of this other information, we are required to report
that fact. We have nothing to report in this regard.
Responsibilities of the Management Board and those charged with
governance for the consolidated financial statements
The Management Board is responsible for the preparation and fair
presentation of the consolidated financial statements in accordance
with IFRSs as adopted by the European Union, and for such internal
control as the Management Board determines is necessary to enable
the preparation of consolidated financial statements that are free
from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, the
Management Board is responsible for assessing the Group's ability
to continue as a going concern, disclosing, as applicable, matters
related to going concern and using the going concern basis of
accounting unless the Management Board of Directors either intends
to liquidate the Group or to cease operations, or has no realistic
alternative but to do so.
Those charged with governance are responsible for overseeing the
Group's financial reporting process.
Responsibilities of the "Réviseur d'entreprises agréé" for the
audit of the consolidated financial statements
The objectives of our audit are to obtain reasonable assurance
about whether the consolidated financial statements as a whole are
free from material misstatement, whether due to fraud or error, and
to issue an audit report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a
guarantee that an audit conducted in accordance with the Law of 23
July 2016 and with ISAs as adopted for Luxembourg by the CSSF will
always detect a material misstatement when it exists. Misstatements
can arise from fraud or error and are considered material if,
individually or in the aggregate, they could reasonably be expected
to influence the economic decisions of users taken on the basis of
these consolidated financial statements.
As part of an audit in accordance with the Law of 23 July 2016
and with ISAs as adopted for Luxembourg by the CSSF, we exercise
professional judgment and maintain professional scepticism
throughout the audit. We also:
-- identify and assess the risks of material misstatement of the
consolidated financial statements, whether due to fraud or error,
design and perform audit procedures responsive to those risks, and
obtain audit evidence that is sufficient and appropriate to provide
a basis for our opinion. The risk of not detecting a material
misstatement resulting from fraud is higher than for one resulting
from error, as fraud may involve collusion, forgery, intentional
omissions, misrepresentations, or the override of internal
control;
-- obtain an understanding of internal control relevant to the
audit in order to design audit procedures that are appropriate in
the circumstances, but not for the purpose of expressing an opinion
on the effectiveness of the Group's internal control;
-- evaluate the appropriateness of accounting policies used and
the reasonableness of accounting estimates and related disclosures
made by the Management Board;
-- conclude on the appropriateness of the Management Board 's
use of the going concern basis of accounting and, based on the
audit evidence obtained, whether a material uncertainty exists
related to events or conditions that may cast significant doubt on
the Group's ability to continue as a going concern. If we conclude
that a material uncertainty exists, we are required to draw
attention in our audit report to the related disclosures in the
consolidated financial statements or, if such disclosures are
inadequate, to modify our opinion. Our conclusions are based on the
audit evidence obtained up to the date of our audit report.
However, future events or conditions may cause the Group to cease
to continue as a going concern;
-- evaluate the overall presentation, structure and content of
the consolidated financial statements, including the disclosures,
and whether the consolidated financial statements represent the
underlying transactions and events in a manner that achieves fair
presentation;
-- obtain sufficient appropriate audit evidence regarding the
financial information of the entities and business activities
within the Group to express an opinion on the consolidated
financial statements. We are responsible for the direction,
supervision and performance of the Group audit. We remain solely
responsible for our audit opinion.
We communicate with those charged with governance regarding,
among other matters, the planned scope and timing of the audit and
significant audit findings, including any significant deficiencies
in internal control that we identify during our audit.
We also provide those charged with governance with a statement
that we have complied with relevant ethical requirements regarding
independence, and communicate to them all relationships and other
matters that may reasonably be thought to bear on our independence,
and where applicable, actions taken to eliminate threats or
safeguards applied.
From the matters communicated with those charged with
governance, we determine those matters that were of most
significance in the audit of the consolidated financial statements
of the current period and are therefore the key audit matters. We
describe these matters in our audit report unless law or regulation
precludes public disclosure about the matter or when, in extremely
rare circumstances, we determine that a matter should not be
communicated in our report because the adverse consequences of
doing so would reasonably be expected to outweigh the public
interest benefits of such communication.
Report on other legal and regulatory requirements
The annual report is consistent with the consolidated financial
statements and has been prepared in accordance with applicable
legal requirements.
We have been appointed as "réviseur d'entreprises agréé" by the
General Meeting of the Shareholders on 28 March 2022 and the
duration of our uninterrupted engagement, including previous
renewals and reappointments, is one year.
PricewaterhouseCoopers,Société Luxembourg, 29 March 2023
coopérative
Represented by
Emanuela Sardi
Consolidated Income Statement
For the year ended 31 December 2022
In thousands of Sterling Note 2022 2021
Income from investments at fair value through profit
or loss 9 159,545 75,443
Other operating income 83 734
Operating income 159,628 76,177
Administrative expenses 6 (11,756) (10,234)
Other operating expenses 7 (12,781) (2,492)
Operating expenses (24,537) (12,726)
Results from operating activities 135,091 63,451
Net finance result 8 (2,005) (1,974)
Net loss on balance sheet hedging 18 (10,572) (782)
Profit before tax 122,514 60,695
Tax expense - net 11 (3,472) (2,698)
Profit for the year 119,042 57,997
Earnings per share
Basic earnings per share (pence) 14 16.70 8.47
Diluted earnings per share (pence) 14 16.68 8.46
The accompanying notes form an integral part of the consolidated
financial statements.
Consolidated Statement of Other Comprehensive Income
For the year ended 31 December 2022
In thousands of Sterling Note 2022 2021
Profit for the year 119,402 57,997
Other comprehensive loss for the year that may
be reclassified to
profit or loss in subsequent periods (net of tax)
Exchange difference on translation of foreign operations 13 (450) (595)
Total comprehensive income for the year 118,592 57,402
The accompanying notes form an integral part of the consolidated
financial statements.
Consolidated Statement of Financial Position
as at 31 December 2022
In thousands of Sterling Note 2022 2021
Assets
Property and equipment 123 68
Investments at fair value through profit or loss 9,18 1,102,844 975,225
Deferred tax assets 11 153 -
Other non-current assets 15 275 1,417
Non-current assets 1,103,395 976,710
Trade and other receivables 20 909 1,024
Other current assets 12 994 761
Derivative financial assets 18 2,885 907
Cash and cash equivalents 10 31,157 26,862
Current assets 35,945 29,554
Total assets 1,139,340 1,006,264
Equity
Share capital 13 850,007 847,858
Additional paid-in capital 21 2,502 1,833
Translation and other capital reserves 13 14,371 (8,809)
Retained earnings 202,298 159,661
Equity attributable to the owners of the Company 1,069,178 1,000,543
Liabilities
Loans and borrowings 15 56,390 -
Derivative financial liabilities 18 5,687 429
Non-current liabilities 62,077 429
Loans and borrowings 15 230 246
Trade and other payables 16 3,242 2,956
Derivative financial liabilities 18 3,006 717
Tax liabilities 11 1,607 1,373
Current liabilities 8,085 5,292
Total liabilities 70,162 5,721
Total equity and liabilities 1,139,340 1,006,264
Net asset value attributable to the owners of the
Company 13 1,069,178 1,000,543
Net asset value per ordinary share (pence) 13 149.89 140.50
The accompanying notes form an integral part of the consolidated
financial statements.
Consolidated Statement of Changes in Equity
For the year ended 31 December 2022
Translation
Additional and other
Share paid-in capital Retained Total
In thousands of Sterling Notes capital capital reserve earnings equity
As at 1 January 2021 770,942 1,517 (378) 143,759 915,840
Total comprehensive income
for
the year ended 31 December
2021
Profit for the year - - - 57,997 57,997
Exchange difference on translation
of
foreign operation - - (8,431) 7,836 (595)
Total comprehensive income
for year - - (8,431) 65,833 57,402
Transactions with the owners
of the
Company, recognised directly
in equity
Issuance of shares from placing
of
ordinary shares - net of
issue cost 13 73,893 - - - 73,893
Scrip dividends 13 1,978 - - (1,978) -
Cash dividends 13 - - - (47,953) (47,953)
Equity settlement of share-based
compensation 13,21 1,045 (1,045) - - -
Share-based payment 21 - 1,361 - - 1,361
Balance as at 31 December
2021 847,858 1,833 (8,809) 159,661 1,000,543
The accompanying notes form an integral part of the consolidated
financial statements.
Translation
Additional and other
Share paid-in capital Retained Total
In thousands of Sterling Notes capital capital reserve earnings equity
Balance as at 1 January 2022 847,858 1,833 (8,809) 159,661 1,000,543
Total comprehensive income
for
the year ended 31 December
2022
Profit for the year - - - 119,042 119,042
Exchange difference on translation
of
foreign operation - - 23,180 (23,630) (450)
Total comprehensive income
for year - - 23,180 95,412 118,592
Transactions with the owners
of the
Company, recognised directly
in equity
Scrip dividends 13 1,092 - - (1,092) -
Cash dividends 13 - - - (51,683) (51,683)
Equity settlement of share-based
compensation 13,21 1,084 (1,068) - - 16
Share-based payment 21 - 1,737 - - 1,737
Share issuance costs 13 (27) - - - (27)
Balance as at 31 December
2022 850,007 2,502 14,371 202,298 1,069,178
The accompanying notes form an integral part of the consolidated
financial statements.
Consolidated Statement of Cash Flows
For the year ended 31 December 2022
In thousands of Sterling Notes 2022 2021
Operating activities
Profit for the year 119,042 57,997
Adjustments for:
Depreciation expense 6 34 23
Net finance results 8 2,005 1,974
Income from investments at fair value through profit
or loss 9 (159,545) (75,443)
Loss on derivative financial instruments - net 18 21,899 1,797
Foreign currency exchange loss (gain) - net 7 840 (448)
Share-based compensation 21 1,737 1,361
Tax expense - net 11 3,472 2,698
Working capital adjustments:
Trade and other receivables (506) 691
Other assets (508) 1,045
Trade and other payables 92 214
Cash used in operating activities (11,438) (8,091)
Interest paid and other borrowing costs (1,870) (1,356)
Interest received 172 -
Realised gain(loss) on derivative financial instruments
- net 18 (3,779) 3
Taxes paid (3,391) (2,667)
Net cash flows used in operating activities (20,306) (12,111)
Investing activities
Acquisition of/additional investments at fair value
through profit or loss 9 (64,407) (79,163)
Distributions received from investments at fair
value through profit or loss 9 96,333 75,055
Realised loss on derivative financial instruments
- net 18 (12,550) (1,543)
Acquisition of property and equipment (89) (33)
Net cash flows from/(used in) investing activities 19,287 (5,684)
Financing activities
Issuance of share capital through placing (net of
issuance cost) 13 - 73,893
Dividends paid 13 (51,683) (47,953)
Repayment of loans and borrowings 15 (17,000) (67,000)
Proceeds from the issuance of loans and borrowings 15 72,512 67,000
Debt and equity instrument issue cost (26) (1,608)
Net cash flows from financing activities 3,803 24,332
Net increase in cash and cash equivalents 2,784 6,537
Impact of foreign exchange on cash and cash equivalents 1,511 (207)
Cash and cash equivalents at 1 January 26,862 20,532
Cash and cash equivalents at 31 December 10 31,157 26,862
The accompanying notes form an integral part of the consolidated
financial statements.
Notes to the Consolidated Financial Statements
For the year ended 31 December 2022
1. Corporate information
B BGI Global Infrastructure S.A.,('BBGI', or the 'Company' or,
together with its consolidated subsidiaries, the 'Group') is an
investment company incorporated in Luxembourg in the form of a
public limited liability company (société anonyme) with variable
share capital (société d'investissement à capital variable, or
'SICAV') and regulated by the Commission de Surveillance du Secteur
Financier ('CSSF') under Part II of the amended Luxembourg law of
17 December 2010 on undertakings for collective investments with an
indefinite life. The Company qualifies as an alternative investment
fund within the meaning of Article 1 (39) of the amended law of 12
July 2013 on alternative investment fund managers ('2013 Law')
implementing Directive 2011/61/EU of the European Parliament and of
the Council of 8 June 2011 on Alternative Investment Fund Managers
and amending Directives 2003/41/EC and 2009/65/EC and Regulations
(EC) No 1060/2009 and (EU) No 1095/2010 and is authorised as an
internal alternative investment fund manager in accordance with
Chapter 2 of the 2013 Law. The Company was admitted to the official
list of the UK Listing Authority (premium listing, closed-ended
investment company) and to trading on the main market of the London
Stock Exchange on 21 December 2011.
As of 1 January 2021, the main market of the London Stock
Exchange is not considered as an EU regulated market (as defined by
the MiFID II). As a result, Directive 2004/109/EC of the European
Parliament and of the Council of 15 December 2004, on the
harmonisation of transparency requirements in relation to
information about issuers whose securities are admitted to trading
on a regulated market, and amending Directive 2001/34/EC (the
Transparency Directive) as implemented in the Luxembourg law by the
act dated 11 January 2008 on transparency requirements for issuers
(the Transparency Act 2008), among other texts, do not apply to the
Company.
The Company's registered office is EBBC, 6E, route de Trèves ,
L-2633 Senningerberg , Luxembourg and is registered with the
Registre du Commerce et des Soci é tes of Luxembourg under the
number B 163879.
The Company is a closed-ended investment company that invests,
through its subsidiaries, principally in a diversified portfolio of
Public Private Partnership ('PPP')/Private Finance Initiative
('PFI') infrastructure or similar style assets ('PPP/PFI
portfolio'). At 31 December 2022, the Group has one investment that
is under construction (31 December 2021: one).
As at 31 December 2022, the Group employed 25 staff (31 December
2021: 25 staff) .
Reporting period
The Company's reporting period runs from 1 January to 31
December each year. The Company's consolidated income statement,
consolidated statement of other comprehensive income, consolidated
statement of financial position, consolidated statement of changes
in equity and consolidated statement of cash flows include
comparative figures as at 31 December 2021.
The amounts presented as 'non-current' in the consolidated
statement of financial position are those expected to be recovered
or settled after more than one year. The amounts presented as
'current' are those expected to be recovered or settled within one
year.
These consolidated financial statements were approved by the
Management Board on 29 March 2023.
2. Basis of preparation
Statement of compliance
The consolidated financial statements of the Group have been
prepared in accordance with International Financial Reporting
Standards ('IFRS') as adopted by the European Union ('EU').
The Group follows, to the fullest extent possible, the
provisions of the Standard of Recommended Practices issued by the
Association of Investment Companies ('AIC SORP'). If a provision of
the AIC SORP is in direct conflict with IFRS as adopted by the EU,
the standards of the latter shall prevail.
The consolidated financial statements have been prepared using
the going concern principle, under the historical cost basis,
except for investments at fair value through profit or loss
('Investments at FVPL') and derivative financial instruments that
have been measured at fair value.
Changes in accounting policy
New and amended standards applicable to the Group are as
follows:
Onerous Contracts - Costs of Fulfilling a Contract - Amendments
to IAS 37
The amendments specify that when assessing whether a contract is
onerous or loss-making, an entity needs to include costs that
relate directly to a contract to provide goods or services
including both incremental costs and an allocation of costs
directly related to contract activities. General and administrative
costs that do not relate directly to a contract are excluded unless
they are explicitly chargeable to the counterparty under the
contract.
The Group had not identified any existing contract as onerous or
loss-making so these amendments had no significant impact on the
consolidated financial statements of the Group.
IFRS 9 Financial Instruments - Fees in the '10 per cent' test
for derecognition of financial liabilities
The amendment clarifies the fees that an entity includes when
assessing whether the terms of a new or modified financial
liability are substantially different from the terms of the
original financial liability. These fees include only those paid or
received between the borrower and the lender, including fees paid
or received by either the borrower or lender on the other's behalf.
There is no similar amendment proposed for IAS 39 Financial
Instruments: Recognition and Measurement.
These amendments had no significant impact on the consolidated
financial statements of the Group as there were no modifications of
the Group's financial instruments during the period.
Functional and presentation currency
These consolidated financial statements are presented in
Sterling, the Company's functional currency. All amounts presented
in tables throughout the report have been rounded to the nearest
thousand, unless otherwise stated.
The Company as an Investment Entity
The Management Board has assessed that the Company is an
Investment Entity in accordance with the provisions of IFRS 10. The
Company meets the following criteria to qualify as an Investment
Entity:
a) Obtains funds from one or more investors for the purpose of
providing those investors with investment management services - The
Group is internally managed with management focused solely on
managing those funds received from its shareholders in order to
maximise investment income/returns.
b) Commits to its investors that its business purpose is to
invest funds solely for returns from capital appreciation,
investment income, or both - The investment objectives of the
Company are to:
- Provide investors with secure and highly predictable long-term
cash flows whilst actively managing the investment portfolio with
the intention of maximising return over the long-term.
- Target an annual dividend payment with the aim to increase
this distribution progressively over the longer-term.
- Target an IRR which is to be achieved over the longer-term via
active management and to enhance the value of existing
investments.
The above-mentioned objectives support the fact that the main
business purpose of the Company is to seek to maximise investment
income for the benefit of its shareholders.
c) Measures and evaluates performance of substantially all of
its investments on a fair value basis - The investment policy of
the Company is to invest in equity, subordinated debt or similar
interests issued in respect of infrastructure assets that have been
developed predominantly under the PPP/PFI portfolio procurement
models. Each of these assets is valued at fair value. The valuation
is carried out on a six-monthly basis as at 30 June and 31 December
each year.
Based on the Management Board's assessment, the Company also
meets the typical characteristics of an Investment Entity as
follows:
a) it has more than one investment - as at 31 December 2022, the
Company has 56 investments;
b) it has more than one investor - the Company is listed on the
London Stock Exchange with its shares held by a broad pool of
investors;
c) it has investors that are not related parties of the entity -
other than those shares held by the Supervisory Board and
Management Board Directors, and certain other employees, all
remaining shares in issue (more than 99 per cent) are held by
non-related parties of the Company; and
d) it has ownership interests in the form of equity or similar
interests - ownership in the Company is through equity
interest.
3. Summary of significant accounting policies
a) Basis of consolidation
Subsidiaries
Subsidiaries are investees controlled by the Company (directly
or indirectly). The Company controls an investee if it is exposed
to, or has rights to, variable returns from its involvement with
the investee and has the ability to affect those returns through
its power over the investee.
The Company is an Investment Entity and measures investments in
certain subsidiaries at fair value through profit or loss. In
determining whether the Company meets the definition of an
Investment Entity, the management considered the Group structure as
a whole (see also Note 2).
The Company, which qualifies as an Investment Entity and is
required to value certain subsidiaries at fair value, has holds,
directly or indirectly, subsidiaries which provide services that
support the Company's investment activities. These subsidiaries are
consolidated on a line-by-line basis (see Note 19).
The shares in some of these consolidated subsidiaries have been
pledged as a security under the Company's multi-currency Revolving
Credit Facility ('RCF') (see note 15 for the RCF terms). As such,
the financial covenants of the RCF includes the financial position
and net results of the consolidated subsidiaries. Furthermore, the
assets and liabilities of the consolidated subsidiaries used in the
preparation of these consolidated financial statements, closely
approximates its fair value due either to: (i) the short-term
nature of their assets and liabilities or; (ii) their underlying
investments of these consolidated subsidiaries are already measured
at fair value through profit and loss.
Transactions eliminated on consolidation (consolidated
subsidiaries)
Intra-group receivables, liabilities, revenue and expenses are
eliminated in their entirety when preparing the consolidated
financial statements. Gains that arise from intra-group
transactions and that are unrealised from the standpoint of the
Group, at the date of the consolidated statement of financial
position, are eliminated in their entirety. Unrealised losses on
intra-group transactions are also eliminated in the same way as
unrealised gains, to the extent that the loss does not correspond
to an impairment loss.
b) Foreign currency transactions
Transactions in foreign currencies are translated into Sterling
at the exchange rate at the dates of the transactions. Monetary
assets and liabilities denominated in foreign currencies at the
reporting date are translated into Sterling at the exchange rate on
that date.
Non-monetary assets and liabilities denominated in foreign
currencies that are measured at fair value are translated into
Sterling at the exchange rate on the date that the fair value was
determined. Foreign currency differences arising on translation are
recognised in the consolidated income statement as a gain or loss
on currency translation.
c) Foreign currency translations
The assets and liabilities of foreign operations are translated
to Sterling at the exchange rates on the reporting date. The income
and expenses of foreign operations are translated to Sterling at
the average exchange rates during the year, if such does not
significantly deviate from the exchange rates at the date on which
the transaction is entered into. If significant deviations arise,
then the exchange rate at the date of the transaction is used.
Foreign currency differences are recognised in the consolidated
statement of other comprehensive income, and presented in
'translation and other capital reserve' in equity, except for
exchange differences from intra-Group monetary items which are
reflected in the consolidated income statement. However, as the
Company qualifies as an investment entity under IFRS 10 and records
its investments in subsidiaries as investment at FVPL, 'translation
reserve' movements during the reporting period relating to
investments are classified as 'Income from investments at fair
value through profit or loss' (income from Investments at FVPL). If
the foreign operation is a non-wholly owned consolidated
subsidiary, then the relevant portion of the translations
difference is allocated to the non-controlling interest.
When a foreign operation is disposed of such that control,
significant influence or joint control is lost, the cumulative
amount in the translation reserve related to that foreign operation
is reclassified to consolidated income statement as part of the
gain or loss on disposal. When the Group disposes of only part of
its interest in a consolidated subsidiary that includes a foreign
operation while retaining control, the relevant proportion of the
cumulative amount is reattributed to non-controlling interests.
When the settlement of a monetary item receivable from or
payable to a foreign operation is neither planned nor likely in the
foreseeable future, foreign currency gains and losses arising from
such an item are considered to form part of a net investment in the
foreign operation and are recognised in other comprehensive income,
and presented in the translation and other capital reserve in
equity.
d) Financial instruments
A financial instrument is any contract that gives rise to a
financial asset of one entity and a financial liability or equity
instrument of another entity.
Financial assets
Initial recognition and measurement
Financial assets are classified at initial recognition at
either: (i) amortised cost; (ii) fair value through other
comprehensive income - debt instruments; (iii) fair value through
other comprehensive income - equity instruments; or (iv) fair value
through profit or loss.
The classification of financial assets at initial recognition
depends on the financial asset's contractual cash flow
characteristics and the Group's business model for managing them.
With the exception of trade receivables that do not contain a
significant financing component or for which the Group has applied
the practical expedient, the Group initially measures a financial
asset at its fair value plus, in the case of a financial asset not
at fair value through profit or loss, transaction costs.
The Group's business model for managing financial assets refers
to how it manages its financial assets in order to generate cash
flows. The business model determines whether cash flows will result
from collecting contractual cash flows, selling the financial
assets, or both. The Group's financial assets classified and
measured at amortised cost are held within a business model with
the objective to hold financial assets in order to collect
contractual cash flows which represents solely payments of
principal and interests.
Financial assets and liabilities are offset and the net amount
presented in the statement of financial position when, and only
when, the Group has a legal right to offset the amounts and intends
either to settle on a net basis or to realise the asset and settle
the liability simultaneously.
At the date of the consolidated statement of financial position,
except for Investments at FVPL and derivative financial assets, all
non-derivative financial assets of the Group have been classified
as financial assets at amortised cost.
Investments at FVPL
The Company is an Investment Entity and therefore values its
investment in subsidiaries at fair value through profit or loss,
except where the subsidiary provides investment related services or
activities. The fair value of an investment in subsidiary includes
the fair value of the equity, loans and interest receivable and any
other amounts which are included in the discounted estimated cash
flow (which is used to compute the fair value) from such
subsidiary. The Company subsequently measures its investment in
certain subsidiaries at fair value in accordance with IFRS 13, with
changes in fair value recognised in consolidated income statement
in the period of change. The fair value estimation of investments
in subsidiaries is described in Note 18.
Financial assets at amortised cost (debt instruments)
The Group classifies its financial assets at amortised cost only
if both of the following criteria are met:
- the asset is held within a business model whose objective is
to collect the contractual cash flows, and
- the contractual terms give rise to cash flows that are solely
payments of principal and interest.
Financial assets at amortised cost are subsequently measured
using the effective interest rate ('EIR') method and are subject to
impairment. Gains and losses are recognised in the consolidated
income statement when the asset is derecognised, modified or
impaired.
The Group recognises an allowance for expected credit losses
('ECLs') for all debt instruments not held at fair value through
profit or loss. ECLs are based on the difference between the
contractual cash flows due in accordance with the contract and all
the cash flows that the Group expects to receive, discounted at an
approximation of the original EIR.
The Group applies a simplified approach in calculating ECLs.
Therefore, the Group does not track changes in credit risk, but
instead recognises a loss allowance based on lifetime ECLs at each
reporting date.
Derecognition
A financial asset (or, where applicable, a part of a financial
asset or part of a group of similar financial assets) is primarily
derecognised when:
- The rights to receive cash flows from the asset have expired; or
- The Group has transferred its rights to receive cash flows
from the asset or has assumed an obligation to pay the received
cash flows in full without material delay to a third party under a
'pass-through' arrangement; and either (a) the Group has
transferred substantially all the risks and rewards of the asset,
or (b) the Group has neither transferred nor retained substantially
all the risks and rewards of the asset, but has transferred control
of the asset.
Non-derivative financial liabilities
The Company classifies non-derivative financial liabilities as
liabilities at amortised cost. Such financial liabilities are
recognised initially at fair value less any direct attributable
transaction costs. Subsequent to initial recognition, these
financial liabilities are measured at amortised cost using the EIR
method.
The Company derecognises a financial liability (or part of a
financial liability) from the consolidated statement of financial
position when, and only when, it is extinguished or when the
obligation specified in the contract or agreement is discharged or
cancelled or has expired. The difference between the carrying
amount of a financial liability (or part of a financial liability)
extinguished or transferred to another party and the consideration
paid, including any non-cash assets transferred or liabilities
assumed, is considered in the consolidated income statement.
e) Fair value measurement
The Group accounts for its investments in Portfolio Companies as
Investments at FVPL. The valuation is determined using the
discounted cash flow methodology. The cash flows forecasted to be
received by the Company or its consolidated subsidiaries, generated
by each of the underlying assets, and adjusted as appropriate to
reflect the risk and opportunities, have been discounted using
asset-specific discount rates. The valuation methodology is
unchanged from previous reporting periods.
The fair value of other financial assets and liabilities, other
than current assets and liabilities, is determined by discounting
future cash flows at an appropriate discount rate and with
reference to recent market transactions, where appropriate. Further
information on assumptions and estimation uncertainties are
disclosed in Note 18.
Fair values are categorised into different levels in a fair
value hierarchy based on the inputs in the valuation methodology,
as follows:
-- Level 1: quoted prices (unadjusted) in active markets for
identical assets and liabilities.
-- Level 2: inputs other than quoted prices included in Level 1,
that are observable for the asset or liability, either directly
(i.e. as prices) or indirectly (i.e. derived from prices).
-- Level 3: inputs for the asset or liability that are not based
on observable market data ('unobservable inputs').
If the inputs to measure fair value of an asset or a liability
fall into different levels of the fair value hierarchy, then the
fair value measurement is categorised in its entirety at the same
level of the fair value hierarchy as the lowest level input that is
significant to the entire measurement.
The Group recognises transfers between levels of fair value
hierarchy at the end of the reporting period in which the change
has occurred.
f) Provisions
A provision is recognised if, as a result of a past event, the
Group has a present legal or constructive obligation that can be
estimated reliably, and it is probable that an outflow of economic
benefits will be required to settle the obligation. Provisions are
determined by discounting the expected future cash flows at a
pre-tax rate that reflects current market assessments of the time
value of money and the risks specific to a liability. The unwinding
of such discount is recognised as a finance cost.
g) Cash and cash equivalents
Cash and cash equivalents comprise of cash balances and term
deposits with maturities of three months or less from the date when
the deposits were made and that are subject to an insignificant
risk of change in their fair value, and are used by the Group in
the management of its short-term commitments.
h) Share capital
Ordinary shares are classified as equity. Costs directly
attributable to the issue of ordinary shares, or which are
associated with the establishment of the Company, that would
otherwise have been avoided are recognised as a deduction from
equity, net of any tax effects.
i) Segment reporting
Segment results that are reported to the Management Board
include items directly attributable to segments as well as those
that can be allocated on a reasonable basis.
j) Employee benefits and share-based payment arrangements
Short-term and other long-term employee benefits are expensed as
the related services are provided. A liability is recognised for
the amount expected to be paid, and discounted at present value if
necessary, if the Group has present legal or constructive
obligation to pay this amount as a result of a past service
provided by the employee and the obligation can be estimated
reliably.
For share-based payment arrangements, the grant-date fair value
of the equity settled share-based payment arrangement is recognised
as an expense, with a corresponding increase in additional paid in
capital over the vesting period of the awards. The amount
recognised as an expense is adjusted to reflect related service and
non-market performance conditions. The market condition related to
the award is measured at the date of grant and there is no
adjustment of expense/income to the consolidated income statement
for differences between expected and actual outcomes.
k) Finance income and finance costs
Interest income and expenses are recognised in the consolidated
income statement using the EIR method.
The EIR is the rate that exactly discounts the estimated future
cash payments and receipts through the expected life of the
financial instrument (or, where appropriate, a shorter period) to
the carrying amount of the financial instrument. When calculating
the EIR rate, the Group estimates future cash flows considering all
contractual terms of the financial instrument, but not future
credit losses.
Interest received or receivable and interest paid or payable are
recognised in the consolidated income statement as finance income
and finance costs, respectively.
l) Leases
Under IFRS 16, upon lease commencement, a lessee recognises a
right-of-use asset and a lease liability. The right-of-use asset is
initially measured at cost, which comprises the initial amount of
the lease liability adjusted for any lease payments made at or
before the commencement date, plus any initial direct costs
incurred and an estimate of costs to dismantle and remove any
improvements made to office premises.
m) Tax
i) Subcription tax
According to the Luxembourg regulations regarding SICAV
companies, the Company itself, as an undertaking for collective
investment, is exempt from paying income and/or capital gains taxes
in Luxembourg. It is, however, liable to annual subscription tax of
0.05 per cent on its consolidated net asset value ('NAV'), payable
quarterly and assessed on the last day of each quarter.
ii) Income tax
Income tax on the consolidated subsidiaries' profits for the
year comprises current and deferred tax. Current and deferred tax
is recognised in the consolidated income statement except to the
extent that it relates to a business combination, or items
recognised directly in equity or in the consolidated statement of
other comprehensive income.
Current tax is the expected tax payable or receivable on the
taxable income or loss for the year, using tax rates enacted or
substantively enacted at the reporting date, and any adjustment to
tax payable in respect of previous periods.
Deferred tax is recognised in respect of temporary differences
between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for taxation
purposes. Deferred tax is not recognised for:
-- Temporary differences on the initial recognition of assets or
liabilities in a transaction that is not a business combination and
that affects neither accounting nor taxable profit or loss;
-- Temporary differences related to investments in subsidiaries
to the extent that the Company is able to control the timing of the
reversal of the temporary difference and it is probable that they
will not reverse in the foreseeable future; and
-- Taxable temporary differences arising on the initial
recognition of goodwill.
Deferred tax assets and liabilities are offset if there is a
legally enforceable right to offset current tax liabilities and
assets, and they relate to taxes levied by the same tax authority
on the same taxable entity, or on different tax entities, but they
intend to settle current tax liabilities and assets on a net basis
or their tax assets and liabilities will be realised
simultaneously.
A deferred tax asset is recognised for unused tax losses, tax
credits and deductible temporary differences to the extent that it
is probable that future taxable profits will be available against
which they can be utilised. Deferred tax assets are reviewed each
reporting date and are reduced to the extent that it is no longer
probable that the related tax benefit will be realised.
n) Current versus non-current classification
The Group presents assets and liabilities in the statement of
financial position based on current/non-current classification. An
asset is current when it is:
-- Expected to be realised or intended to be sold or consumed in
the normal operating cycle
-- Held primarily for the purpose of trading
-- Expected to be realised within 12 months after the reporting
period or
-- Cash or cash equivalent unless restricted from being
exchanged or used to settle a liability for at least 12 months
after the reporting period
All other assets are classified as non-current.
A liability is current when:
-- It is expected to be settled in the normal operating
cycle
-- It is held primarily for the purpose of trading
-- It is due to be settled within 12 months after the reporting
period; or
-- There is no unconditional right to defer the settlement of
the liability for at least 12 months after the reporting period
The terms of the liability that could, at the option of the
counterparty, result in its settlement by the issue of equity
instruments do not affect its classification.
The Group classifies all other liabilities as non-current.
4. Significant accounting judgements, estimates and
assumptions
The preparation of consolidated financial statements in
conformity with IFRS requires the Management Board to make
judgements, estimates and assumptions that affect the application
of accounting policies and the reported amounts of assets,
liabilities, income and expenses. Actual results may differ from
these estimates.
Estimates and underlying assumptions are reviewed on an ongoing
basis. Revisions to accounting estimates are recognised in the
period in which the estimates are revised and in any future periods
affected.
In the process of applying the Group's accounting policies, the
Management Board has made the following judgements that would have
the most significant effect on the amounts recognised in the
consolidated financial statements.
4.1 Assessment as an investment entity
Refer to Note 2 for the discussion on this topic.
4.2 Fair value determination
Refer to Note 3 d) for the discussion on this topic.
4.3 Share-based payments
Estimating fair value for share-based payment transactions
requires determination of the most appropriate valuation model,
which depends on the terms and conditions of the grant. This
estimate also requires determination of the most appropriate inputs
to the valuation model including the expected life of the share
option or appreciation right, volatility and dividend yield and
making assumptions about them.
For the measurement of the fair value of equity-settled
transactions for the Long-Term Incentive Plan ('LTIP'), the Group
uses a Monte Carlo simulation model for the market-based
performance condition element of the awards. Non-market based
performance conditions are not taken into account in the valuation
of the unit fair value per share of the LTIP. Instead, the number
of shares is adjusted at each reporting date to take into account
the actual level of non-market based performance condition.
For the measurement of the fair value of equity-settled
transactions for the Deferred Short-Term Incentive Plan ('Deferred
STIP'), the Group recognises a portion of the annual estimated
bonus of the Management Board. The assumptions and models used for
estimating fair value for share-based payment transactions are
disclosed in Note 20.
4.4 Going concern basis of accounting
The Group's portfolio is more than 99 per cent operational and
relies on availability-style revenues. At the time of producing
these consolidated financial statements, there was no evidence to
suggest of material disruption to the operations of the Group and
financial performance is not expected to be materially
affected.
The Management Board has satisfied itself that the Group has
adequate resources to continue in operational existence for at
least 12 months from the date of approval of the consolidated
financial statements. After due consideration, the Management Board
believes it is appropriate to adopt the going concern basis of
accounting in preparing the consolidated financial statements.
5. Segment reporting
IFRS 8 - Operating Segments adopts a 'through the eyes of the
management' approach to an entity's reporting of information
relating to its operating segments, and also requires an entity to
report financial and descriptive information about its reportable
segments.
Based on a review of information provided to the Management
Board (determined to be the chief operating decision makers or
CODM), the Group has identified five reportable segments based on
the geographical concentration risk. The main factor used to
identify the Group's reportable segments is the geographical
location of the asset. The Management Board has concluded that the
Group's reportable segments are:
(1) UK; (2) North America; (3) Australia; (4) Continental
Europe; and (5) Holding Activities. These reportable segments are
the basis on which the Group reports information to the Management
Board
Segment information is presented below:
For the year ended 31 December North Continental Holding Total
2022
In thousands of Sterling UK America Australia Europe Activities Group
Income from investments at
FVPL (note 9) 66,910 72,902 10,707 9,026 - 159,545
Administrative expenses - - - - (11,756) (11,756)
Other operating expenses -
net - - - - (12,698) (12,698)
Results from operating activities 66,910 72,902 10,707 9,026 (24,454) 135,091
Net finance result - - - - (2,005) (2,005)
Net loss on balance sheet
hedging - - - - (10,572) (10,572)
Tax expense - net - - - - (3,472) (3,472)
Profit or loss for the year 66,910 72,902 10,707 9,026 (40,503) 119,042
For the year ended 31 December North Continental Holding Total
2021
In thousands of Sterling UK America Australia Europe Activities Group
Income from investments at
FVPL (note 9) 4,718 65,061 1,509 4,155 - 75,443
Administration expenses - - - - (10,234) (10,234)
Other operating expenses -
net - - - - (1,758) (1,758)
Results from operating activities 4,718 65,061 1,509 4,155 (11,992) 63,451
Net finance result - - - - (1,974) (1,974)
Net loss on balance sheet
hedging - - - - (782) (782)
Tax expense - net - - - - (2,698) (2,698)
Profit or loss for the year 4,718 65,061 1,509 4,155 (17,446) 57,997
Statement of financial position per segment information as at 31
December 2022 and 2021 are presented below:
As at 31 December 2022 North Continental Holding Total
In thousands of Sterling UK America Australia Europe Activities Group
Assets
Property and equipment - - - - 123 123
Investments at FVPL 354,002 504,408 112,414 132,020 - 1,102,844
Other non-current assets - - - - 428 428
Current assets - - - - 35,945 35,945
Total assets 354,002 504,408 112,414 132,020 36,496 1,139,340
Liabilities
Non-current - - - - 62,077 62,077
Current - - - - 8,085 8,085
- - - -
Total liabilities - - - - 70,162 70,162
as at 31 December 2021 North Continental Holding Total
In thousands of Sterling UK America Australia Europe Activities Group
Assets
Property and equipment - - - - 68 68
Investments at FVPL 319,324 456,690 110,242 88,969 - 975,225
Other non-current assets - - - - 1,417 1,417
Current assets - - - - 29,554 29,554
Total assets 319,324 456,690 110,242 88,969 31,039 1,006,264
Liabilities
Non-current - - - - 429 429
Current - - - - 5,292 5,292
Total liabilities - - - - 5,721 5,721
The Holding Activities of the Group include the activities which
are not specifically related to a particular asset or region, but
to those companies which provide services to the Group. The total
current assets classified under Holding Activities mainly represent
cash and cash equivalents.
Transactions between reportable segments are conducted at arm's
length and are accounted for in a similar way to the basis of
accounting used for third parties. The accounting methods used for
all the segments are similar and comparable with those of the
Company.
The Group maintains a well-diversified portfolio with no major
single asset exposure.
6. Administrative expenses
Year ended Year ended
31 December 31 December
In thousands of Sterling 2022 2021
Personnel expenses
Short-term benefits 5,919 5,334
Share-based compensation expenses 1,737 1,361
Supervisory Board fees 260 220
7,916 6,915
Legal and professional fees 2,630 2,496
Office and other expenses 1,176 800
Depreciation expense 34 23
11,756 10,234
Short-term benefits relate to the Management Board and staff,
and include basic salaries, Short-Term Incentive Plan ('STIP'),
staff bonus, social security contributions and other related
expenses.
The Group has engaged certain third parties to provide legal,
depositary, custodian, audit, tax and other services. The expenses
incurred in relation to such services are treated as legal and
professional fees. Depositary and custodian related charges during
the year amounted to GBP 383,000 (2021: GBP 459,000).
During the year, the Company and its consolidated subsidiaries
obtained the following services from the external auditors.
Year ended Year ended
31 December 31 December
In thousands of Sterling 2022 2021
Group auditor remuneration:
Statutory audit fees 238 177
Audit-related fees 56 65
Non-audit-related fees 5 -
299 242
Audit and audit-related fees from non-Group auditor 65 33
364 275
Audit-related fees includes the fees in respect to the interim
review of the Group's consolidated interim financial statements and
other permitted audit-related services.
7. Other operating expenses
Year ended Year ended
31 December 31 December
In thousands of Sterling 2022 2021
Loss on derivative financial instruments at FVPL
- net (Note 18) 11,326 1,015
Foreign currency exchange loss - net 840 -
Acquisition-related (including unsuccessful bid costs) 615 1,477
12,781 2,492
8. Net finance results
Year ended Year ended
31 December 31 December
In thousands of Sterling 2022 2021
Finance costs on loans and borrowings (Note 15) (2,177) (1,905)
Other finance costs - (69)
Interest income on bank deposits 172 -
(2,005) (1,974)
9. Investments at FVPL
31 December 31 December
In thousands of Sterling 2022 2021
Balance at 1 January 975,225 895,674
Acquisitions of/additions in Investments at FVPL 64,407 79,163
Income from investments at FVPL (i) 159,545 75,443
Distributions received from Investments at FVPL (96,333) (75,055)
Balance at 31 December 1,102,844 975,225
(i) This account reflects the unrealised gain on valuation of
investments.
Income from investments at FVPL include the impact of foreign
exchange gains or losses for the year ended 31 December 2022
amounted to a net gain of GBP34.2 million (year ended 31 December
2021: net loss of GBP3.2 million). Refer to Note 18 of the
consolidated financial statements for further information on
Investments at FVPL.
Distributions from Investments at FVPL are received after
either: (a) financial models have been tested for compliance with
certain ratios; or (b) financial models have been submitted to the
external lenders of the Portfolio Companies; or (c) approvals of
the external lenders on the financial models have been
obtained.
As at 31 December 2022 and 2021, loan and interest receivable
amounts from unconsolidated subsidiaries is embedded within
Investments at FVPL .
The valuation of Investments at FVPL considers all future cash
flows related to each individual underlying asset.
Interest income, dividend income, asset-related management fee
income and other income, recorded under the accrual's basis or when
the right to receive the payment is established at the level of the
consolidated subsidiaries for the year ended 31 December 2022,
amounted to GBP80,434,000 (31 December 2021: GBP67,046,000). The
associated future cash flows deriving from these items are
considered when fair valuing the investments.
During the year, the Group made the following acquisitions:
John Hart Generating Station Replacement Project (Canada) : In
February 2022, BBGI completed the acquisition of an investment in
InPower BC General Partnership, the entity responsible for
delivering the John Hart Generating Station Replacement Project
('John Hart Generating Station'), an investment delivered through
the existing strategic partnership between the Company and
SNC-Lavalin Group Inc. The PPP consists of the design,
construction, financing, maintenance and rehabilitation of a new
three-turbine, 132-MW hydroelectric power generation station on the
Campbell River, British Columbia, including a three generating unit
underground powerhouse, 2.1 kilometres of water passage tunnels and
a water bypass system to protect downstream fish habitat. The
acquisition price was approximately GBP24 million.
Service commencement was achieved in 2019 and the concession
runs until 2033. The asset is classified as availability-style
under the investment policy of the Company. The investment is not
subject to demand or power price risk. Availability payments are
received from the British Columbia Hydro & Power Authority
(rated AA/Aaa by DBRS Morningstar and Moody's respectively) a Crown
corporation wholly owned by the Government of British Columbia. The
station generates clean and reliable energy for over 80,000
homes.
A7 German motorway (Germany) : In September 2022, BBGI completed
the acquisition of a 49 per cent interest in Via Solutions Nord
GmbH & Co. KG, the project company for the A7 motorway PPP near
Hamburg in Germany. The asset is classified as availability-based
under the investment policy of the Company and aligns with BBGI's
ESG principles.
The project consists of the design, construction, financing,
operation, maintenance and rehabilitation, of 65 km widening of a
section of the A7 motorway between Neumünster and Hamburg. The
project includes 11 interchanges, six parking facilities and four
rest areas, various civil engineering structures and a 550-meter
noise enclosure tunnel. Availability payments are received from
Federal Republic of Germany, represented by the Free City of
Hamburg and the Federal State of Schleswig-Holstein, rated AAA/Aaa
by S&P and Moody's respectively. Construction completion was
achieved in December 2019 and the concession runs until 2044.
The increased efficiency of the A7 motorway seeks to minimise
any increase in exhaust emissions from the higher traffic load by
reducing congestion and traffic jams and is expected to achieve a
consistent traffic flow and uniform driving speeds. Environmental
impact assessments (EIA) have been performed. During the EIA
procedure, all potentially affected Natura 2000 sites, habitats and
species have been analysed, including habitats and species placed
beyond Natura 2000 sites.
Details of various asset investments in the Group's portfolio
and their respective acquisition dates are as follows:
Country of Ownership Year
Company Asset Incorporation Interest Acquired
RW Health Partnership Royal Women's Hospital Australia 100% 2012
Holdings Pty Limited*
Victorian Correctional Victoria Correctional Australia 100% 2012
Infrastructure Partnership Facilities
Pty Limited
BBPI Sentinel Holdings Northern Territory Australia 100% 2014
Pty Limited*, BBGI Sentinel Secure Facilities and 2015
Holdings 2 Pty Limited*,
Sentinel Financing Holdings
Pty Limited*
Golden Crossing Holdings Golden Ears Bridge Canada 100% 2012
Inc.* and 2013
Trans-Park Highway Holding
Inc.* Kicking Horse Canyon Canada 50% 2012
NorthwestConnect Holdings Northwest Anthony Canada 50% 2012
Inc.* Henday Drive
BBGI KVH Holdings Inc.*, Kelowna and Vernon Canada 100% 2013
BBGI KVH Holdings 2 Inc. Hospital and 2020
*
WCP Holdings Inc.* Women's College Hospital Canada 100% 2013
Stoney Trail Group Holdings Northeast Stoney Trail Canada 100% 2013
Inc.*
BBGI NCP Holdings Inc.* North Commuter Parkway Canada 50% 2015
SNC-Lavalin Infrastructure William R. Bennet Canada 80% 2017
Partners LP* Bridge
Southeast Stoney Trail Canada 40% 2017
Canada Line Canada 26.7% 2017
Restigouche Hospital Canada 80% 2017
Centre
McGill University Canada 40% 2018
Health Centre
John Hart Generating Canada 80% 2022
Station
BBGI Stanton Holdings Stanton Territorial Canada 100% 2018
Inc.* Hospital and 2020
BBGI 104 GP Inc. Highway 104 Canada 50% 2020
BBGI Champlain Holding Champlain Bridge Canada 25% 2020
Inc.*
Kreishaus Unna Holding Unna Administrative Germany 90% 2012
GmbH* Centre and 2020
PJB Beteiligungs-GmbH* Burg Correctional Germany 90% 2012
Facility
Hochtief PPP 1 Holding Cologne Schools Germany 50% 2014
GmbH & Co.KG* Rodenkirchen Schools Germany
Frankfurt Schools Germany
Fürst Wrede Military Germany
Base
BBGI PPP Investment S. A7 Motorway Luxembourg 49% 2022
à r.l.
Noaber18 Holding B.V.* N18 Motorway Netherlands 52% 2018,
2019
and 2020
De Groene SchakelHolding Westland Town Hall Netherlands 100% 2018
B.V. * and 2019
SAAone Holding B.V* A1/A6 Motorway Netherlands 37.1% 2018
and 2019
Agder OPS Vegselskap AS E18 Motorway Norway 100% 2013
and 2014
Folera TH Holdings Limited Poplar Affordable Jersey 100% 2021
Housing & Recreational
Centres
Kent Education Partnership Kent Schools UK 50% 2012
(Holdings) Limited*
Healthcare Providers (Gloucester) Gloucester Royal Hospital UK 50% 2012
Limited*
Highway Management M80 M80 Motorway UK 50% 2012
Topco Limited*
Bedford Education Partnership Bedford Schools UK 100% 2012
Holdings Limited*
Lisburn Education Partnership Lisburn College UK 100% 2012
Holdings (Limited)*
Clackmannanshire Schools Clackmannanshire Schools UK 100% 2012
Education Partnership
(Holdings) Limited*
Primaria (Barking Dagenham Barking Dagenham & UK 60% 2012
& Havering) Limited* Havering Clinics (LIFT)
East Down Education Partnership East Down Colleges UK 100% 2012
(Holdings) Limited* and 2018
Scottish Borders Education Scottish Borders Schools UK 100% 2012
Partnership (Holdings)
Limited*
Coventry Education Partnership Coventry Schools UK 100% 2012
Holdings Limited*
Fire Support (SSFR) Holdings Stoke & Staffs Rescue UK 85% 2012
Limited* Service
GB Consortium 1 Limited* North London Estates UK 60% (both) 2012,
Partnership (LIFT) 2014
Liverpool & Sefton UK and 2018
Clinics (LIFT)
Mersey Care Development Mersey Care Hospital UK 79.6% 2013
Company 1 Limited* and 2014
MG Bridge Investments Mersey Gateway Bridge UK 37.5% 2014
Limited*
Tor Bank School Education Tor Bank School UK 100% 2013
Partnership (Holdings)
Limited*
Lagan College Education Lagan College UK 100% 2014
Partnership (Holdings)
Limited*
Highway Management (City) M1 Westlink UK 100% 2014
Holding Limited*
Blue Light Partnership Avon and Somerset UK 100% 2014,
(ASP) Holdings Limited* Police 2015
HQ and 2016
Northwin Limited North West Regional UK 100% 2015
College
Northwin (Intermediate) Belfast Metropolitan UK 100% 2016
(Belfast) Limited* College
Fire and Rescue NW Holdings North West Fire and UK 100% 2021
Limited Rescue
Woodland View Holdings Ayrshire and Arran UK 100% 2021
Co Limited Hospital
Aberdeen Roads Holdings Aberdeen Western Peripheral UK 33.3% 2021
Limited Route
BBGI East End Holdings Ohio River Bridges US 66.7% 2014
Inc.* and 2019
*and its subsidiary companies.
10. Cash and cash equivalents
Cash and cash equivalents relate to bank deposits amounting to
GBP31,157,000 (31 December 2021: GBP26,862,000).
11. Taxes
Year ended Year ended
31 December 31 December
In thousands of Sterling 2022 2021
Current tax:
Income tax and other taxes 3,705 2,470
Subscription tax 515 459
4,220 2,929
Deferred tax:
Relating to origination and reversal of temporary
differences (748) (231)
3,472 2,698
The Company, as an undertaking for collective investment, is
exempt from corporate income tax in Luxembourg and instead pays an
annual subscription tax of 0.05 per cent on the value of its total
net assets. Moreover, the Company as a SICAV is not subject to
taxes on capital gains or income. All other consolidated
subsidiaries are subject to taxation at the applicable rate in
their respective jurisdictions.
Reconciliation of tax expense and the accounting profit
multiplied by the Company's effective corporate tax rate for the
year is as follows:
Year ended Year ended
31 December 31 December
In thousands of Sterling 2022 2021
Profit before tax 122,514 60,695
Income tax using the Luxembourg domestic tax rate
of 24.94% 30,555 15,137
Subscription tax during the year 515 459
Reconciling difference mainly due to fair valuation
of
assets, net of gain/loss on derivatives (unrealised) (27,598) (12,898)
Tax charge for the year 3,472 2,698
A significant portion of the profit before tax results from fair
valuation of Investments at FVPL. The net income of the
unconsolidated subsidiaries is taxed in their respective
jurisdictions.
As a consequence of the adoption of IFRS 10, the Company is
classified as an Investment Entity (see Note 2), meaning the tax
expenses of the unconsolidated subsidiaries are not included within
these consolidated financial statements. Therefore, the
consolidated tax expense and tax assets/liabilities, if any, do not
include those of the Portfolio Companies. The tax liabilities of
the Portfolio Companies are embedded in the fair value calculation
of Investments at FVPL.
The Group recognise a deferred tax asset during the year
amounting to GBP153,000 (31 December 2021: GBPnil). Furthermore,
the Group has additional tax losses carried forward amounting to
GBP18,032,000 (2021: GBP7,229,000) for which no deferred tax asset
was recognised.
Tax liability as at 31 December 2022 amounted to GBP1,607,000
(31 December 2021: GBP1,373,000).
12. Other current assets
31 December 31 December
In thousands of Sterling 2022 2021
Prepaid taxes 537 587
Prepaid expenses 227 11
Others 230 163
994 761
13. Capital and reserves
Share capital
Changes in the Company's share capital are as follows:
31 December 31 December
In thousands of Sterling 2022 2021
Share capital as at 1 January 847,858 770,942
Issuance of ordinary shares through placing - 75,000
Share capital issued through scrip dividends 1,092 1,978
Equity settlement of share-based compensation (Note
20) 1,084 1,045
Shares issuance costs (27) (1,107)
850,007 847,858
The changes in the number of ordinary shares of no-par value
issued by the Company are as follows:
31 December 31 December
In thousands of shares 2022 2021
In issue at beginning of the year 712,126 664,691
Shares issued through placing of ordinary shares - 45,181
Shares issued through scrip dividends 649 1,155
Shares issued as share based compensation - net(i) 556 1,099
713,331 712,126
(i) - Being the net share entitlement after adjustments to
settle taxes
Gross number of ordinary shares entitlement, before the
settlement of taxes, as share based compensation amounted to the
following:
31 December 31 December
In thousands of shares 2022 2021
LTIP 636 353
STIP 367 746
1,003 1,099
All of the ordinary shares issued rank pari passu. The holders
of ordinary shares are entitled to receive dividends as declared
from time to time and are entitled to one vote per share at general
meetings of the Company.
The Company meets the minimum share capital requirement as
imposed under the applicable Luxembourg regulation.
Translation and other capital reserve
Foreign currency differences are recognised in other
comprehensive income and presented in the foreign currency
translation reserve in equity except for exchange differences from
intragroup monetary items which are reflected in the consolidated
income statement. The translation reserve amounting to a credit
balance of GBP14,153,000 (31 December 2021: debit balance of
GBP9,028,000) comprises foreign currency differences arising from
the translation of the financial statements of foreign operations.
The remaining balance of Other capital reserve relates to statutory
amounts required to be allocated to this reserve account and which
may not be distributed.
Dividends
The dividends declared and paid by the Company during the year
ended 31 December 2022 are as follows:
31 December
In thousands of Sterling except as otherwise stated 2022
2021 2(nd) interim dividend of 3.665 pence per qualifying ordinary
share - for the period
1 July 2021 to 31 December 2021 26,099
2022 1(st) interim dividend of 3.740 pence per qualifying ordinary
share - for the period
1 January 2022 to 30 June 2022 26,676
Total dividends declared and paid during the year 52,775
The 31 December 2021 2(nd) interim dividend was paid in April
2022. The value of the scrip election was GBP964,000, with the
remaining amount of GBP25,135,000 paid in cash to those investors
that did not elect for the scrip.
The 30 June 2022 1(st) interim dividend was paid in October
2022. The value of the scrip election was GBP127,000 with the
remaining amount of GBP26,548,000 paid in cash to those investors
that elected for a cash dividend.
The dividends declared and paid by the Company during the year
ended 31 December 2021 are as follows:
31 December
In thousands of Sterling except as otherwise stated 2021
2020 2(nd) interim dividend of 3.590 pence per qualifying ordinary
share - for the period
1 July 2020 to 31 December 2020 23,863
2021 1(st) interim dividend of 3.665 pence per qualifying ordinary
share - for the period
1 January 2021 to 30 June 2021 26,068
Total dividends declared and paid during the year 49,931
The 31 December 2020 2(nd) interim dividend was paid in April
2021. The value of the scrip election was GBP514,000, with the
remaining amount of GBP23,349,000 paid in cash to those investors
that did not elect for the scrip.
The 30 June 2021 1(st) interim dividend was paid in October
2021. The value of the scrip election was GBP1,464,000 with the
remaining amount of GBP24,604,000 paid in cash to those investors
that elected for a cash dividend.
Net Asset Value ('NAV')
The consolidated NAV and NAV per share as at 31 December 2022,
31 December 2021 and 31 December 2020 were as follows:
In thousands of Sterling/pence 2022 2021 2020
NAV attributable to the owners of the Company 1,069,178 1,000,543 915,840
NAV per ordinary share (pence) 149.89 140.50 137.78
14. Earnings per share
a) Basic earnings per share
The basic earnings per share is calculated by dividing the
profit for the year by the weighted average number of ordinary
shares outstanding.
Year ended Year ended
31 December 31 December
In thousands of Sterling / in thousands of shares 2022 2021
Profit for the year 119,042 57,997
Weighted average number of ordinary shares in issue 712,917 684,569
Basic earnings per share (in pence) 16.70 8.47
The weighted average number of ordinary shares outstanding for
the purpose of calculating the basic earnings per share is computed
as follows:
Year ended Year ended
31 December 31 December
In thousands of shares 2022 2021
Shares outstanding as at 1 January 712,126 664,691
Effect of shares issued on placing of ordinary shares - 18,825
Effect of scrip dividends issued 443 366
Shares issued as share based compensation 348 687
Weighted average - outstanding shares 712,917 684,569
b) Diluted earnings per share
The diluted earnings per share is calculated by dividing the
profit for the year by the weighted average number of ordinary
shares outstanding, after adjusting for the effects of all
potential dilutive ordinary shares. There were no items of the
consolidated income statement accounts which have a dilutive effect
on the profit for the year.
The weighted average number of potential diluted ordinary shares
for the purpose of calculating the diluted earnings per share is
computed as follows:
Year ended Year ended
31 December 31 December
In thousands of shares 2022 2021
Weighted average number of ordinary shares for basic
earnings per share 712,917 684,569
Effect of potential dilution from share-based payment 852 985
Weighted average - outstanding shares 713,769 685,554
The price of the Company's shares for the purpose of calculating
the potential dilutive effect of award letters (see Note 21) was
based on the average market price for the year ended 2022 and 2021,
during which period the awards were outstanding.
15. Loans and borrowings
In 2021, the Group secured an amendment and restatement to the
RCF with ING Bank, KFW IPEX Bank, DZ Bank, Frankfurt Am Main and
SMBC Bank EU AG for a total commitment of GBP230 million. The tenor
of the RCF is five years (maturing in May 2026). The borrowing
margin is 165 bps over the reference bank rate. Under the RCF, the
Group retains the possibility to consider larger transactions by
virtue of having structured a further GBP70 million incremental
accordion tranche, for which no commitment fees will be paid.
Outstanding borrowings under the RCF as at 31 December 2022
amounted to GBP57.5 million (31 December 2021: nil). As at 31
December 2022, the Group has utilised GBP1.3 million (31 December
2021: GBP1.2 million ) of the GBP230 million RCF , which was being
used to cover letters of credit.
The interest and other related fees payables under the RCF as at
31 December 2022 amounted to GBP230,000 (31 December 2021:
GBP246,000).
The RCF unamortised debt issuance cost amounted to GBP1,094,000
as at 31 December 2022 (2021: GBP1,417,000). The unamortised debt
issuance cost is presented as part of 'Loans and borrowings' in the
Consolidated Statement of Financial Position (2021: as part of
'Other non-current assets').
The total finance cost incurred under the RCF for the year ended
31 December 2022 amounted to GBP2,171,000 (31 December 2021:
GBP1,927,000) which includes amortisation of debt issuance costs of
GBP549,000 (31 December 2021: GBP549,000).
Changes in liabilities arising from financing activities
1 January Foreign 31 December
In thousands of Sterling 2022 Proceeds Repayment exchange Others 2022
Loans and borrowings_non-current - 72,512 (17,000) 1,972 (1,094) 56,390
1 January Foreign 31 December
In thousands of Sterling 2021 Proceeds Repayment exchange Others 2021
Loans and borrowings_non-current - 67,000 (67,000) - - -
Pledges and collaterals
As of 31 December 2022, and 31 December 2021, the Group has
provided a pledge over shares issued by consolidated subsidiaries,
pledge over receivables between consolidated subsidiaries and a
pledge over the bank accounts of the consolidated subsidiaries.
Based on the provisions of the RCF, where there is a continuing
event of default, the lender, among other things, will have the
right to cancel all commitments and declare all or part of
utilisations to be due and payable, including all related
outstanding amounts, and exercise or direct the security agent to
exercise any or all of its rights, remedies, powers or discretions
under the RCF.
The Group operated comfortably within covenant limits of the RCF
during the year.
16. Trade and other payables
Trade and other payables are non-interest bearing and are
usually settled within six months.
17. Financial risk review and management
The Group has exposure to the following risks from financial
instruments:
- Credit risk
- Liquidity risk
- Market risk
This note presents information about the Group's exposure to
each of the above risks, the Group's objectives, policies and
processes for measuring and managing risk and the Group's
management of capital. This note also presents the result of the
review performed by management on the above-mentioned risk
areas.
Risk management framework
The Management Board has overall responsibility for the
establishment and control of the Group's risk management
framework.
Credit risk
Credit risk is the risk that the counterparty to a financial
instrument will fail to discharge an obligation or commitment that
it has entered into with the Group, resulting in:
1) impairment or reduction in the amounts recoverable from
receivables and other current and non-current assets; and
2) non-recoverability, in part or in whole, of cash and cash equivalents deposited with banks.
Exposures to credit risks
The Group is exposed to credit risks on the following items in
the consolidated statement of financial position:
31 December 31 December
In thousands of Sterling 2022 2021
Derivative financial assets 2,885 907
Trade and other receivables 909 1,024
Cash and cash equivalents 31,157 26,862
34,951 28,793
The maximum exposure to credit risk on receivables that are
neither overdue nor impaired as of 31 December 2022, amounts to
GBP909,000 (2021: GBP1,024,000).
As of 31 December 2022, the Group is also exposed to credit risk
on the loan receivable, interest and other receivable components of
Investments at FVPL (loans provided to Portfolio Companies)
totalling to GBP282,378,000 (2021: GBP262,822,000).
Cash and cash equivalents and foreign currency forwards
The cash and cash equivalents and foreign currency forward
contracts (recorded either as 'derivative financial assets' or
'derivative financial liabilities') are maintained with reputable
banks with ratings that are acceptable based on the established
internal policy of the Group. Based on the assessment of the
Management Board, there are no significant credit risks related to
the cash and cash equivalents and foreign currency forward
contracts maintained. The main counterparty banks of the Group have
S&P/Moody's credit rating of A+/A1 and AA-/AA1.
Liquidity risk
Liquidity risk is the risk that the Group will encounter
difficulty in meeting the obligations associated with its financial
liabilities that are settled by delivering cash or another
financial asset.
The Group's policy over liquidity risk is that it will seek to
have sufficient liquidity to meet its liabilities and obligations
when they fall due.
The Group manages liquidity risk by maintaining adequate cash
and cash equivalents and access to borrowing facilities to finance
day-to-day operations and medium to long-term capital needs. The
Group also regularly monitors the forecast and actual cash
requirements and matches the maturity profiles of the Group's
financial assets and financial liabilities.
The following are the undiscounted contractual maturities of the
financial liabilities of the Group, including estimated interest
payments:
Contractual cash flows
31 December 2022 Carrying Within 1-5
In thousands of Sterling amount Total 1 year years
Loans and borrowings (Note 15) 56,620 65,112 19,907 45,205
Trade and other payables 3,242 3,242 3,242 -
Net derivative liability 5,808 5,808 121 5,687
65,670 74,897 8,503 66,394
Contractual cash flows
31 December 2021 Carrying Within 1-5
In thousands of Sterling amount Total 1 year years
Loans and borrowings (Note 15) 246 5,801 1,326 4,475
Trade and other payables 2,956 2,956 2,956 -
3,202 8,757 4,282 4,475
The Group needs to maintain certain financial covenants under
the RCF. Non-compliance with such covenants may trigger an event of
default (see Note 15). At 31 December 2022 and 2021, the Group was
not in breach of any of the covenants under the RCF.
The Company has the possibility of raising capital through the
issuance of shares in order to finance further acquisitions or to
repay debt.
All external financial liabilities of the Group have maturities
of less than one year except for loans and borrowings, which have a
maturity of more than one year. The Group has sufficient cash and
cash equivalents and sufficient funding sources to pay and/or
refinance currently maturing obligations.
Market risk
Market risk is the risk that changes in market prices, such as
foreign exchange rates, interest rates and equity prices, will
affect the Group's income or the value of its holdings of financial
instruments. The objective of market risk management is to manage
and control market risk exposures within acceptable parameters,
while optimising the returns.
Currency risk
The Group buys derivative financial instruments, and also incurs
financial liabilities, in order to manage market risks. All such
transactions are carried out within certain internal guidelines.
The Group, via its hedge counterparty, reports all trades under
these hedging instruments, for European Market Infrastructure
Regulations purposes, to an EU branch of the derivative
repository.
The Group is exposed to currency risk as a result of its
underlying Investments at FVPL and cash and cash equivalents being
denominated in currencies other than Sterling. The currencies in
which these items are primarily denominated are Australian dollars
(A$), Canadian dollars (C$), Euros (EUR), Norwegian kroner (NOK)
and US dollars (US$).
The Group actively seeks to manage geographical concentration
and mitigate foreign exchange risk by balance sheet hedging through
foreign exchange forward contracts, hedging of forecast portfolio
distributions and borrowing in non-Sterling currencies.
Furthermore, Euro-denominated running costs provide a natural hedge
against the Euro-denominated portfolio distributions.
In respect of other monetary assets and liabilities denominated
in currencies other than Sterling, the Group's policy is to ensure
that its net exposure is kept at an acceptable level. The Company
accepts that risk from foreign exchange exposure is an inherent
aspect of holding an international portfolio of investments.
However, the Management Board believes that, in addition to the
hedging program in place, this risk is further mitigated by having
exposure to a number of different currencies including the
Australian dollar, Canadian dollar, US dollar, Euro and Norwegian
krone, all of which can provide diversification benefits. The
Management Board spends considerable time reviewing its hedging
strategy and believes it remains both appropriate and cost
effective to continue with its four-year rolling hedge policy.
The summary of the quantitative data about the Group's exposure
to foreign currency risk are as follows:
31 December 2022
In thousands of Sterling A$ C$ EUR NOK US $
Financial assets measured at fair value
Investments at FVPL 112,414 386,678 106,655 25,365 117,730
Financial assets measured at amortised
cost
Cash and cash equivalents 18 10,117 579 3 101
Trade and other receivables 148 467 76 - 201
166 10,584 655 3 302
Financial liabilities measured at amortised
cost
Trade and other payables 17 688 877 - 80
31 December 2021
In thousands of Sterling A$ C$ EUR NOK US
$
Financial assets measured at fair value
Investments at FVPL 110,242 347,921 64,199 24,770 108,769
Financial assets measured at amortised
cost
Cash and cash equivalents 15 13,615 736 2 160
Trade and other receivables 484 241 1 - 103
499 13,856 737 2 263
Financial liabilities measured at amortised
cost
Trade payables and other payables (10) (1,224) (1,367) - (29)
The significant exchange rates applied during the year ended 31
December 2022 and 31 December 2021 are as follows:
31 December 2022
Average Spot rate
GBP GBP
A$ 1 0.562 0.564
C$ 1 0.623 0.610
EUR 1 0.853 0.885
NOK 1 0.084 0.084
US$ 1 0.811 0.827
31 December 2021
Average Spot rate
GBP GBP
A$ 1 0.546 0.537
C$ 1 0.580 0.583
EUR 1 0.860 0.840
NOK 1 0.085 0.084
US$ 1 0.727 0.740
The sensitivity of the NAV to a 10 per cent positive and adverse
movement in foreign exchange rates is disclosed in Note 18 to the
consolidated financial statements. This scenario assumes that all
other macroeconomic assumptions remain constant.
Interest rate risk
Except for the loans and other receivables from Portfolio
Companies which are included as part of Investments at FVPL, the
Group does not account for other fixed-rate financial assets and
liabilities at fair value through profit or loss. For the years
ended 31 December 2022 and 2021, the main variable interest rate
exposure of the Group is on the interest rates applied to the
Group's cash and cash equivalents, including deposit rates used in
valuing the Investments at FVPL and the loans and borrowings of the
Group (see Note 15). A change in the deposit rates used in valuing
Investments at FVPL would have an impact on the value of such and a
corresponding impact on the Group's NAV. Refer to Note 18 for a
sensitivity analysis of the impact of a change on deposit rates on
the Group's NAV.
Investment risk
The valuation of Investments at FVPL depends on the ability of
the Group to realise cash distributions from Portfolio Companies.
The distributions to be received from the Portfolio Companies are
dependent on cash received by a particular Portfolio Company under
the service concession agreements. The service concession
agreements are predominantly granted to the Portfolio Companies by
a variety of public sector clients including, but not limited to,
central government departments and local, provincial and state
government and corporations set up by the public sector.
The Group predominantly makes investments in countries where the
Management Board consider that asset structures are reliable, where
(to the extent applicable) public sector counterparties carry what
the Management Board consider to be an appropriate credit risk, or
alternatively where insurance or guarantees are available for the
sovereign credit risk, where financial markets are relatively
mature and where a reliable judicial system exists to facilitate
the enforcement of rights and obligations under the contracts.
The Management Board continuously monitors the ability of a
particular Portfolio Company to make distributions to the Group.
During the year, there have been no material concerns raised in
relation to current and future distributions to be received from
any of the Portfolio Companies.
Capital risk management
The Company's objective when managing capital is to ensure the
Group's ability to continue as a going concern in order to provide
returns to shareholders and benefits for further stakeholders and
to maintain an optimal capital structure. The Company, at a Group
level, views the share capital (see Note 13) and the RCF (see Note
15) as capital.
In order to maintain or adjust the capital structure, the
Company may adjust the amount of dividend paid to shareholders,
return capital to shareholders, avail itself of additional debt
financing, pay down debt or issue new shares.
The Group regularly reviews compliance with Luxembourg
regulations regarding restrictions on minimum capital. During the
year, the Group complied with all externally imposed capital
requirements and made no changes in its approach to capital
management.
Derivative financial assets and liabilities for which hedge
accounting is not applied
The Group has entered into foreign currency forwards to fix the
foreign exchange rates on certain investment distributions that are
expected to be received ('cash flow hedges') and on a portion of
the non-Sterling and non-Euro denominated portfolio value ('balance
sheet hedges'). The derivative financial instruments
(asset/liability) in the consolidated statement of financial
position represent the fair value of foreign currency forwards
which were not designated as hedges. The movements in their fair
value are directly charged/credited in the consolidated income
statement within other operating expenses and net gain(loss) on
balance sheet hedging.
Derivative financial assets and liabilities are offset and the
net amount is reported in the consolidated statement of financial
position as the Group has a legally enforceable right to offset the
recognised amounts, and there is an intention to settle on a net
basis. Cash flows from the settlement of cash flow hedges and
balance sheet hedges are presented as part of the net cash flows in
operating and investing activities, respectively.
18. Fair value measurements and sensitivity analysis
The fair values of financial assets and liabilities, together
with the carrying amounts shown in the consolidated statement of
financial position are presented below. This does not include fair
value information for financial assets and financial liabilities
not measured at fair value if the carrying amount is a reasonable
approximation of fair value (i.e. cash and cash equivalents; trade
and other receivables; trade payables, accruals and other payables,
loans and borrowings).
The table below analyses financial instruments carried at fair
value, by valuation method.
31 December 2022 Fair value
In thousands of Sterling Level Level Level Total
1 2 3
Financial assets measured at fair value
Investments at FVPL - - 1,102,844 1,102,844
Derivative financial assets - 2,885 - 2,885
Financial liabilities measured at fair
value
Derivative financial liabilities - (8,693) - (8,693)
31 December 2021 Fair value
In thousands of Sterling Level Level Level Total
1 2 3
Financial assets measured at fair value
Investments at FVPL - - 975,225 975,225
Derivative financial assets - 907 - 907
Financial liabilities measured at fair
value
Derivative financial liabilities - (1,146) - (1,146)
Refer to table presented in Note 9 for the reconciliation of the
movements in the fair value measurements in level 3 of the fair
value hierarchy for Investments at FVPL. There were no transfers
between any levels during the year.
Investments at FVPL
The Management Board is responsible for carrying out the fair
market valuation of the Company's investments, which it then
presents to the Supervisory Board. The portfolio valuation is
carried out on a six-monthly basis as at 30 June and 31 December
each year. The portfolio valuation is reviewed by an independent
third-party professional.
The valuation is determined using the discounted cash flow
methodology. The cash flow forecasts, generated by each of the
underlying assets, are received by the Company or its subsidiaries,
adjusted as appropriate to reflect risks and opportunities, and
discounted using asset -specific discount rates. The portfolio
valuation methodology remains unchanged from previous reporting
periods.
Key Portfolio Company and portfolio cash flow assumptions
underlying NAV calculation include:
- Discount rates and the Assumptions, as set out below, continue to be applicable.
- The updated financial models used for the valuation accurately
reflect the terms of all agreements relating to the Portfolio
Companies and represent a fair and reasonable estimation of future
cash flows accruing to the Portfolio Companies.
- Cash flows from and to the Portfolio Companies are received
and made at the times anticipated.
- Non-UK investments are valued in local currency and converted
to Sterling at either the period-end spot foreign exchange rates or
the contracted foreign exchange rate.
- Where the operating costs of the Portfolio Companies are
contractually fixed, such contracts are performed, and where such
costs are not fixed, they remain within the current forecasts in
the valuation models.
- Where lifecycle costs/risks are borne by the Portfolio
Companies, they remain in line with the current forecasts in the
valuation models.
- Contractual payments to the Portfolio Companies remain on
track and contracts with public sector or public sector backed
counterparties are not terminated before their contractual expiry
date.
- Any deductions or abatements during the operations period of
Portfolio Companies are passed down to subcontractors under
contractual arrangements or are part of the planned (lifecycle)
forecasts.
- Changes to the concession period for certain investments are realised.
- In cases where the Portfolio Companies have contracts which
are in the construction phase, they are either completed on time or
any delay costs are borne by the construction contractors.
- Enacted tax or regulatory changes, or forecast changes with a
high probability, on or prior to this reporting period-end with a
future effect materially impacting cash flow forecasts, are
reflected in the financial models.
In forming the above assessments, BBGI uses its judgement and
works with our Portfolio Company management teams, as well as using
due diligence information from, or working with, suitably qualified
third parties such as technical, legal, tax and insurance
advisers.
Macroeconomic assumptions
31 December 2022 31 December 2021
Inflation UK(i) RPI/CPIH 13.4% (actual) for 2022; 2.75% / 2.00%
5.8% for 2023 then 2.75%
(RPI) / 2.0% (CPIH)
Canada 6.3% (actual) for 2022; 2.00% / 2.35%
4.0% for 2023; 2.3% for
2024 then 2.0%
8.0% for 2022; 4.75%
for 2023 3.25% for 2024
Australia then 2.5% 2.50%
8.4% for 2022; 6.3% for
Germany/ 2023; 3.4% for 2024 then
Netherlands(ii) 2.0% 2.00%
5.9% (actual) for 2022;
Norway(ii) 4.9% for 2023 then 2.25% 2.25%
6.5% (actual) for 2022;
US 3.4% for 2023 then 2.5% 2.50%
Deposit UK 2.00% to 2024, then 1.50% 0.00% to 2023, then 1.00%
rates (p.a.)
Canada 3.50% to 2024, then 1.75% 0.50% to 2023, then 1.50%
Australia 3.25% to 2024, then 3.00% 0.25% to 2023, then 2.00%
Germany/ 0.50% to 2024, then 1.0% 0.00% to 2023, then 0.50%
Netherlands
Norway 2.00% to 2024, then 2.00% 0.00% to 2023, then 2.00%
US 3.75% to 2024, then 1.50% 0.00% to 2023, then 1.50%
Corporate UK 19.00% until March 2023 19.0% to Q1 2023, then
tax rates then 25% 25.0%
(p.a.)
Canada(iii) 23.00% / 26.50% / 27.00% 23.0% / 26.5% / 27.0% /
/ 29.00% 29.0%
Australia 30.00% 30.0%
Germany(iv) 15.83% (incl. solidarity 15.8% (incl. solidarity
charge) charge)
Netherlands 25.80% 25.8%
Norway 22.00% 22.0%
US 21.00% 21.0%
(i) On 25 November 2020, the UK Government announced the phasing
out of RPI after 2030 to be replaced with CPIH; the Company's UK
portfolio indexation factor changes from RPI to CPIH beginning on 1
January 2031.
(ii) CPI indexation only. Where investments are subject to a
basket of indices, a projection for non-CPI indices is used.
(iii) Individual tax rates vary among Canadian Provinces:
Alberta; Ontario, Quebec, Northwest Territory; Saskatchewan,
British Columbia; New Brunswick.
(iv) Individual local trade tax rates are considered in addition
to the tax rate above.
Based on data from transactional activity, benchmark analysis
with comparable companies and sectors, discussions with advisers in
the relevant markets, publicly available information gathered over
the year and equity risk premium over government bond yields, we
have increased the weighted average discount rate to 6.9 per cent
(31 December 2021: 6.6 per cent). This methodology calculates the
weighted average based on the value of each investment in
proportion to the total portfolio value i.e. based on the net
present value of their respective future cash flows. Furthermore,
the Group, with the advice of external experts, has considered the
impact of climate change on the value of the investments at FVPL
and has concluded that no valuation adjustment was required.
Discount rate sensitivity
The weighted average discount rate applied to the Company's
portfolio of investments is the single most important judgement and
variable.
The following table shows the sensitivity of the NAV to a change
in the discount rate:
+1% to 7.9% in 2022 -1% to 5.9% in
(i) 2022 (i)
Profit Profit
Effects in thousands of Sterling Equity or loss Equity or loss
31 December 2022 (87,101) (87,101) 100,702 100,702
31 December 2021 (78,057) (78,057) 89,908 89,908
(i) Based on the weighted average discount rate of 6.9 per cent
(31 December 2021: 6.6 per cent).
Inflation has increased in all jurisdictions across BBGI's
geographies and interest rates have risen from historical lows. In
the event long-term interest rates rise substantially further, this
is likely to effect on discount rates, and as a result negatively
impact portfolio valuation.
Combined sensitivity: inflation, deposit rates and discount
rates
It is reasonable to assume that if discount rates increase, then
deposit rates and inflation would also be affected. To illustrate
the effect of this combined movement on the Company's NAV, a
scenario was created assuming a one percentage point increase in
the weighted average discount rate to 7.9 per cent, and a one
percentage point increase in both deposit and inflation above the
macroeconomic assumptions.
+1%
In thousands of Sterling Equity Profit or
loss
31 December 2022 (22,796) (22,796)
31 December 2021 (23,127) (23,127)
Inflation sensitivity
The Company's investments are contractually entitled to receive
availability-style revenue streams from public sector clients,
which are typically adjusted every year for inflation. Facilities
management subcontractors for accommodation investments and
operating and maintenance subcontractors for transport investments
have similar indexation arrangements. The portfolio cash flows are
positively linked with inflation (e.g. RPI, CPI, or a basket of
indices).
This inflation-linkage is achieved through contractual
indexation mechanics in the various project agreements with the
public sector clients at the portfolio companies and the inflation
adjustment updated at least annually.
The table below shows the sensitivity of the NAV to a change in
inflation rates compared to the long-term assumptions in the table
above:
+1% -1%
Profit Profit
Effects in thousands of Sterling Equity or loss Equity or loss
31 December 2022 51,508 51,508 (45,524) (45,524)
31 December 2021 39,499 39,499 (32,622) (32,622)
Short-term inflation sensitivity
It is reasonable to assume that inflation could be elevated for
the short-term before diminishing. To illustrate the effect of
persistent higher short-term inflation on the Company's NAV, three
scenarios were created assuming inflation is two percentage points
above our assumptions for the next one, three and five years.
+2%
In thousands of Sterling Equity Profit or
loss
Inflation +2% for one year 12,008 12,008
Inflation +2% for three years 52,619 52,619
Inflation +2% for five years 65,624 65,624
Foreign exchange sensitivity
As described above, a significant proportion of the Group's
underlying investments are denominated in currencies other than
Sterling.
The following table shows the sensitivity of the NAV, by
applying a change to foreign exchange rates:
Decrease by 10%
Increase by 10% (i) (i)
Profit Profit or
Effects in thousands of Sterling Equity or loss Equity loss
31 December 2022 (23,665) (23,665) 31,488 31,488
31 December 2021 (28,372) (28,372) 31,140 31,140
(i) Sensitivity in comparison to the spot foreign exchange rates
at 31 December 2022 and considering the contractual and natural
hedges in place, derived by applying a 10 per cent increase or
decrease to the Sterling/foreign currency rate.
Deposit rate sensitivity
Portfolio Companies typically have cash deposits that are
required to be maintained as part of the senior debt funding
requirements (e.g. six-month debt service reserve accounts and
maintenance reserve accounts). The total deposits held by the
Portfolio Companies exceed GBP400 million. The asset cash flows are
positively correlated with the deposit rates.
The table below shows the sensitivity of the NAV to a
percentage-point change in long-term deposit rates compared to the
long-term assumptions in the table above:
+1% -1%
Profit or Profit
Effects in thousands of Sterling Equity loss Equity or loss
31 December 2022 20,659 20,659 (20,635) (20,635)
31 December 2021 17,260 17,260 (17,151) (17,151)
Lifecycle costs sensitivity
Lifecycle costs are the cost of planned interventions or
replacing material parts of an asset to maintain it over the
concession term. They involve larger items that are not covered by
routine maintenance and, for roads, it will include items such as
replacement of asphalt, rehabilitation of surfaces, or replacement
of electromechanical equipment. Lifecycle obligations are generally
passed down to the facility maintenance provider, with the
exception of transportation investments, where these obligations
are typically retained by the Portfolio Company.
Of the Group's 56 Investments at FVPL, 20 Investments at FVPL
retain the lifecycle obligations. The remaining 36 investments have
this obligation passed down to the subcontractor.
The table below shows the sensitivity of the NAV to a change in
lifecycle costs:
Increase by 10%(i) Decrease by 10%(i)
Profit Profit or
Effects in thousands of Sterling Equity or loss Equity loss
31 December 2022 (25,956) (25,956) 23,459 23,459
31 December 2021 (19,003) (19,003) 19,580 19,580
(i) Sensitivity applied to the 20 investments in the portfolio
that retain the lifecycle obligation i.e. the obligation is not
passed down to the subcontractor.
Corporate tax rate sensitivity
The profits of each Portfolio Company are subject to corporation
tax in the country where the Portfolio Company is located.
The table below shows the sensitivity of the NAV to a change in
corporate tax rates compared to the assumptions in the table
above
+1% in 2022 -1% in 2021
Profit Profit
In thousands of Sterling Equity or loss Equity or loss
31 December 2022 (11,150) (11,150) 11,011 11,011
31 December 2021 (8,760) (8,760) 8,739 8,739
Refinancing: senior debt rate sensitivity
Assumptions are used where a refinancing of senior debt
financing is required for an investment during the remaining
investment concession term. There is a risk that such assumptions
may not be achieved.
The table below shows the sensitivity of the NAV to a +100bps
adjustment to the forecasted debt rate.
Margin +1%
In thousands of Sterling Equity Profit or
loss
2022 (9,051) (9,051)
2021 (6,321) (6,321)
Derivative financial instruments
The fair value of derivative financial instruments ('foreign
exchange forwards') is calculated by the difference between the
contractual forward rate and the estimated forward exchange rates
at the maturity of the forward contract. The foreign exchange
forwards are fair valued periodically by the counterparty bank. The
fair value of derivative financial instruments as of 31 December
2022 amounted to a net liability of GBP5,808,000 (31 December 2021:
GBP239,000 - net liability). The counterparty bank has an
S&P/Moody's long-term credit rating of A+/A1.
During the year, the Group recognised the following net losses
on derivatives financial instruments at FVPL:
Year ended Year ended
31 December 31 December
In thousands of Sterling 2022 2021
Realised 16,330 1,541
Unrealised 5,569 256
21,899 1,797
19. Subsidiaries
During the year ended 31 December 2022, the Company had the
following consolidated subsidiaries ('Holding Companies' if
referred to individually ) which are included in the consolidated
financial statements:
Company Country of Effective Year
Incorporation Ownership Acquired/
Interest Established
Ultimate
BBGI Global Infrastructure S.A. Luxembourg Parent 2011
BBGI Management HoldCo S.à r. Luxembourg 100% 2011
l. ('MHC')
BBGI Inv, S.à r. l. Luxembourg 100% 2012
BBGI Investments S.C.A. Luxembourg 100% 2012
BBGI Holding Limited UK 100% 2012
BBGI (NI) Limited UK 100% 2013
BBGI (NI) 2 Limited UK 100% 2015
BBGI CanHoldco Inc. Canada 100% 2013
BBGI Guernsey Holding Limited Guernsey 100% 2013
BBGI Ireland Limited Ireland 100% 2017
BBGI US Holding, Inc.(i) US 100% 2021
(i) Dissolved during the year
The Company's subsidiaries which are not consolidated, by virtue
of the Company being an Investment Entity, and are accounted for as
Investments at FVPL, are as follows:
Date
Country Effective Acquired
of
Company Asset Name Incorporation Ownership Controlled
RW Health Partnership Holdings Royal Women's Hospital Australia 100% 2012
Pty Limited
RWH Health Partnership Royal Women's Hospital Australia 100% 2012
Pty Limited
RWH Finance Pty Limited Royal Women's Hospital Australia 100% 2012
Victorian Correctional Victoria Correctional Australia 100% 2012
Infrastructure Partnership Facilities
Pty Limited
BBPI Sentinel Holdings Northern Territory Australia 100% 2014
Pty Limited Secure Facilities
BBPI Sentinel Holding Trust Northern Territory Australia 100% 2014
Secure Facilities
BBPI Sentinel Pty Limited Northern Territory Australia 100% 2014
Secure Facilities
BBPI Member Trust Northern Territory Australia 100% 2014
Secure Facilities
Sentinel Partnership Pty Northern Territory Australia 100% 2014 and
Limited Secure Facilities 2015
Sentinel UJV Northern Territory Australia 100% 2014 and
Secure Facilities 2015
Sentinel Financing Holdings Northern Territory Australia 100% 2014 and
Pty Limited Secure Facilities 2015
Sentinel Financing Pty Northern Territory Australia 100% 2014 and
Limited Secure Facilities 2015
Sentinel Finance Holding Northern Territory Australia 100% 2014 and
Trust Secure Facilities 2015
Sentinel Finance Trust Northern Territory Australia 100% 2014 and
Secure Facilities 2015
BBGI Sentinel Holdings Northern Territory Australia 100% 2015
2 Pty Limited Secure Facilities
BBGI Sentinel Holding Trust Northern Territory Australia 100% 2015
2 Secure Facilities
BBGI Sentinel 2 Pty Limited Northern Territory Australia 100% 2015
Secure Facilities
BBGI Sentinel Trust 2 Northern Territory Australia 100% 2015
Secure Facilities
BBGI Champlain Holding Champlain Bridge Canada 100% 2020
Inc.
BBGI SSLG Partner Inc. Champlain Bridge Canada 100% 2020
Golden Crossing Holdings Golden Ears Bridge Canada 100% 2012 and
Inc. 2013
Golden Crossing Finance Golden Ears Bridge Canada 100% 2012 and
Inc. 2013
Golden Crossing Inc. Golden Ears Bridge Canada 100% 2012 and
2013
Global Infrastructure Limited Golden Ears Bridge Canada 100% 2012 and
Partnership 2013
Golden Crossing General Golden Ears Bridge Canada 100% 2012 and
Partnership 2013
BBGI KVH Holdings Inc. Kelowna and Vernon Canada 100% 2013
Hospitals
BBGI KVH Inc. Kelowna and Vernon Canada 100% 2013
Hospitals
BBGI KVH Holdings 2 Inc. Kelowna and Vernon Canada 100% 2020
Hospitals
BBGI KVH 2 Inc. Kelowna and Vernon Canada 100% 2020
Hospitals
Infusion Health KVH General Kelowna and Vernon Canada 100% 2013 and
Partnership Hospitals 2020
BBGI 104 GP Inc. Highway 104 Canada 100% 2020
WCP Holdings Inc. Women's College Canada 100% 2013
Hospital
WCP Inc. Women's College Canada 100% 2013
Hospital
WCP Investments Inc. Women's College Canada 100% 2013
Hospital
Women's College Partnership Women's College Canada 100% 2013
Hospital
Stoney Trail Group Holdings Northeast Stoney Canada 100% 2013
Inc. Trail
Stoney Trail LP Inc. Northeast Stoney Canada 100% 2013
Trail
Stoney Trail Investments Northeast Stoney Canada 100% 2013
Inc. Trail
Stoney Trail Inc. Northeast Stoney Canada 100% 2013
Trail
Stoney Trail Global Limited Northeast Stoney Canada 100% 2013
Partnership Trail
Stoney Trail General Partnership Northeast Stoney Canada 100% 2013
Trail
BBGI NCP Holdings Inc. North Commuter Canada 100% 2015
Parkway
BBGI Stanton Holdings Inc. Stanton Territorial Canada 100% 2018 and
Hospital 2020
BBGI Stanton Partner 1 Stanton Territorial Canada 100% 2018 and
Inc. Hospital 2020
BBGI Stanton Partner 2 Stanton Territorial Canada 100% 2020
Inc. Hospital
Boreal Health Partnership Stanton Territorial Canada 100% 2018 and
Hospital 2020
PJB Beteiligungs-GmbH Burg Correctional Germany 100% 2012
Facility
Projektgesellschaft Justizvollzug Burg Correctional Germany 90% 2012
Burg GmbH & Co. KG Facility
PJB Management-GmbH Burg Correctional Germany 100% 2012
Facility
Kreishaus Unna Holding Unna Administrative Germany 100% 2012 and
GmbH Center 2020
Projekt- und Betriebsgesellschaft Unna Administrative Germany 90% 2012 and
Kreishaus Unna mbH Center 2020
BBGI PPP Investment S.à A7 Motorway Luxembourg 100% 2018
r.l.
De Groene Schakel Holding Westland Town Hall Netherlands 100% 2018 and
B.V. 2019
De Groene Schakel B.V. Westland Town Hall Netherlands 100% 2018 and
2019
Noaber18 Holding B.V. N18 Motorway Netherlands 52% 2018, 2019
and 2020
Noaber18 B.V. N18 Motorway Netherlands 52% 2018, 2019
and 2020
Agder OPS Vegselskap AS E18 Motorway Norway 100% 2013 and
2014
Bedford Education Partnership Bedford Schools UK 100% 2012
Holdings Limited
Bedford Education Partnership Bedford Schools UK 100% 2012
Limited
Lisburn Education Partnership Lisburn College UK 100% 2012
(Holdings) Limited
Lisburn Education Partnership Lisburn College UK 100% 2012
Limited
Clackmannanshire Schools Clackmannanshire UK 100% 2012
Education Partnership (Holdings) Schools
Limited
Clackmannanshire Schools Clackmannanshire UK 100% 2012
Education Partnership Limited Schools
Primaria (Barking & Havering) Barking, Dagenham UK 100% 2012
Limited & Havering Clinics
(LIFT)
Barking Dagenham Havering Barking, Dagenham UK 60% 2012
Community Ventures Limited & Havering Clinics
(LIFT)
Barking & Havering LIFT Barking, Dagenham UK 60% 2012
(Midco) Limited & Havering Clinics
(LIFT)
Barking & Havering LIFT Barking, Dagenham UK 60% 2012
Company (No.1) Limited & Havering Clinics
(LIFT)
Scottish Borders Education Scottish Borders UK 100% 2012
Partnership (Holdings) Schools
Limited
Scottish Borders Education Scottish Borders UK 100% 2012
Partnership Limited Schools
Coventry Education Partnership Coventry Schools UK 100% 2012
Holdings Limited
Coventry Education Partnership Coventry Schools UK 100% 2012
Limited
Fire Support (SSFR) Holdings Stoke & Staffs UK 85% 2012
Limited Rescue Service
Fire Support (SSFR) Limited Stoke & Staffs UK 85% 2012
Rescue Service
Highway Management M80 M80 Motorway UK 100% 2012
Topco Limited
Tor Bank School Education Tor Bank School UK 100% 2013
Partnership (Holdings)
Limited
Tor Bank School Education Tor Bank School UK 100% 2013
Partnership Limited
Mersey Care Development Mersey Care Hospital UK 100% 2013 and
Company 1 Limited (LIFT) 2014
MG Bridge Investments Limited Mersey Gateway UK 100% 2014
Bridge
Lagan College Education Lagan College UK 100% 2014
Partnership (Holdings)
Limited
Lagan College Education Lagan College UK 100% 2014
Partnership Limited
Highway Management (City) M1 Westlink UK 100% 2014
Holding Limited
GB Consortium 1 Limited North London Estates UK 100% 2012, 2014
Partnership (LIFT) and 2018
and
Liverpool and Sefton
Clinics (LIFT)
East Down Education Partnership East Down Colleges UK 100% 2012 and
(Holdings) Limited 2018
East Down Education Partnership East Down Colleges UK 100% 2012 and
Limited 2018
Highway Management (City) M1 Westlink UK 100% 2014
Finance Plc
Highway Management (City) M1 Westlink UK 100% 2014
Limited
Blue Light Partnership Avon and Somerset UK 100% 2014 and
(ASP) NewCo Limited (i) Police HQ 2016
Blue Light Partnership Avon and Somerset UK 100% 2014, 2015
(ASP) Holdings Limited Police HQ and 2016
Blue Light Partnership Avon and Somerset UK 100% 2015
(ASP) NewCo 2 (i) Limited Police HQ
GT ASP Limited (i) Avon and Somerset UK 100% 2015
Police HQ
Blue Light Partnership Avon and Somerset UK 100% 2014, 2015
(ASP) Limited Police HQ and 2016
Northwin Limited North West Regional UK 100% 2015
College
Northwin (Intermediate) Belfast Metropolitan UK 100% 2016
(Belfast) Limited College
Northwin (Belfast) Limited Belfast Metropolitan UK 100% 2016
College
Folera TH Holdings Limited Poplar Affordable Jersey 100% 2021
Housing & Recreational
Centres
Folera Limited Poplar Affordable Jersey 100% 2021
Housing & Recreational
Centres
Woodland View Holdings Ayrshire and Arran UK 100% 2021
Co Limited Hospital
Woodland View Intermediate Ayrshire and Arran UK 100% 2021
Co Limited Hospital
Woodland View Project Co Ayrshire and Arran UK 99% 2021
Limited Hospital
Fire and Rescue NW Holdings North West Fire UK 100% 2021
Limited and Rescue
Fire and Rescue NW Intermediate North West Fire UK 100% 2021
Limited and Rescue
Fire and Rescue NW Limited North West Fire UK 100% 2021
and Rescue
BBGI East End Holdings Ohio River Bridges US 100% 2014
Inc.
(i) in the process of liquidation
20. Related parties and key contracts
All transactions with related parties were undertaken on an
arm's length basis.
Supervisory Board fees
The members of the Supervisory Board of the Company were
entitled to total fees of GBP260,000 for the year ended 31 December
2022 (2021: GBP220,000).
Directors' shareholding in the Company
31 December 31 December
In thousands of shares 2022 2021
Management Board
Duncan Ball 871 636
Frank Schramm 829 600
Michael Denny 504 412
Supervisory Board
Andrew Sykes 40 -
Sarah Whitney 39 39
June Aitken 31 -
Christopher Waples 17 17
2,331 1,704
Remuneration of the Management Board
The Management Board members are entitled to a fixed
remuneration under their contracts and are also entitled to
participate in a short-term incentive plan and a long-term
incentive plan. Compensation under their contracts is reviewed
annually by the Remuneration Committee.
The total short-term and other long-term benefits recorded in
the consolidated income statement for the Management Board, as the
key management personnel, are as follo ws:
Year ended Year ended
31 December 31 December
In thousands of Sterling 2022 2021
Short-term benefits 2,944 2,769
Share-based payments 1,536 1,224
4,480 3,993
Trade and other receivables
As at 31 December 2022, trade and other receivables include
short-term receivables from non-consolidated subsidiaries amounting
to GBP909,000 (2021: GBP1,024,000 ).
21. Share-based compensation
Each of the members of the Management Board received award
letters ('2021 Award', '2020 Award', and '2019 Award', respectively
and referred collectively as 'Awards') under the Group's long-term
incentive plan. These Awards are to be settled by MHC in the
Company's own shares. The Awards vest by reference to a combination
of performance measures linked to the Company's Total Shareholder
Return ('TSR condition'), increase in the Company's Investment
Basis NAV per share ('NAV condition') and decrease in Corporate
Greenhouse Gas Emissions ('GHG') over the Return Periods.
2019 Award
For 2019 awards, 50 per cent of the performance target will be
subject to stretching NAV Total Return and 50 per cent to the Total
Shareholder Return ('TSR') targets, over a three-year period.
2020 Award
For 2020 awards, 100 per cent of the performance target will be
subject to stretching NAV Total Return targets over a three-year
period.
Performance metric Threshold performance Target performance Maximum performance
NAV Total return Dividend of 7.18p Dividend growth of Dividend growth
(100% weighting) per annum 2% per annum of 2% per annum
to 2023, and NAV to 2023; and 1% per to 2023; and 2%
per share annum NAV per share per annum NAV
maintained from 31 growth to 31 December per share growth
December 2023. to 31 December
2020 to 31 December 2023.
2023.
2021 Award
For 2021 awards, 90 per cent of the performance target will be
subject to stretching NAV Total Return targets over a three-year
period.
10 per cent. of the award will be linked to a reduction in
corporate GHG emissions (Scope 1, 2 & 3) (against a 2019
baseline), a key climate related ESG metric linked to BBGI's Net
Zero Plan.
Performance metric Threshold performance Target performance Maximum performance
NAV Total return Dividend of 7.33p Dividend growth of Dividend growth of
(90% weighting) per 2% per 2% per
annum to 2024, and annum to 2024; and annum to 2024; and
NAV 1% per 2% per
per share maintained annum NAV per share annum NAV per share
from growth growth to 31 December
31 December 2021 to 31 December 2024. 2024.
to 31
December 2024.
ESG - % Corporate GHG emissions as % of 2019 baseline (at 31 December
GHG emissions 2024)
(Scope 1, 2 &
3)
(10% weighting) 77% 75% 72%
The fair value of the equity instruments awarded to the
Management Board was determined using the following key
parameters:
2021 Award 2020 Award 2019 Award
Share price at grant date GBP 1.760 GBP 1.700 GBP 1.675
Maturity 3 years 3 years 3 years
Annual target dividend (2024) GBP0.0771 - -
Annual target dividend (2023) GBP0.0755 GBP0.0733 -
Annual target dividend (2022) GBP0.0741 - -
Annual target dividend (2020) - - GBP0.0718
Annual target dividends (2021 GBP0.0733 GBP0.0733 GBP0.0733
to 2022)
Volatility n/a n/a 11%
Risk free rate Between 0.38% Between -0.11% Between 0.53% and
and and
0.68% -0.05% 0.60%
The expected volatility under the 2019 awards reflects the
assumption that the historical volatility over a period similar to
the life of the plan is indicative of future trends, which may not
necessarily be the actual outcome.
The Group has issued restricted share awards to selected
employees. The restricted share award entitles the employee to a
right to receive shares in the Company upon meeting a service
condition.
The fair value of the awards and amounts recognised as
additional paid in capital in the Group's consolidated statement of
financial position are as follows:
31 December 31 December
In thousands of Sterling 2022 2021
2021 Award 354 -
2020 Award 691 345
2019 Award 445 297
2018 Award - 472
Deferred STIP 708 616
Staff Award Plan 304 103
Amount recognised in additional paid-in capital 2,502 1,833
During the year ended 31 December 2022, the 2018 Award vested,
resulting in a gross entitlement before tax, of 636,281. A portion
of the 2018 Award was settled in cash in order to realise
sufficient funds to settle resulting tax liabilities arising from
the vesting, with only the net number of shares being issued to
each individual. The total accrued amount under the 2018 Award as
at 31 December 2021 was GBP472,000. This amount was transferred
from Additional paid in capital to Share capital at the settlement
date plus an adjustment of GBP28,000 for the non-market based
performance condition.
The share-based compensation expenses amount recognised as part
of 'administrative expenses' in the Group's consolidated income
statement are as follows:
Year ended Year ended
31 December 31 December
In thousands of Sterling 2022 2021
2021 Award 354 -
2020 Award 345 345
2019 Award 148 148
2018 Award (28) 157
2017 Award - 25
Deferred STIP 718 607
Staff Award Plan 200 79
Amount recognised in administrative expenses 1,737 1,361
Deferred STIP
O ne-third of any bonus earned under the STIP is being deferred
into shares for three year holding period. The deferral component
of the STIP differs from the Company's share-based compensation in
that there are no further vesting conditions on this earned
bonus.
The Deferred STIP is valued at one-third of the anticipated
outcome of the annual bonus for the Management Board. The total
value of the Deferred STIP as at 31 December 2022 was GBP708,000
(31 December 2021: GBP616,000).
22. Commitments and contingencies
The Group has engaged, in the ordinary course of business, the
services of certain entities to provide legal, custodian, audit,
tax and other services to the Company. The expenses incurred in
relation to such are treated as legal and professional fees under
the administrative expenses grouping in the consolidated income
statement.
As at 31 December 2022, the Group had utilised GBP1.3 million
(31 December 2021: GBP1.2 million) of the GBP230 million RCF to
cover letters of credit. Refer to Note 15 for further details on
the RCF.
The BBGI Luxembourg office is leased under a cancellable
operating lease agreement. The expenses incurred in relation to
such lease are recognised as office and other expenses under
administrative expenses (see Note 6).
23. Service Concession Agreements
As at 31 December 2022, the Group has a portfolio of 56 assets
(see Note 9), with a weighted average portfolio life of 20.2 years.
The Group has a diverse asset mix from which the service concession
receivables are derived. All assets are availability-style. The
rights of both the concession provider and concession operator are
stated within the specific asset agreement.
The following table summarises the main information about the
Group's outstanding service concession agreements, which are all
classified as availability-style social infrastructure:
Period of Concession
% Equity (Operational Phase)
Asset Name Owned Short Description of Concession Phase Start End
Arrangement Date Date
Kicking Horse 50% Design, build, finance and Operational September October
Canyon operate a 26-km stretch of 2007 2030
the Trans-Canada Highway, a
vital gateway to British Columbia
.
Golden Ears 100% Design, build, finance and Operational June 2009 June
Bridge operate the Golden Ears Bridge 2041
that spans the Fraser River
and connects Maple Ridge and
Pitt Meadows to Langley and
Surrey, near Vancouver, British
Columbia.
Northwest 50% Partly design, build, finance Operational November October
Anthony and operate a major transport 2011 2041
Henday Drive infrastructure asset in Canada,
a ring road through Edmonton,
capital of the province of
Alberta.
M80 Motorway 50% Design, build, finance and Operational July 2011 September
operate 18 km of dual two/three 2041
lane motorway with associated
slip roads and infrastructure
from Stepps in North Lanarkshire
to Haggs in Falkirk (Scotland).
E18 Motorway 100% Design, build, finance, operate Operational August August
and maintain a 38 km dual carriageway 2009 2034
in Norway, including 75 bridges
and structures and 75 km of
secondary roads, carving through
a rugged and beautiful landscape
between Grimstad and Kristiansand.
Northeast 100% Design, build, finance, operate Operational November October
Stoney Trail and maintain a 21 km section 2009 2039
of highway, forming part of
a larger ring road developed
in Calgary, Alberta, Canada.
Ohio River 67% Design, build, finance, operate Operational December December
Bridges and maintain East End Bridge 2016 2051
asset which includes a cable-stay
bridge, a tunnel and the connecting
highway with a total length
of 8 miles crossing the Ohio
river in the greater Louisville-Southern
Indiana region.
Mersey Gateway 38% Design, build, finance, operate Operational October March
Bridge and maintain a new circa 1-km 2017 2044
long six-lane toll cable-stay
bridge (three towers) over
the Mersey river to relieve
the congested and ageing Silver
Jubilee Bridge and upgrading
works for 9.5 km of existing
roads and associated structures.
M1 Westlink 100% Design, build, finance, operate Operational February October
and maintain with significant 2006 2036
amount of construction work
completed in 2009 to upgrade
key sections of approx. 60
km of motorway through Belfast
and its vicinity, including
O&M of the complete motorway.
North Commuter 50% Design, build, finance, operate Operational October September
Parkway and maintain two new arterial 2018 2048
roadways and a new river crossing
located in the north area of
Saskatoon, Saskatchewan, Canada,
and design, construct, finance,
operate and maintain a replacement
river crossing located in Saskatoon's
downtown core.
Canada Line 27% Design, build, finance, operate Operational August July
and maintain a 19km rapid transit 2009 2040
line connecting the cities
of Vancouver and Richmond with
Vancouver International Airport
in British Columbia, Canada.
Southeast 40% Design, build, finance, operate Operational November September
Stoney Trail and maintain a 25km section 2013 2043
of highway, forming part of
a larger ring road developed
in Calgary, Alberta, Canada.
William R. 80% Design, build, finance, operate Operational May 2008 June
Bennett Bridge and maintain a 1.1km long floating 2035
bridge in Kelowna, British
Columbia, Canada.
A1/A6 Motorway 37% Design, build finance operate Operational July 2017 June
and maintain the enlargement 2042
of the A1/A6 in the Netherlands,
which involves the reconstruction
and widening of this 2x5 lanes
motorway plus 2 reversible
direction lanes. The asset
involves some 90 engineering
structures.
N18 Motorway 52% Design, build, finance operate Operational April 2018 April
and maintain the extension 2043
of the N18 motorway between
Varsseveld and Enschede in
the eastern part of the Netherlands.
It comprises of 15 km of existing
and 27km of a new 2x2-lane
motorway with more than 30
ecological passages, aiming
at a reduction in traffic in
certain villages and safety
improvement.
Highway 104 50% Design, build, finance, operate Construction May 2020 August
and maintain PPP following 2043
completion of construction.
The project consists of the
construction of a four-lane
divided highway corridor beginning
at the end of the existing
divided highway east of New
Glasgow near Exit 27 at Sutherlands
River and running for a distance
of approximately 38km to the
existing divided highway just
west of the Addington Fork
Interchange (Exit 31) at Antigonish.
Champlain 25% Design, construction, financing, Operational December October
Bridge operation, maintenance and 2020 2049
rehabilitation of a new bridge
spanning the St. Lawrence River
between Montreal and Brossard,
Quebec.
Victoria Correctional 100% Design, build, finance, operate, Operational March 2006 May 2031
Facilities and maintain for a period of (MRC)/February
25 years, two new correctional 2006 (MCC)
facilities for the State of
Victoria, Australia (MCC and
MRC).
Burg Correctional 90% Design, build, finance, operate, Operational May 2009 April
Facility and maintain for a concession 2034
period of 25 years, a new correctional
facility for the state of Saxony-Anhalt,
Germany.
Avon and Somerset 100% Design, build, finance, operate Operational July 2014/July March
Police HQ and maintain four new build 2015 2039
police and custody facilities
in the Avon and Somerset region
(UK).
Northern Territory 100% Design, build, finance, operate Operational November June
Secure Facilities and maintain a new correctional 2014 2044
facility, located near Darwin,
including three separate centres
of the 1,048 bed multi-classification
men's and women's correctional
centre and 24-bed Complex Behaviour
Unit.
Bedford Schools 100% Design, build, finance, operate Operational June 2006 December
and maintain the redevelopment 2035
of two secondary schools in
the County of Bedfordshire.
Coventry Schools 100% Design, build, finance, operate Operational In stages December
and maintain one new school from March 2034
and community facilities for 2006 to
the Coventry City Council. June 2009
Kent Schools 50% Design, build, finance, operate Operational June 2007 September
and maintain the redevelopment, 2035
which included the construction
of new build elements for each
academy as well as extensive
reconfiguration and refurbishment
of six academies.
Scottish Borders 100% Design, build, finance, operate Operational July 2009 November
Schools and maintain three new secondary 2038
schools
for Scottish Borders Council.
Clackmannanshire 100% Design, build, finance, operate Operational In stages March
Schools and maintain the redevelopment from January 2039
of three secondary schools to May
in Clackmannanshire, Scotland. 2009
East Down 100% Design, build, finance, operate Operational June 2009 May 2036
Colleges and maintain the three East
Down Colleges campuses in Northern
Ireland
Lisburn College 100% Design, build, finance, operate Operational April 2010 May 2036
and maintain Lisburn College
in Northern Ireland.
Tor Bank School 100% Design, build, finance, operate Operational October October
and maintain a new school for 2012 2037
pupils with special education
needs in Northern Ireland.
Lagan College 100% Design, build, finance operate Operational October June
and maintain the redevelopment 2013 2038
of Lagan College in Northern
Ireland.
Cologne Schools 50% Design, build, finance operate Operational April 2005 December
and maintain the redevelopment 2029
of five schools in Cologne.
Rodenkirchen 50% Design, build, finance operate Operational November November
Schools and maintain a school for approx. 2007 2034
1200 pupils in Cologne.
Frankfurt 50% Design, build, finance operate Operational August July
Schools and maintain the redevelopment 2007 2029
of four schools in Frankfurt.
North West 100% Design, build, finance, operate Operational February January
Regional College and maintain the North West 2001 2026
Regional College educational
campus in Northern Ireland
Belfast Metropolitan 100% Design, build, finance, operate Operational September August
College and maintain the Belfast Metropolitan 2002 2027
educational campus in Northern
Ireland
Westland Town 100% Design, build, finance, operate Operational August August
Hall and maintain Westland Town 2017 2042
Hall, a PPP accommodation asset
consisting of a new approximately
11,000m(2) town hall for the
Dutch Municipality of Westland.
Gloucester 50% Design, build, finance, operate Operational April 2005 February
Royal Hospital and maintain a hospital scheme 2034
in Gloucester, UK.
Liverpool 60% Design, build, finance, operate Operational In 7 tranches In 7
and Sefton and maintain the primary healthcare starting tranches
Clinics (LIFT) facilities in Liverpool and April 2005 starting
Sefton, UK. and ending April
February 2033
2013 and ending
February
2043
North London 60% Design, build, finance, operate Operational In 4 tranches In 4
Estates Partnership and maintain the primary healthcare starting tranches
(LIFT) facilities of the Barnet, Enfield February starting
and Haringey LIFT programme, 2006 and October
UK. ending 2030
June 2013 and ending
June
2043
Barking Dagenham 60% Design, build, finance, operate Operational In 3 tranches In 3
& Havering and maintain 10 facilities/clinics starting tranches
(LIFT) in East London, UK with asset October starting
construction completions between 2005 and September
2005 and 2009. ending 2030
October and ending
2008 September
2033
Royal Women's 100% Design, build, finance, operate Operational June 2008 June
Hospital and maintain a new nine-storey 2033
Royal Women's Hospital in Melbourne.
Mersey Care 80% Design, build, finance, operate Operational December December
Hospital (part and maintain a new mental health 2014 2044
of Liverpool in-patient facility on the
Sefton Clinics former Walton hospital site
(LIFT) above) in Liverpool, UK.
Kelowna and 100% Design, build, finance, operate Operational January August
Vernon Hospital and maintain a new Patient 2012 2042
Care Tower, a new University
of British Columbia Okanagan
Clinical Academic Campus and
car park at Kelowna General
Hospital, and a new Patient
Care Tower at Vernon Jubilee
Hospital.
Women's College 100% Design, build, finance, operate Operational May 2013 May 2043
Hospital and maintain the new Women's (Phase
College Hospital in Toronto, 1), September
Ontario, Canada. 2015 (Phase
2),
March 2016
(final
completion).
Restigouche 80% Design, build, finance, operate Operational June 2015 October
Hospital Centre and maintain the new Psychiatric 2044
Care Centre in Restigouche,
New Brunswick, Canada.
McGill University 40% Design, build, finance, operate Operational October September
Health Centre and maintain the new McGill 2014 2044
University Health Centre, Montreal,
Canada.
Stanton Territorial 100% Design, build, finance, operate Operational December October
Hospital and maintain the new Stanton 2018 2048
Territorial Hospital, Yellowknife,
Northwest Territories, Canada.
Stoke & Staffs 85% Design, build, finance, operate Operational November October
Rescue Service and maintain 10 new community 2011 2036
fire stations in Stoke-on-Trent
and Staffordshire, UK.
Unna Administrative 90% Design, build, finance, operate Operational July 2006 July
Centre and maintain the administration 2031
building of the Unna District
in Rhine-Westphalia, Germany.
Fürst 50% Design, build, finance, operate Operational March 2008 March
Wrede Military and maintain the 2028
Base refurbishment and new construction
of a 32 hectare army barracks
in Munich, Germany.
Poplar Affordable 100% Design, construction, financing, Operational October July
Housing & operation, maintenance and 2015 2051
Recreational rehabilitation of separate
Centres buildings.
Aberdeen Western 33% Design, construction, financing, Operational May 2018 November
Peripheral operations and maintenance 2047
Route of 12 km of the existing roadway
(upgraded) and 47 km of new
dual carriageway including
two significant river crossings.
Ayrshire and 100% Design, construction, financing Operational March 2016 March
Arran Hospital and maintenance of a 206-bed 2041
acute mental health facility
and community hospital in Irvine,
North Ayrshire, Scotland.
North West 100% Design, construction, financing, Operational June 2013 July
Fire and Rescue maintenance and rehabilitation 2038
of 16 new community fire stations
in the North West of England.
John Hart 80.0% Design, construction, financing, Operational June 2019 October
Generating maintenance and rehabilitation 2033
Station of a new three-turbine, 132-MW
hydroelectric power generation
station on the Campbell River,
British Columbia, including
a 3 generating unit underground
powerhouse, 2.1 kilometers
of water passage tunnels and
a water bypass system to protect
downstream fish habitat.
A7 Motorway 49.0% Expansions and upgrades to Operational December August
certain critical sections of 2019 2044
the A7 motorway and consists
of the design, construction,
financing, operation, maintenance
and rehabilitation of 65 km
widening from four to six lanes
of a section of the A7 motorway
between Bordesholm and Hamburg.
The project includes 11 interchanges,
six parking facilities, four
rest areas, 79 civil engineering
structures, c. 100,000 m2 noise
barriers and a c. 550-metre
noise enclosure tunnel.
24. Standards issued but not yet effective
A number of new standards and amendments to standards are
effective for annual periods beginning after 1 January 2023 and
earlier application is permitted; however, the Group has not early
adopted any of the forthcoming new or amended standards in
preparing these financial statements. The Group intends to adopt
these new and amended standards, if applicable, when they become
effective. The adoption of the below news standards are not
expected to have a significant impact on the Group's financial
statements.
Amendments to IAS 1 Presentation of Financial Statements and
IFRS Practice Statement 2: Disclosure of Accounting policies
The amendments aim to help entities provide accounting policy
disclosures that are more useful by replacing the requirement for
entities to disclose their 'significant' accounting policies with a
requirement to disclose their 'material' accounting policies and
adding guidance on how entities apply the concept of materiality in
making decisions about accounting policy disclosures.
Amendments to IAS 1: Classification of Liabilities as Current or
Non-current
The amendments specify the requirements for classifying
liabilities as current or non-current and clarify:
-- What is meant by a right to defer settlement
-- That a right to defer must exist at the end of the reporting
period
-- That classification is unaffected by the likelihood that an
entity will exercise its deferral right
-- That only if an embedded derivative in a convertible
liability is itself an equity instrument would the terms
of a liability not impact its classification
The amendments are effective for annual reporting periods
beginning on or after 1 January 2023 and must
be applied retrospectively.
Definition of Accounting Estimates - Amendments to IAS 8
The amendments introduce a definition of 'accounting estimates'
and clarify the distinction between changes in accounting estimates
and changes in accounting policies and the correction of errors.
Also, they clarify how entities use measurement techniques and
inputs to develop accounting estimates.
Amendments to IAS 1: Classification of Liabilities as Current or
Non-current
The amendments specify the requirements for classifying
liabilities as current or non-current and clarify:
-- What is meant by a right to defer settlement
-- That a right to defer must exist at the end of the reporting
period
-- That classification is unaffected by the likelihood that an
entity will exercise its deferral right
-- That only if an embedded derivative in a convertible
liability is itself an equity instrument would the terms
of a liability not impact its classification
The amendments are effective for annual reporting periods
beginning on or after 1 January 2023 and must
be applied retrospectively.
25. Events after the end of the reporting period
Dividend declaration
In February 2023, the Company declared a 2(nd) interim dividend
of 3.74 pence per share with scrip alternative for qualifying
shareholders for the period 1 July - 31 December 2022. The dividend
is expected to be paid in April 2023.
Grant of Share Awards under LTIP
In February 2023, each of the members of the Management Board
received an award letter ('2022 Award'). The maximum number of
shares that could be issued under this award was determined by
using the average closing price of the Company's share price during
December 2022, as ascertained from the Official List, which was
156.46 pence per share. Subject to the achievement of the
performance conditions, the awards will vest after 31 December
2025.
AUDIT REPORT
To the Shareholders
BBGI Global Infrastructure S.A.
Our opinion
In our opinion, the accompanying financial statements give a
true and fair view of the financial position of BBGI Global
Infrastructure S.A. (the "Company") as at 31 December 2022, and of
its financial performance and its cash flows for the year then
ended in accordance with International Financial Reporting
Standards (IFRSs) as adopted by the European Union.
What we have audited
The Company's financial statements comprise:
-- the statement of financial position as at 31 December 2022;
-- the statement of comprehensive income for the year then ended;
-- the statement of changes in equity for the year then ended;
-- the statement of cash flows for the year then ended; and
-- the notes to the financial statements, which include a
summary of significant accounting policies.
Basis for opinion
We conducted our audit in accordance with the Law of 23 July
2016 on the audit profession (Law of 23 July 2016) and with
International Standards on Auditing (ISAs) as adopted for
Luxembourg by the "Commission de Surveillance du Secteur Financier"
(CSSF). Our responsibilities under the Law of 23 July 2016 and ISAs
as adopted for Luxembourg by the CSSF are further described in the
"Responsibilities of the "Réviseur d'entreprises agréé" for the
audit of the financial statements" section of our report.
We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our opinion.
We are independent of the Company in accordance with the
International Code of Ethics for Professional Accountants,
including International Independence Standards, issued by the
International Ethics Standards Board for Accountants (IESBA Code)
as adopted for Luxembourg by the CSSF together with the ethical
requirements that are relevant to our audit of the financial
statements. We have fulfilled our other ethical responsibilities
under those ethical requirements.
Key audit matters
Key audit matters are those matters that, in our professional
judgment, were of most significance in our audit of the financial
statements of the current period. These matters were addressed in
the context of our audit of the financial statements as a whole,
and in forming our opinion thereon, and we do not provide a
separate opinion on these matters.
Key audit matter How our audit addressed the key audit
matter
Impairment of Investment In assessing the impairment of investment
in subsidiary and loans in subsidiary and loans receivable from
receivable from subsidiary: subsidiary, we performed the procedures
outlined below.
Refer to the financial We assessed that the accounting policy
statements (Note 3.e), in relation with the impairment of the
impairment testing for investment in subsidiary and loans receivable
investments and loans from subsidiary was in compliance with
and receivables from the applicable accounting framework.
subsidiary; Note 13 and We understood and evaluated the design
Note 14). and implementation of key controls in
Investment in subsidiary place around the impairment of the investment
and loan receivables in subsidiary and loans receivable from
from subsidiary are measured subsidiary.
at cost less accumulated We obtained the management's impairment
impairment losses. Their assessment of the investment in subsidiary
carrying amounts are and loans receivable from subsidiary
GBP 243 million and GBP and performed an overall assessment
354 million, respectively, to challenge the criteria and inputs
and they are the most used in the impairment analysis, as
significant balances well as the assumptions and models used
on the statement of financial to calculate the ECL ;
position. In addition, considering that the impairment
The impairment assessment of the investment in subsidiary and
of the investment in loans receivable from subsidiary is
the subsidiary and the linked to the fair value of the underlying
determination of expected investments, we obtained substantive
credit loss (ECL) for audit evidence over the valuation of
loans receivable from the underlying investments as follows:
subsidiary is linked * We tested key controls performed in the valuation
to the fair value of process of investments in relation to the financial
the underlying investments data included in the valuation models, the "look
which are mainly made back" comparison of the forecast vs actual cash flows
of social infrastructure for the previous financial year, as well as other
investments through public investment model review controls.
private partnership and/or
public finance initiatives
or similar procurement * We inquired into the qualification of Management
models ("investments") Board and its internal valuation team and concluded
generating long-term that they have sufficient experience and expertise.
predictable cash flows.
The valuation of the * We obtained the overall fair value reconciliation of
nvestments is determined opening to closing fair value of the underlying
using the discounted investments and corroborated significant fair value
cash flow methodology. movements during the year, thereby assessing the
It relies on significant reasonableness and completeness of the movement for
unobservable inputs and the year.
requires significant
judgments from the Management
Board. A small change * With the support of our own valuation experts, we
in these assumptions assessed that the Group's valuation methodology was
could result in a significant in compliance with the International Private Equity
impact on the fair value and Venture Capital Valuation Guidelines and market
of the investments. As practice based on our knowledge of the investments
a consequence, there held by the Group and experience of the industry in
is an inherent risk that which the Group operates.
the fair value of these
investments may not be
appropriate. * For a sample of assets selected via risk and
Taking this into account, value-based targeted sampling of the investments by
coupled with the magnitude value, we assessed that the key macroeconomic
of the amounts involved, assumptions such as inflation, deposit rates,
we consider this area corporate tax rates, base discount rate setting were
as a key audit matter. appropriate and/or within acceptable ranges based on
market search. We also checked that the selected
asset specific discount rates were within acceptable
ranges.
* We obtained and read the valuation report prepared by
Management's external valuation experts which
confirmed that the portfolio value prepared by the
Management Board was appropriate.
* Finally, for the entire portfolio, we obtained
external confirmation over the existence and
percentage of ownership of the investments held by
the Group.
Other information
The Management Board is responsible for the other information.
The other information comprises the information stated in the
annual report but does not include the financial statements and our
audit report thereon.
Our opinion on the financial statements does not cover the other
information and we do not express any form of assurance conclusion
thereon.
In connection with our audit of the financial statements, our
responsibility is to read the other information identified above
and, in doing so, consider whether the other information is
materially inconsistent with the financial statements or our
knowledge obtained in the audit, or otherwise appears to be
materially misstated. If, based on the work we have performed, we
conclude that there is a material misstatement of this other
information, we are required to report that fact. We have nothing
to report in this regard.
Responsibilities of the Management Board and those charged with
governance for the financial statements
The Management Board is responsible for the preparation and fair
presentation of the financial statements in accordance with IFRSs
as adopted by the European Union, and for such internal control as
the Management Board determines is necessary to enable the
preparation of financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the financial statements, the Management Board is
responsible for assessing the Company's ability to continue as a
going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the
Management Board either intends to liquidate the Company or to
cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the
Company's financial reporting process.
Responsibilities of the "Réviseur d'entreprises agréé" for the
audit of the financial statements
The objectives of our audit are to obtain reasonable assurance
about whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to issue
an audit report that includes our opinion. Reasonable assurance is
a high level of assurance, but is not a guarantee that an audit
conducted in accordance with the Law of 23 July 2016 and with ISAs
as adopted for Luxembourg by the CSSF will always detect a material
misstatement when it exists. Misstatements can arise from fraud or
error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these financial
statements.
As part of an audit in accordance with the Law of 23 July 2016
and with ISAs as adopted for Luxembourg by the CSSF, we exercise
professional judgment and maintain professional scepticism
throughout the audit. We also:
-- identify and assess the risks of material misstatement of the
financial statements, whether due to fraud or error, design and
perform audit procedures responsive to those risks, and obtain
audit evidence that is sufficient and appropriate to provide a
basis for our opinion. The risk of not detecting a material
misstatement resulting from fraud is higher than for one resulting
from error, as fraud may involve collusion, forgery, intentional
omissions, misrepresentations, or the override of internal
control;
-- obtain an understanding of internal control relevant to the
audit in order to design audit procedures that are appropriate in
the circumstances, but not for the purpose of expressing an opinion
on the effectiveness of the Company's internal control;
-- evaluate the appropriateness of accounting policies used and
the reasonableness of accounting estimates and related disclosures
made by the Management Board;
-- conclude on the appropriateness of the Management Board 's
use of the going concern basis of accounting and, based on the
audit evidence obtained, whether a material uncertainty exists
related to events or conditions that may cast significant doubt on
the Company's ability to continue as a going concern. If we
conclude that a material uncertainty exists, we are required to
draw attention in our audit report to the related disclosures in
the financial statements or, if such disclosures are inadequate, to
modify our opinion. Our conclusions are based on the audit evidence
obtained up to the date of our audit report. However, future events
or conditions may cause the Company to cease to continue as a going
concern;
-- evaluate the overall presentation, structure and content of
the financial statements, including the disclosures, and whether
the financial statements represent the underlying transactions and
events in a manner that achieves fair presentation.
We communicate with those charged with governance regarding,
among other matters, the planned scope and timing of the audit and
significant audit findings, including any significant deficiencies
in internal control that we identify during our audit.
We also provide those charged with governance with a statement
that we have complied with relevant ethical requirements regarding
independence, and communicate to them all relationships and other
matters that may reasonably be thought to bear on our independence,
and where applicable, actions taken to eliminate threats or
safeguards applied.
From the matters communicated with those charged with
governance, we determine those matters that were of most
significance in the audit of the financial statements of the
current period and are therefore the key audit matters. We describe
these matters in our audit report unless law or regulation
precludes public disclosure about the matter or when, in extremely
rare circumstances, we determine that a matter should not be
communicated in our report because the adverse consequences of
doing so would reasonably be expected to outweigh the public
interest benefits of such communication.
Report on other legal and regulatory requirements
The annual report is consistent with the financial statements
and has been prepared in accordance with applicable legal
requirements.
We have been appointed as "réviseur d'entreprises agréé" by the
General Meeting of the Shareholders on 28 March 2022 and the
duration of our uninterrupted engagement, including previous
renewals and reappointments, is one year.
PricewaterhouseCoopers, Société Luxembourg, 29 March 2023
coopérative
Represented by
Emanuela Sardi
Company Statement of Comprehensive Income
for the year ended 31 December 2022
In thousands of Sterling Notes 2022 2021
Administrative expenses 5 (11,617) (9,498)
Other operating expenses 6 (22,748) (12,611)
Other operating income 7 4,883 -
Results from operating activities (29,482) (22,109)
Net finance result 8 21,496 20,118
Loss before tax (7,986) (1,991)
Tax expense 9 (515) (459)
Loss for the year (8,501) (2,450)
Other comprehensive income for the year - -
Total comprehensive loss for the year (8,501) (2,450)
The accompanying notes form an integral part of the Company's
financial statements
Company Statement of Financial Position
as at 31 December 2022
In thousands of Sterling Notes 2022 2021
Assets
Property and equipment 73 7
Loans receivable from subsidiary 13 243,212 243,638
Investment in subsidiary 14 354,233 350,453
Non-current assets 597,518 594,098
Loans receivable from subsidiary 13 37,663 91,968
Interest and other receivables from subsidiary 13 11,164 8,760
Other current assets 733 325
Cash and cash equivalents 10 18,738 11,311
Current assets 68,298 112,364
Total assets 665,816 706,462
Equity
Share capital 11 852,391 850,355
Retained earnings (222,400) (161,124)
Equity attributable to the owners of the Company 629,991 689,231
Liabilities
Trade and other payables 1,200 1,125
Advances from subsidiary 13 34,496 15,990
Tax liabilities 9 129 116
Current liabilities 35,825 17,231
Total liabilities 35,825 17,231
Total equity and liabilities 665,816 706,462
Net asset value attributable to the owners of
the Company 11 629,991 689,231
Net asset value per ordinary share (pence) 11 88.32 96.78
The accompanying notes form an integral part of the Company's
financial statements.
Company Statement of Changes in Equity
For the year ended 31 December 2022
Share Retained Total
In thousands of Sterling Notes Capital Earnings Equity
772,640 (108,743) 663,897
Balance at 1 January 2021 772,640 (108,743) 663,897
Total comprehensive loss for the year - (2,450) (2,450)
Transactions with the owners of the Company
recognised directly in equity
Issuance of shares from placing of ordinary
shares net of issue cost 11 73,893 - 73,893
Cash dividends 11 - (47,953) (47,953)
Scrip dividends 11 1,978 (1,978) -
Shares issued on behalf of a subsidiary 11 1,844 - 1,844
Balance at 31 December 2021 850,355 (161,124) 689,231
Total comprehensive loss for the year - (8,501) (8,501)
Transactions with the owners of the Company,
recognised directly in
recognised directly in equity
Cash dividends 11 - (51,683) (51,683)
Scrip dividends 11 1,092 (1,092) -
Shares issued on behalf of a subsidiary 11 971 - 971
Share issuance costs 11 (27) - (27)
Balance at 31 December 2022 852,391 (222,400) 629,991
The accompanying notes form an integral part of the Company's
financial statements.
Company Statement of Cash Flows
For the year ended 31 December 2022
In thousands of Sterling Notes 2022 2021
Operating activities
Loss for the year (8,501) (2,450)
Adjustments for:
Net finance result 8 (21,496) (20,118)
Foreign currency exchange loss (gain) - net 6,7 (4,883) 5,063
Tax expense 9 515 459
Depreciation 3 -
Working capital adjustments:
Advances/other receivables from subsidiary 19,475 30,279
Other current assets (407) (69)
Trade and other payables 53 (119)
Cash from/(used in) operating activities (15,241) 13,045
Interest received 24 -
Taxes paid (502) (445)
Net cash flows from/(used in) operating activities (15,719) 12,600
Investing activities
Loan repayment from subsidiary 59,557 29,449
Loans provided to subsidiary - (57,971)
Investment in subsidiary 14 (3,780) (17,405)
Interest received 19,134 12,925
Acquisition of property and equipment (69) -
Net cash flows from/(used in) investing activities 74,842 (33,002)
Financing activities
Proceeds from the issuance of ordinary shares 11 - 75,000
Equity instruments issue costs 11 (27) (1,107)
Dividends paid 11 (51,683) (47,953)
Net cash flows from/(used) in financing activities (51,710) 25,940
Net increase in cash and cash equivalents 7,413 5,538
Impact of foreign exchange on cash and cash equivalents 14 137
Cash and cash equivalents at 1 January 10 11,311 5,636
Cash and cash equivalents at 31 December 10 18,738 11,311
The accompanying notes form an integral part of the Company's
financial statements
Notes to the Company Financial Statements
For the year ended 31 December 2022
1. Corporate information
BBGI Global Infrastructure S.A., ('BBGI', or the 'Company') is
an investment company incorporated in Luxembourg in the form of a
public limited liability company (société anonyme) with variable
share capital (société d'investissement à capital variable, or
'SICAV') and regulated by the Commission de Surveillance du Secteur
Financier ('CSSF') under Part II of the amended Luxembourg law of
17 December 2010 on undertakings for collective investments with an
indefinite life. The Company qualifies as an alternative investment
fund within the meaning of Article 1 (39) of the amended law of 12
July 2013 on alternative investment fund managers ('2013 Law')
implementing Directive 2011/61/EU of the European Parliament and of
the Council of 8 June 2011 on Alternative Investment Fund Managers
and amending Directives 2003/41/EC and 2009/65/EC and Regulations
(EC) No 1060/2009 and (EU) No 1095/2010 and is authorised as an
internal alternative investment fund manager in accordance with
Chapter 2 of the 2013 Law. The Company was admitted to the official
list of the UK Listing Authority (premium listing, closed-ended
investment fund) and to trading on the main market of the London
Stock Exchange on 21 December 2011.
As of 1 January 2021, the main market of the London Stock
Exchange is not considered as an EU regulated market (as defined by
the MiFID II). As a result, Directive 2004/109/EC of the European
Parliament and of the Council of 15 December 2004 on the
harmonisation of transparency requirements in relation to
information about issuers whose securities are admitted to trading
on a regulated market and amending Directive 2001/34/EC (the
Transparency Directive) as implemented in the Luxembourg law by the
act dated 11 January 2008 on transparency requirements for issuers
(the Transparency Act 2008), among other texts, does not apply to
the Company.
The Company's registered office is EBBC, 6E, route de Treves,
L-2633 Senningerberg, Luxembourg and is registered with the
Registre du Commerce of Luxembourg under the number B 163 879
The Company is a closed-ended investment company that invests,
through its subsidiaries, principally in a diversified portfolio of
operational Public-Private Partnership ('PPP')/Private Finance
Initiative ('PFI') infrastructure or similar style assets ('PPP/PFI
portfolio'). At 31 December 2022, the Company has one indirectly
held investment that is under construction (31 December 2021:
one).
The Company had no employees as of 31 December 2022 and 2021,
respectively.
Reporting period
The Company's reporting period runs from 1 January to 31
December each year. The Company's statement of comprehensive
income, statement of financial position, statement of changes in
equity and statement of cash flows include comparative figures as
at 31 December 2021.
The amounts presented as 'non-current' in the Company's
statement of financial position are those expected to be recovered
or settled after more than one year. The amounts presented as
'current' are expected to be recovered settled within one year.
These financial statements were approved by the Management Board on
29 March 2023.
2. Basis of preparation
Statement of compliance
The separate financial statements of the Company have been
prepared in accordance with International Financial Reporting
Standards ('IFRS') as adopted by the European Union ('EU'). Please
refer to Note 3 d) for the accounting policy with respect to the
investment in subsidiary.
The Company also prepares consolidated financial statements in
accordance with IFRS as adopted by the EU.
The Company follows, to the fullest extent possible, the
provisions of the Standard of Recommended Practices issued by the
Association of Investment Companies ('AIC SORP'). If the provisions
of the AIC SORP are in direct conflict with IFRS as adopted by the
EU, the standards of the latter shall prevail.
The separate financial statements have been prepared using the
going concern principle under the historical cost basis.
Functional and presentation currency
These financial statements are presented in Sterling, the
Company's functional currency. All amounts presented in tables
throughout the report have been rounded to the nearest thousand,
unless otherwise stated.
Changes in accounting policy
New and amended standards applicable to the Company is as
follows:
Onerous Contracts - Costs of Fulfilling a Contract - Amendments
to IAS 37
The amendments specify that when assessing whether a contract is
onerous or loss-making, an entity needs to include costs that
relate directly to a contract to provide goods or services
including both incremental costs and an allocation of costs
directly related to contract activities. General and administrative
costs do not relate directly to a contract and are excluded unless
they are explicitly chargeable to the counterparty under the
contract.
These amendments have no significant impact on the Company
financial statements.
IFRS 9 Financial Instruments - Fees in the '10 per cent' test
for derecognition of financial liabilities
The amendment clarifies the fees that an entity includes when
assessing whether the terms of a new or modified financial
liability are substantially different from the terms of the
original financial liability. These fees include only those paid or
received between the borrower and the lender, including fees paid
or received by either the borrower or lender on the other's behalf.
There is no similar amendment proposed for IAS 39 Financial
Instruments: Recognition and Measurement.
These amendments had no significant impact on the Company
financial statements as there were no modifications of the
Company's financial instruments during the period.
3. Summary of significant accounting policies
a) Foreign currency transactions
Transactions in foreign currencies are translated into Sterling
at the exchange rate on the dates of the transactions. Monetary
assets and liabilities denominated in foreign currencies at the
reporting date are translated into Sterling at the exchange rate on
that date.
Non-monetary assets and liabilities denominated in foreign
currencies that are measured at fair value are translated into
Sterling at the exchange rate on the date that the fair value was
determined. Foreign currency differences arising on translation are
recognised in the statement of comprehensive income as a gain or
loss on currency translation.
b) Foreign currency translations
The assets and liabilities of foreign operations are translated
to Sterling at the exchange rates on the reporting date. The income
and expenses of foreign operations are translated to Sterling at
the average exchange rates during the year, if such does not
significantly deviate from the exchange rates at the date on which
the transaction is entered into. If significant deviations arise,
then the exchange rate at the date of the transaction is used.
c) Financial instruments
A financial instrument is any contract that gives rise to a
financial asset of one entity and a financial liability or equity
instrument of another entity.
Financial assets
Initial recognition and measurement
Financial assets are classified at initial recognition at
either: (i) amortised cost; (ii) fair value through other
comprehensive income - debt instruments; (iii) fair value through
other comprehensive income - equity instruments; or (iv) fair value
through profit or loss.
The classification of financial assets at initial recognition
depends on the financial asset's contractual cash flow
characteristics and the Company's business model for managing them.
With the exception of trade receivables that do not contain a
significant financing component or for which the Company has
applied the practical expedient, the Company initially measures a
financial asset at its fair value plus, in the case of a financial
asset not at fair value through profit or loss, transaction
costs.
The Company's business model for managing financial assets
refers to how it manages its financial assets in order to generate
cash flows. The business model determines whether cash flows will
result from collecting contractual cash flows, selling the
financial assets, or both. The Company's financial assets
classified and measured at amortised cost are held within a
business model with the objective to hold financial assets in order
to collect contractual cash flows which represents solely payments
of principal and interests.
In general, the Company derecognises a financial asset when the
contractual rights to the cash flows from the asset expire, or it
transfers the rights to receive the contractual cash flows in a
transaction in which substantially all the risks and rewards of
ownership of the financial asset are transferred. Any interest in
such transferred financial assets that is created or retained by
the Company is recognised as a separate financial asset or
liability.
Financial assets and liabilities are offset and the net amount
presented in the statement of financial position when, and only
when, the Company has a legal right to offset the amounts and
intends either to settle on a net basis or to realise the asset and
settle the liability simultaneously.
At the date of the statement of financial position, all
financial assets of the Company have been classified as financial
assets at amortised cost. Financial assets of the Company consist
of investment in subsidiary, loan receivables from subsidiary,
interest and other receivables from subsidiary and cash and cash
equivalents.
Derecognition
A financial asset (or, where applicable, a part of a financial
asset or part of a group of similar financial
assets) is primarily derecognised when:
- The rights to receive cash flows from the asset have expired; or
- The Company has transferred its rights to receive cash flows
from the asset or has assumed an obligation to pay the received
cash flows in full without material delay to a third party under a
'pass-through' arrangement; and either (a) the Company has
transferred substantially all the risks and rewards of the asset,
or (b) the Company has neither transferred nor retained
substantially all the risks and rewards of the asset, but has
transferred control of the asset.
Financial assets at amortised cost (debt instruments)
Financial assets at amortised cost are subsequently measured
using the effective interest (EIR) method and are subject to
impairment. Gains and losses are recognised in the statement of
comprehensive income when the asset is derecognised, modified or
impaired.
Financial liabilities
The Company classifies financial liabilities at amortised cost.
Such financial liabilities are recognised initially at fair value
less any direct attributable transaction costs. Subsequent to
initial recognition, these financial liabilities are measured at
amortised cost using the EIR method.
The Company derecognises a financial liability (or part of a
financial liability) from the statement of financial position when,
and only when, it is extinguished or when the obligation specified
in the contract or agreement is discharged or cancelled or has
expired. The difference between the carrying amount of a financial
liability (or part of a financial liability) extinguished or
transferred to another party and the consideration paid, including
any non-cash assets transferred or liabilities assumed, is
considered in the statement of comprehensive income.
d) Investments in subsidiary
The investment in subsidiary is held at cost less any
impairment.
e) Impairment testing for investments and loans and receivables
from subsidiary
The investment in subsidiary and loan receivables from
subsidiary are measured at cost less accumulated impairment losses.
The impairment losses are based on expected credit loss ('ECL') on
such receivables. The loans and receivables of the Company from its
subsidiary are directly linked to the PPP/PFI portfolio financed by
this subsidiary either through loans and/or equity investments. The
ECL, if any, of the Company from its loans and receivables from
subsidiary has a direct link with the fair value of the Company's
PPP/PFI portfolio. The Company performs a fair valuation of the
underlying PPP/PFI portfolio every six months and considers any ECL
on the loans and receivables, among others based on the results of
the valuation. The fair valuation of the underlying PPP/PFI
portfolio is done by calculating the net present value of the cash
flows from these assets, based on internally generated models. The
net present value of each asset is determined using future cash
flows, applying certain macroeconomic assumptions for the cash
flows which include indexation rates, deposit interest rates,
corporate tax rates and foreign currency exchange rates. The cash
flows are discounted at the applicable discount rate for companies
involved in service concession assets. A material change in the
macroeconomic assumptions and discount rates used for such
valuation could have a significant impact on the net present value
of the future cash flows. The determined fair value will be
considered as the recoverable amount to be compared to the carrying
amount of investment in subsidiary to determine possible
impairment. Excess of the carrying amount of the investment in
subsidiary over the recoverable amount is recognised as an
impairment loss. As of 31 December 2022, the Company identified no
ECL to be recorded on its loans and receivables from subsidiary
(2021: nil) nor any impairment on its investment in subsidiary.
f) Provisions
A provision is recognised if, as a result of a past event, the
Company has a present legal or constructive obligation that can be
estimated reliably, and it is probable that an outflow of economic
benefits will be required to settle the obligation. Provisions are
determined by discounting the expected future cash flows at a
pre-tax rate that reflects current market assessments of the time
value of money and the risks specific to a liability. The unwinding
of such discount is recognised as a finance cost.
g) Cash and cash equivalents
Cash and cash equivalents comprise of cash balances and term
deposits with maturities of three months or less from the date when
the deposits were made and that are subject to an insignificant
risk of change in their fair value, and are used by the Company in
the management of its short-term commitments.
h) Share capital
Ordinary shares are classified as equity. Costs directly
attributable to the issue of ordinary shares, or which are
associated with the establishment of the Company, that would
otherwise have been avoided are recognised as a deduction from
equity, net of any tax effects.
i) Finance income and finance costs
Interest income and expenses are recognised in the statement of
comprehensive income using the EIR method.
The EIR is the rate that exactly discounts the estimated future
cash payments and receipts through the expected life of the
financial instrument (or, where appropriate, a shorter period) to
the carrying amount of the financial instrument. When calculating
the EIR, the Company estimates future cash flows considering all
contractual terms of the financial instrument, but not future
credit losses.
Interest received or receivable and interest paid or payable are
recognised in the statement of comprehensive income as finance
income and finance costs, respectively.
j) Tax
According to the Luxembourg regulations regarding SICAV
companies, the Company itself, as an undertaking for collective
investment, is exempt from paying income and/or capital gains taxes
in Luxembourg. It is, however, liable to annual subscription tax of
0.05 per cent on its consolidated net asset value ('NAV') payable
quarterly and assessed on the last day of each quarter.
k) Current versus non-current classification
The Company presents assets and liabilities in the statement of
financial position based on current/non-current classification. An
asset is current when it is:
-- Expected to be realised or intended to be sold or consumed in
the normal operating cycle
-- Held primarily for the purpose of trading
-- Expected to be realised within 12 months after the reporting
period or
-- Cash or cash equivalent unless restricted from being
exchanged or used to settle a liability for at least 12 months
after the reporting period
All other assets are classified as non-current.
A liability is current when:
-- It is expected to be settled in the normal operating
cycle
-- It is held primarily for the purpose of trading
-- It is due to be settled within 12 months after the reporting
period or
-- There is no unconditional right to defer the settlement of
the liability for at least 12 months after the reporting period
The terms of the liability that could, at the option of the
counterparty, result in its settlement by the issue of equity
instruments do not affect its classification.
The Company classifies all other liabilities as non-current.
4. Significant accounting judgements, estimates and
assumptions
The preparation of financial statements in conformity with IFRS
requires the Management Board to make judgements, estimates and
assumptions that affect the application of accounting policies and
the reported amounts of assets, liabilities, income and expenses.
Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing
basis. Revisions to accounting estimates are recognised in the
period in which the estimates are revised and in any future periods
affected.
In the process of applying the Company's accounting policies,
the Management Board has made the following judgements that would
have the most significant effect on the amounts recognised in the
Company's financial statements.
4.1 Impairment testing for investments
Refer to Note 2 for the discussion of this topic.
4.2 Going concern basis of accounting
The Management Board has examined significant areas of possible
financial risk including cash and cash requirements. It has not
identified any material uncertainties which would cast significant
doubt on the Company's ability to continue as a going concern for a
period of 12 months from the end of this reporting period. The
Management Board has satisfied itself that the Company has adequate
resources to continue in operational existence for the foreseeable
future. After due consideration, the Management Board believes it
is appropriate to adopt the going concern basis of accounting in
preparing the financial statements.
5. Administrative expenses
Year ended Year ended
31 December 31 December
In thousands of Sterling 2022 2021
Support agreement fees (Note 13) 8,914 6,982
Legal and professional fees 2,207 2,090
Supervisory Board fees and expenses 275 225
Others 221 201
11,617 9,498
Included in the legal and professional fees expensed during the
year are those amounts charged by the Company's external auditor
which include audit fees of GBP201,000 (2021: GBP157 ,000) and
audit related fees of GBP73,000 (2021: GBP64,000). N on-audit
related fees charged by the Company's external auditors during the
year amounted to GBP5,000 (2021: nil). Also included in the legal
and professional fees are depositary and custodian related charges
which amounted to GBP383,000 (2021: GBP460,000).
6. Other operating expenses
Year ended Year ended
31 December 31 December
In thousands of Sterling 2022 2021
Foreign exchange indemnity agreement expense (Note
13) 22,326 6,965
Foreign currency exchange loss - net - 5,063
Acquisition-related (including unsuccessful bid costs) 422 583
22,748 12,611
7. Other operating income
Year ended Year ended
31 December 31 December
In thousands of Sterling 2022 2021
Foreign currency exchange gain - net 4,883 -
The net foreign currency exchange gains are mainly attributable
to the unrealised gains on the translation of foreign currency
denominated loans receivable from the Company's subsidiary.
8. Net finance result
Year ended Year ended
31 December 31 December
In thousands of Sterling 2022 2021
Finance income from multi-currency facility (Note 13) 21,474 20,149
Interest income from deposits 24 -
Other finance costs (2) (31)
21,496 20,118
9. Taxes
As at 31 December 2022, tax payable with respect to subscription
tax amounted to GBP129,000 (2021: GBP116,000).
A reconciliation of the tax expense and the tax at applicable
tax rate is as follows:
Year ended Year ended
31 December 31 December
In thousands of Sterling 2022 2021
Loss before tax (7,986) (1,991)
Income tax using the Luxembourg domestic tax rate
of 24.94% (1,991) (497)
Effect of tax-exempt deductions/(income) 1,991 497
Subscription tax expense 515 459
Tax charge for the year 515 459
The Company, as an undertaking for collective investment, pays
an annual subscription tax of 0.05 per cent on its consolidated
NAV. For the year ended 31 December 2022, the Company incurred a
subscription tax charge of GBP515,000 (2021: GBP459,000).
10. Cash and cash equivalents
Cash and cash equivalents relate to bank deposits amounting to
GBP18,738,000 (2021: GBP11,311,000).
11. Share capital
Changes in the Company's share capital are as follows:
31 December 31 December
In thousands of Sterling 2022 2021
Share capital as at 1 January 850,355 772,640
Issuance of ordinary shares through placing - 75,000
Share capital issued through scrip dividends 1,092 1,978
Shares issued as share based compensation 971 1,844
Shares issuance cost (27) (1,107)
852,391 850,355
BBGI Management HoldCo S.à r.l. ('MHC'), a wholly owned direct
subsidiary of the Company, provides share-based compensation to
senior executives whereby issues a certain number of shares of the
Company to entitled executives calculated based on the conditions
of the Long-Term Incentive Plan ('LTIP') rules and the respective
LTIP Award letters. During the year, the Company issued 346,203
shares, in connection with the 2018 LTIP award at 174.3 pence per
share for a total amount of GBP604,000 (2021: GBP1,844,000). The
amount of GBP604,000 was recorded as an advance made by the Company
to MHC during the year (2021: GBP618,000).
Deferred STIP
MHC introduced a bonus deferral with one-third of any bonus
earned under the STIP is being deferred into shares of the Company
for three year holding period. The deferral component of the STIP
differs from the Company's share-based compensation as there are no
further vesting conditions on this earned bonus. The amount of
GBP366,000 was recorded as an advance made by the Company to MHC
during the year (2021: GBP618,000).
The changes in the number of ordinary shares of no-par value
issued by the Company are as follows:
31 December 31 December
In thousands of shares 2022 2021
In issue at beginning of the year 712,126 664,691
Shares issued through placing of ordinary shares - 45,181
Shares issued through scrip dividends 649 1,155
Shares issued as share based compensation 556 1,099
713,331 712,126
All of the ordinary shares issued rank pari passu. The holders
of ordinary shares are entitled to receive dividends as declared
from time to time, and are entitled to one vote per share at
general meetings of the Company.
The Company meets the minimum share capital requirement as
imposed under the applicable Luxembourg regulation.
Dividends
The dividends declared and paid by the Company during the year
ended 31 December 2022 are as follows:
31 December
In thousands of Sterling except as otherwise stated 2022
2021 2(nd) interim dividend of 3.665 pence per qualifying ordinary
share - for the period
1 July 2021 to 31 December 2021 26,099
2022 1(st) interim dividend of 3.740 pence per qualifying ordinary
share- for the period
1 January 2022 to 30 June 2022 26,676
Total dividends declared and paid during the year 52,775
The 31 December 2021 2(nd) interim dividend was paid in April
2022. The value of the scrip election was GBP964,000, with the
remaining amount of GBP25,135,000 paid in cash to those investors
that did not elect for the scrip.
The 30 June 2022 1(st) interim dividend was paid in October
2022. The value of the scrip election was GBP127,000 with the
remaining amount of GBP26,548,000 paid in cash to those investors
that elected for a cash dividend.
The dividends declared and paid by the Company during the year
ended 31 December 2021 are as follows:
31 December
In thousands of Sterling except as otherwise stated 2021
2020 2(nd) interim dividend of 3.590 pence per qualifying ordinary
share - for the period
1 July 2020 to 31 December 2020 23,863
2021 1(st) interim dividend of 3.665 pence per qualifying ordinary
share- for the period
1 January 2021 to 30 June 2021 26,068
Total dividends declared and paid during the year 49,931
The 31 December 2020 2(nd) interim dividend was paid in April
2021. The value of the scrip election was GBP514,000, with the
remaining amount of GBP23,349,000 paid in cash to those investors
that did not elect for the scrip.
The 30 June 2021 1(st) interim dividend was paid in October
2021. The value of the scrip election was GBP1,464,000 with the
remaining amount of GBP24,604,000 paid in cash to those investors
that elected for a cash dividend.
Net asset value ('NAV')
The Company NAV and NAV per share as of 31 December 2022, 31
December 2021 and 31 December 2020 were as follows:
In thousands of Sterling/pence 2022 2021 2020
NAV attributable to the owners of the Company 629,991 689,231 663,897
NAV per ordinary share (pence) 88.32 96.78 99.88
12. Financial risk and capital risk management
The Company has exposure to the following risks from financial
instruments:
- Credit risk
- Liquidity risk
- Market risk
This note presents information about the Company's exposure to
each of the above risks, the Company's objectives, policies and
processes for measuring and managing risk and the Company's
management of capital. This note also presents the result of the
review performed by management on the above-mentioned risk
areas.
Risk management framework
The Management Board has overall responsibility for the
establishment and control of the Company's risk management
framework.
Credit risk
Credit risk is the risk that the counterparty to a financial
instrument will fail to discharge an obligation or commitment that
it has entered into with the Company, resulting in:
1) impairment or reduction in the amounts recoverable from
receivables and other current and non-current assets; and
2) non-recoverability, in part or in whole, of cash and cash equivalents deposited with banks.
A significant part of receivables of the Company are receivables
from a subsidiary. This subsidiary has the ability to pay based on
the projected cash flows to be received by such subsidiary from
their respective investments.
Exposures to credit risks
The Company is exposed to credit risks on the following items in
the Company's statement of financial position:
31 December 31 December
In thousands of Sterling 2022 2021
Loans and other receivable to subsidiary (including
accrued interest) 292,039 344,366
Cash and cash equivalents 18,738 11,311
310,777 355,677
The maximum exposure to credit risk on receivables that are
neither overdue nor impaired as of 31 December 2022, amounts to
GBP292,039,000 (2021: GBP344,366,000).
Recoverable amounts of receivables and other current and
non-current assets
The Company establishes when necessary an allowance for
impairment, based on ECL specific to the asset. Currently there are
no recorded allowances for impairment. All the Company's
receivables are recoverable and no significant amounts are
considered as overdue, impaired or subject to ECL.
Cash and cash equivalents
The cash and cash equivalents are maintained with reputable
banks with ratings that are acceptable based on the established
internal policy of the Company. Based on the assessment of the
Management Board, there are no significant credit risks related to
the cash and cash equivalents. The main counterparty banks of the
Company have S&P/Moody's credit rating between A+/Aa3 and
AA-/Aa2.
Liquidity risk
Liquidity risk is the risk that the Company will encounter
difficulty in meeting the obligations associated with its financial
liabilities that are settled by delivering cash or another
financial asset.
The Company's policy over liquidity risk is that it will seek to
have sufficient liquidity to meet its liabilities and obligations
when they fall due.
The Company manages liquidity risk by maintaining adequate cash
and cash equivalents and access to borrowing facilities to finance
day-to-day operations and medium to long-term capital needs. The
Company also regularly monitors the forecast and actual cash
requirements and matches the maturity profiles of the Company's
financial assets and financial liabilities.
The Company has the possibility to raise capital through the
issuance of shares in order to finance further acquisitions.
The following are the undiscounted contractual maturities of the
financial liabilities of the Company:
Contractual cash flows
31 December 2022 Carrying Within 1-5
In thousands of Sterling amount Total 1 year years
Trade and other payables 1,200 1,200 1,200 -
Advances from subsidiary 34,496 34,496 34,496 -
35,696 35,696 35,696 -
Contractual cash flows
31 December 2021 Carrying Within 1-5
In thousands of Sterling amount Total 1 year years
Trade and other payables 1,125 1,125 1,125 -
Advances from subsidiary 15,990 15,990 15,990 -
17,115 17,115 17,115 -
Market risk
Market risk is the risk that changes in market prices, such as
foreign exchange rates, interest rates and equity prices, will
affect the Company's income or the value of its holdings of
financial instruments. The objective of market risk management is
to manage and control market risk exposures within acceptable
parameters, while optimising the returns.
Currency Risk
The Company is exposed to currency risk as a result of its cash
and cash equivalents being denominated in currencies other than
Sterling. The currencies in which these items are primarily
denominated are Australian Dollar (A$), Canadian Dollar (C $ ),
Euro (EUR), Norwegian Krone (NOK) and US Dollar (US $ ).
In respect of other monetary assets and liabilities denominated
in currencies other than Sterling, the Company's policy is to
ensure that its net exposure is kept at an acceptable level. The
management believes that there is no significant concentration of
currency risk in the Company.
The summary of the quantitative data about the Company's
exposure to foreign currency risk provided to the management is as
follows:
31 December 2022
In thousands of Sterling A$ C$ EUR NOK US
$
Cash and cash equivalents 13 7 277 2 1
Trade and other payables - - (745) - -
13 7 (468) 2 1
31 December 2021
In thousands of Sterling A$ C$ EUR NOK US
$
Cash and cash equivalents 12 8 331 2 1
Trade and other payables - - (641) - -
12 8 (310) 2 1
The Company has loans and receivables from MHC denominated in
foreign currency but the Company is not exposed to fluctuations in
foreign exchange rates in relation to these receivables due to the
foreign exchange indemnity agreement entered into between the
Company and MHC (see Note 13).
The significant exchange rates applied during the year ended 31
December 2022 and 31 December 2021 are as follows:
31 December 2022
Average Spot rate
GBP GBP
A$ 1 0.562 0.564
C$ 1 0.623 0.610
EUR 1 0.853 0.885
NOK 1 0.084 0.084
US$ 1 0.811 0.827
31 December 2021
Average Spot rate
GBP GBP
A$ 1 0.546 0.537
C$ 1 0.580 0.583
EUR 1 0.860 0.840
NOK 1 0.085 0.084
US$ 1 0.727 0.740
The impact of a strengthening or weakening of Sterling against
the A$ , C$, NOK and U$, as applicable, by 10 per cent at 31
December 2022 and 31 December 2021 would not have a significant
impact on the Company's statement of comprehensive income and net
equity. This assumes that all other variables, in particular,
interest rates, remain constant and ignores any impact of forecast
revenues, hedging instruments and other related costs.
Fair values versus carrying amounts
The below analyses financial instruments carried at fair value,
by valuation method. The different levels have been defined as
follows:
- Level 1: quoted prices (unadjusted) in active markets for identical assets and liabilities.
- Level 2: inputs other than quoted prices included in Level 1,
that are observable for the asset or liability, either directly
(i.e. as prices) or indirectly (i.e. derived from prices).
- Level 3: inputs for the asset or liability that are not based
on observable market data (unobservable inputs).
The carrying amounts of cash and cash equivalents, receivables
and payables approximates their fair value due to their short-term
nature with maturity of one year or less, or on demand.
The fair value of loans and other receivables from subsidiary
and investment in subsidiary, with a total carrying value of
GBP635,108,000 (2021: GBP681,167,000), amounts to GBP1,104,000
(2021: GBP976,249,000). The fair value of these loans receivable
and investment in subsidiary is determined by discounting the
future cash flows to be received from such assets using applicable
market rates (Level 3).
Capital risk management
The Company's objective when managing capital is to ensure the
Company's ability to continue as a going concern in order to
provide returns to shareholders and benefits for further
stakeholders and to maintain an optimal capital structure. The
Company views the share capital (see Note 11) as capital.
In order to maintain or adjust the capital structure, the
Company may adjust the amount of dividend paid to shareholders,
return capital to shareholders, avail of additional debt financing,
pay down debt, or issue new shares.
The Company regularly reviews compliance with Luxembourg
regulations regarding restrictions on minimum capital. During the
year, the Company complied with all externally imposed capital
requirements and made no changes in its approach to capital
management.
The portfolio continued its strong performance over the
reporting period with no material adverse effect on valuation. This
strong performance is primarily as a result of the Company holding
a low-risk, 100 per cent availability-style underlying portfolio,
coupled with strong stakeholder collaboration during the reporting
period.
13. Related parties and key contracts
Supervisory Board fees
During the year 31 December 2022, the aggregate remuneration
paid to the Supervisory Board was GBP260,000 (2021:
GBP220,000).
Loans and receivables from subsidiary - multicurrency facility
agreement
On 1 January 2017, the Company as a lender and MHC as a
borrower, entered into a multicurrency credit facility agreement
('MCF'). Pursuant to this agreement the Company has and will
continue to make available an interest-bearing loan to MHC for the
purposes of funding its initial and subsequent acquisitions of
interests in PPP/PFI portfolio. The maximum amount that can be
withdrawn from the MCF is GBP680,000,000. The Company engages a
third-party transfer pricing specialist to determine the reasonable
ranges of interest rates to be applied on borrowings under the
MCF.
Movements in the MCF during the year are as follows:
31 December 31 December
In thousands of Sterling 2022 2021
1 January 243,638 217,182
Additions - 36,398
Capitalisation of interest under MCF 94 83
Principal payments received (5,253) (5,060)
Foreign exchange movements 4,733 (4,965)
243,212 243,638
During the year, the finance income from the MCF amounted to
GBP21,474,000 (2021: GBP20,149,000).
Loans receivable from subsidiary - interest free loan
agreements
The Company has entered into various interest free loan
agreements ('IFL') with MHC, an indirect 100 per cent owned
subsidiary. These IFLs have a term of one year with the possibility
to extend and to introduce an arm's length interest rate. The
details of the interest free loans receivable from MHC is as
follows:
31 December 31 December
In thousands of Sterling 2022 2021
IFL receivable from MHC 37,663 91,968
Interest and other receivables from subsidiary
The details of the interest and other receivables from
subsidiary are as follows:
31 December 31 December
In thousands of Sterling 2022 2021
Interest receivable from MCF 11,164 8,760
Foreign exchange indemnity agreement
The Company and MHC have entered into a foreign exchange
indemnity agreement (Indemnity Agreement) whereby the Company will
indemnify MHC for any net losses incurred by MHC in relation to
foreign exchange movements, including losses incurred on foreign
exchange forward contracts. The agreement also stipulates that
where MHC makes a net gain on foreign transactions, then it shall
pay an equivalent amount to the Company. As at 31 December 2022,
the Company recorded an Indemnity Agreement expense amounting to
GBP22,326,000 (2021: GBP6,965,000).
Support agreement with MHC
The Company and MHC have entered into a support agreement
(Support Agreement) whereby MHC provides support and assistance to
the Company with respect to the day-to-day operations. As at 31
December 2022, the Company recorded Support Agreement expenses
amounting to GBP8,914,000 (2021: GBP6,982,000).
Advances from subsidiary
This account is non-interest bearing and relates to remaining
liabilities arising from the foreign exchange indemnity agreement,
support agreement and other unsettled advances received from MHC
that is usually settled in the next 12 months. Advances from
subsidiary as at 31 December 2022 amounted to GBP34,496,000 (2021:
GBP15,990,000).
14. Investment in subsidiary
The Company's total equity investment in MHC amounted to
GBP354,233,000 as of 31 December 2022 (2021: GBP350,453,000). The
movements in the Company's investment in MHC are as follows:
31 December 31 December
In thousands of Sterling 2022 2021
1 January 350,453 333,048
Additional investment through capital contribution 3,780 17,405
354,233 350,453
The Company's investments in PPP/PFI portfolio, were made and
will continue to be made through MHC.
15. Commitments and contingencies
The Company is an obligor under the Group's Revolving Credit
Facility ('RCF'), and as a result has pledged all its current and
future financial assets and shares in its investments in
subsidiary.
Based on the provisions of the RCF, where there is a continuing
event of default by MHC as borrower, the lenders will, among other
things, have the right to cancel all commitments and declare all or
part of utilisations to be due and payable, including all related
outstanding amounts, and exercise or direct the security agent to
exercise any or all of its rights, remedies, powers or discretions
under the RCF. There was GBP 57,484,000 outstanding principal from
the RCF as at the 31 December 2022 .
16. Standards issued but not yet effective
A number of new standards and amendments to standards are
effective for annual periods beginning after 1 January 2023 and
earlier application is permitted; however, the Company has not
early adopted any of the forthcoming new or amended standards in
preparing these financial statements. The Company intends to adopt
these new and amended standards, if applicable, when they become
effective. T he adoption of the below new standards is not expected
to have a significant impact on the Company's financial
statements.
Amendments to IAS 1 Presentation of Financial Statements and
IFRS Practice Statement 2: Disclosure of Accounting policies
The amendments aim to help entities provide accounting policy
disclosures that are more useful by replacing the requirement for
entities to disclose their 'significant' accounting policies with a
requirement to disclose their 'material' accounting policies and
adding guidance on how entities apply the concept of materiality in
making decisions about accounting policy disclosures.
Amendments to IAS 1: Classification of Liabilities as Current or
Non-current
The amendments specify the requirements for classifying
liabilities as current or non-current and clarify:
-- What is meant by a right to defer settlement
-- That a right to defer must exist at the end of the reporting
period
-- That classification is unaffected by the likelihood that an
entity will exercise its deferral right
-- That only if an embedded derivative in a convertible
liability is itself an equity instrument would the terms
of a liability not impact its classification
Definition of Accounting Estimates - Amendments to IAS 8
The amendments introduce a definition of 'accounting estimates'
and clarify the distinction between changes in accounting estimates
and changes in accounting policies and the correction of errors.
Also, they clarify how entities use measurement techniques and
inputs to develop accounting estimates.
17. Events after the reporting period.
Dividend declaration
In February 2023, the Company declared a 2(nd) interim dividend
of 3.74 pence per share with scrip alternative for qualifying
shareholders for the period 1 July - 31 December 2022. The dividend
is expected to be paid in April 2023.
Board Members, Agents and Advisers
Supervisory Board Management Board
* Sarah Whitney (Chair) * Duncan Ball
* Howard Myles (retired on 29 April 2022) * Michael Denny
* Jutta af Rosenborg * Frank Schramm
* Christopher Waples
* Andrew Sykes (appointed as of 29 April 2022)
* June Aitken (appointed as of 29 April 2022)
Registered Office Receiving Agent and UK Transfer
EBBC, 6E route de Trèves Agent
L-2633 Senningerberg Link Market Services Trustees
Grand Duchy of Luxembourg Limited
10(th) Floor
Central Square
29 Wellington Street
Leeds
LS1 4DL
United Kingdom
Central Administrative Agent, Luxembourg Communications Adviser
Registrar H/Advisors Maitland
and Transfer Agent, Depositary 3 Pancras Square
and Principal Paying Agent London N1C 4AG
RBC Investor Services Bank S.A. United Kingdom
14 Porte de France
L-4360 Esch-sur-Alzette
Grand Duchy of Luxembourg
Depository Auditors
Link Market Services Trustees Limited PricewaterhouseCoopers,
10(th) Floor Société
Central Square cooperative
29 Wellington Street 2 rue Gerhard Mercator
Leeds B.P. 1443
LS1 4DL L-1014 Luxembourg
United Kingdom Grand Duchy of Luxembourg
Corporate Brokers Corporate Brokers
Jefferies International Limited Winterflood Securities Limited
100 Bishopsgate Cannon Bridge House
London EC2N 4JL 25 Dowgate Hill
United Kingdom London EC4R 2GA
United Kingdom
EEA based Centralised Securities Luxembourg CSD Principal Agent
Depository Banque Internationale à
LuxCSD Luxembourg
42 Avenue John F. Kennedy 69 route d'Esch
L-1855 Luxembourg Office PLM 018A
Grand Duchy of Luxembourg L-2953 Luxembourg
Grand Duchy of Luxembourg
Registre de Commerce et des Sociétés Luxembourg B163879
Listing Chapter 15 premium listing, closed-ended investment
company
Trading Main Market
ISIN LU0686550053
SEDOL B6QWXM4
Ticker BBGI
Indices FTSE 250, FTSE 350, FTSE 350 High Yield and FTSE All-Share
Glossary
Abbreviation Definition
/ Term
AIC The UK Association of Investment Companies, the
trade association for closed-ended investment
companies in the UK
AGM Annual General Meeting of the Company's shareholders
AIC Code The 2019 AIC Code of Corporate Governance
AIC SORP Standard of Recommended Practices issued by the
AIC
AIF Alternative Investment Fund
AIFM Law / 2013 The Luxembourg amended law of 12 July 2013 on
Law Alternative Investment Fund Managers
AIFMD EU Alternative Investment Fund Managers Directive
APM Alternative Performance Measures
Availability-style Availability-style, unlike 'demand-based' means
that revenues are paid provided the asset is available
for use
BBGI / Company BBGI Global Infrastructure S.A.
Carbon neutral a state where the residual GHG emissions have
been balanced out by financing activities that
remove atmospheric CO2 ('offsets')
Circular 18/698 CSSF circular 18/698, published 23 August 2018,
concerning Authorisation and organisation of investment
fund managers incorporated under Luxembourg law;
Specific provisions on the fight against money
laundering and terrorist financing applicable
to investment fund managers and entities carrying
out the activity of registrar agent
Corporate Emissions GHG emissions that pertain to our business activities
CSSF Commission de Surveillance du Secteur Financier,
the public institution that supervises the professionals
and products of the Luxembourg financial sector,
including the Company
CPI Consumer Price Index
DTR The UK Disclosure Guidance and Transparency Rules
ECL Expected Credit Losses
EIR Effective Interest Rate
ESG Environmental, Social and Governance
ESMA European Securities and Markets Authority
FCA the UK Financial Conduct Authority
Financed Emissions GHG emissions from our investments
FRC Financial Reporting Council, the UK's regulator
of auditors, accountants and actuaries, and responsible
for setting the UK's Corporate Governance and
Stewardship Codes
FRC Code The UK Corporate Governance Code 2018
GDP Gross Domestic Product
GHG Greenhouse Gas
Group The Company and its subsidiaries
IFRS International Financial Reporting Standards as
adopted by the European Union
Investments Investments at fair value through profit or loss
at FVPL
IPO Initial Public Offering
KPI Key Performance Indicator
LIBOR London Interbank Offered Rate
LIFT The UK's Local Improvement Finance Trust
LTIP Long-Term Incentive Plan
Management Board The Executive Directors of the Company
NAV Net Asset Value
NED Independent Non-Executive Director, a member of
the Supervisory Board
NPPR The UK's National Private Placement Regime
NZAM The Net Zero Asset Managers Initiative
O&M Operation and Maintenance
Offsets Removing CO2 from the atmosphere, by financing
projects which are either creating natural carbon
dioxide sinks or technology that captures carbon
dioxide from the air. The long-term removals must
be measurable, verifiable, permanent and additional.
Offsets cannot be done in isolation to combat
climate change, they must be supported by science-based
targets and GHG reduction pathways
OGC Ongoing Charges
Pathways Net zero pathways show how much and how quickly
companies need to reduce their GHG emissions to
reach their science-based GHG reduction targets
PFI Private Finance Initiative
PPP Public Private Partnership
PwC PricewaterhouseCoopers société cooperative,
the Company's External Auditor
RCF Revolving Credit Facility for up to GBP230 million,
with the possibility of increasing the quantum
to GBP300 million by means of an accordion provision,
and matures in May 2026
RPI Retail Price Index
Science-based Targets adopted by companies to reduce GHG emissions
targets are considered 'science-based' if they follow
a pathway that is consistent with the latest climate
science and keeping warming to below 1.5degC
SDG, SDGs The UN Sustainable Development Goals
SFDR Sustainable Finance Disclosure Regulation
SONIA Sterling Overnight Index Average
STIP Short-Term Incentive Plan
Supervisory The independent Non-Executive Directors of the
Board Company
TCFD Task Force on Climate-Related Financial Disclosures
TSR Total Shareholder Return
UNGC UN Global Compact
Cautionary Statement
Certain sections of this Annual Report, including, but not
limited to, the Chair's Statement and the Strategic Report of the
Management Board, have been prepared solely to provide additional
information to shareholders to assess the Group's strategies and
the potential for those strategies to succeed. This additional
information should not be relied on by any other party or for any
other purpose.
These sections may include statements that are, or may be deemed
to be, 'forward-looking statements'. These forward-looking
statements can be identified using forward-looking terminology,
including the terms: 'believes', 'estimates', 'anticipates',
'forecasts', 'projects', 'expects', 'intends', 'may', 'will' or
'should' or, in each case, their negative or other variations or
comparable terminology.
These forward-looking statements include matters that are not
historical facts. They appear throughout this document and include
statements regarding the intentions, beliefs or current
expectations of the Management and Supervisory Boards concerning,
among other things, the investment objectives and investment
policy, financing strategies, investment performance, results of
operations, financial condition, liquidity, prospects and
distribution policy of the Group, and the markets in which it
invests.
By their nature, forward-looking statements involve risks and
uncertainties because they relate to events and depend on
circumstances that may or may not occur in the future.
Forward-looking statements are not a guarantee of future
performance. The Group's actual investment performance, results of
operations, financial condition, liquidity, distribution policy and
the development of its financing strategies may differ materially
from the impression created by the forward-looking statements
contained in this document.
Subject to their legal and regulatory obligations, the
Management and Supervisory Boards expressly disclaim any
obligations to update or revise any forward-looking statement
contained herein to reflect any change in expectations with regard
thereto or any change in events, conditions, or circumstances on
which any statement is based.
In addition, these sections may include target figures and
guidance for future financial periods. Any such figures are targets
only and are not forecasts.
This report has been prepared for the Group, and therefore gives
greater emphasis to those matters that are significant to BBGI
Global Infrastructure S.A. and its subsidiaries when viewed as a
whole.
[i] Social infrastructure refers to public infrastructure assets
and services and includes education, healthcare, blue light (fire
and police), affordable housing, modern correctional facilities,
clean energy and transport infrastructure assets. In exchange for
the provision of these assets and services, BBGI receives a revenue
stream that is paid directly by the public sector.
[ii] Refer to the Alternative Performance Measures section of
this Annual Report for further details.
[iii] Pence per share (pps).
[iv] Inflation linkage of 0.5 per cent means that if inflation
is one percentage point higher than our modelled assumptions for
all future periods then our portfolio returns will increase from
6.9 per cent to 7.4 per cent.
[v] Availability-style means revenues are paid provided the
assets are available for use, so our portfolio has no exposure to
demand-based or regulated investments.
[vi] Source: Standard & Poor's credit ratings.
[vii] In comparison to the latest publicly available information
for all closed-ended, LSE-listed equity infrastructure investment
companies.
[viii] Paris Aligned Investment Initiative Net Zero Investment
Framework specific guidance for the Infrastructure sector
https://www.iigcc.org/download/iigcc-paii-infrastructure-consultation/?wpdmdl=5961&refresh=63f715ed3f4cc1677137389
[ix] SFDR disclosure requirements. The Company is designated as
an Article 8 Fund under SFDR and will report on criteria for a
socially beneficial investment.
([x]) In comparison to the latest publicly available information
for all closed-ended, LSE-listed equity infrastructure investment
companies.
[xi] After adjusting for the balance sheet hedge position of
GBP2.9 million.
([xii]) For the purpose of this illustration, when a project has
more than one FM contractor and/or O&M contractor, the exposure
is allocated equally among the contractors.
[xiii] Source:
https://www.whitecase.com/insight-our-thinking/looking-ahead-future-us-infrastructure
[xiv] The FTSE All-Share, ten-year data represents the ten years
preceding 31 December 2022.
[xv] These are targets only and are not a profit forecast. There
can be no assurance that these targets will be met or that the
Company will make any distribution at all.
[xvi] See the Risk Section for further details.
[xvii] Based on the portfolio composition on the date the
balance sheet hedge contracts are entered into.
[xviii] The Company assumes an equal and offsetting amount
between running costs and Euros received into the future.
[xix] Calculated using the Morningstar methodology.
[xx] 2022 market-based Corporate Emissions: -13.7% reduction
compared to 2019.
[xxi] The 2022 LTIP award was granted in February 2023 with
effect December 2022. The vesting period under these awards is from
December 2022 to December 2025.
[xxii] The Co-CEOs, Duncan Ball and Frank Schramm, are paid in
Canadian Dollars and Euro, respectively. The CFO is paid in
Euro.
[xxiii] This minimum holding is calculated based on the
Director's salary at 1 May 2020 and is fixed for three years.
[xxiv] The detail provided in the table above goes significantly
beyond that required to be disclosed under the relevant Luxembourg
law.
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END
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