TIDMGCP
RNS Number : 7664R
GCP Infrastructure Investments Ltd
14 December 2016
14 December 2016
GCP Infrastructure Investments Limited ("GCP Infrastructure"
and/or the "Company")
Annual Report and Financial Statements for the year ended 30
September 2016.
The Directors of the Company are pleased to announce the
Company's annual results for the year ended 30 September 2016. The
full Annual Report and Financial Statements can be accessed via the
Company's website at
http://gcpuk.com/gcp-infrastructure-investments-ltd and will be
posted to shareholders over the course of the next few weeks.
Contact details:
Gravis Capital Partners
LLP +44 (0)20 7518 1490
Stephen Ellis
Rollo Wright
Dion Di Miceli
Stifel Nicolaus Europe
Limited +44 (0)20 7710 7600
Mark Bloomfield
Neil Winward
Tunga Chigovanyika
Buchanan +44 (0)20 7466 5000
Charles Ryland
Robbie Ceiriog-Hughes
Victoria Watkins
Notes to Editors
About GCP Infrastructure
GCP Infrastructure is a closed-ended London Stock
Exchange-listed investment company that seeks to generate returns
from senior and subordinated infrastructure debt and related and/or
similar assets. GCP Infrastructure is advised by Gravis Capital
Partners LLP.
About us
GCP Infrastructure is the only UK listed fund focused primarily
on investments in UK infrastructure debt.
The Company achieves its investment policy by investing
substantially all its capital in debt secured against UK
infrastructure projects primarily in the renewable energy and PFI
sectors that generate long dated, public sector backed revenues.
The company is currently exposed to a diversified portfolio of
partially inflation protected investments.
The Company is a closed ended investment company incorporated in
Jersey. It was admitted to the Official List and to trading on the
London Stock Exchange's Main Market in July 2010 and since then it
has grown to a market capitalisation of just over GBP868.6 million
as at 30 September 2016.
Highlights for the year
-- Dividends of 7.6 pence per share paid for the year to 30 September 2016
-- Total shareholder return for the year of 15.6% and total return since IPO in 2010 of 94.1%
-- Profit for the year of GBP54.4 million up c.11.7% from GBP48.7 million in the previous year
-- GBP95 million successfully raised through two significantly
oversubscribed share issues with a further GBP90 million raised
post year end
-- New loans advanced totalling c.GBP92.8 million secured
against UK renewable energy, social housing and PFI projects, with
a further GBP53.6 million post year end
-- Company NAV per ordinary share as at 30 September 2016 of
109.67 pence per share up 2.05% since 30 September 2015
-- Third party valuation of the Company's investment portfolio
at 30 September 2016 of GBP699.7 million
Investment objectives
The Company invests in UK infrastructure debt to meet the
following key objectives:
Key performance Key performance Key performance
highlights highlights highlights
---------------------------- ------------------------- --------------------------
To provide shareholders To create a diversified To preserve the
with regular, sustainable portfolio of debt capital value of
long--term dividends secured against its investment assets
UK infrastructure over the long term
projects
---------------------------- ------------------------- --------------------------
The Company has The Company has The valuation of
maintained or progressively increased the number the Company's investments
increased its dividend of investments in is in excess of
for every period its portfolio from the principal value
since inception 40 to 43 as at 30 outstanding. The
and has paid a dividend September 2016. increase in valuation
of 7.6 pence for The investment portfolio has resulted in
the previous four is exposed to a a net asset value
financial years. wide variety of per share as at
sectors in terms 30 September 2016
of project type of 109.67 pence
and source of underlying per share. The ordinary
cash flow. shares have traded
at a premium to
their net asset
value since IPO.
---------------------------- ------------------------- --------------------------
Key performance Key performance Key performance
highlights highlights highlights
---------------------------- ------------------------- --------------------------
7.6p 43 109.67p
Dividends paid Number of investments NAV per share
in 2015/16
---------------------------- ------------------------- --------------------------
GBP54.4m 11.5%(1) 131.60p
Profit for the Size of largest Share price as at
year investment 30 September 2016
---------------------------- ------------------------- --------------------------
(1) The size of the largest investment is calculated by
reference to the percentage of total assets. The Cardale PFI loan
is secured on a cross--collateralised basis against 14 separate
operational PFI projects, with no exposure to any individual
project being in excess of 10% of the total portfolio.
Chairman's statement
I'm pleased to report that the Company, entering its seventh
year, has produced another period of measured growth, maintaining a
high level of dividend distributions and enjoying a robust share
price performance.
Dividends and returns
One of the Company's key objectives is to provide shareholders
with regular, sustainable long--term dividends. For the fourth
consecutive year the Company has paid dividends of 7.6 pence per
share. This predictable and dependable income has resulted in a
consistently strong demand for the Company's shares. The Company's
share price has been resilient and stable in the midst of wider
market upheaval, including the post--Brexit tremors, and has
performed strongly over the last few months. The Company's share
price at the year end was 131.60 pence per share, representing a
premium to net asset value of 20%, producing a total shareholder
return for the year of 15.6%.
Net asset valuation
The net asset value per share increased over the year from
107.47 to 109.67 pence per share. This was primarily driven by the
accretive nature of shares issued at a premium to prevailing net
asset values and investment valuation uplifts. Valuation discount
rate reductions over the year, relating to mature renewable energy
and PFI investments with operational track records, were driven by
comparable market transactions and wider credit market conditions.
Net valuation movements accounted for a 1.05% increase in the
Company's net asset value at 30 September 2016.
Equity raisings and investments
During the year, the Company raised gross proceeds of GBP95
million through placings of 16.9 million and 64.4 million shares
issued at 118.00 and 116.50 pence per share respectively. Both
share issuances were oversubscribed, a continuing reflection of
investors' support of and confidence in the investment strategy of
the Company.
The Board believes that considered and conservative growth
benefits shareholders through increased share liquidity, economies
of scale, and further investment diversification.
The Company made loan investments totalling GBP92.8 million over
the period with GBP53.6 million advanced post year end.
Investment portfolio
The Company's loan investments have performed well, accruing an
average yield of c.9.0% throughout the year, with the operational
and construction performance of most of the projects that support
the Company's investment portfolio being materially in line with
expectations. Two biomass projects have encountered operational and
grid connection challenges, issues that have been reflected in
valuation reductions, but the Board are instigating in both cases a
clear plan to achieve much improved performance. The Company's
investment portfolio is 26% exposed to PFI projects, 64% to
renewable energy assets and 9% to social housing transactions.
Market outlook and investment focus
The Chancellor's Autumn Statement on 23 November 2016 was full
of positive sentiment toward future UK infrastructure development,
with infrastructure spending still seen as a key tool to boost
economic growth. There seems to have been a policy shift towards
smaller projects that, it is hoped, will have a more immediate
impact on productivity. The Chancellor gave particular mention to
areas such as road and rail improvements, ultra-fast fibre networks
and social housing. Given the Government's commitment to announce a
new PF2 pipeline early next year and the long-awaited second
contracts for difference auction for renewable energy projects in
April 2017, there is room for cautious optimism that a meaningful
infrastructure development pipeline will emerge.
Over the last few years, the influx of capital seeking both debt
and equity exposure to UK infrastructure has driven up prices in
many of the Company's target investment sectors. This has resulted
in valuation uplifts on some of the Company's existing assets, a
reduction in available investment yields and a challenging
investment environment.
However, most investors, institutional investors in particular,
tend to be restricted to opportunities larger in size and profile.
This has meant that the Company still remains well positioned to
achieve attractive returns by investing in smaller infrastructure
projects in areas that continue to be poorly served by the broad
lending market. The Company has also found an increasing number of
opportunities to lend at attractive rates against well-performing
operational assets supported by legacy subsidy regimes as asset
owners seek to refinance existing debt or lenders look to sell down
positions. Particular areas of focus are social housing for
vulnerable adults, small--scale PFI and established areas within
the renewable energy sector.
With the Brexit decision now over six months behind us, the
impact of the UK's decision to leave the EU remains difficult to
quantify. In part, that is simply due to the enduring uncertainty
that surrounds the withdrawal process and the nature of the UK's
longer--term relationship with the rest of the EU. Key economic
repercussions seem to be an increased likelihood of higher
inflation and rising rates. The Company is well positioned to
weather both eventualities with inflation protection across half of
its investments, valuation discount rates at material premiums to
the risk--free rate and a profile of principal repayments that, in
a higher interest rate environment, would allow reinvestment at
higher rates of return.
Principal risks and uncertainties
The principal risks faced by the Company include (but are not
limited to) execution risk, portfolio risk, financial risk,
operational risk, cyber-crime and regulatory, legal and compliance
risk. The full details can be found below.
Mr Ian Reeves CBE
Chairman
13 December 2016
Strategic overview
To provide shareholders with regular, sustained, long-term
distributions and to preserve the capital value of its investment
assets over the long term.
Investment objectives and policies
The Company's investment objectives are to provide its
shareholders with regular, sustained, long--term distributions and
to preserve the capital value of its investment assets over the
long term, by generating exposure to subordinated PFI debt and/or
similar assets.
The Company makes investments in subordinated debt instruments
issued by infrastructure project companies, their owners or their
lenders, and assets with a similar economic effect. The Company may
also acquire (or acquire interests in) the senior debt of
infrastructure project companies, or their owners.
The Company receives debt service payments in accordance with
the terms of its investments. The debt service payments, comprising
interest and principal payments are covered by expected cash flows
generated by the underlying infrastructure project company.
The objective of the Company is to generate a diversified
portfolio of subordinated debt infrastructure assets and related
and/or similar assets and to maintain its portfolio so that not
more than 10% in value of the Company's total assets from time to
time consist of securities or loans relating to any one individual
infrastructure asset (having regard to the risks relating to any
cross default or cross collateralisation provisions). This
objective is subject to the Company having a sufficient level of
investment capital from time to time, the ability of the Company to
invest its cash in suitable investments and is subject to the
investment restrictions described in the investment strategy.
Similarly, it is the intention of the Directors that the assets
of the Company are (as far as is reasonable in the context of a UK
infrastructure portfolio) appropriately diversified by asset type
(e.g. PFI healthcare, PFI education, solar power, social housing,
biomass etc.) and by revenue source (e.g. NHS Trusts, local
authorities, FiT, ROCs etc.)
Non--financial objectives of the Company
The key non--financial objectives of the Company are:
-- to maintain strong relationships with all key stakeholders of
the Company, including shareholders and borrowers; and
-- to develop and increase the understanding of the investment
strategy of the Company and infrastructure as an investment
class.
Key policies
Distribution
The Company aims to provide its shareholders with regular,
sustained, long--term distributions.
Capital raising and financing
The Company may seek to raise additional capital from time to
time to the extent that the Directors and the Investment Adviser
believe the Company will be able to make suitable investments. This
will enable the Company to achieve greater diversification of risk
and to benefit from economies of scale in relation to the
operational costs of the Company.
Leverage and gearing
The Company intends to make prudent use of leverage to finance
the acquisition of investments and enhance returns to
investors.
Structural gearing of investments is permitted up to a maximum
of 20% of the Company's net asset value immediately following
drawdown of the relevant debt.
Conflicts of interest
The Company has given its consent for the Investment Adviser to
act as the investment manager to GCP Asset Backed Income Fund
Limited (formerly Project Finance Investments Limited), a
closed--ended investment company listed on the London Stock
Exchange's Main Market. GCP Asset Backed Income Fund Limited is
focused predominantly on debt investments secured against physical
assets and/or contracted cash flows.
The Company has given its consent on the basis that where the
Investment Adviser identifies an investment which, in its opinion
acting reasonably and in good faith, falls within the Company's
remit, the Company will have a right of first refusal ("ROFR").
Investment strategy
The Company achieves its investment objectives primarily by
seeking exposure to debt (both senior and subordinated) secured
against UK infrastructure projects with the following
characteristics:
-- pre--determined, very long--term, public sector backed revenues;
-- no construction or property risk; and
-- contracts where payments do not depend on the level of use of the project assets.
In accordance with the Company's prospectus, investments as
described above must make up a minimum of 75% of the Company's
total assets. The Company may also consider, in respect of up to an
absolute maximum of 25% of its total assets (at the time the
relevant investment is made), taking exposure to:
-- projects that have not yet completed construction;
-- projects in the regulated utilities sector; and
-- projects with "demand" based concessions (i.e. where the
payments received depend on the level of use of the project assets)
or which have private sector sponsored concessions, to the extent
that the Investment Adviser considers that there is a reasonable
level of certainty in relation to:
o the likely level of demand; and
o the stability of the resulting revenue.
As at 30 September 2016, the Company does not have any exposure
to projects purely in the regulated utilities sector or projects
with demand--based concessions. The Company's exposure to projects
that have not yet completed construction with reference to total
portfolio value at 30 September 2016 was 10.1%. Approximately 6% of
the debt service payable to the Company is expected to be serviced
by cash flows arising from the sale of electricity.
There is no, and it is not anticipated that there will be any,
outright property exposure of the Company (except potentially as
additional security).
Delivery of investment objectives through implementation of
investment strategy
Investment objective Implementation of investment strategy
-------------------------- ------------------------------------------------
Dividend PFI, social housing and renewable energy
income cash flows
To provide shareholders The Company's distributions are dependent
with regular, primarily on the long--term cash flows
sustainable generated by projects in the PFI, social
long--term dividends housing and renewable energy sectors
that are backed by the UK public sector,
unitary charge payments in PFI transactions,
lease payments in social housing deals
and subsidy payments in renewable energy
projects.
Availability--based cash flows
The Company's investments are typically
secured against cash flows that are
not dependent on the level of use of
the underlying infrastructure asset,
meaning that if the project is operating
as expected, future cash flows are predictable
and dependable.
Investment in debt
The Company only invests in debt. In
all investments, there is equity that
takes the first loss position in the
event of project cash flow interruption
or underperformance. Debt returns, by
their nature, are more predictable than
equity returns.
Careful management of costs
The Board pays careful attention to
the management of costs associated with
running the Company and follows comprehensive
corporate governance procedures.
Careful management of capital raising/spending
The Company raises capital on a highly
conservative basis only when it has
a clear view of a robust pipeline of
highly advanced investment opportunities.
Delivery of investment objective
The Company has maintained or progressively
increased its dividend for every period
since inception and has paid or declared
a dividend of 7.6 pence for the previous
four financial years.
7.6p GBP54.4m
Dividends paid in 2015/16 Profit for
the year
-------------------------- ------------------------------------------------
Diversification Exposure limits
To create a The investments of the Company are,
diversified as far as is reasonable in the context
portfolio of of a UK infrastructure portfolio, appropriately
debt secured diversified by underlying project, borrower,
against UK infrastructure facilities manager, asset type (e.g.
projects PFI healthcare, PFI education, solar
power, social housing, biomass etc.)
and by revenue source (e.g. NHS Trusts,
local authorities, FiT, ROCs etc.)
Synergy with existing portfolio
New investments are evaluated to ensure
their addition would add balance and
diversification to the existing portfolio
of the Company with regards to credit
risk, asset sector, investment term
and income return.
Regular monitoring
The exposures within the Company's investment
portfolio are constantly monitored to
ensure any concentration of risk falls
within acceptable parameters.
Delivery of investment objective
During the year, the Company has increased
the number of investments in its portfolio
from 40 to 43. The investment portfolio
is exposed to a wide variety of sectors
in terms of project type and source
of underlying cash flow.
43 11.5%(1)
Number of investments Size of largest
investment
-------------------------- ------------------------------------------------
Capital preservation Inflation protection
To preserve Wherever possible, the Company invests
the capital in projects with sufficient inflation
value of its linkage in the underlying cash flows
investment assets to enable the Company's debt investments
over the long to be structured with inflation protection
term characteristics. This protects the capital
value of the investments in the event
of high inflation.
Underlying project dependability
The Company invests primarily in debt
secured against projects that are relatively
simple in terms of construction, operation,
maintenance and technology, have competent
and financially stable facilities managers
and good operational histories.
Extensive due diligence
Where appropriate, the Investment Adviser
will complement its analysis through
the use of professional third party
advisers, including technical advisers,
financial and legal advisers and valuation
and insurance experts. These advisers
are engaged to conduct due diligence
that is intended to provide an additional
and independent review of key aspects
and risks of a project, providing comfort
as to the level of risk mitigation and
the project's ongoing performance.
Investment in debt
The capital value of the Company's investments
is insulated from underlying project
underperformance by the equity finance
that always ranks below such debt investments.
Return premium over long--term interest
rates
The valuations of the Company's investments
take into account, inter alia, long--term
interest rates. The Company's investments
yield significant premiums to such rates
as swaps and gilts and as such create
a buffer in the event of long--dated
rate rises.
Delivery of investment objective
The valuation of the Company's investments
is in excess of the principal value
outstanding. The increase in valuation
has resulted in a NAV per share of 109.67
pence. The ordinary shares have always
traded at a premium to their net asset
value.
109.67p 131.60p
NAV per share Share price as at 30 September
2016
-------------------------- ------------------------------------------------
(1) The size of the largest investment is calculated by
reference to the percentage of total assets. The Cardale PFI loan
is secured on a cross--collateralised basis against 14 separate
operational PFI projects, with no exposure to any individual
project being in excess of 10% of the total portfolio.
UK infrastructure market
UK Infrastructure assets involving private sector investment
typically generate revenues from long-term, public-sector backed
contracts.
Social and economic infrastructure
The UK Government first introduced PFI structures in the
mid-1990s as the primary method of procurement for social
infrastructure projects. Over GBP60 billion of predominantly
hospitals and schools were developed using private sector capital
under PFI structures, with a new, if similar, model being
introduced in 2012 in the form of PFI and PF2 structures which
involve a private sector consortium entering into a contract with a
central or local government entity (e.g. a local authority in the
case of a school or an NHS Trust in the case of a hospital) to
design, finance, build and operate an infrastructure asset. The
contract term is typically between 25 and 30 years. During the
operational phase of the contract, the public sector entity pays a
predetermined fee for the use of the asset that is operated by the
private sector consortium. The payment of such a fee is typically
not dependent on the level of use of the infrastructure asset, but
on whether the asset is available for use. As such, PFI and PF2
structures create long dated and predictable cash flows payable by
central or local government entities.
Renewable energy infrastructure
In an effort to increase the proportion of energy produced in
the UK from renewable resources like sunlight, wind and wood, the
UK introduced a variety of incentives to stimulate private sector
investment in renewable energy infrastructure. The subsidies (such
as the FiT, RHI and ROCs) are typically payable over a 20 year
period to owners of eligible renewable energy projects for the
generation of energy using renewable sources. As such, renewable
energy projects that receive subsidy payments generate long dated
and predictable cash flows that are either implicitly or explicitly
supported by the UK Government.
Social housing
Housing associations, or registered providers of social housing,
are independent bodies established for the purpose of providing
low-cost social housing for people in housing need on a
not-for-profit basis. Housing associations are regulated in England
by the Homes and Communities Agency and are classed by the Office
for National Statistics as Public Non-Financial Corporations. There
are now c.1,775 English housing associations that provide a wide
range of housing, some managing large estates of housing for
families, while others provide supported accommodation through
specialist projects for people with mental or physical
disabilities. The vast majority of the income of housing
associations arises from the payments of rent by local authorities
in the form of housing benefit. Housing associations typically
either own the properties within their portfolios or enter into
long--term (typically 20 to 50 year) fully repairing and insuring
leases from private sector landlords in order to access suitable
properties.
Long--dated infrastructure debt finance
Given the high capital cost and long--dated cash flows generated
by infrastructure assets, they are generally most efficiently
financed by long--dated debt. Such loans are made to a single
purpose, ring--fenced company that owns the underlying asset (as
shown below).
Loan documentation ensures key structural benefits for the
lenders, including tight control of project cash flows and assets,
high transparency and an exposure limited solely to an identified
asset with pre-defined risks.
Typical infrastructure project structure
UK infrastructure assets involving private sector investment are
often constructed and (to a greater or lesser extent) maintained by
a private sector entity or consortium acting through a single
purpose company known as the project company. Such companies
typically generate their primary source of revenue from long--term
contracts with public sector or public sector backed counterparties
and are thus generally considered to be relatively dependable and
predictable. The project company also enters into various contracts
in order to deliver, inter alia, the construction and operations
and maintenance of the project.
Illustrative priority of payments with typical infrastructure
project structure
Total revenues, often contracted to rise in line with RPI or
another inflation index, will typically be used to service (in
order of priority) the cost of operating and/or maintaining the
asset to the required standard, senior debt, subordinated debt (if
any), and finally to provide a return to the equity holders.
Market outlook
The Chancellor's Autumn Statement re-affirmed the Government's
support for private sector investment in UK infrastructure.
UK infrastructure sector overview
The Company's investment strategy is to make debt investments
secured primarily against UK infrastructure projects that generate
pre--determined, long--term, public sector backed revenues. This is
reflected in the Company's existing exposure to PFI, renewable
energy and social housing assets, all sectors with appropriately
predictable operational and cash flow characteristics.
Over the last few years, these sectors have become better known
and better understood by an ever-expanding universe of equity and
debt investors, from pension funds to private individuals
participating through investment companies. Investors have been
attracted by the low volatility and income--generative nature of
the sectors in a market environment of ever decreasing income
returns, particularly the case in the credit markets where yields
are currently experiencing sustained and historic lows.
The influx of capital into UK infrastructure has not generally
been matched by levels of procurement of new projects and this
demand and supply imbalance has resulted in a contraction of
investment yields in many sectors to which the Company has existing
exposure. This has resulted in both valuation increases on existing
investments as well as a challenging market to unearth debt
investments of sufficient quality that produce yields within the
Company's target range.
It is, as yet unclear whether investors will view Brexit as
having a materially negative impact on the attraction of UK
infrastructure. Any reservations that investors currently have seem
to derive from the general uncertainty rather than asset--specific
concerns and only time will tell whether Brexit will have a
longer--term impact on pricing. There will, no doubt, be some
investors that have their own reasons for withdrawing from the
market, one likely example being the European Investment Bank whose
primary mandate is investing in EU countries.
Target market updates and investment focus
PFI/PF2
The secondary PFI market has been relatively quiet over the
year, with only a small number of portfolios coming to the market
through traditional auction processes. The Chancellor's Autumn
Statement reaffirmed the Government's support for private sector
investment in UK infrastructure. The explicit focus seems to be
shifting from health and education projects to smaller scale
transport, social housing and technology projects, although the
exact role of private sector investment remains unclear. The
Government has committed to announce in early 2017 a new PF2
pipeline with the wider infrastructure industry hopeful to reverse
a decade--long trend of falling procurement levels.
The Company has not made large investments in PFI or PF2
projects for a number of years but exciting, small--scale
opportunities continue to emerge. The Company has formed strong
relationships with developers seeking subordinated debt funding and
is confident that recent levels of investment activity can be
maintained.
Renewable energy
The UK renewable energy market has experienced enormous growth
over the last few years.
The growth has been largely fuelled by subsidy regimes, the most
significant of which have been the FiT and ROCs. The estimated
budget for these two subsidies for 2016 is c. GBP5.8 billion.
However, subsidy payments for new projects have been falling for a
number of years, most significantly following the election of the
new Government in May 2015. This was largely anticipated given the
level of historic investment.
Projects will only be eligible for subsidy payments under the
ROCs regime if completed before March 2017 (with asset-specific
grace periods of up to 18 months) and current FiT levels have been
reduced to such a level as to make development in many sectors
uneconomic. The Government's support for future renewable energy
projects (under the Electricity Market Reform) has now shifted
towards the CfD's model. CfDs are private law contracts between a
low carbon electricity generator and the Low Carbon Contracts
Company ("LCCC"), a government-owned company.
In November 2016, after a two--year auction hiatus, the
Department for Business, Energy and Industrial Strategy provided
long--awaited clarity to the renewables sector by releasing further
details on a second CfDs. allocation round to be held in April
2017. Onshore wind and solar were not included as eligible
technologies with a move to offshore wind.
Given the Company's experience in a wide range of technologies,
the Investment Adviser remains confident of finding investment
opportunities either from the current stock of developed assets or
from projects eligible under future subsidy regimes.
Social housing
The Company has specifically targeted the financing of the
supported living sector of the social housing market, primarily
because this sector tends to be available in relatively small lot
sizes, and hence is less competitive than the general needs social
housing arena. The provision for the additional costs of supported
living as compared to general needs housing has recently been
amended, and from 2019/20 will be met by ring-fenced funding from
central Government to the local authorities.
There remains a substantial shortfall in the provision of
specialist supported living units in England, and, quite apart from
the obvious social advantages of giving those in need of support as
much independence as is possible, there are demonstrable economic
benefits too. As a result, it is hoped that there will be an
accelerating provision of such units in coming years, and the
Company is well positioned to assist in its financing.
To date, the Company has financed the development or acquisition
of supported living units through the investment of senior ranking
debt. Each of these units benefits from a long dated (typically 35
years) fully repairing and insuring lease with an English housing
association.
BEPS
Following the publication of the outputs from the G20
Organisation of Economic Co-operation and Development ("OECD") BEPS
project in October 2015 and their endorsement by G20 leaders in
November 2015, the UK Government has set out plans for taking
forward this work. The Government has announced that new rules on
interest deductibility will be introduced from April 2017 in line
with the recommendations set out in the OECD report and taking into
account the responses to their initial consultation that closed in
January 2016.
The Investment Adviser does not believe that such new rules are
a material risk to the Company, primarily as the Company is a
single company and it makes arm's length loans to third parties on
wholly commercial terms. As such, it is neither a multinational
corporation nor engaged in artificial arrangements and as a result
the Investment Adviser does not believe the Company is an intended
target of the OECD's BEPS measures.
Furthermore, the Government recently announced that it will
widen provisions to protect "public benefit infrastructure
projects" from the BEPS legislation.
The Investment Adviser will continue to monitor further
Government announcements regarding BEPS to ensure the correct
positioning of the Company in the future.
Review of the year
The Company raised a total of GBP95 million, made eleven
investments totalling GBP92.8 million and delivered a total
shareholder return of 15.6%.
Financial performance and dividends paid
The Company has delivered another year of strong results with
profit of GBP54.4 million generated from the Company's investment
portfolio. Total income has increased from GBP56.3 million to
GBP63.6 million following the deployment of GBP92.8 million into a
variety of renewable energy, PFI and social housing projects.
Finance costs of GBP1.3 million were incurred in respect of the
Company's continued use of a revolving credit facility with RBSI
(the "Facility"). The Company declared a dividend of 1.9 pence per
ordinary share for each of the four quarters during the year.
Cash generation
The Company received debt service payments of GBP105 million
during the year, comprising GBP51 million of interest and GBP54
million of loan principal payments (including prepayments of GBP6.4
million from GCP Onshore Wind 2 Limited and refinancing of GCP
Rooftop Solar 6 of GBP34.8 million). The Company paid dividends of
GBP46.1 million during the year.
The Company fully drew down and partially repaid the Facility
with RBSI during the year, with GBP26.5 million being drawn at the
year end. The Company raised GBP95 million of equity capital and
made advances of GBP92.8 million during the year. Total cash
reserves at the year end were GBP52.0 million.
NAV and share price performance
The net assets of the Company have grown from GBP619.5 million
at 30 September 2015 to GBP723.8 million at 30 September 2016 as a
result of GBP95 million of equity capital raised and the upward
valuation of a number of the Company's renewable and PFI assets,
offset by the reduction in the valuation of two biomass assets. The
Company's NAV per share has increased from 107.47 pence at the
prior year end to 109.67 pence at 30 September 2016 due to the
accretive nature of the share issuances and investment
revaluations.
The Company has delivered a total shareholder return of 15.6%
over the past twelve months and 94.1% since IPO. The Company has
continued to trade at a significant premium to NAV, with an average
of 12.9% for the year and 20% at the year end. The share price hit
an all time peak of 133.20 pence on 21 September 2016. The 52 week
low of 114.50 pence coincided with the shares going ex dividend,
following the December 2015 dividend announcement on 22 January
2016.
Credit facility
The Company has continued over the year to make periodic use of
the Facility with RBSI. The Facility has enabled the Company to
raise and deploy capital more efficiently. All amounts drawn under
the Facility have been used in accordance with the Company's
investment policy. Post year end, the Company repaid in full the
Facility on 7 December 2016.
Capital raised
The Company raised a total of GBP95 million during the year
through two significantly oversubscribed capital raises under
placing programmes. The Company raised GBP20 million on 7 December
2015, at a placing price per new ordinary share of 118.00 pence and
GBP75 million on 8 July 2016, at a placing price per new ordinary
share of 116.50 pence.
In the period since the year end, on 29 November 2016 the
Company raised a further GBP90 million. The placing price was
123.50 pence per share.
Further details on the share movements are disclosed in note
17.
Key investment highlights
The Company made eleven advances during the year totalling
GBP92.8 million; four new loans and seven extensions to existing
facilities. The Company refinanced a GBP59.7 million loan and used
the proceeds to partially repay GBP32 million of its Facility with
RBSI, retaining a subordinated investment of GBP23.9 million. The
Company's GCP Onshore Wind 2 loan was also redeemed in full on 8
March 2016. As the repayment was unscheduled, the amount repaid of
GBP6.4 million included a redemption fee which has positively
impacted income for the year.
The Company made six advances totalling GBP53.6 million post
year end.
Advances made during the year
Investment Loan Project
------------------------ --------------------------- --------------------------
GCP Rooftop Solar Amount GBP3.1 million Portfolios of domestic
5 Limited(1) Term 21 years solar panel installations
Security Subordinated in England installed
Status Operational by A Shade Greener
Limited.
------------------------ --------- ---------------- --------------------------
GCP Biomass 4 Limited(1) Amount GBP3.9 million Construction of
Term 16 years a waste to energy
Security Subordinated biomass facility
Status Construction in Widnes, England.
------------------------ --------- ---------------- --------------------------
GCP Social Housing Amount GBP0.3 million Portfolio of housing
1 Limited(1) Term 35 years units for occupation
A notes Security Senior by adults with
Status Operational learning difficulties.
------------------------ --------- ---------------- --------------------------
GCP Social Housing Amount GBP10.8 million Portfolio of housing
1 Limited(1) Term 40 years units for occupation
B notes Security Senior by adults with
Status Operational learning difficulties.
------------------------ --------- ---------------- --------------------------
GCP Social Housing Amount GBP4.6 million Funding for construction
1 Limited(1) Term 1 year and renovation
C notes Security Senior of housing units
Status Operational for occupation
by adults with
learning difficulties.
------------------------ --------- ---------------- --------------------------
GCP Social Housing Amount GBP32.7 million Portfolio of housing
1 Limited(1) Term 35 years units for occupation
D notes Security Senior by adults with
Status Operational learning difficulties.
------------------------ --------- ---------------- --------------------------
GCP Biomass 5 Limited Amount GBP12.5 million Construction of
B notes Term 15 years food waste anaerobic
Security Senior digestion facility
Status Construction in Wales.
------------------------ --------- ---------------- --------------------------
GCP Biomass 5 Limited Amount GBP12.8 million Construction of
C notes Term 15 years food waste anaerobic
Security Senior digestion facility
Status Construction in England.
------------------------ --------- ---------------- --------------------------
GCP Asset Finance Amount GBP11.1 million Construction of
1 Limited Term 27 years a number of availability
C notes Security Subordinated based accommodation
Status Construction PPP assets in Scotland
under the NPD procurement
model.
------------------------ --------- ---------------- --------------------------
GCP Biomass 1 Limited(1) Amount GBP1.0 million Construction of
C notes Term 16 years a waste to energy
Security Subordinated biomass facility
Status Construction in Londonderry,
Northern Ireland.
------------------------ --------- ---------------- --------------------------
GCP Asset Finance Amount GBP5.0 million Asset finance for
1 Limited Term 14 years the construction
D notes Security Senior of an energy centre
Status Construction within an NHS hospital.
------------------------ --------- ---------------- --------------------------
Investments
totalling
GBP92.8 million
------------------------ --------- ---------------- --------------------------
Prepayments
Investment Loan Project
---------------- -------------------------- -------------------
GCP Onshore Wind Amount GBP6.4 million Three 500kW single
2 Limited Term 12 years turbine wind sites
Security Senior in England and
Status Operational Wales.
---------------- --------- --------------- -------------------
Investments
totalling
GBP6.4 million
---------------- --------- --------------- -------------------
Advances made post year end
Investment Loan Project
--------------------- --------------------------- --------------------------
GCP Programme Funding Amount GBP44.2 million Portfolio of housing
1 Limited Term 35 years units for occupation
Series 1 notes Security Senior by adults with
Status Operational learning or physical
difficulties.
--------------------- --------- ---------------- --------------------------
GCP Programme Funding Amount GBP1.0 million Funding for construction
1 Limited Term 2 years and renovation
Series 2 notes Security Senior of housing units
Status Construction for occupation
by adults with
learning difficulties.
--------------------- --------- ---------------- --------------------------
GCP Asset Finance Amount GBP0.3 million Construction of
1 Limited Term 27 years an availability
C notes Security Subordinated based accommodation
Status Construction PPP asset inn Scotland
under the NPD procurement
model.
--------------------- --------- ---------------- --------------------------
GCP Healthcare 1 Amount GBP0.3 million Construction of
Limited Term 27 years an NHS LIFT asset
C notes Security Subordinated in Hull.
Status Construction
--------------------- --------- ---------------- --------------------------
GCP Social Housing Amount GBP1.9 million Purchase of an
1 Limited Term 40 years additional housing
B notes Security Senior unit for occupation
Status Operational by adults with
learning or physical
difficulties.
--------------------- --------- ---------------- --------------------------
GCP Social Housing Amount GBP5.9 million Purchase of additional
1 Limited Term 35 years housing units for
D notes Security Senior occupation by adults
Status Operational with learning or
physical difficulties.
--------------------- --------- ---------------- --------------------------
Investments
totalling
GBP53.6 million
--------------------- --------- ---------------- --------------------------
(1) Further drawings under, or extensions to, existing
facilities.
Investment portfolio
The Company is exposed to a portfolio of 43 infrastructure loans
valued at GBP699.7 million with an average annualised yield of 8.8%
and an average life across the portfolio of 15 years.
Portfolio overview
The valuation of the Company's investments at 30 September 2016
was GBP699.7 million. The Company made four new investments and
seven extensions to existing facilities during the year. The
Company also refinanced one loan and received an early prepayment
on an existing facility, taking the number of investments to 43 at
the year end. Post year end the Company made a further six
advances.
As at 30 September 2016, the principal value of the Company's
investments was GBP644.9 million with a weight--adjusted average
annualised yield of 8.8% and an average life across the portfolio
of 15 years.
A full list of the Company's portfolio can be found on the
Company's website at
www.gcpuk.com/gcp-infrastructure-investments-ltd.
Key exposures
Top ten investments
Loan Cash flow type Project type % of total assets
------------------------------------- --------------- -------------------- -----------------
Cardale PFI Investments Limited Unitary charge Various UK PFI 11.5%
GCP Biomass 1 Limited ROCs Anaerobic digestion 5.6%
GCP Green Energy Limited ROCs Onshore wind 4.9%
GCP Biomass 5 Limited FiT Anaerobic digestion 4.9%
GCP Social Housing 1 Limited D notes Lease payment Social Housing 4.7%
GCP Rooftop Solar 4 Limited FiT Rooftop solar 4.6%
GCP Healthcare 1 Limited Unitary charge Various UK PFI 4.4%
GCP Rooftop Solar 5 Limited FiT Rooftop solar 3.7%
GCP Rooftop Solar 6 Limited FiT Rooftop solar 3.6%
GCP Biomass 4 Limited ROCs Biomass 3.1%
------------------------------------- --------------- -------------------- -----------------
Top ten project counterparties
E.ON Energy Limited (Ofgem) 24.6%
Ofgem 19.0%
Power NI (Ofgem) 8.5%
Bespoke Supported Tenancies 6.2%
Centrica (Ofgem) 3.4%
Viridian Energy Supply Limited (Ofgem) 3.0%
Co-op Group (Ofgem) 3.0%
Smartest Energy Limited (Ofgem) 2.6%
Inclusion 2.6%
Aberdeen City Council 2.3%
--------------------------------------- -----
Top ten facilities managers
A Shade Greener Maintenance Limited 23.8%
Agrivert Group 8.9%
Fairhome 6.2%
Agrikomp (UK) Limited 6.0%
Burmeister & Wain Scandinavian Contractor A/S 5.9%
Vestas Northern Europe A/S 5.3%
Grosvenor Facilities Management 4.1%
Senvion 3.0%
Smarter Energy Solutions Limited 2.6%
Inclusion 2.6%
---------------------------------------------- -----
Case study
Cardale PFI Investments Limited
Cardale PFI Investments
Loan Limited
---------------- -------------------------
Loan valuation GBP86.4 million
Weighted average 17 years
life
Security Secured on a subordinated
basis
Sector Various UK PFI
Project status Operational
Cash flow Unitary charge
---------------- -------------------------
Project information
The Company has made a loan, secured against a portfolio of
operational healthcare and accommodation PFI projects:
-- Runwell - a 96 bed forensic and low security mental health facility in Wickford, Essex;
-- Lanchester Road - a mental health facility for Tees, Esk and Wear Valleys NHS Trust;
-- Stanley - a primary healthcare facility for children and
young persons for County Durham Primary Care Trust;
-- Braintree - a community hospital at the St Michael's site in
Braintree for mid Essex Primary Care Trust;
-- North Yorkshire Schools - four primary schools in North Yorkshire;
-- Amber Valley - three leisure facilities on three sites,
Alfreton Leisure Centre, Ripley Leisure Centre and William Gregg VC
Leisure Centre;
-- Rotherham - four leisure facilities being Aston-Cum-Aughton
Leisure Centre, Maltby Service Centre, Rotherham Leisure Centre and
Wath Upon Dearne Leisure Centre;
-- Wolverhampton - Bowman's Harbour Leisure Centre that is
backed by Wolverhampton City Council;
-- Kirklees - three special needs schools in the Borough of Kirklees; and
-- Slough Schools - three schools in the Borough of Slough.
Fit with investment strategy
Under a PFI contract, a private sector entity constructs and
operates an infrastructure asset in return for a, typically, 25 to
30 year cash flow (the unitary charge) payable by an NHS Trust or a
local authority.
PFI projects can thus generate long-dated, public sector backed
cash flows in the form of unitary charge cash flows.
Case study
GCP Biomass 1 Limited
Loan GCP Biomass 1 Limited
---------------- ------------------------
Loan valuation GBP41.9 million
Weighted average 13 years
life
Security Secured on a senior
basis
Sector Anaerobic digestion
Project status Construction/operational
Cash flow Construction 8.3%
NIROCs 71.5%
PPA 20.2%
---------------- ------------------------
Project information
The Company has made a series of loans secured against a
portfolio of 500kWh, on-farm anaerobic digestion plants primarily
in Northern Ireland. The plants are being constructed and operated
by Agrikomp GmbH.
Anaerobic digestion is a process by which naturally occurring
micro--organisms digest biomass (organic material) releasing a
methane-rich gas (biogas) that can be used to generate renewable
heat and power. The biomass used in the on-farm plants is slurry
and crops. The remaining material (digestate) is rich in nutrients
and can be used as a fertiliser for agricultural land.
Fit with investment strategy
The ROCs scheme for anaerobic digestion plants provides a tariff
for each MWh of electricity generated. The tariff is ROCs (or
NIROCs), which are issued by the Gas and Electricity Markets
Authority. The tariff is payable for 20 years increasing in line
with RPI.
Anaerobic digestion plants can thus generate long-dated, public
sector backed cash flows in the form of ROCs or NIROCs.
Case study
GCP Green Energy 1 Limited
GCP Green Energy
Loan 1 Limited
---------------- ------------------------
Loan valuation GBP36.8 million
Weighted average 11 years
life
Security Secured on a senior
basis
Sector Commercial solar/onshore
wind
Project status Operational
Cash flow ROCs/FiT/PPA
---------------- ------------------------
Project information
The Company has made a series of loans against a portfolio of
operational wind and solar assets owned by Good Energy Group,
comprising two wind farms and five solar parks:
-- Hampole Wind Farm - a four turbine, 8.2MW wind farm located near Doncaster;
-- Creathorne Farm Solar Park - a 1.8MW located in Cornwall, near the town of Bude;
-- Woolbridge Solar Park - a 5MW solar park set over 34 acres,
located near the town of Wool, in Dorset;
-- Rookwood Solar Park - a 4.9MW solar park is located in Wiltshire, 7km South West of Swindon;
-- Crossroads Solar Park - a 5MW solar park is located near Alderholt in Dorset;
-- Lower end Solar Park - a 4.9MW site over 25 acres in Marston, Wiltshire; and
-- Carloggas Solar Park - a 8.4MW of solar panels spread over 50
acres, near St Austell in Cornwall.
Fit with investment strategy
The assets all receive government subsidies, either in the form
of the FiT scheme or ROCs.
Assets under construction
At 30 September 2016, 10.1% of the Company's loan investments
are exposed to projects under construction. All construction assets
where relevant are timed within remaining government subsidy
periods. The assets under construction are progressing in line with
expectations (as shown below) or have been completed.
GCP Biomass 1 Limited Funding has been advanced
for a portfolio of 500kW
plants. Eleven are fully
constructed with ten connected
to the grid, one is due
for connection in Q4 2016.
GCP Biomass 4 Limited The construction of a 20.2MWe
wood fuelled biomass combined
heat and power plant in
Widnes, Merseyside is due
for completion in Q1 2017.
GCP Biomass 5 Limited B The construction of a plant
notes in Stormy Downs, Wales;
owned and operated by Agrivert
Group. Works have progressed
in line with expectations
and the plant is fully connected
and generating power.
GCP Biomass 5 Limited C The construction finance
notes of a plant in Hertfordshire;
owned and operated by Agrivert
Group. Works have progressed
in line with expectations
and the plant is fully connected
and generating power.
GCP Asset Finance Limited The construction of Scottish
C notes PFI projects funded under
the non-profit distributing
programme. The projects
are in the initial construction
phases and works are progressing
in line with expectations.
GCP Asset Finance Limited The construction of key
D notes back-up generators at a
hospital in Ipswich, Suffolk.
Construction of the asset
is expected to be completed
in or by early March 2017.
Works are progressing in
line with expectations.
GCP Social Housing 1 Limited Renovation of a portfolio
of supported living accommodation
located around the UK. Works
are progressing in line
with expectations.
---------------------------- ----------------------------------
Asset performance
The PFI and social housing projects that support the Company's
investments have experienced no material operational or
construction issues.
Whilst the operational and construction performance of most
renewable energy projects against which the Company has made loans
has been materially as expected, a number of macro-economic and
policy factors have negatively impacted forecasted net cash flows.
The removal of the Climate Change Levy exemption, lower than
anticipated power prices and the continuing low inflation
environment have all reduced the predicted income generated.
However, it is the current expectation of the Investment Adviser
that the cash flows expected to arise to the Company from such
projects in the form of debt service payments will not be
materially affected.
With regard to asset--specific issues, the cash flows generated
by two biomass projects have been lower than expected primarily due
to delays in grid connection, slower than predicted operational
ramp up and power capacity concerns.
The Investment Adviser and its technical adviser have worked
closely throughout the period to consider alternative actions
available to address the underperformance of the plants. The Board
has conducted an ongoing evaluation of the likely cost of remedial
capital works and resulting future performance and cash flow
generation. As a result, the valuation of one of the loans was
reduced by 0.35% of the Company's NAV in November 2015 and further
by 0.44% of the Company's NAV in March 2016. The valuation of the
other loan was reduced by 0.60% of the Company's NAV in September
2016. The Board are instigating clear plans to make improvements to
each of these loans.
Investment valuation
The Valuation Agent, Mazars LLP, carries out a fair market
valuation of the Company's investments on behalf of the Board on a
quarterly basis (prior to 31 March 2016, this was performed on a
monthly basis). The valuation principles used by the Valuation
Agent are based on a discounted cash flow methodology. A fair value
for each asset acquired by the Company is calculated by applying a
discount rate (determined by the Valuation Agent) to the cash flow
expected to arise from each asset.
The weighted average discount rate at 30 September 2016 was
7.93%, a decrease of 39 basis points from 8.32% as at 30 September
2015. The valuation of investments is sensitive to changes in
discount rates applied. Sensitivity analysis detailing the impact
of a change in discount rates is given in note 19.
In the year, there has been a tightening of yields available on
operational renewables and secondary PFI assets, and in November
2015, March 2016, and September 2016 certain assets in the
portfolio were revalued upwards. The aggregate of these valuations
was an increase of 2.45% of the Company's NAV as at 30 September
2016.
The Valuation Agent, in order to reflect the ongoing performance
issues with two of the Company's biomass assets, revalued downwards
one biomass loan in November 2015 and March 2016 and a further
biomass loan in September 2016. The aggregate impact of these
valuation movements was 1.40% reduction in the Company's NAV for
the year to 30 September 2016.
The valuation of the portfolio as at 30 September 2016 was
GBP699.7 million, compared to a valuation of GBP657.7 million at 30
September 2015.
Principal risks and uncertainties
The Board and the AIFM recognise that risk is inherent in the
operation of the Company and are committed to effective risk
management to protect and maximise shareholder value.
Risk management
Role of the Board
The Board has the ultimate responsibility for risk management
and internal control within the Company. The Board recognises the
existence of inherent risks within the Company's operation and that
effective risk management is critical to the success of the
organisation. When setting the risk management strategy, the Board
also determines the nature and extent of the principal risks they
are willing to take to achieve the Company's strategic
objectives.
The Board, with the assistance of the Audit Committee,
undertakes a formal risk review twice a year to assess the
effectiveness of the Company's risk management process and internal
control systems. The review covers the operational, compliance and
financial risks facing the Company. During the course of such
review, the Board has not identified, nor been advised of any
failings or weaknesses which it has determined to be of a material
nature.
The following are the key components which the Company has in
place to provide effective internal control:
-- the Board and Investment Committee have agreed clearly
defined investment criteria, which specifies levels of authority
and exposure limits;
-- the Board notes the rules of the UK FCA on the promotion of
non--mainstream pooled investments and has a procedure to ensure
that the Company can continue to be approved as an investment
company by complying with sections 1158/1159 of the Corporation Tax
Act 2010;
-- the Investment Adviser and Administrator prepare forecasts
and management accounts which allow the Board to assess the
Company's activities and review its performance;
-- the contractual agreements with the Investment Adviser and
other third party service providers, and their adherence to them,
are regularly reviewed;
-- the services and controls at the Investment Adviser and at
other third party suppliers are reviewed at least annually. The
Audit Committee receives and reviews assurance reports on the
controls of the Depositary and Custodian undertaken by professional
service providers; and
-- the Investment Adviser's Compliance Officer continually
reviews the Investment Adviser's operations.
Role of the AIFM
The AIFM is required to operate an effective and suitable risk
management framework to allow the identification, monitoring and
management of the risks that the AIFM and the AIFs under its
management are exposed.
The AIFM's permanent risk management function, has a primary
role alongside the Board in shaping the risk policy of the Company,
in addition to responsibility for risk monitoring and risk
measuring in order to ensure that the risk level complies on an
ongoing basis with the Company's risk profile.
Principal risk and uncertainties
The principal risks faced by the Company include (but are not
limited to) execution risk, portfolio risk, financial risk,
operational risk, cyber--crime and regulatory, legal and compliance
risk. The principal financial risks, the Company's policies for
managing these risks and the policy and practice with regard to
financial instruments are summarised in note 19 to the financial
statements.
The principal risks and uncertainties identified by the Board
can be found below.
Risk How the risk is managed
---------------------------------- ---------------------------------------
Execution
---------------------------------------------------------------------------
Sufficiency of due diligence In addition to due diligence
The Investment Adviser's carried out by the Investment
due diligence may not Committee of the Board
reveal all the facts relevant and the Investment Adviser,
in connection with an various third party financial,
investment and may not technical, insurance and
highlight issues that legal experts are engaged
could affect the investment's to advise on specific project
performance. If the investment risks.
underperforms, the interest
and principal received
on investments may be
lower than envisaged.
---------------------------------- ---------------------------------------
Availability of suitable The Investment Adviser
investments and reinvestment is constantly in touch
risk with the market seeking
There is no guarantee new deals and builds a
that the Company will specifically identified
be able to make suitable investment pipeline before
investments with risk the Board seeks to raise
and return characteristics additional finance in an
that fit within the investment attempt to ensure that
strategy of the Company, capital is deployed in
or that suitable investments a timely fashion.
that can be identified
will be made in a timely
manner. This is a risk
when raising capital and
when reinvesting principal
returned to the Company
under existing loan agreements.
If the Company cannot
invest capital in suitable
assets in a timely manner,
the uninvested cash balance
will have a negative impact
on the Company's returns.
If the only available
investments with an appropriate
risk profile yield lower
rates of return than have
historically been achievable,
to be fully invested,
the Company's overall
returns may be adversely
affected.
---------------------------------- ---------------------------------------
Portfolio
---------------------------------- ---------------------------------------
Change in laws, regulation Any changes in laws, regulation
and/or policy and/or policy are monitored
Any change in the laws, by the Board on an ongoing
regulations and/or government basis. Given the UK government's
policy, in particular reliance on private capital
relating to the PFI and for, inter alia, the funding
renewable energy markets, of new social and economic
may have an adverse effect infrastructure and renewable
on the performance of energy projects, it is
the Company's investment the view of the Investment
portfolio and the returns Adviser and the Board that
achieved by the Company. any future changes in policy
are more likely to have
prospective rather than
retrospective effect.
---------------------------------- ---------------------------------------
Performance of sub--contractors The competence and financial
The performance of the strength of contractors,
Company's investments as well as the terms of
is typically, to a considerable contractors engagements,
degree, dependent on the is a key focus of investment
performance of sub--contractors, due diligence. The Board
most notably facilities and the Investment Adviser
managers and operation monitors the Company's
and maintenance contractors. exposure to any given sub--contractor,
If a key sub--contractor and ensures that the risk
has to be replaced due of underperformance is
to the insolvency of that mitigated by diversification.
sub--contractor or for
any other reason, the
replacement sub--contractor
may charge a higher price
for the relevant services
than previously paid.
The resulting increase
in the costs may result
in the Company receiving
lower interest and principal
payments than envisaged.
---------------------------------- ---------------------------------------
Operational or construction The Investment Adviser
issues undertakes extensive due
The investments which diligence on all projects
the Company holds are regarding expected performance.
exposed to construction A full package of insurance
and/or operational risks and manufacturer guarantees
and may not perform as is put in place to protect
expected. In the event the Company from any unforeseen
of material operational events. The Company's construction
or construction issues, exposure is limited to
the interest and principal 25% of its total assets.
payments received by the The Board and the Investment
Company may be lower than Adviser monitors this limit
expected. and the status of any project
in the construction phase
on an ongoing basis. The
Board ensures that the
Company has security over
the assets against which
it is lending, so in an
instance of borrower default
it can enforce security
over the assets.
---------------------------------- ---------------------------------------
Technology risk Some of The Investment Committee
the projects that the of the Board and the Investment
Company invests in utilise Adviser ensures that due
relatively new or developing diligence is carried out
technologies. There may by technical experts to
be issues in relation advise on specific project
to those technologies risks including technology
that become apparent only risk.
in the future. Such issues
may give rise to additional
costs or may otherwise
result in the financial
performance of the relevant
investment being poorer
than is anticipated. This
may adversely affect the
value of and returns generated
by the Company's investments.
---------------------------------- ---------------------------------------
Lifecycle and maintenance Project lifecycle and maintenance
costs timings and costs are typically
From time to time components based on manufacturers'
of a project may need data and warranties and
to be replaced or undergo advice received from specialist
a major refurbishment. consultants. Updated lifecycle
Over the life of a project cost projections are received
the cost of such replacements on a regular basis and
or refurbishments may with appropriate provisions
be higher than projected. made which are monitored
In such circumstances on an ongoing basis by
the cash flow available the Investment Adviser.
to service the Company's
debt may be reduced to
an extent where the interest
and principal payments
received by the Company
is less than forecast.
---------------------------------- ---------------------------------------
Insurance The Investment Adviser
All the projects that requires confirmations
the Company is exposed and evidence from all borrowers
to are required under that the insurance required
the loan documentation by the relevant loan documentation
to have appropriate insurance is in place.
in place. There is a risk
that a project encounters
issues resulting in a
loss that is uninsured,
either because it is not
covered by the insurance
that is in place or because
no insurance is in place.
This could mean the Company
loses all or part of the
value of its investment.
---------------------------------- ---------------------------------------
Project company owner The Investment Adviser
The owners of the Project and the Investment Committee
companies to which the of the Board ensure that
Company lends money are equity owners have appropriate
responsible for the underlying expertise and financial
asset performance. There standing to own, construct
is a risk that these equity and operate the underlying
owners do not have the project by carrying out
experience, track record, the appropriate due diligence.
ability or financial resources
to satisfactorily fulfil
their required role.
---------------------------------- ---------------------------------------
Financial
---------------------------------- ---------------------------------------
Assumptions When modelling future cash
The Company makes investments flows and structuring debt
which rely on detailed profiles, the Investment
financial models based Adviser uses assumptions
on certain assumptions, considered to be conservative
estimates and projections by third party experts.
of each investment's future The Investment Adviser
cash flow. Such assumptions constantly monitors the
include, inter alia, inflation, actual performance of projects
power price, feedstock and takes action where
cost, asset productivity, appropriate.
lifecycle and insurance
cost. There can be no
assurance that these assumptions
will turn out to be accurate,
and actual data could
have an adverse impact
on the performance of
the Company's investments.
---------------------------------- ---------------------------------------
Valuation The value of The Company's infrastructure
the investments made by investments are generally
the Company will change low volatility investments
from time to time according with stable pre determined,
to a variety of factors, very long term, public--sector
including movements and backed revenues.
expected movements in Approximately half of the
interest rates and inflation Company's investment portfolio
and general market pricing has some form of inflation
of similar investments. protection mechanism that
Such changes will impact will result in increased
the value of the Company's returns in the event of
investment portfolio. high inflation.
The Company's investments
are valued with reference
to duration matched interest
rates, typically between
15 and 25 year rates. The
discount rates currently
used to value the Company's
investments include a material
premium that offers protection
in the event of rate rises.
---------------------------------- ---------------------------------------
Interest rate The Facility is in place
The Company has a floating to fund potential investments
rate revolving credit in the near term and to
facility and as such the avoid holding material
financial performance amounts of uninvested cash
of the Company will be awaiting investment. The
adversely affected in Facility is a short term
the event that interest measure and the loan to
rates rise. value (borrowings as %
of net assets) at year
end was 3.7%.
---------------------------------- ---------------------------------------
Other
---------------------------------- ---------------------------------------
Regulatory, legal and
compliance risk The Company The Board monitors compliance
may not achieve full compliance information provided by
with all applicable legislation the Administrator, Company
leading to reputational Secretary, Investment Adviser
or financial consequences. and legal counsel and monitors
ongoing compliance developments
in the Channel Islands
and Europe along with regulatory
developments in the UK
as well as listing rules
and FCA marketing rules.
The Company has a comprehensive
compliance monitoring programme
to ensure full compliance
with legislation/regulation
relevant to the Company's
operations.
---------------------------------- ---------------------------------------
Operational risk The Company has no employees
Operational risk arises but has sufficient policies
from inadequate or failed and procedures in place
internal processes, people, to ensure operational risk
and systems, or from external is mitigated.
causes (deliberate, accidental
or natural). Events may
be manifested as direct
financial losses or result
in damage to reputation
causing longer--term financial
consequences.
---------------------------------- ---------------------------------------
Cyber-attack risk The Company has no dedicated
Inadequate systems, policies IT systems and it relies
and procedures in place on those of its service
to prevent against cyber--attack, providers. The Board monitors
which may manifest as reports and compliance
financial losses, theft information provided by
of intellectual property the Administrator, Company
or damage to the Company's Secretary, Investment Adviser
reputation as a consequence. and legal counsel and monitors
ongoing compliance developments
in the Channel Islands
and Europe to ensure the
risk is mitigated.
---------------------------------- ---------------------------------------
Reliance on Investment The Investment Adviser
Adviser has industry and asset
The Company is heavily knowledge of specific use
reliant on the Investment and importance to the Company.
Adviser to implement the The Company has entered
Company's strategy and into a contractual engagement
investment policy to deliver with the Investment Adviser.
its objectives. There The Board maintains an
is a risk that the Company awareness of other advisers
may not be able to find that could replace the
an appropriate replacement Investment Adviser if required.
investment adviser should
the engagement with the
Investment Adviser be
terminated.
---------------------------------- ---------------------------------------
Brexit vote There is a The Chancellor stated in
risk that the uncertainty the November 2016 Autumn
caused by the Brexit vote Statement that the UK government
could result in adverse remains committed to UK
conditions for the Company infrastructure development
and an increase in the and as such the risk of
risks mentioned above, governmental policy changes
most particularly "Change would appear unchanged.
in laws, regulation and/or Although long dated interest
policy", "Valuation" and rates fell post the vote
"Interest rate". they have bounced back
and there appears an increased
risk of rising interest
rates and high inflation.
The Company mitigates against
these risks as detailed
above.
---------------------------------- ---------------------------------------
Going concern
The Directors have assessed the financial prospects of the
Company for the next twelve months and made an assessment of the
Company's ability to continue as a going concern. The Directors are
satisfied that the Company has the resources to continue in
business for the foreseeable future and furthermore are not aware
of any material uncertainties that may cast significant doubt upon
the Company's ability to continue as a going concern.
Viability statement
At least twice a year, the Board carries out a robust assessment
of the principal risks facing the Company, including those that
would threaten its business model, future performance, solvency and
liquidity. The Directors have considered each of the Company's
principal risks and uncertainties detailed below and in particular
the risk and impact of changes in government policy that could
materially affect the cash flows of the underlying projects that
support the Company's investments. The Directors also considered
the Company's policy for monitoring, managing and mitigating its
exposure to these risks.
The Directors have assessed the prospects of the Company over a
longer period than the twelve months required by the going concern
provision. The Board have conducted this review for a period
covering the next five years as over this period. it believes the
risk of changes in government policy that would result in
retrospective adjustments to such public-sector backed cash flows
is low.
This assessment involved an evaluation of the potential impact
on the Company of these risks occurring. Where appropriate, the
Company's financial model was subject to a sensitivity analysis
involving flexing a number of key assumptions in the underlying
financial forecasts in order to analyse the effect on the Company's
net cash flows and other key financial ratios. The sensitivity
analysis undertaken considered the impact of a significant
proportion of the portfolio not yielding, which is a plausible
consequence of a number of the principal risks materialising,
either in isolation or in parallel. The sensitivity analysis was
based on a number of assumptions, including that the Company's
credit facility remains in place to provide short term finance for
further investments and that there will be sufficient liquidity in
the market to raise new capital as and when required.
Given that the projects that the Company's investments are
secured against are all UK infrastructure projects that generate
long-dated, public-sector backed cash flows, the Board thus
considers the revenue of the Company over that period to be
dependable.
Additionally, the Company primarily invests in long-dated, UK
infrastructure debt that earns a fixed rate of interest and is
repaid over time according to a pre-determined amortisation
schedule. As such, assuming that the underlying projects perform as
expected, the Company's cash inflows are also predictable.
Based on this assessment of the principal risks facing the
Company and the stress testing based assessment of the Company's
prospects, the Directors have a reasonable expectation that the
Company will be able to continue in operation and meet its
liabilities as they fall due over the five-year period of their
assessment.
Mr Ian Reeves CBE
Chairman
13 December 2016
Board of Directors
Ian Reeves CBE, CCMI, FCInstCES, FRSA, FINSTD
Chairman - 72
Ian Reeves CBE, a UK resident, is an entrepreneur, international
businessman and adviser. He is Senior Partner of Synaps Partners
LLP and visiting Professor of Infrastructure Investment and
Construction at Manchester Business School, The University of
Manchester. He was made a Commander of the Most Excellent Order of
the British Empire (CBE) in 2003 for his services to business and
charity. Ian has served as a Director since 15 June 2010.
Clive Spears ACIB, MCISI
Deputy Chairman - 63
Clive Spears, a Jersey resident, is a career qualified corporate
banker, with 32 years' experience with the Royal Bank of Scotland
Group of which the last 18 years were spent in Jersey until
retirement in 2003. Relevant experience has spanned corporate
finance, treasury products, global custody and trust and fund
administration. Additional experience in audit and compliance has
also accrued during the period. Clive serves on the board of an AIM
listed company, EPE Special Opportunities plc and on the board of a
main market listed investment trust; Invesco Perpetual Enhanced
Income Fund Ltd. Clive has served as a Director since 7 February
2014.
David Pirouet FCA
Audit Committee Chairman - 62
David Pirouet, a Jersey resident, is a qualified accountant. He
was an audit and assurance partner for 20 years with PwC until he
retired in June 2009. He specialised in the financial services
sector, in particular in the alternative investment management
area. Since retiring from PwC, Mr Pirouet serves on the board of
another listed company, the AIM listed Ludgate Environmental Fund
Limited and on various privately held investment entities. David
has served as a Director since 15 June 2010.
Julia Chapman
Non--executive Director - 51
Julia Chapman, a Jersey resident, is a solicitor qualified in
England & Wales and Jersey with over 25 years' experience in
the investment fund and capital markets sector. Having trained with
Simmons & Simmons in London, Julia moved to Jersey to work for
Mourant du Feu & Jeune (now Mourant Ozannes) and became a
partner in 1999. Julia was then appointed general counsel to
Mourant International Finance Administration (the firm's fund
administration division) with responsibility for legal, risk and
compliance oversight of third--party administration services to
alternative investment funds. Ms Chapman serves on the board of a
main market listed company, Henderson Far East Income Limited.
Julia was appointed as a Director on 1 October 2015.
Paul De Gruchy
Non--executive Director - 44
Paul De Gruchy, a UK resident since August 2016, is a qualified
Jersey Advocate with 20 years' experience in financial services
law. For the last nine years he has been Head of Legal for BNP
Paribas in the UK offshore area. He has extensive experience in the
financial services sector, in particular in the area of offshore
funds. He has held senior positions at the Jersey Economic
Development Department where he was the Director responsible for
finance industry development and the Jersey Financial Services
Commission (the regulator of the Company). Paul is a graduate of
Queens' College, Cambridge. Paul has served as a Director since 7
February 2014.
Michael Gray FCIBS
Non--executive Director - 50
Michael Gray is a Jersey resident, a qualified corporate banker
and corporate treasurer. Michael was most recently the Regional
Managing Director, Corporate Banking for RBS International, based
in Jersey but with responsibility for The Royal Bank of Scotland's
Corporate Banking Business in the Crown Dependencies and British
Overseas Territories. In a career spanning 31 years with The Royal
Bank of Scotland Group plc, Michael has undertaken a variety of
roles including that of an auditor for four years and has extensive
general management and lending experience across a number of
industries. Michael was appointed as a Director on 1 October
2015.
The Investment Adviser
Stephen Ellis
Partner
Stephen Ellis has overall responsibility for the provision of
investment advice to the Company.
Stephen graduated from Oxford University in 1980 and after a
short service commission with the British Army he spent a 16 year
career in investment banking, principally in tax--based finance,
securitisation and debt origination. Stephen formed the Investment
Adviser in 2008 after five years as a Director at DTZ Corporate
Finance, where he had responsibility for all UK infrastructure
financing, in particular in the healthcare and education
sectors.
Rollo Wright
Partner
Rollo Wright is responsible for asset acquisition. He is also
responsible for monitoring and reporting on the ongoing performance
of the Company.
Rollo graduated with a degree in Mathematics from Oxford
University before qualifying as a chartered accountant with Arthur
Andersen. He moved to the capital markets division of Commerzbank
Securities where he focused on the origination of pan--European
corporate debt, specifically convertible bonds. He joined the
structured finance team at DTZ Corporate Finance in 2004 and
specialised in advising on the sale and financing of healthcare and
education projects, as well as the structuring of residential
property--backed transactions.
Nick Parker
Partner
Nick Parker is responsible for asset sourcing and acquisition,
and the negotiation and documentation of the Company's financing
and hedging arrangements.
Nick holds a degree in Economics from Cambridge University.
After ten years in investment banking, focused on rate structured
products and asset-backed securities, he became a Director of
Structured Finance at DTZ where he advised on the financing of
long-dated cash flows underlying property and infrastructure
assets, particularly in respect of their documentation and
hedging.
Ronan Kierans
Partner
Ronan Kierans is responsible for asset sourcing and acquisition.
His role involves identifying suitable assets, and carrying out and
reporting on acquisition due diligence, including financial
modelling and insurance, legal and built asset due diligence.
Ronan qualified as a chartered accountant with KPMG Dublin and
subsequently worked in corporate finance with KPMG and DTZ
Corporate Finance. At KPMG, Ronan worked on a number of corporate
tax and M&A transactions. During his time at DTZ Corporate
Finance, Ronan worked in the fund structuring team, specialising in
the structuring of, and asset acquisition for, European property
funds. In 2007, Ronan moved to the Infrastructure team at DTZ,
where he primarily worked on healthcare projects.
Dion Di Miceli
Head of Investment Companies
Dion Di Miceli has responsibility for liaising with the client
boards, investors and advisers and leading product development
alongside the fund managers. A member of the Chartered Institute
for Securities & Investment since 2005, Dion qualified as a
Chartered Accountant with Arthur Anderson LLP in 2002 and
subsequently spent four years in the Investment Funds practice at
Ernst & Young LLP. He joined the Investment Companies team at
Cenkos Securities plc in 2007 where, as senior corporate adviser,
he worked with investment company boards and their managers
advising on and structuring a board range of transactions covering
IPOs, secondary issuance, mergers and corporate reconstructions.
Dion joined the Investment Adviser in February 2016.
Ben Perkins
Analyst
Ben Perkins is responsible for asset sourcing and acquisitions,
and the reporting and monitoring of the ongoing performance of the
Company.
Ben graduated from Warwick University with a degree in
Mechanical Engineering. He then spent five years at John Laing
where he was involved in originating and monitoring a variety of
infrastructure assets, whilst also obtaining the CFA qualification.
He then moved to Hadrian's Wall Capital, specialising in
infrastructure debt structuring, before joining the Investment
Adviser in 2013.
Corporate governance statement
I am pleased to present the Company's corporate governance
statement of the year ended 30 September 2016.
Corporate Governance Code
The Disclosure Rules of the UKLA require certain listed
companies to disclose how they have applied the principles and
complied with the provisions of the Corporate Governance Code to
which the issuer is subject. The Board has considered the
principles and recommendations of the AIC Code. The AIC Code, as
explained by the AIC Guide, addresses all the principles set out in
the UK Code issued by the FRC, as well as setting out additional
principles and recommendations on issues that are of specific
relevance to the Company.
The FRC has confirmed that AIC member companies who report
against the AIC Code and who follow the AIC Guide will be meeting
their obligations in relation to the UK Code and the associated
disclosure requirements of the Disclosure Rules. The Board
considers that reporting against the principles and recommendations
of the AIC Code, (and by reference to the AIC Guide), will provide
better information to shareholders. A copy of the AIC Code and the
AIC guide can be viewed at www.theaic.co.uk.
Statement of compliance with the AIC Code and Guide
The Board recognises the importance of a strong corporate
governance culture that meets the requirements of the Listing Rules
of the UKLA. The Board has put in place a framework for corporate
governance which it believes is appropriate for the Company. All
Directors contribute to Board discussions and debates. The Board
believes in providing as much transparency for shareholders as is
reasonably possible. It should be noted that most of the Company's
day--to--day responsibilities are delegated to third parties, the
Company has no employees and the Directors are non--executive.
The Company has complied with the recommendations of the AIC
Code and the relevant provisions of the UK Code, except as set out
below:
-- the role of the Chief Executive: for the reasons set out in
the AIC Guide, and as explained in the UK Code the Board considers
that the post of Chief Executive is not relevant for the Company,
being an externally managed investment company;
-- the appointment of a Senior Independent Director: the
Nomination Committee has discussed whether it would be in the best
interests of the Company to recommend to the Board the appointment
of a Senior Independent Director and have agreed that at the
present time the Board has an appropriate balance of skills and
experience and as such, an appointment is not considered necessary.
However, the Nomination Committee has agreed to keep the matter
under regular review;
-- Executive Directors' remuneration: as the Board has no
executive Directors, it is not required to comply with the
principles of the AIC Code in respect of executive Directors'
remuneration and does not have a Remuneration Committee. A full
Remuneration Report is included below;
-- Internal Audit function: the Company delegates the majority
of its operations to third parties and has no employees. The
majority of these third parties have their own internal audit
function and the Board has therefore determined that there is no
need for the Company to have its own internal audit function but
this is reviewed on an annual basis. The Directors consider
semi--annually the principal risks relating to the operations of
the Company. Such a review includes the consideration of whether
the Company's third parties have adequate internal controls in
place; and
-- the Chairman of the Company, Mr Ian Reeves CBE is also a
member of the Audit Committee. The Board believes it is appropriate
for Mr Reeves CBE to be a member of the committee as he is
considered to be independent and there are no conflicts of
interest.
For the reasons set out in the AIC Code, the Board considers
that these provisions are not relevant to the position of the
Company, being an externally managed investment company. The
Company has therefore not reported further in respect of these
provisions.
The Board's responsibilities and processes
The Board is responsible to shareholders for the overall
management of the Company, and may exercise all the powers of the
Company subject to the relevant statutes, the Company's Articles of
Association and any directions given by special resolution of the
shareholders. The Articles of Association empower the Board to
offer, allot, grant options over or otherwise deal with or dispose
of the Company's shares as the Board may decide. The Law authorises
the Company to make market purchases of its own shares if the
purchase has first been authorised by a resolution of the
Company.
At the Annual General Meeting on 12 February 2016, the
shareholders renewed the Board's authority to allot ordinary shares
and to repurchase ordinary shares on behalf of the Company subject
to certain limits. Details of the authorities which the Board will
be seeking at the 2017 Annual General Meeting are set out in the
2017 Notice of Annual General Meeting.
At each quarterly meeting of the Board, the Directors follow a
formal agenda which includes a review of the Company's investments
and associated matters such as gearing, asset allocation, principal
risks, marketing and investor relations and economic and industrial
issues. The Board is also active in ensuring any regulatory
developments which may affect the operations of the Company are
considered. The Board regularly considers the Company's investment
objective and strategy. In July 2016, a strategy day was held and
it was attended by all Directors. The discussions centred on
general market conditions and future investment opportunities for
the Company. The discussions focused on general market conditions
and future investment opportunities for the Company.
In order to enable the Directors to discharge their
responsibilities effectively, they have full and timely access to
all relevant information.
Matters reserved for the Board
The Board has approved a formal schedule of matters reserved for
the Board.
The schedule is available upon request from the Company
Secretary.
Composition of the Board
The Board consists of six Directors, all of whom are
non--executive and are considered to be independent.
Each of the Directors has signed letters of appointment which
set out the terms and conditions of their appointment. These
letters are available for inspection at the Company's registered
office. No Director has any contract or arrangement in place
between themselves and the Company. Further details as to the terms
of appointment of the Directors are set out in the remuneration
report below.
Overview of Board and employees
Appointments to the Board continue to be based on merit,
regardless of gender, ethnic group or background. The Board
comprises five male Directors and one female Director. The Company
has no other employees.
Diversity is an important consideration in ensuring that the
Board and its committees have the right balance of skills,
experience, independence and knowledge necessary to discharge their
responsibilities. The right blend of perspectives is critical to
ensuring an effective Board and a successful Company.
Appointment and re--election of Directors
Under the provisions of the Company's Articles, the Directors
retire by rotation with one-third of the Directors submitting
themselves for election at each Annual General Meeting. The Board
recognises that as a FTSE 250 Company and in accordance with
corporate governance best practice as set out in the AIC Code, all
Directors should put themselves forward for re-election every
year.
The Board's policy regarding tenure of service is that any
decisions regarding tenure should balance the need to maintain
continuity, knowledge, experience and independence, against the
need to periodically refresh the Board composition in order to have
the appropriate mix of skills, experience, age and length of
service. The Board does not consider that the length of service of
a Director should just be determined on length of service but
should be considered on an individual basis. Therefore, if a
Director has served more than nine years, the Board will consider
the issue of independence carefully on an annual basis as part of
the Board self--evaluation process and will disclose its
conclusions in the Directors report.
Directors' independence
The Board has reviewed the independence of each Director in
accordance with the guidance set out under Principle 2 of the AIC
Code and the corresponding AIC Guide. The Board acknowledges that
Paul De Gruchy has an indirect holding of 453,825 ordinary shares
in the Company and that Clive Spears has a holding of 25,000
ordinary shares in the Company, as at 30 September 2016. The Board
has discussed the interests in the Company held by Mr De Gruchy and
Mr Spears and it is satisfied that it does not materially impact
their ability to exercise independent judgement on the Board.
Accordingly, the Board considers all Directors on the Board to be
independent.
Performance evaluation
The Directors participated in a formal external evaluation
process in 2014 which was conducted by independent external
consultants, Thomas & Dessain. The Company intends to carry out
an external review every three years with the next review due to
take place in 2017.
During the year, the Directors carried out an internal
evaluation process of the Board's and committees' performance. The
evaluation process included the completion of two separate
questionnaires by the Directors. The areas under review included an
assessment of the Chairman, Board and committee process and
effectiveness, overall strategy, corporate governance, investment
management, communications with the shareholders, training
requirements and personal development. A report summarising the
conclusions was presented to and discussed by the Board. This
evaluation report concluded that the Chairman, the Board, the
Committees and each of the individual Directors are performing
well.
Additionally, the Board undertakes annual anti-money laundering
training and the Jersey resident Directors undertake the required
hours of continuing professional development in accordance with
their profession and Jersey regulations including training on areas
relating to the Company's activities such as specialist renewable
sectors.
The Board attempts to ensure that it has the appropriate balance
of skills, experience, knowledge and independence in order to
remain effective. Biographical details of the Directors are shown
below.
Board operation
The Board holds formal meetings on a quarterly basis and
additional ad-hoc meetings are held when necessary. Attendance at
the quarterly Board and committee meetings is displayed in the
table under the heading "Meetings".
The principal matters considered by the Board during the year
(in addition to matters formally reserved to the Board)
included:
-- the Company's strategic model, related KPIs and annual budget;
-- regular reports from the Board's committees;
-- the Annual report and financial statements and half-yearly report;
-- the Company's dividend policy; and
-- organisational capability and succession planning.
Committees
The structure includes an Audit Committee, an Investment
Committee, a Management Engagement Committee and a Nomination
Committee.
Audit Committee
The membership and activities of the Audit Committee are
described in its report below.
Investment Committee
At 30 September 2016, the Investment Committee is comprised of
three Directors, namely Mr Clive Spears (Chairman), Mr Paul De
Gruchy and Ms Julia Chapman. Ms Chapman was appointed to the
committee with effect from 1 October 2015.
The Board has agreed terms of reference for the committee which
includes meeting to consider each new investment proposal received
from the Investment Adviser and advisory reports and
recommendations. The committee met six times during the year. The
committee is also responsible for ensuring key conditions precedent
are complied with for each deal and for sign-off on the release of
capital advances.
Management Engagement Committee
The Management Engagement Committee comprises all Directors of
the Company in view of the wide remit of the committee. The Board
has agreed terms of reference for the committee, which meets at
least once a year to consider the performance of the Investment
Adviser and other third party service providers, the terms of their
engagement and to consider their continued appointment. The
committee met once during the last financial year for an
interrogative workshop and follow-up session. It was recommended
that Gravis Capital Partners LLP be retained as Investment Adviser
in addition to the continued engagement of the third party service
providers whom the committee independently evaluated.
Nomination Committee
The Nomination Committee comprises Mr Ian Reeves CBE, Mr Clive
Spears and Mr David Pirouet.
Further details relating to the function of the committee can be
found below.
The Company does not have a Remuneration Committee; the Board
fulfils the role of the Remuneration Committee as it was agreed
that the size and nature the Board does not warrant the
establishment of a separate committee.
The terms of reference for each of the committees are available
upon request from the Company Secretary.
Meetings
The number of meetings of the Board and committees held during
the year and the attendance of individual Directors are shown
below:
Number of meetings attended
------------------------------------------------------------
Number
of meetings Ian Reeves Clive David Paul Julia Michael
Meeting held CBE Spears Pirouet De Gruchy Chapman Gray
------------------- ------------ ---------- ------- -------- ---------- -------- -------
Quarterly
Board meeting 4 4 4 4 3 4 4
Audit Committee 4 2 - 4 - - 4
Nomination
Committee 1 1 1 1 - - --
Management
Engagement
Committee 1 1 1 1 1 1 1
Investment
Committee 7 - 7 - 7 5 -
------------------- ------------ ---------- ------- -------- ---------- -------- -------
Total number
of
meetings attended - 8 13 10 11 10 9
------------------- ------------ ---------- ------- -------- ---------- -------- -------
20 additional Board meetings were held during the year. These
meetings were in respect of share issuances, capital raisings and
regulatory/procedural matters such as the adoption of revised
procedures following the implementation of the Market Abuse
Regulation.
Conflicts of interest
The Directors have declared any conflicts or potential conflicts
of interest to the Board of Directors which has the authority to
approve such situations. The Company Secretary maintains the
Register of Directors' Conflicts of Interests which is reviewed
quarterly by the Board and whenever changes are notified. The
Directors advise the Company Secretary and Board as soon as they
become aware of any conflicts of interest. Directors who have
conflicts of interest do not take part in discussions which relate
to any of their conflicts.
It is the responsibility of each individual Director to avoid a
conflict arising. In the event that a conflict of interest arises,
the Director(s) must request authorisation from the Board as soon
as they become aware of the possibility of a situational conflict
arising.
The Board is responsible for considering Directors' requests for
authorisation of situational conflicts and for deciding whether or
not the situational conflict should be authorised. The factors to
be considered will include whether the situational conflict could
prevent the Director from properly performing his duties, whether
it has, or could have, any impact on the Company and whether it
could be regarded as likely to affect the judgement and/or actions
of the Director in question. When the Board is deciding whether to
authorise a conflict or potential conflict, only Directors who have
no interest in the matter being considered are able to take the
relevant decision, and in taking the decision, the Directors must
act in a way they consider, in good faith, will be most likely to
promote the Company's success. The Directors are able to impose
limits or conditions when giving authorisation if they believe this
is appropriate in the circumstances.
The Directors must also comply with the statutory rules
requiring company directors to declare any interest in an actual or
proposed transaction or arrangement with the Company.
Dialogue with shareholders
The Board recognises the importance of maintaining a purposeful
relationship with shareholders. The Company, through its Directors,
Investment Adviser and Broker, engages in ongoing communication
with its shareholders. The Board encourages shareholders to attend
and vote at general meetings of the Company in order that they may
discuss governance and strategy and to understand shareholders'
issues and concerns. The Chairman of the Board and the Chair of
each of the committees attend general meetings of the Company to
answer any questions posed by the shareholders and met with a
number of key shareholders in October 2015.
The Company's annual and interim reports are dispatched to
shareholders by post and are also available to download from the
Company's website at
www.gcpuk.com/gcp-infrastructure-investments-ltd. This information
is supplemented by the quarterly calculation and publication of the
NAV of the Company's shares on the London Stock Exchange and the
publication of a quarterly factsheet by the Investment Adviser.
In the Annual Report, the Directors seek to provide shareholders
with information in sufficient detail to allow them to obtain a
reasonable understanding of recent developments affecting the
business and the prospects for the Company in the year ahead. The
various sections of the Strategic report below provide further
information.
Communication of up-to-date information is provided through the
Company's website at
www.gcpuk.com/gcp-infrastructure-investments-ltd.
Internal controls and risk management review
The Directors acknowledge that they have overall responsibility
for ensuring that there are in place systems of internal control,
both financial and non--financial, and for reviewing their
effectiveness. The purpose of the internal financial controls is to
ensure that proper accounting records are maintained, the Company's
assets are safeguarded and the financial information used within
the business and for publication is accurate and reliable; such a
system can provide only reasonable and not absolute assurance
against material misstatement or loss.
The Board reviews the effectiveness of its risk management
systems and all financial performance and results notifications
together with the Investment Adviser. Non--financial internal
controls include the systems of operational and compliance controls
maintained by the Administrator and the Investment Adviser in
relation to the Company's business as well as the management of key
risks as referred to in the Strategic report. A more detailed
overview of the risks that have been assessed are detailed below.
There were no matters arising from this review that required
further investigation and no significant failings or weakness were
identified.
Responsibility for accounting and company secretarial services
has been contractually delegated to the Administrator. The
Administrator has established its own system of internal controls
in relation to these matters, details of which have been reviewed
by the Board as part of the semi--annual risk assessment.
Internal control assessment process
The Board conducts a risk assessment on a semi--annual basis.
The review covers the operation, compliance and financial risks
facing the Company. The Directors confirm that by means of the
procedures set out above, and in accordance with the UK Code and
the AIC Code and Guide, they have established a continuing process
for identifying, evaluating and managing the significant potential
risks faced by the Company and have reviewed the effectiveness of
the internal control systems. The Board, through the Audit
Committee, has identified risk management controls in the following
key areas:
-- investment objective and portfolio;
-- investment strategy;
-- operational risks (particularly in relation to the preparation of financial information);
-- compliance with laws and regulations; and
-- reliance on third party service providers and financial risks.
In arriving at its judgement of what risks the Company faces,
the Board has considered the Company's operations in the light of
the following factors:
-- the nature and extent of risks which it regards as acceptable
for the Company to bear within its overall business objective;
-- the threat of such risks becoming reality;
-- the Company's ability to reduce the incidence and impact of risk on its performance;
-- the cost to the Company and benefits related to the review of
risk associated controls of the Company; and
-- the extent to which the third parties operate the relevant controls.
This process has been in place throughout and subsequent to the
accounting year under review.
Market Abuse Regulation
Following the implementation of the EU Market Abuse Regulation
("MAR") on 3 July 2016, the Board formally adopted revised
procedures in relation to the management, identification and
disclosure of inside information and share dealing in accordance
with MAR.
AIFMD
The Company is classed as an externally managed AIF under the
Directive. The Board appointed the Investment Adviser as the
authorised AIFM to the Company and Capita Trust Company (Jersey)
Limited as the Company's Depositary under the Directive on 22 July
2014.
AIFM remuneration
With effect from 22 July 2014, the Company's Investment Adviser
was authorised as an AIFM by the Financial Conduct Authority under
the AIFMD regulations. The Company has provided disclosures on its
website, www.gcpuk.com/gcp-infrastructure-investments-ltd,
incorporating the requirements of the AIFMD regulations.
The total annual fee paid to the Investment Adviser by the
Company is disclosed in note 20 to the financial statements.
Annual General Meeting
The Annual General Meeting of the Company will be held on 10
February 2017 at 12 Castle Street, St Helier, Jersey JE2 3RT.
By order of the Board
Mr Ian Reeves CBE
Chairman
13 December 2016
Audit Committee report
Summary
Revised versions of the UK Code and the AIC Code and Guide were
published in April 2016 and June 2016 respectively with the amended
provisions having a specific impact on Audit Committee reporting.
The Board has adopted the provisions set out in the revised UK Code
and the AIC Code.
The Audit Committee operates within clearly defined terms of
reference, a copy of which is available on request from the Company
Secretary. The terms of reference require the Audit Committee to
monitor the Company's financial reporting, internal controls and
risk management and external audit process. In October 2016, the
committee reviewed and recommended updates to its terms of
reference to the Board.
The Audit Committee is responsible for making recommendations to
the Board in respect of appointment, re--appointment, and
remuneration of the Auditor and the Auditor's plan for the
year.
Composition
At 30 September 2016, the Audit Committee comprised three of the
Company's Directors including the Chairman, Mr Pirouet, who is a
Chartered Accountant and a former audit partner, Mr Reeves CBE and
Mr Gray (who was appointed to the committee on 1 October 2015). Mr
Spears stepped down from the committee at the conclusion of the
Board meeting held on 17 December 2015.
The Board considers that the independence, experience and
knowledge of each of the Audit Committee members is sufficient for
discharging its responsibilities and in particular taking account
of the financial, audit, banking and infrastructure experience of
the members of the committee. The Audit Committee meets at least
twice a year.
The Audit Committee has reviewed and evaluated its own
performance as part of the Board's annual evaluation process,
explained in the Nomination Committee report detailed below.
Financial reporting
The Audit Committee considered the requirements of the UK
Companies Act 2006 (Strategic Report and Directors' Report)
Regulation 2013 with which it is complying voluntarily, in line
with best practice reporting. The Audit Committee specifically
reviewed the annual report and financial statements to conclude
whether the financial reporting is fair, balanced, understandable,
comprehensive and consistent with:
-- prior year reporting; and
-- how the Board assesses the performance of the Company's
business during the financial year, as required for companies with
a Premium Listing under the UK Code.
As part of this review, the Audit Committee considered if the
annual report and financial statements provided the information
necessary to shareholders to assess the Company's performance,
strategy and business model and reviewed the description of the
Company's key performance indicators.
The Audit Committee presented its conclusions to the Board and
the Board concluded that it considered the annual report and
financial statements, taken as a whole, to be fair, balanced and
understandable and provides the information necessary for the
shareholders to assess the Company's performance, business model
and strategy.
In addition to the above matters, the Audit Committee's work was
focused on the following areas:
-- reviewing the effectiveness of the internal control
environment of the Company and the Company's compliance with its
regulatory requirements;
-- reviewing and recommending to the Board significant
accounting matters and accounting disclosures in the half yearly
and annual financial statements of the Company including matters of
judgement in relation to valuation;
-- overseeing the Company's relations with its Auditor including
assessing the conduct and effectiveness of the audit process and
the Auditor's independence and objectivity, recommending the
Auditor's reappointment and approving the Auditor's fees; and
-- reviewing the Company's compliance with its regulatory obligations in Jersey.
The Auditor is invited to attend the Audit Committee meeting at
which the Annual report is considered and at which they have the
opportunity to meet with the Audit Committee without
representatives of the Investment Adviser being present. The Audit
Committee has direct access to the external Auditor and to the key
senior staff of the Investment Adviser and reports its findings and
recommendations to the Board which retains the ultimate
responsibility for the financial statements of the Company. All
recommendations were accepted by the Board.
Significant issues considered
After discussions with both the Investment Adviser and the
external Auditor, the Audit Committee determined that the key risk
of material misstatement of the Company's financial statements
related to the valuation of investments.
Valuation of investments
As outlined in note 19, the total carrying value of financial
assets at fair value at 30 September 2016 was GBP699.7 million
(2015: GBP657.7 million). Market quotations are not available for
these financial assets such that their valuation is undertaken
using a discounted cash flow methodology. This requires a series of
material judgements to be made as further explained in note 19.
The Audit Committee discussed the valuation process and
methodology with the Investment Adviser in May, July, September and
October 2016 as part of the review of the interim and annual
report. The Valuation Agent carries out a valuation quarterly (up
until 1 April 2016, this was carried out monthly) and provides a
detailed valuation report to the Company.
In order to provide further assurance regarding the basis of
valuation, the Company meets with the Valuation Agent at least once
a year to discuss this as well as reviewing the formal reports from
the Valuation Agent on a regular basis.
In August 2016, the Audit Committee met with the Auditor and
reviewed and agreed the Auditor's audit plan. The committee also
discussed the conclusion of the audit of the financial statements
in December 2016 and in particular, discussed the audit approach
and conclusion on the valuation of investments.
The discount rates adopted to determine the valuation are
selected and recommended by the Valuation Agent. The discount rate
is applied to the expected future cash flows for each investment's
financial forecasts derived, adopting the assumptions explained
above, to arrive at a valuation (discounted cash flow valuation).
The resulting valuation is sensitive to the discount rate selected.
The Valuation Agent is experienced and active in the area of
valuing these investments and adopts discount rates reflecting
their current and extensive experience of the market. The discount
rate assumptions and the sensitivity of the valuation of the
investments to this discount rate are disclosed in note 19.
In particular, the Audit Committee considered in detail the
reductions of the discount rate applied to certain assets during
the year. The Valuation Agent explained this was principally as a
consequence of increased competition in the secondary market for
infrastructure and renewable assets, which had been seen during
bidding and general market activity. This was also corroborated by
the Investment Adviser. The Audit Committee also considered in
detail the revised discount rates applied to the two loans subject
to impairment.
The Audit Committee discussed the material estimates and
judgements and also compared this to feedback from the Investment
Adviser. The Audit Committee was satisfied that the range of
discount rates were appropriate for the valuation carried out by
the Valuation Agent.
The Auditor explained the results of their audit and that on the
basis of their audit work there were no adjustments proposed that
were material in the context of the financial statements as a
whole.
External audit
Audit fees for the year amounted to GBP52,000 (2015: GBP55,000)
and audit related non-audit fees amounting to GBP15,000 (2015:
GBP37,000).
As explained in last year's annual report, following an audit
tender process in September 2015 and a recommendation put to the
Annual General Meeting on 12 February 2016, KPMG was appointed as
the Auditor. Mr Steven Stormonth is the Executive Director from
KPMG responsible for the audit.
Following the Company's entry into the FTSE 250 index, The Board
concluded that it would be in the best interests of the Company to
ask the Auditor to review the Company's half year accounts from 31
March 2016 onwards. In January 2016, the Board agreed to adopt a
policy whereby the Auditor would not be requested to perform any
non-audit services other than the half-year review.
During the year, the Company was notified that the FRC's Audit
Quality Review Team ("AQRT") would carry out a review of the
Company's previous Auditor EY's working papers in relation to their
audit of the Company's financial statements for the year ended 30
September 2015. Each year, the AQRT routinely selects a number of
audits carried out by the large audit firms, including EY, with a
view to inspecting the audits of all FTSE 350 companies over a five
year cycle. The selection of EY's audit of the Company for the year
ended 30 September 2015 was part of this routine inspection
programme in the 2015/16 cycle. The Company has received a copy of
the AQRT's report following this review and their findings which
related to the audit process. The actions required have been
discussed with the Company's former Auditor EY and the Company's
new Auditor, KPMG in August 2016. The Audit Committee reviewed the
effectiveness of the Audit process during the year, considering
performance, objectivity, independence and relevant experience with
KPMG during the year. Following this review, the Audit Committee
has recommended the re-appointment of KPMG as the Company's Auditor
at the Annual General Meeting.
Mr David Pirouet FCA
Chairman of the Audit Committee
13 December 2016
Nomination Committee report
The Nomination Committee comprises Mr Ian Reeves CBE, Mr Clive
Spears and Mr David Pirouet. The function of this committee is to
consider appointments to the Board and its individual committees in
the context of the requirements of the Company and to make
recommendations to the Board with regard to any changes to maintain
a balanced and effective Board. The Nomination Committee is also
obliged to consider succession planning for Directors with
particular attention paid to the challenges and opportunities
facing the Company. Board diversity, including gender, is taken
into account when evaluating the skills, knowledge and experience
desirable to fill vacancies on the Board as and when they arise.
The committee would like to emphasise that all appointments to the
Board are based on merit with the most appropriate candidate, who
is the best fit for the Company, being nominated for appointment.
The committee believes the Directors provide, individually and
collectively, the necessary breadth of skills and experience to
manage the Company.
As Ian Reeves CBE is Chairman of the Nomination Committee and
the Company, he will not chair at any meeting when dealing with the
appointment of a successor to the Company's chairmanship.
The Company engaged an independent external search consultant,
Thomas & Dessain to assist with the appointment of Ms Chapman
and Mr Gray who were appointed to the Board on 1 October 2015. The
committee considered the desired expertise and background to
complement the skills already on the Board. The committee
considered a shortlist of potential candidates provided by Thomas
& Dessain and interviews were then held leading to the new
appointments.
The Nomination Committee met in October 2016 to review the
results of the performance evaluation of the Board. The evaluation
process involved an analysis of the Chairman's performance, Board
performance and that of its committees and individual Directors.
The Deputy Chairman also met with the Chairman to discuss the
Directors' comments on the Chairman's performance evaluation. The
results of the evaluation process were reported to, and discussed
by, the Nomination Committee and subsequently by the Board. The
evaluation considered the overall composition of the Board
including plans for succession over time and the delivery of
Directors' performance appraisals. At this meeting, the committee
noted that each of the Directors had expressed an intention to
continue in office for the foreseeable future. The committee also
agreed that Mr Spears would continue to assume the role of Deputy
Chairman in the event of Mr Reeves' unavailability.
Based on the outcome of the Board performance evaluation
process, the Nomination Committee agreed to recommend the
re-appointment of Ian Reeves CBE as Chairman at the Annual General
Meeting. The committee believes that Mr Reeves has continued to
make valuable contributions to the Company and has exercised his
judgement and expressed his opinions in an independent manner. Each
of the Directors will also be offering themselves for re-election
at the forthcoming Annual General Meeting on 10 February 2017.
In October 2016, the committee reviewed and recommended to the
Board updates to its terms of reference. A copy is available upon
request from the Company Secretary.
Mr Ian Reeves CBE
Chairman of the Nomination Committee
13 December 2016
Remuneration report
The Directors are pleased to present their report on
remuneration for the year ended 30 September 2016. The report is
made up of two sections; the Directors' policy report and the
annual report on remuneration.
The annual report on remuneration provides details on
remuneration in the year. The report will be subject to an advisory
shareholder vote at the 2017 Annual General Meeting. Although it is
not a requirement under Jersey Company Law to have the annual
report on remuneration approved by shareholders, the Board believes
that as a company whose shares are listed on the Main Market of the
London Stock Exchange it is good practice to do so. Accordingly, a
resolution to approve the annual report on remuneration will be
proposed at the forthcoming Annual General Meeting.
This report is not subject to audit.
Directors' policy report
The Board considers that Directors' fees should reflect the time
commitment required and the level of responsibility borne by
Directors, and should be broadly comparable to those paid by
similar companies. It is not considered appropriate that Directors'
remuneration should be linked to individual performance and none of
the Directors are eligible for bonuses, pension benefits, share
options, long--term incentive schemes or other benefits in respect
of their services as non--executive Directors of the Company.
In December 2014, the Board engaged an independent external
consultant Thomas & Dessain to conduct a review of the
Directors' remuneration and their recommendations were put forward
at the 2015 Annual General Meeting. The cumulative cap on
Directors' base remuneration is GBP370,000 as approved at the 2015
Annual General Meeting together with the following base
remuneration fee caps:
GBP
--------------------------------- ------
The Chairman 55,000
Chairman of Audit Committee 45,000
Chairman of Investment Committee 45,000
Director 40,000
--------------------------------- ------
All non--executive Directors, including the Chairman, serve
under letters of appointment and either party can terminate on
three months' written notice provided that any such notice shall
not expire earlier than the first anniversary of the Director's
appointment. Neither the Chairman nor the non--executive Directors
have any right to compensation on the early termination of their
appointment.
The following table provides a summary of the key elements of
the remuneration package for non--executive Directors:
Element Process Operation
------- ---------------------------- ----------------------
Fees To compensate the Reviewed annually
Directors for their and set to be broadly
time commitment comparable to similar
and level of responsibility companies, subject
borne. to an annual cap
in accordance with
the articles of
association.
------- ---------------------------- ----------------------
Annual remuneration report
The fees paid to the Directors in the year ended 30 September
2016 are set out in the table below:
Special
fee
for placing
Total programme Total
expensed fees
Directors' Audit Investment through charged paid
fees income directly to
(base Committee Committee statement to equity Directors
fee) fees fees
2016 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------- ---------- --------- ---------- --------- ----------- ---------
Ian Reeves CBE 55 4 n/a 59 5 64
David Pirouet 45 10 n/a 55 5 60
Clive Spears 45 1 10 56 5 61
Paul De Gruchy 40 n/a 10 50 5 55
Julia Chapman 40 n/a 10 50 5 55
Michael Gray 40 4 n/a 44 5 49
--------------- ---------- --------- ---------- --------- ----------- ---------
Total 265 19 30 314 30 344
--------------- ---------- --------- ---------- --------- ----------- ---------
The fees paid to the Directors in the year ended 30 September
2015 are set out in the table below:
Special
fee for
reorganisation
Directors' and placing Audit Investment
fees
(base programme Committee Committee Total
fee) fees fees
2015 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------- ---------- -------------- --------- ---------- -------
Ian Reeves CBE 55 5 4 n/a 64
David Pirouet 45 5 10 n/a 60
Trevor Hunt 30 5 n/a 7 42
Clive Spears 45 5 4 10 64
Paul De Gruchy 40 5 n/a 10 55
Julia Chapman n/a n/a n/a n/a n/a
Michael Gray n/a n/a n/a n/a n/a
--------------- ---------- -------------- --------- ---------- -------
Total 215 25 18 27 285
--------------- ---------- -------------- --------- ---------- -------
Directors' expenses for the year totalled GBP13,000 (30
September 2015: GBP13,000), no other remuneration or compensation
was paid or payable by the Company during the year to any of the
Directors.
Statement of Directors' shareholding and share interests
At the year end, Paul De Gruchy had a holding of 453,825
ordinary shares in the Company. Clive Spears had a holding of
25,000 ordinary shares in the Company. No other Directors held
shares. There were no changes to the Directors' interests between
the end of the financial year and the date of this report.
Accordingly, the Board is satisfied that the interests in the
Company, held by both Mr De Gruchy and Mr Spears, do not materially
impact their ability to exercise independent judgement on the Board
and considers all Directors on the Board to be independent.
Statement of voting at general meeting
The Company is committed to ongoing shareholder dialogue and
takes an active interest in voting outcomes. Where there are
substantial votes against any resolution at the Annual General
Meeting, the Company will liaise with investors and agree on the
actions it intends to take going forward.
At the last Annual General Meeting, 99.99% of shareholders voted
for the resolution to approve the Directors' remuneration
report.
Approach to remuneration
The principle adopted by the Board is that fees for future
non--executive Directors should reflect the performance of the
Company, as well as the responsibilities and time commitment
required. The Board seeks to ensure that remuneration packages
offered are designed to promote the long--term success of the
Company. Any new Director would be paid on the same basis as the
existing Directors' remuneration.
Company performance
In setting the Directors' remuneration, consideration is given
to the size and long--term performance of the Company. The tables
below highlight the comparative total shareholder return to
ordinary shareholders since launch compared with the GBP Corporate
Bond Index over the same period. The GBP Corporate Bond Index is
used as a benchmark as the constituents are comparable in asset
type with the Company's investment portfolio (being a portfolio of
debt instruments). During the year, the total shareholder return
for the Company was 15.6% compared with the GBP Corporate Bond
Index which was 17.2%.
Cumulative performance to 30 September 2016
Period Three months Six months One year Three years Four years Since launch
------------------------------- ------------ ---------- -------- ----------- ---------- ------------
GCP Infrastructure Investments
Ltd 12.33% 15.41% 15.62% 49.16% 63.87% 94.09%
GBP Corporate Bond Index 6.45% 12.74% 17.17% 31.24% 34.37% 65.85%
------------------------------- ------------ ---------- -------- ----------- ---------- ------------
Annual performance to 30 September 2016
Year ended Year ended Year ended Year ended
30 September 30 September 30 September 30 September
Period 2016 2015 2014 2013
----------------------------------- ------------ ------------ ------------ ------------
GCP Infrastructure Investments Ltd 15.62% 9.68% 17.62% 9.86%
GBP Corporate Bond Index 17.17% 3.86% 7.84% 2.38%
----------------------------------- ------------ ------------ ------------ ------------
Relative importance of the spend on pay
The table below sets out Directors' fees for the Company in
respect of the financial years ended 30 September 2016 and 30
September 2015, as a relative proportion of the Company's total
expenses for the year:
30 September 30 September
2016 2015
Percentage of expenses 3.99% 4.11%
----------------------- ------------ ------------
Approval
This annual report on remuneration and the policy report were
approved by the Board on 13 December 2016 and signed on its behalf
by:
By order of the Board
Mr Ian Reeves CBE
Chairman
13 December 2016
Directors' report
The Directors are pleased to present their Annual report and the
audited financial statements for the year ended 30 September 2016.
The corporate governance statement set out below forms part of this
report.
Principal activity and business review
The strategic report has been prepared by the Directors and
should be read in conjunction with the Chairman's statement and
forms part of the Annual report to shareholders.
Greenhouse gas emissions reporting
The Company funds renewable energy projects which seek to reduce
the United Kingdom's greenhouse gas emissions. The Company has no
employees or property, and it does not purchase electricity, heat,
steam or cooling for its own use.
The Company outsources all services on a fee basis, and, as such
it is not practical to attempt to measure or quantify emissions in
respect of any outsourced energy use.
Dividends
The Directors have announced a fourth interim dividend of 1.9
pence per ordinary share which was paid on 25 November 2016 to
ordinary shareholders on the register on 21 October 2016.
The Company offered a scrip dividend alternative under which
shareholders elected to receive new ordinary shares in lieu of the
cash dividend. The price of a new ordinary share to be issued under
the scrip dividend alternative was calculated by taking the average
of the Company's closing middle market quotations of an ordinary
share for the five consecutive dealing days commencing on the
ex--dividend date of 20 October 2016. A circular and form of
election was sent to shareholders on 31 October 2016.
Share capital
During the year, the Company issued 83,544,335 ordinary shares
of GBP0.01. Details of the movements in share capital during the
year are set out in the statement of changes in equity below and in
note 17.
At 30 September 2016, the Company's issued share capital
comprised 660,025,921 ordinary shares of GBP0.01, none of which
were held in treasury. At general meetings of the Company, every
holder shall have one vote in respect of every ordinary share.
Significant voting rights
As at 30 September 2016, the Company had received notification
of the following disclosable interests in the voting rights of the
Company:
Shares % of total
Name held voting rights
-------------------------------------- ---------- -------------
Rathbone Investment Management 39,571,190 6.00
Investec Wealth & Management 38,631,742 5.85
Insight Investment Management 38,274,939 5.80
Tredje AP Fonden 37,750,000 5.72
BMO Global Asset Management 33,718,823 5.11
Brewin Dolphin 33,193,735 5.03
Close Asset Management 31,931,606 4.84
West Yorkshire Pension Fund 26,344,860 3.99
Quilter Cheviot Investment Management 24,666,885 3.74
-------------------------------------- ---------- -------------
The following changes have been notified to the Company between
30 September 2016 and the date of this report:
Shares % of total
Name held voting rights
----------------------- ---------- -------------
Close Asset Management 33,085,066 5.01
----------------------- ---------- -------------
The table of significant shareholders disclosed above forms part
of note 2.3(b) in the financial statements.
Directors
The Directors in office as at 30 September 2016 are listed
below.
Details as to the Directors' terms of appointment can be found
in the corporate governance statement and the remuneration report
as detailed below.
Directors' interests
At the year end, Paul De Gruchy had a holding of 453,825
ordinary shares in the Company. Clive Spears had a holding of
25,000 ordinary shares in the Company.
None of the Directors or any persons connected with them have
had a material interest in the Company's transactions or agreements
during the year.
None of the Directors or the Chairman sit on the Boards of any
other Companies managed by the Investment Adviser and do not have
any close family ties with any of the Company's advisers.
The Board has not delegated any of its decision-making powers to
the Investment Adviser other than in relation to the administration
of the SPVs and also in respect of holdings in the portfolio, the
Company has delegated the exercise of its voting rights to the
Investment Adviser, who has the discretion to manage the assets in
accordance with the Company's investment objective and policy.
There are no agreements between the Company and its Directors
concerning compensation for loss of office.
Directors' and officers' liability insurance and indemnity
agreements
The Company has purchased insurance to cover Directors' and
officers' liability, as permitted by the Law.
Key service providers
Investment Adviser
Gravis Capital Partners LLP is the Investment Adviser and AIFM
to the Company. The Investment Adviser was incorporated in England
and Wales on 14 October 2007 under the Limited Liability
Partnership Act 2000 (registered number OC332060) and is authorised
and regulated by the Financial Conduct Authority (registration
number 487393). The partners of the Investment Adviser formed
Gravis Capital Partners LLP in May 2008 with a view to developing a
specialist infrastructure advisory boutique. This business model
was amended in July 2009 to focus specifically on fund management,
principally in the area of UK infrastructure.
The Investment Adviser provides advice to the Directors of the
Company to enable them to make informed decisions for the Company's
funding requirements (including advice and assistance in any
equity/further fund raising process) and also borrowing/gearing
requirements. The terms of appointment of the Investment Adviser
and its fees payable are explained in note 20.
The Investment Adviser also provides advice which enables the
Directors of the Company to identify potential investments, monitor
the performance of existing assets and the financial and
infrastructure markets generally.
The partners of the Investment Adviser have a long track record
of working within the UK infrastructure market, particularly with
regard to debt advisory work.
The partners of the Investment Adviser have advised extensively
on debt structures in a wide variety of infrastructure sectors,
including a wide variety of renewable energy sectors, healthcare,
education, court buildings, specialised offices, registered social
landlord accommodation and transport. They have primarily advised
project companies or their owners.
The personnel primarily responsible for delivering investment
advice to the Company on behalf of the Investment Adviser are
detailed below.
The Company is party to an Investment Advisory Agreement under
which the Investment Adviser provides advisory services relating to
the Company's assets on a day-to-day basis in accordance with the
investment objectives and policies agreed by the Company and under
the overall supervision and direction of the Board of
Directors.
The Investment Advisory Agreement was amended in January 2014 to
reflect a change in methodology for the calculation of fees and the
provision of AIFM services to the Company. An increase in the fees
payable for the provision of AIFM services was agreed by the Board
in October 2014. AIFM services provided by the Investment Adviser
to the Company are as follows:
-- monitoring of investment policy, investment strategies and performance;
-- risk management;
-- liquidity risk and leverage management;
-- ensuring the valuation of the Company's assets is performed
with due impartiality and with due skill, care and diligence;
-- ensuring marketing safeguards are in place;
-- identification and management of conflicts of interest; and
-- supervision of service providers.
The Investment Advisory Agreement was further amended and
restated in November 2015 in order to ensure that the key person
provisions of that agreement remain up to date. Under the terms of
the Investment Advisory Agreement, the notice period of the
termination of the appointment of the Investment Adviser by the
Company is twelve months. The remuneration of the Investment
Adviser is set out in note 20 to the financial statements.
The Company has noted the publication of a prospectus on 29
September 2015 by the GCP Asset Backed Income Fund Limited
(formerly Project Finance Investments Limited), a fund for which
the Investment Manager is Gravis Capital Partners LLP, which is
also the Investment Adviser to the Company. The Directors further
note that the GCP Asset Backed Income Fund Limited will seek to
make investments in a portfolio of project finance loans across
multiple sectors. Under its Investment Advisory Agreement, the
Company's prior consent is required for the Investment Adviser to
act as the adviser, manager or sponsor of any fund or entity that
may invest in assets within the scope of the Company's investments
or engage in any activity which may compete in the same or
substantially similar investment area as the Company.
The Company has given its consent for the Investment Adviser to
act as the investment manager of the GCP Asset Backed Income Fund
Limited, on the basis that the Investment Adviser has agreed with
the Company that where it identifies an investment which, in its
opinion acting reasonably and in good faith, falls within the
Company's remit, the Company will have ROFR.
The Directors believe that the Company's investment objectives,
and the pipeline of opportunities available to it, will not be
adversely affected, and that the ROFR Agreement protects the
Company's interests in the event of any conflict. The Investment
Advisory Agreement continues to contain other clauses specifying
minimum time commitments from key Investment Adviser personnel and
general provisions for dealing with conflicts of interest.
Administrator and Company Secretary
Fund accounting administration services and company secretarial
services are provided to the Company by Capita Financial
Administrators (Jersey) Limited pursuant to an Agreement dated 31
January 2014. The fee for the provision of these services during
the year was GBP582,000 (2015: GBP531,000). The Agreement with
Capita Financial Administrators (Jersey) Limited continues until
terminated by either party on giving not less than six months'
written notice.
Depositary
Depositary services are provided to the Company by Capita Trust
Company (Jersey) Limited pursuant to an agreement dated 21 July
2014. The fee for the provision of these services during the year
was GBP198,000 (2015: GBP170,000). The agreement with Capita Trust
Company (Jersey) Limited continues until terminated by either party
on giving not less than six months' written notice.
Registrar
Registrar services are provided to the Company by Capita
Registrars (Jersey) Limited pursuant to an agreement dated 28 June
2010. The fee for the provision of these services during the year
was GBP125,000 (2015: GBP75,000). The agreement with Capita
Registrars (Jersey) Limited continues until terminated by either
party on giving not less than six months' written notice.
The Directors undertake an annual review of the effectiveness of
all third--party service providers. Following this review, it is
the Directors' opinion that the continuing appointment of the
Investment Adviser, the Administrator and the Company Secretary,
the Depositary and the Registrar, is in the best interests of the
Company and its shareholders.
Political donations
The Company made no donations to political parties or
organisations during the year and no political expenditure was
incurred.
Annual general meetings
The Company's Annual report and financial statements for the
year ended 30 September 2016 will be tabled for approval at the
Company's 2017 Annual General Meeting. The Annual General Meeting
will be held on 10 February 2017 at 12 Castle Street, St Helier,
Jersey JE2 3RT.
Share repurchases
No shares have been bought back in the year. The latest
authority to purchase ordinary shares for cancellation was granted
to the Directors on 12 February 2016 and expires on the date of the
next Annual General Meeting. The Directors are proposing that their
authority to buy back shares be renewed at the forthcoming Annual
General Meeting on 10 February 2017.
Treasury shares
The Law allows companies to hold shares acquired by market
purchase as treasury shares, rather than having to cancel the
shares. Up to 10% of the issued shares may be held in treasury and
may be subsequently cancelled or sold for cash in the market. This
gives the Company the ability to reissue shares quickly and cost
efficiently, thereby improving liquidity and providing the Company
with additional flexibility in the management of its capital
base.
Disclosure of information to the Auditor
Each of the persons who is a Director at the date of approval of
this annual report confirms that:
-- so far as they are aware, there is no relevant audit
information of which the Company's Auditor is unaware; and
-- they have taken all the steps that they ought to have taken
as a Director in order to make themselves aware of any relevant
audit information and to establish that the Company's Auditor is
aware of that information.
External audit
Following an external audit tender process in October 2015, the
Board recommended that KPMG be appointed as Auditor and a
resolution to appoint them was approved at the Annual General
Meeting in February 2016. KPMG has expressed its willingness to
continue in office as an Auditor of the Company and resolutions for
its appointment and for the Directors to determine its remuneration
will be proposed at the forthcoming Annual General Meeting.
Financial risk management
Information about the Company's financial risk management
objectives is set out in note 19 of the financial statements.
Non--mainstream pooled investments
The Board notes the rules of the UK Financial Conduct Authority
on the promotion of non--mainstream pooled investments, effective
from 1 January 2014. The Board confirms that it conducts the
Company's affairs, and intends to continue to conduct its affairs,
so that the Company's shares will be "excluded securities" under
the Financial Conduct Authority's new rules. This is on the basis
that the Company, which is resident outside the EEA, would qualify
for the approval as an investment trust by the Commissioners for HM
Revenue and Customs under Sections 1158 and 1159 of the Corporation
Tax Act 2010 if resident and listed in the United Kingdom.
Therefore, the Company's shares will not amount to non--mainstream
pooled investments. Accordingly, promotion of the Company's shares
will not be subject to the Financial Conduct Authority's
restriction on the promotion of non-mainstream pooled
investments.
Requirements of the Listing Rules
Listing Rule 9.8.4 requires the Company to include specified
information in a single identifiable section of the Annual Report
or a cross reference table indication where the information is set
out. The Directors confirm that there are no disclosures required
in relation to Listing Rule 9.8.4.
By order of the Board
Mr David Pirouet FCA
13 December 2016
Statement of Directors' responsibilities
The Directors are responsible for preparing the financial
statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial
statements for each financial year. Under the Law they have elected
to prepare the financial statements in accordance with
International Financial Reporting Standards and applicable law.
Under company law, the Directors must not approve the financial
statements unless they are satisfied that they give a true and fair
view of the state of affairs of the Company and of the profit or
loss of the Company for that period. In preparing these financial
statements, the Directors are required to:
-- select suitable accounting policies and then apply them consistently;
-- make judgements and estimates that are reasonable and prudent;
-- state whether applicable accounting standards have been
followed, subject to any material departures disclosed and
explained in the financial statements; and
-- prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Company will
continue in business.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company's
transactions and disclose with reasonable accuracy at any time the
financial position of the Company and enable them to ensure that
the financial statements comply with Companies (Jersey) Law 1991.
They have general responsibility for taking such steps as are
reasonably open to them to safeguard the assets of the Company and
to prevent and detect fraud and other irregularities.
The Directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
Company's website. Legislation in Jersey governing the preparation
and dissemination of financial statements may differ from
legislation in other jurisdictions(1) .
Directors' responsibility statement
In accordance with the FCA's Disclosure and Transparency Rules,
each of the Directors, whose names are set out below, confirms that
to the best of his or her knowledge that:
-- the financial statements have been prepared in accordance
with IFRS as adopted by the European Union, and give a true and
fair view of the assets, liabilities, financial position and profit
or loss of the Company; and
-- the strategic report, including the Directors' report,
includes a fair, balanced review of the development and performance
of the business and the position of the Company, together with a
description of the principal risks and uncertainties that the
Company faces.
The Annual report and financial statements, taken as a whole,
are considered by the Board to be fair, balanced and understandable
and provide the information necessary for shareholders to assess
the Company's position and performance, business model and
strategy.
By order of the Board
Mr Ian Reeves CBE
Chairman
13 December 2016
1. Where financial statements are published on the Company's website.
Independent Auditor's report
To the members of GCP Infrastructure Investments Limited
Opinions and conclusions arising from our audit
Opinion on financial statements
We have audited the financial statements of GCP Infrastructure
Investments Limited for the year ended 30 September 2016 which
comprise the statement of comprehensive income, the statement of
financial position, the statement of changes in equity, the
statement of cash flows and the related notes. The financial
reporting framework that has been applied in their preparation is
applicable law and International Financial Reporting Standards as
adopted by the European Union. In our opinion, the financial
statements:
-- give a true and fair view of the state of the Company's
affairs as at 30 September 2016 and of its total profit and
comprehensive income for the year then ended;
-- have been properly prepared in accordance with International
Financial Reporting Standards as adopted by the EU; and
-- have been prepared in accordance with the requirements of the Companies (Jersey) Law, 1991.
Our assessment of risks of material misstatement
The risks of material misstatement detailed in this section of
this report are those risks that we have deemed, in our
professional judgement, to have had the greatest effect on: the
overall audit strategy; the allocation of resources in our audit;
and directing the efforts of the engagement team. Our audit
procedures relating to these risks were designed in the context of
our audit of the financial statements as a whole. Our opinion on
the financial statements is not modified with respect to any of
these risks, and we do not express an opinion on these individual
risks.
In arriving at our audit opinion above on the financial
statements, the risk of material misstatement that had the greatest
effect on our audit was as follows:
Valuation of financial assets at fair value through profit and
loss ("Investments") (GBP699,682,000 or 93% of total assets)
Refer to the Audit Committee report, note 2.2 Significant
accounting judgements, note 11 Financial assets at fair value
through profit or loss and note 19.3 Financial instruments.
The risk:
93% of the Company's total assets are represented by the fair
value of a portfolio of unquoted infrastructure debt investments
domiciled in the United Kingdom (the "Investments"). The Company's
determination of the fair value of the Investments involves using a
discounted cash flow methodology, where the inputs and assumptions
such as amounts and timings of cash flows, the calculation of
appropriate discount rates and the selection of appropriate values
surrounding uncertain future events are subjective. As a result,
there is a risk that the Company selects inputs and assumptions
that may not be appropriate. This may result in a materially
different fair value being attributed to the Investments.
Our response:
Our audit procedures with respect to the valuation of
Investments included, but were not limited to, the following:
-- we tested the design and implementation of controls adopted
by the Company over the review, challenge and subsequent approval
of the fair value of the Investments;
-- we evaluated the competence of the Company's third party
Valuation Agent in the context of their ability to appropriately
challenge and review the fair value of the Investments prepared by
the Company, by assessing their professional qualifications,
experience and independence from the Company; and
-- we engaged our own valuation specialist, who used market and
investment specific knowledge to support our challenge of the
inputs and assumptions used by the Company in determining the
discount rates applied in arriving at the fair value of a sample of
the Investments;
-- we performed substantive procedures in relation to the
Company's determination of fair value on a sample of the
Investments, which included:
o comparing the long-term forecasted cash flows included in the
discounted cash flow models to the terms of the original agreements
such as the repayment profile, repayment premium, loan term and the
coupon;
o compared the to date financial performance of the Investments
against forecasted cash flows for the same period in the context of
determining the accuracy of cash flow forecasts included in the
discounted cash flow models; and
o testing the mathematical accuracy of the discounted cash flow
models.
We considered the adequacy of the Company's disclosures in note
19.3 in respect of the fair value of Investments, specifically the
estimates and judgements made by the Company in arriving at that
fair value. We also reviewed the disclosure of the degree of
sensitivity of a fair value to a reasonably possible change in the
discount rate.
Our application of materiality and an overview of the scope of
our audit
Materiality is a term used to describe the acceptable level of
precision in financial statements. Auditing standards describe a
misstatement or an omission as "material" if it could reasonably be
expected to influence the economic decisions of users taken on the
basis of the financial statements. The auditor has to apply
judgement in identifying whether a misstatement or omission is
material and to do so the auditor identifies a monetary amount as
"materiality for the financial statements as a whole".
Materiality for the financial statements as a whole was set at
GBP6,860,000. This has been calculated using a benchmark of the
Company's total assets (of which it represents approximately 1%)
which we believe is the most appropriate benchmark as total assets
are considered to be one of the principal considerations for
members of the Company in assessing the financial performance.
We agreed with the audit committee to report to it all corrected
and uncorrected misstatements we identified through our audit with
a value in excess of GBP343,000, in addition to other audit
misstatements below that threshold that we believe warranted
reporting on qualitative grounds.
Our audit of the Company was undertaken to the materiality level
specified above, which has informed our identification of
significant risks of material misstatement and the associated audit
procedures performed in those areas as detailed above.
Whilst the audit process is designed to provide reasonable
assurance of identifying material misstatements or omissions it is
not guaranteed to do so. Rather, we plan the audit to determine the
extent of testing needed to reduce to an appropriately low level
the probability that the aggregate of uncorrected and undetected
misstatements does not exceed materiality for the financial
statements as a whole. This testing requires us to conduct
significant depth of work on a broad range of assets, liabilities,
income and expense as well as devoting significant time of the most
experienced members of the audit team, in particular the
Responsible Individual, to subjective areas of the accounting and
reporting process.
An audit involves obtaining evidence about the amounts and
disclosures in the financial statements sufficient to give
reasonable assurance that the financial statements are free from
material misstatement, whether caused by fraud or error. This
includes an assessment of: whether the accounting policies are
appropriate to the Company's circumstances and have been
consistently applied and adequately disclosed; the reasonableness
of significant accounting estimates made by the Board of Directors;
and the overall presentation of the financial statements. In
addition, we read all the financial and non-financial information
in the annual report to identify material inconsistencies with the
audited financial statements and to identify any information that
is apparently materially incorrect based on, or materially
inconsistent with, the knowledge acquired by us in the course of
performing the audit. If we become aware of any apparent material
misstatements or inconsistencies we consider the implications for
our report.
Disclosures of principal risks
Based on the knowledge we acquired during our audit, we have
nothing material to add or draw attention to in relation to:
-- the Directors' viability statement concerning the principal
risks, their management, and, based on that, the Directors'
assessment and expectations of the Company continuing in operation
over the five years to 2021; or
-- the disclosures in note 2.1 of the financial statements
concerning the use of the going concern basis of accounting.
Matters on which we are required to report by exception
Under International Standards on Auditing (UK and Ireland) we
are required to report to you if, based on the knowledge we
acquired during our audit, we have identified other information in
the annual report that contains a material inconsistency with
either that knowledge or the financial statements, a material
misstatement of fact, or that is otherwise misleading.
In particular, we are required to report to you if:
-- we have identified material inconsistencies between the
knowledge we acquired during our audit and the Directors' statement
that they consider that the annual report and financial statements
taken as a whole is fair, balanced and understandable and provides
the information necessary for members to assess the Company's
performance, business model and strategy; or
-- the Audit Committee report does not appropriately address
matters communicated by us to the Audit Committee.
Under the Companies (Jersey) Law, 1991, we are required to
report to you if, in our opinion:
-- adequate accounting records have not been kept by the Company; or
-- the Company's financial statements are not in agreement with the accounting records; or
-- we have not received all the information and explanations we require for our audit.
Under the Listing Rules we are required to review the part of
the corporate governance statement relating to the Company's
compliance with the eleven provisions of the UK Corporate
Governance Code specified for our review.
We have nothing to report in respect of the above
responsibilities.
Scope of report and responsibilities
The purpose of this report and restrictions on its use by
persons other than the Company's members as a body
This report is made solely to the Company's members, as a body,
in accordance with Article 113A of the Companies (Jersey) Law 1991
and, in respect of any further matters on which we have agreed to
report, on terms we have agreed with the Company. Our audit work
has been undertaken so that we might state to the Company's members
those matters we are required to state to them in an auditor's
report and for no other purpose. To the fullest extent permitted by
law, we do not accept or assume responsibility to anyone other than
the Company and the Company's members, as a body, for our audit
work, for this report, or for the opinions we have formed.
Respective responsibilities of Directors and Auditor
As explained more fully in the statement of Directors'
responsibilities set out below, the Directors are responsible for
the preparation of the financial statements and for being satisfied
that they give a true and fair view. Our responsibility is to
audit, and express an opinion on, the financial statements in
accordance with applicable law and ISAs (UK and Ireland). Those
standards require us to comply with the UK Ethical Standards for
Auditors.
Mr Steven D Stormonth
For and on behalf of KPMG Channel Islands Limited
Chartered Accountants and Recognised Auditors
Jersey, Channel Islands
13 December 2016
Statement of comprehensive income
For the year ended 30 September 2016
Year ended Year ended
30 September 30 September
2016 2015
Notes GBP'000 GBP'000
-------------------------------------- ----- ------------ ------------
Income
Net income/gains on financial assets
at fair value through profit or
loss 3 59,291 54,818
Other income 3 4,276 1,486
-------------------------------------- ----- ------------ ------------
Total income 63,567 56,304
-------------------------------------- ----- ------------ ------------
Expense
Investment advisory fees 20 (5,754) (4,740)
Operating expenses 5 (2,113) (2,182)
-------------------------------------- ----- ------------ ------------
Total expense (7,867) (6,922)
-------------------------------------- ----- ------------ ------------
Total operating profit before finance
costs 55,700 49,382
-------------------------------------- ----- ------------ ------------
Finance costs
Finance expenses 6 (1,342) (707)
-------------------------------------- ----- ------------ ------------
Total profit and comprehensive
income for the year 54,358 48,675
-------------------------------------- ----- ------------ ------------
Basic and diluted earnings per
share (pence) 10 8.9776 9.3032
-------------------------------------- ----- ------------ ------------
All of the Company's results are derived from continuing
operations.
Statement of financial position
As at 30 September 2016
As at As at
30 September 30 September
2016 2015
Notes GBP'000 GBP'000
------------------------------------------------- ------- ------------ ------------
Assets
Cash and cash equivalents 15 52,057 4,906
Other receivables and prepayments 12 303 49
Amounts held on security account 14 - 1,230
Financial assets at fair value through profit or
loss 11 & 19 699,682 657,730
------------------------------------------------- ------- ------------ ------------
Total assets 752,042 663,915
------------------------------------------------- ------- ------------ ------------
Liabilities
Other payables and accrued expenses 13 (1,998) (2,018)
Amounts held on security account 14 - (1,230)
Interest bearing loans and borrowings 16 (26,208) (41,123)
------------------------------------------------- ------- ------------ ------------
Total liabilities (28,206) (44,371)
------------------------------------------------- ------- ------------ ------------
Net assets 723,836 619,544
------------------------------------------------- ------- ------------ ------------
Capital and reserves
Share capital 17 6,600 5,765
Share premium 17 694,406 599,242
Capital redemption reserve 18 101 101
Retained earnings 22,729 14,436
------------------------------------------------- ------- ------------ ------------
Total capital and reserves 723,836 619,544
------------------------------------------------- ------- ------------ ------------
Ordinary shares in issue 17 660,025,921 576,481,586
------------------------------------------------- ------- ------------ ------------
NAV per ordinary share (pence per share) 109.67 107.47
------------------------------------------------- ------- ------------ ------------
Signed and authorised for issue on behalf of the Board of
Directors
Mr Ian Reeves CBE Mr David Pirouet
Chairman Director
13 December 2016
Statement of changes in equity
For the year ended 30 September 2016
Capital
Share Share redemption Retained Total
capital premium reserve earnings equity
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------- ----- ------- ------- ---------- --------- --------
At 1 October 2014 4,504 461,402 101 4,796 470,803
------------------------------- ----- ------- ------- ---------- --------- --------
Total profit and comprehensive
income - - - 48,675 48,675
Equity shares issued 17 1,261 141,577 - - 142,838
Share issue costs 17 - (3,737) - - (3,737)
Dividends 9 - - - (39,035) (39,035)
------------------------------- ----- ------- ------- ---------- --------- --------
At 30 September 2015 5,765 599,242 101 14,436 619,544
------------------------------- ----- ------- ------- ---------- --------- --------
Total profit and comprehensive
income - - - 54,358 54,358
Equity shares issued 17 835 96,803 - - 97,638
Share issue costs 17 - (1,639) - - (1,639)
Dividends 9 - - - (46,065) (46,065)
------------------------------- ----- ------- ------- ---------- --------- --------
At 30 September 2016 6,600 694,406 101 22,729 723,836
------------------------------- ----- ------- ------- ---------- --------- --------
Statement of cash flows
For the year ended 30 September 2016
Year ended Year ended
30 September 30 September
2016 2015
Notes GBP'000 GBP'000
--------------------------------------------------------- ----- ------------ ------------
Cash flows from operating activities
Total operating profit before finance costs 55,700 49,382
Purchase of financial assets (92,785) (224,453)
Repayment of financial assets 19,253 20,819
Proceeds from refinancing of financial assets 34,804 -
Unrealised income/gain on investments at fair value
through profit or loss (3,224) (20,497)
Increase in other payables and accrued expenses 105 519
(Increase)/decrease in other receivables and prepayments (256) 2
--------------------------------------------------------- ----- ------------ ------------
Net cash flow used in operating activities 13,597 (174,228)
--------------------------------------------------------- ----- ------------ ------------
Cash flows from financing activities
Proceeds from issue of shares 93,361 136,264
Proceeds from interest bearing loans and borrowings 76,900 91,600
Repayment of interest bearing loans and borrowings (92,000) (50,000)
Dividends paid 9 (43,426) (36,198)
Finance costs paid (1,281) (964)
--------------------------------------------------------- ----- ------------ ------------
Net cash flow generated from financing activities 33,554 140,702
--------------------------------------------------------- ----- ------------ ------------
Increase/(decrease) in cash and cash equivalents 47,151 (33,526)
Cash and cash equivalents at beginning of the year 4,906 38,432
--------------------------------------------------------- ----- ------------ ------------
Cash and cash equivalents at end of the year 52,057 4,906
--------------------------------------------------------- ----- ------------ ------------
Non-cash items
Purchase of financial assets (4,941) -
Other non-cash items
Decrease in amounts held on security account 1,230 (1,230)
Decrease in amounts held on security account payable (1,163) 1,163
Decrease in interest held on security account payable (67) 67
--------------------------------------------------------- ----- ------------ ------------
Net cash generated by operating activities includes:
Investment income received 51,126 858
Deposit interest received 20 132
--------------------------------------------------------- ----- ------------ ------------
Notes to the financial statements
For the year ended 30 September 2016
1. General information
GCP Infrastructure Investments Limited is a public company
incorporated and domiciled in Jersey on 21 May 2010 with
registration number 105775. The Company is governed by the
provisions of the Law and the CIF Law. The Company merged with its
former subsidiary, GCP Asset Holdings Limited on 30 September
2015.
The Company is a closed-ended investment company incorporated
under the laws of Jersey and its ordinary shares are listed on the
Main Market of the London Stock Exchange.
The Company makes infrastructure investments through acquiring
(or acquiring interests in) debt instruments issued by
infrastructure project companies (or by their existing lenders or
holding vehicles) that are, or are expected to be, in receipt of
public sector backed cash flows.
2. Significant accounting policies
2.1 Basis of preparation
These financial statements are prepared in accordance with IFRS
and interpretations issued by the International Financial Reporting
Interpretations Committee of the IASB as they apply to the
financial statements of the Company for the year as required by
IFRS and as adopted by the EU.
The financial statements have been prepared under the historical
cost convention, as modified by the revaluation of financial assets
held at fair value through profit or loss.
New standards, amendments and interpretations
There are a number of new standards and amendments to existing
standards which have been published and are mandatory for the
Company's accounting periods beginning after 1 October 2016 or
later periods, but the Company has decided not to early adopt them.
The following standards are the most relevant to the Company:
-- Disclosure Initiative (Amendments to IAS 7) (effective for
annual periods beginning on or after 1 January 2017): the objective
of the Amendments is to provide disclosures that enable users of
financial statements to evaluate changes in liabilities arising
from financing activities, including both changes arising from cash
flows and non-cash changes;
-- IFRS 15 Revenue from Contracts with Customers (effective for
annual periods beginning on or after 1 January 2018): the objective
of IFRS 15 is to establish the principles that an entity shall
apply to report useful information to users of financial statements
about the nature, amount, timing, and uncertainty of revenue and
cash flows arising from a contract with a customer; and
-- IFRS 9 Financial Instruments (effective for annual periods
beginning on or after 1 January 2018): the new financial
instruments impairment requirements provide users with useful
information about an entity's expected credit losses on financial
instruments. These new requirements incorporate the classification
and measurement requirements, the impairment requirements and the
general hedge accounting requirements.
In addition to the above, there are no new IFRS or IFRIC
interpretations that are effective that would be expected to have a
material impact on the Company's financial statements.
Going concern
The Directors have made an assessment of the Company's ability
to continue as a going concern and are satisfied that the Company
has the resources to continue in business for the foreseeable
future. Furthermore, the Directors are not aware of any material
uncertainties that may cast significant doubt upon the Company's
ability to continue as a going concern. Therefore, the financial
statements have been prepared on a going concern basis. In addition
to a going concern assessment, the Directors have undertaken a
longer-term assessment of the Company, the results of which can be
seen in the viability statement.
2.2 Significant accounting judgements and estimates
The preparation of financial statements in accordance with IFRS
requires the Directors of the Company to make judgements, estimates
and assumptions that affect the application of accounting policies
and the reported amounts recognised in the financial statements.
However, uncertainty about these assumptions and estimates could
result in outcomes that require a material adjustment to the
carrying amount of the asset or liability in the future. The
valuation of financial investments requires a significant degree of
judgement and is dependent on assumptions and estimates which are
significant to the reported amounts recognised in the financial
statements (see note 19).
The Directors have determined that the SPVs through which the
Company invests fall under the control of the Company in accordance
with the control criteria prescribed by IFRS 10 and therefore meet
the definition of subsidiaries. In addition the Directors continue
to hold the view that the Company meets the definition of an
investment entity and therefore can measure and present the SPVs at
fair value through profit or loss. As the investments in the SPVs
are in the form of debt instruments, judgement has been involved in
determining the unit of account for the measurement of these
investments. This process requires a significant degree of
judgement taking into account the complexity of the structure of
the Company and extent of investment activities (see note 11).
2.3 (a) Functional and presentation currency
Items included in the financial statements of the Company are
measured in the primary economic environment in which the Company
operates.
The primary objective of the Company is to generate returns in
Pound Sterling, its capital-raising currency. The Company's
performance is evaluated in Pound Sterling. Therefore, the
Directors consider Pound Sterling as the currency that most
faithfully represents the economic effects of the underlying
transactions, events and conditions and have adopted it as the
Company's presentation currency. All values have been rounded to
the nearest thousand pounds (GBP'000) except where otherwise
indicated.
2.3 (b) Segmental information
For management purposes, the Company is organised into one main
operating segment. All of the Company's activities are
interrelated, and each activity is dependent on the others.
Accordingly, all significant operating decisions are based upon
analysis of the Company as one segment. The financial results from
this segment are equivalent to the financial statements of the
Company as a whole. The following table analyses the Company's
underlying operating income per geographical location. The basis
for attributing the operating income is the place of incorporation
of the underlying counterparty.
30 September 30 September
2016 2015
GBP'000 GBP'000
---------------- ------------ ------------
Channel Islands 20 128
United Kingdom 63,547 56,176
---------------- ------------ ------------
Total 63,567 56,304
---------------- ------------ ------------
Significant shareholders are disclosed in the Directors'
report.
3. Operating income
The table below analyses the Company's operating income for the
year per investment type:
30 September 30 September
2016 2015
GBP'000 GBP'000
---------------------------------------- ------------ ------------
Cash and cash equivalents 20 128
Net movement in fair value of financial
assets through profit or loss 59,291 54,818
Other income 4,256 1,358
---------------------------------------- ------------ ------------
Total 63,567 56,304
---------------------------------------- ------------ ------------
Until 30 September 2015, the Company's main income was derived
from dividends paid by its former subsidiary, which was a company
domiciled in the Channel Islands. The Company merged with its
subsidiary on 30 September 2015. Subsequent to the merger, the
Company's main income is derived from interest on loans to project
companies held at fair value through profit or loss.
The table below analyses the operating income derived from the
Company's financial assets and liabilities at fair value through
profit or loss:
30 September 30 September
2016 2015
GBP'000 GBP'000
------------------------------------------------------------ ------------ ------------
Loan interest - cash 51,126 858
Loan interest - capitalised 4,941 -
Dividend income - 58,971
Unrealised gain on investments at fair value through profit
or loss 16,519 -
Unrealised loss on investments at fair value through profit
or loss (13,295) (5,011)
------------------------------------------------------------ ------------ ------------
Total 59,291 54,818
------------------------------------------------------------ ------------ ------------
Unrealised losses on investment at fair value through profit or
loss include downward revaluations of GBP9.4 million (driven by
reduced forecast cash flows and an increase in valuation discount
rates) of two of the Company's biomass assets. The Directors
continue to monitor and manage these assets carefully; for further
details refer to note 19.7.
Unrealised gains on investment at fair value through profit or
loss includes upward revaluations of GBP16.7 million (driven by
reductions in valuation discount rates) on a variety of operational
PFI and renewable energy assets.
The remaining unrealised gains and losses on investments at fair
value through profit and loss are attributable to the timing of
interest received.
Accounting policy
Dividend income, which is in respect of dividends received from
GCP Asset Holdings Limited prior to the merger on 30 September 2015
was recognised when the right to receive payment has been
established. Interest revenue and interest expense other than
interest received on financial assets at fair value through profit
or loss are recognised on an accruals basis in the statement of
comprehensive income. Interest income on financial assets is
included in the net income/gains on financial assets at fair value
through profit or loss.
Other income includes early repayment penalties and is
recognised in the financial statements when the contractual
provisions are met and the amounts become due.
4. Auditor's remuneration
30 September 30 September
2016 2015
GBP'000 GBP'000
--------------- ------------ ------------
Audit fees 52 55
Non-audit fees 15 37
--------------- ------------ ------------
Total 67 92
--------------- ------------ ------------
5. Operating expenses
30 September 30 September
2016 2015
GBP'000 GBP'000
------------------------------------------------------------ ------------ ------------
Corporate administration 792 708
Legal and professional 127 410
Valuation agent fees 303 346
Directors' remuneration and expenses (also shown in note 7) 327 298
Advisory 78 100
Other 486 320
------------------------------------------------------------ ------------ ------------
Total 2,113 2,182
------------------------------------------------------------ ------------ ------------
Accounting policy
All operating expenses are charged to the statement of
comprehensive income and are accounted for on an accruals
basis.
6. Finance expenses
30 September 30 September
2016 2015
GBP'000 GBP'000
----------------- ------------ ------------
Finance expenses 1,342 707
----------------- ------------ ------------
Total 1,342 707
----------------- ------------ ------------
Accounting policy
Finance expenses in the statement of comprehensive income
comprises of loan arrangement and commitment fees which are
accounted for on an accruals basis along with interest accrued on
the Facility incurred in connection with the borrowing of funds.
Arrangement fees are amortised over the life of the Facility.
7. Directors' remuneration
The Directors of the Company are remunerated on the following
basis:
30 September 30 September
2016 2015
GBP'000 GBP'000
-------------------- ------------ ------------
Ian Reeves CBE 59 64
David Pirouet 55 60
Trevor Hunt - 42
Clive Spears 56 64
Paul De Gruchy 50 55
Julia Chapman 50 -
Michael Gray 44 -
-------------------- ------------ ------------
314 285
-------------------- ------------ ------------
Directors' expenses 13 13
-------------------- ------------ ------------
Total 327 298
-------------------- ------------ ------------
During the year, in addition to the amounts disclosed above an
amount of GBP30,000 was paid to Directors as a fee for the placing
programme. This amount was charged directly within issue costs to
the statement of changes in equity.
Full details of the Directors' remuneration policy, including
the special fee for the placing programme can be found in the
Directors' remuneration report.
8. Taxation
Profits arising in the Company for the year ended 30 September
2016 are subject to tax at the standard rate of 0% (30 September
2015: 0%) in accordance with the Income Tax (Jersey) Law 1961, as
amended.
9. Dividends
Dividends paid for the year ended 30 September 2016 were 7.60
pence per share (30 September 2015: 7.60 pence per share) as
follows:
30 September 30 September
2016 2015
Declaration date Dividend Pence GBP'000 GBP'000
---------------------------------- ----------------------- ----- ------------ ------------
Current year dividends
30 September 2016 2016 interim dividend 1.90 - -
30 June 2016 2016 interim dividend 1.90 12,528 -
31 March 2016 2016 interim dividend 1.90 11,297 -
31 December 2015 2015 interim dividend 1.90 11,286 -
---------------------------------- ----------------------- ----- ------------ ------------
7.60
---------------------------------------------------------- ----- ------------ ------------
Prior year dividends
30 September 2015 2015 interim dividend 1.90 10,954 -
30 June 2015 2015 interim dividend 1.90 - 10,940
31 March 2015 2015 interim dividend 1.90 - 9,774
31 December 2014 2014 interim dividend 1.90 - 9,763
---------------------------------- ----------------------- ----- ------------ ------------
7.60
---------------------------------------------------------- ----- ------------ ------------
30 September 2014 2014 interim dividend 1.90 - 8,558
---------------------------------- ----------------------- ----- ------------ ------------
Dividends in statement of changes
inequity 46,065 39,035
Dividends settled in shares (2,639) (2,837)
----------------------------------------------------------- ----- ------------ ------------
Dividends in cash flow statement 43,426 36,198
----------------------------------------------------------- ----- ------------ ------------
The Company announced a fourth interim dividend of 1.90 pence
per ordinary share amounting to GBP12,540,493 which was paid on 25
November 2016 to ordinary shareholders on the register on 21
October 2016.
Accounting Policy
In accordance with the Company's constitution, in respect of the
ordinary shares, the Company will distribute the income it receives
to the fullest extent that is deemed appropriate by the Directors.
Dividends due to the Company's shareholders are recognised when
they become payable.
10. Earnings per share
Basic and diluted earnings per share are calculated by dividing
profit for the year attributable to ordinary equity holders of the
Company by the weighted average number of ordinary shares in issue
during the year.
Weighted
average
number of
Profit ordinary Pence per
GBP'000 shares share
------------------------------- ------- ----------- ---------
Year ended 30 September 2016
Basic and diluted earnings per
ordinary share 54,358 605,482,290 8.9776
------------------------------- ------- ----------- ---------
Year ended 30 September 2015
Basic and diluted earnings per
ordinary share 48,675 523,206,327 9.3032
------------------------------- ------- ----------- ---------
11. Financial assets at fair value through profit or loss
30 September 30 September
2016 2015
GBP'000 GBP'000
----------------------------------------- ------------ ------------
Opening balance 657,730 389,036
----------------------------------------- ------------ ------------
Purchases of financial assets 92,785 224,453
Repayments of financial assets (19,253) (20,819)
Proceeds from refinancing of financial
assets (34,804) -
Unrealised gain on investments at fair
value through profit or loss 16,519 -
Unrealised loss on investments at fair
value through profit or loss (13,295) (5,011)
Decrease in Intercompany loan - 70,066
Decrease of other assets and liabilities
of subsidiary - 5
----------------------------------------- ------------ ------------
Closing balance 699,682 657,730
----------------------------------------- ------------ ------------
The Facility with RBSI is secured against the portfolio of
assets held by the Company. (See note 16).
In the prior year all amounts were considered to be Level 3
being the investment in the subsidiary up to the date of merger on
the 30 September 2015.
Accounting for subsidiaries
The Company's investments are made through a number of SPVs (see
note 25) which are domiciled in the UK. The Company does not hold
equity interests in these SPVs, the Investment Adviser holds a
nominal equity position in each SPV and operates the SPVs on a
day-to-day basis. The Company owns 100% of the loan notes issued by
the SPVs with the exception of GCP Rooftop Solar 6 Limited (37.7%)
and FHW Dalmore (Salford Pendleton Housing) Plc (13.2%).
During the year, the Directors made an assessment in regard to
whether the Company controls the SPVs and whether the SPVs meet the
definition of subsidiary companies in accordance with the
definition of IFRS 10. The Directors have made an assessment on
whether the Company as an investor controls the SPVs under each of
the criteria within IFRS 10.
The Directors are of the opinion that the Company demonstrates
all three of the criteria for all SPVs which therefore determines
these SPVs to be considered subsidiary companies within the
definition of IFRS 10 with the exception of GCP Rooftop Solar 6
Limited and Salford Pendleton Housing Limited which are considered
to be associates as the Company has significant influence over the
relevant activities of the SPV through similar arrangements.
Assessment as an investment entity
Entities that meet the definition of an investment entity within
IFRS 10 are required to measure their subsidiaries at fair value
through profit or loss rather than consolidate the entities. The
criteria which define an investment entity are, as follows:
-- an entity that obtains funds from one or more investors for
the purpose of providing those investors with investment
services;
-- an entity that commits to its investors that its business
purpose is to invest funds solely for returns from capital
appreciation, investment income or both; and
-- an entity that measures and evaluates the performance of
substantially all of its investments on a fair value basis.
The Directors have concluded that the Company continues to meet
the characteristics of an investment entity, in that it has more
than one investor and its investors are not related parties; holds
a portfolio of investments, predominantly in the form of loan
securities which generates returns through interest income and
capital appreciation; the Company reports to its investors via
quarterly investor information, and to its management, via internal
management reports, on a fair value basis. All investments are
reported at fair value to the extent allowed by IFRS in the
Company's annual reports.
Accounting policy
Holdings of the loan notes held by the Company are shown as
financial assets at fair value through profit or loss in the
statement of financial position which in the opinion of the
Directors represent the fair value of the SPVs as any other net
assets held in the SPVs at year end are immaterial. The Company
recognises a financial asset or a financial liability when, and
only when, it becomes a party to the contractual provisions of the
instrument. Purchases or sales of financial assets that require
delivery of assets within the time frame generally established by
regulation or convention in the marketplace are recognised on the
trade date, i.e. the date that the Company commits to purchase or
sell the asset. A financial asset (or, where applicable a part of a
financial asset or part of a group of similar financial assets) is
derecognised where:
-- the rights to receive cash flows from the asset have expired;
-- 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.
When the Company transfers its rights to receive cash flows from
an asset or has entered into a pass--through arrangement, and has
neither transferred nor retained substantially all the risks and
rewards of the asset nor transferred control of the asset, the
asset is recognised to the extent of the Company's continuing
involvement in the asset. The Company derecognises a financial
liability when the obligation under the liability is discharged,
cancelled or expired.
Financial assets and financial liabilities at fair value through
profit or loss are recorded in the statement of financial position
at fair value. All transaction costs for such instruments are
recognised directly in the statement of comprehensive income.
After initial measurement, the Company measures financial
instruments which are classified as fair value through profit or
loss at fair value. Subsequent changes in the fair value of those
financial instruments are recorded in the statement of
comprehensive income.
Fair value is the price that would be received to sell an asset
or paid to transfer a liability in an orderly transaction between
market participants at the measurement date. For all other
financial instruments not traded in an active market, the fair
value is determined by using appropriate valuation techniques.
Valuation techniques include using recent arm's length market
transactions, referenced to appropriate current market data, and
discounted cash flow analysis, at all times making as much use of
available and supportable market data as possible.
An analysis of fair values of financial instruments and further
details as to how they are measured are provided in note 19.
12. Other receivables and prepayments
30 September 30 September
2016 2015
GBP'000 GBP'000
---------------------------- ------------ ------------
Interest receivable - 1
Arrangement fees receivable 227 -
Other debtors - 3
Prepayments 76 45
---------------------------- ------------ ------------
Total 303 49
---------------------------- ------------ ------------
Accounting policy
Receivables are recognised initially at fair value and
subsequently measured at amortised cost using the effective
interest method, less provision for impairment. A provision for
impairment is established when there is objective evidence that the
Company will not be able to collect all amounts according to the
original terms of the contract.
13. Other payables and accrued expenses
30 September 30 September
2016 2015
GBP'000 GBP'000
------------------------- ------------ ------------
Investment advisory fees 1,540 1,381
Payables 458 637
------------------------- ------------ ------------
Total 1,998 2,018
------------------------- ------------ ------------
Accounting policy
Payables are recognised initially at fair value including
transaction costs and subsequently measured at amortised cost using
the effective interest method.
14. Amounts held on security account
30 September 30 September
2016 2015
GBP'000 GBP'000
----------------------------------------- ------------ ------------
Amounts held on security account payable - 1,163
Interest payable on security account - 67
----------------------------------------- ------------ ------------
Total - 1,230
----------------------------------------- ------------ ------------
Until 11 June 2015, amounts held on security account related to
a cash deposit of GBP1,230,482 belonging to GPFI Holdings Limited
("GPFI"). The cash was held in a segregated Company account as
collateral to protect the Company against underperformance of the
loans made to GPFI (the "GPFI Loans"). On 11 June 2015, GPFI Loans
were refinanced by a loan to Cardale PFI Investments Limited (the
"Cardale Loan"). Under the terms of the Cardale Loan, the amounts
held on the security account could be distributed to GPFI but not
released to the shareholders of GPFI until the Cardale Loan was
fully repaid. The amounts held on security account were released to
GPFI on 3 August 2016.
15. Cash and cash equivalents
30 September 30 September
2016 2015
GBP'000 GBP'000
-------------------------- ------------ ------------
Cash and cash equivalents 52,057 4,906
-------------------------- ------------ ------------
Total 52,057 4,906
-------------------------- ------------ ------------
Cash is held at a number of financial institutions to spread
credit risk and cash awaiting investment is held on behalf of the
Company at banks carrying a minimum rating of A-1, P-1 or F-1 from
Standard & Poor's, Moody's or Fitch respectively, or in one or
more similarly rated money market or short-dated gilt funds. RBSI
are currently rated F-2. The Directors closely monitor this aspect
but take comfort from the fact that this account is a collection
account with balances swept daily to Lloyds Bank International
Limited. Cash held by institutions at year end is shown in the
table below:
30 September 30 September
2016 2015
GBP'000 GBP'000
---------------------------------- ------------ ------------
RBSI Cash Management Account 1,301 1,598
Lloyds Money Market Call Account 46,320 3,308
BNY Mellon Account 1 -
RBSI Capital and Interest Account 4,435 -
---------------------------------- ------------ ------------
Total 52,057 4,906
---------------------------------- ------------ ------------
Accounting policy
Cash and cash equivalents in the statement of financial position
and statement of cash flows comprise cash on hand, demand deposits,
short-term deposits in banks with original maturities of three
months or less and short-term, highly liquid investments that are
readily convertible to known amounts of cash and which are subject
to an insignificant risk of changes in value.
16. Interest bearing loans and borrowings
30 September 30 September
2016 2015
GBP'000 GBP'000
----------------------------- ------------ ------------
RBSI loan facility 26,500 41,600
Unamortised arrangement fees (292) (477)
----------------------------- ------------ ------------
Total 26,208 41,123
----------------------------- ------------ ------------
The table below analyses the movement for the period:
30 September 30 September
2016 2015
GBP'000 GBP'000
---------------------------------------------------- ------------- ------------
Opening balance 41,600 -
Proceeds from interest bearing loans and borrowings 76,900 91,600
Payments on Interest bearing loans and borrowings (92,000) (50,000)
---------------------------------------------------- ------------- ------------
Total 26,500 41,600
---------------------------------------------------- ------------- ------------
On 23 March 2015, the Company entered into a three-year GBP50
million revolving credit facility with RBSI. Interest on amounts
drawn under the Facility is charged at LIBOR plus 2.25% per annum.
A commitment fee is payable on undrawn amounts. The total costs
incurred to establish the Facility of GBP754,000 (including the
arrangement fee of GBP675,000) were offset against the amount drawn
down. On 15 October 2015, GBP3.1 million was drawn down from the
Facility with an additional GBP5.3 million drawn down on 28
October. The balance of the Facility was GBP50 million which the
Company repaid on 15 April 2016. Additional drawdowns were made of
GBP18 million on 15 April, GBP4 million on 5 May, GBP2 million on
25 May, GBP8 million on 2 June and GBP10 million on 29 June 2016.
These drawdowns totalling GBP42 million were repaid on 15 July
2016. On 29 September, the Company drew down a further GBP26.5
million with a further GBP10 million drawn down on 22 November
(post year end). These drawdowns totalled GBP36.5 million with the
Company repaying the balance of GBP36.5 million of the Facility on
7 December 2016. The Facility with RBSI is secured against the
portfolio of assets held by the Company. (See note 11).
For the purposes of the AIFMD, leverage is any method which
increases the Company's exposure, including the borrowing of cash
and the use of derivatives. It is expressed as a ratio between the
Company's exposure and its net asset value and is calculated under
the gross and commitment methods, in accordance with the AIFMD.
The Company is required to state its maximum and actual leverage
levels, calculated as prescribed by AIFMD as at 30 September 2016,
figures are as follows:
Maximum Actual
Leverage exposure limit exposure
------------------ ------- --------
Gross method 1.2 0.97
Commitment method 1.2 1.04
------------------ ------- --------
The leverage figures above represent leverage calculated under
the AIFMD methodology as follows:
Gross Commitment
GBP'000 GBP'000
----------------------------------------- ------- ----------
Investments at fair value through profit
or loss 699,682 699,682
Cash and cash equivalents - 52,057
----------------------------------------- ------- ----------
Total exposure under AIFMD 699,682 751,739
----------------------------------------- ------- ----------
Total shareholders' funds 723,836 723,836
----------------------------------------- ------- ----------
Leverage 0.97 1.04
----------------------------------------- ------- ----------
The Company's leverage limit under the AIFMD is 1.20 which
equates to a gearing limit of 20%. The Company has maintained
significant headroom against the limit throughout the year.
Accounting policy
Borrowings are recognised initially at fair value, less
attributable costs. Borrowings are subsequently stated at amortised
cost. Any difference between the proceeds (net of transaction
costs) and the redemption value is recognised in the statement of
comprehensive income over the period of the borrowings using the
effective interest method. Transaction costs are spread over the
term of the Facility.
17. Authorised and issued share capital
30 September 2016 30 September 2015
-------------------- --------------------
Number Number
Share capital of shares GBP'000 of shares GBP'000
-------------------------------------- ----------- ------- ----------- -------
Ordinary shares issued and fully paid
At 1 October 576,481,586 5,765 450,420,663 4,504
Equity shares issued through:
Scrip dividends 2,217,500 22 2,418,923 24
Placing programme 81,326,835 813 123,642,000 1,237
-------------------------------------- ----------- ------- ----------- -------
Total 660,025,921 6,600 576,481,586 5,765
-------------------------------------- ----------- ------- ----------- -------
The 83,544,335 shares issued in the year represent 81,326,835
ordinary shares issued under the placing programme and 2,217,500
ordinary shares issued under the scrip dividend alternative. These
are further analysed below.
The Company is authorised to issue 800 million ordinary shares,
150 million C shares and 150 million deferred shares, each having a
par value of one pence per share.
30 September 30 September
2016 2015
Share premium GBP'000 GBP'000
----------------------------------------- ------------ ------------
Premium on ordinary shares issued and
fully paid
Opening balance 599,242 461,402
Premium on equity shares issued through:
Scrip dividends 2,616 2,813
Placing programme 94,187 138,764
Share issue costs (1,639) (3,737)
----------------------------------------- ------------ ------------
Total 694,406 599,242
----------------------------------------- ------------ ------------
Share capital is the nominal amount of the Company's ordinary
shares in issue. Share premium relates to amounts subscribed for
share capital in excess of nominal value less associated issue
costs of the subscription.
The Company's share capital is represented by one class of
ordinary shares. Quantitative information about the Company's share
capital is provided in the statement of changes in equity.
Number of
Date shares issued Description Period
----------------- ------------- ---------------------------------- -----------------------------
25 November 2015 572,610 Ordinary shares issued in respect 1 July 2015 to 30 September
of the 2015
offer of a scrip dividend
alternative
----------------- ------------- ---------------------------------- -----------------------------
10 December 2015 16,949,153 Ordinary shares issued by way N/A
of a fundraising of GBP20 million
by way of placing programme
----------------- ------------- ---------------------------------- -----------------------------
25 February 2016 596,219 Ordinary shares issued in respect 1 October 2015 to 31 December
of the 2015
offer of a scrip dividend
alternative
----------------- ------------- ---------------------------------- -----------------------------
27 May 2016 399,016 Ordinary shares issued in respect 1 January 2016 to 31 March
of the 2016
offer of a scrip dividend
alternative
----------------- ------------- ---------------------------------- -----------------------------
12 July 2016 64,377,682 Ordinary shares issued by way N/A
of a fundraising of GBP75 million
by way of two placing programmes
----------------- ------------- ---------------------------------- -----------------------------
26 August 2016 649,655 Ordinary shares issued in respect 1 April 2016 to 30 June 2016
of the
offer of a scrip dividend
alternative
----------------- ------------- ---------------------------------- -----------------------------
Total 83,544,335
----------------- ------------- ---------------------------------- -----------------------------
As at 30 September 2016, the Company's issued share capital
comprised 660,025,921 ordinary shares, none of which were held in
treasury.
The ordinary shares carry the right to dividends out of the
profits available for distribution attributable to each share
class, if any, as determined by the Directors. Each holder of an
ordinary share is entitled to attend meetings of shareholders and,
on a poll, to one vote for each share held.
Accounting policy
The Directors of the Company continually assess the
classification of the ordinary shares. If the ordinary shares cease
to have all the features or meet all the conditions set out to be
classified as equity, they will be reclassified as financial
liabilities and measured at fair value at the date of
reclassification, with any differences from the previous carrying
amount recognised in equity transaction costs incurred by the
Company in issuing, acquiring or reselling its own equity
instruments are accounted for as a deduction from equity to the
extent that they are incremental costs directly attributable to the
equity transaction that otherwise would have been avoided. No gain
or loss is recognised in the statement of comprehensive income on
the purchase, sale, issuance or cancellation of the Company's own
equity instruments.
18. Capital redemption reserve
30 September 30 September
2016 2015
GBP'000 GBP'000
--------------------------------------- ------------ ------------
At 1 October 101 101
Transfer to capital redemption reserve - -
--------------------------------------- ------------ ------------
At 30 September 101 101
--------------------------------------- ------------ ------------
The Company is required to establish and maintain this reserve
on the redemption or repurchase of its own shares.
19. Financial instruments
The table below sets out the classifications of the carrying
amounts of the Company's financial assets and financial liabilities
into categories of financial instruments.
30 September 30 September
2016 2015
GBP'000 GBP'000
----------------------------------------------------------- ------------ ------------
Financial assets
Cash and cash equivalents 52,057 4,906
Other receivables and prepayments 303 49
Amounts held on security - 1,230
----------------------------------------------------------- ------------ ------------
Loans and receivables 52,360 6,185
Financial assets held at fair value through profit or loss 699,682 657,730
----------------------------------------------------------- ------------ ------------
Total 752,042 663,915
----------------------------------------------------------- ------------ ------------
Financial liabilities
Other payables and accrued expenses (1,998) (2,018)
Amounts held on security - (1,230)
Interest bearing loans and borrowings (26,208) (41,123)
----------------------------------------------------------- ------------ ------------
Financial liabilities measured at amortised cost (28,206) (44,371)
----------------------------------------------------------- ------------ ------------
Refer to notes 12, 13, 14, 15, 16 and 19 for accounting policies
in respect of the financial instruments above.
19.1 Capital management
The Company is wholly funded from equity balances, comprising
issued ordinary share capital, as detailed in note 17 and retained
earnings, as well as a revolving credit facility, as detailed in
note 16.
The Company may seek to raise additional capital from time to
time to the extent that the Directors and the Investment Adviser
believe the Company will be able to make suitable investments. The
Company raises capital on a highly conservative basis only when it
has a clear view of a robust pipeline of highly advanced investment
opportunities.
The Company may borrow up to 20% of its NAV as at such time any
such borrowings are drawn down. At the year end, borrowings
amounted to 3.7% of NAV (2015: 6.6%).
19.2 Financial risk management objectives
The Company has an investment policy and strategy, as summarised
in its prospectus dated 18 April 2016, that sets out its overall
investment strategy and its general risk management philosophy and
has established processes to monitor and control these in a timely
and accurate manner. These guidelines are the subject of regular
operational reviews undertaken by the Investment Adviser to ensure
that the Company's policies are adhered to as it is the Investment
Adviser's duty to identify and assist in the control of risk. The
Investment Adviser reports regularly to the Directors who have
ultimate responsibility for the overall risk management
approach.
The Investment Adviser and the Directors ensure that all
investment activity is performed in accordance with the investment
guidelines. The Company's investment activities expose it to
various types of risks that are associated with the financial
instruments and markets in which it invests. Risk is inherent in
the Company's activities and it is managed through a process of
ongoing identification, measurement and monitoring. The financial
risks to which the Company is exposed include market risk which
includes other price risk and interest rate risk, credit risk and
liquidity risk.
19.3 Market risk
There is a risk that market movements in interest rates, credit
markets and observable yields may decrease or increase the fair
value of the Company's financial asset's without regard to the
assets underlying performance. The fair value of the Company's
financial assets is measured and monitored on a quarterly basis by
the Investment Adviser with the assistance of the Valuation
Agent.
The Valuation Agent considers the movements in comparable credit
markets and publicly available information around each project in
assessing the expected future cash flows from each investment.
The valuation principles used are based on a discounted cash
flow methodology. A fair value for each asset acquired by the
Company is calculated by applying a relevant market discount rate
to the contractual cash flows expected to arise from each
asset.
The Valuation Agent determines the discount rate that it
believes the market would reasonably apply to each investment
taking into account, inter alia, the following significant
inputs:
-- Pound Sterling interest rates;
-- movements of comparable credit markets; and
-- observable yields on other comparable instruments.
In addition, the following are also considered as part of the
overall valuation process:
-- general infrastructure market activity and investor sentiment; and
-- changes to the economic, legal, taxation or regulatory environment.
The Valuation Agent exercises its judgement in assessing the
expected future cash flows from each investment. Given that the
investments of the Company are generally fixed-income debt
instruments (in some cases with elements of inflation protection)
or other investments with a similar economic effect, the focus of
the Valuation Agent is on assessing the likelihood of any
interruptions to the debt service payments, in light of the
operational performance of the underlying asset.
The valuations are reviewed by the Investment Adviser and the
subsequent NAV is reviewed and approved by the Directors on a
quarterly basis (previously approved on a monthly basis prior to 1
April 2016).
The table below shows how changes in discount rate affect the
changes in the valuation of financial assets at fair value. The
range of discount rates used reflects the Investment Adviser's view
of a reasonable expectation of valuation movements across the
portfolio in a twelve-month period.
30 September 2016
Change in discount
rate 0.50% 0.25% 0.00% (0.25%) (0.50%)
---------------------- -------- -------- ------- ------- -------
Value of financial
assets at fair value
(GBP'000) 674,953 687,120 699,682 712,656 726,059
Change in value of
financial assets at
fair value (GBP'000) (24,729) (12,562) - 12,974 26,377
---------------------- -------- -------- ------- ------- -------
As at 30 September 2016, the discount rates used in the
valuation of financial assets ranged from 6.75% to 10.30%.
30 September 2015
Change in discount
rate 0.50% 0.25% 0.00% (0.25%) (0.50%)
---------------------- -------- -------- ------- ------- -------
Value of financial
assets at fair value
(GBP'000) 635,706 646,554 657,730 669,248 681,122
Change in value of
financial assets at
fair value (GBP'000) (22,023) (11,176) - 11,518 23,392
---------------------- -------- -------- ------- ------- -------
As at 30 September 2015, the discount rates used in the
valuation of financial assets ranged from 6.5% to 10.5%.
19.4 Interest rate risk
Interest rate risk has the following effect:
Fair value of financial assets
Interest rates are one of the factors which the Valuation Agent
takes into account when valuing the financial assets.
Future cash flows
The Company primarily invests in senior and subordinated debt
instruments of infrastructure project companies. The financial
assets have fixed interest rate coupons, albeit with some inflation
protection, and as such movements in interest rates will not
directly affect the future cash flows payable to the Company.
Interest rate hedging may be carried out to seek to provide
protection against falling interest rates in relation to assets
that do not have a minimum fixed rate of return acceptable to the
Company in line with its investment policy and strategy.
Where the debt instrument is subordinated, the Company is
indirectly exposed to the gearing of the infrastructure project
companies. The Investment Adviser ensures as part of its due
diligence that the project company debt ranking senior to the
Company's investment has been hedged against movement in interest
rates where appropriate, through the use of interest rate
swaps.
Borrowings
During the year, the Company made use of its Facility with RBSI,
which was used to finance investments made by the Company. Details
of the RBSI Facility are given in note 16.
Any potential financial impact of movements in interest rates on
the cost of borrowings to the Company is mitigated by the
short-term nature of such borrowings.
19.5 Credit risk
Credit risk refers to 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. The assets
classified at fair value through profit or loss do not have a
published credit rating, however, the Investment Adviser monitors
the financial position and performance of the project companies on
a regular basis to ensure that credit risk is appropriately
managed.
The Company is exposed to differing levels of credit risk on all
its assets. Per the statement of financial position, the Company's
total exposure to credit risk is GBP752 million (2015: GBP664
million) being the balance of total assets less prepayments. As
explained in note 15, cash is held at a number of financial
institutions to spread credit risk, with cash awaiting investment
being held on behalf of the Company at banks which carry a minimum
rating of A-1, P-1 or F-1 from Standard & Poor's, Moody's or
Fitch respectively or in one or more similarly rated money market
or short-dated gilt funds.
Before an investment decision is made the Investment Adviser
performs extensive due diligence complemented by professional third
party advisers, including technical advisers, financial and legal
advisers and valuation and insurance experts. After an investment
is made the Investment Adviser uses detailed cash flow forecasts to
assess the continued credit worthiness of project companies and
their ability to pay all costs as they fall due. The forecasts are
regularly updated with information provided by the project
companies in order to monitor ongoing financial performance.
The project companies receive a significant portion of revenue
from government departments and public sector or local authority
clients.
The project companies are also reliant on their subcontractors,
particularly facilities managers, continuing to perform their
service delivery obligations such that revenues are not disrupted.
The credit standing of each significant subcontractor is monitored
on an ongoing basis, and period end significant exposures are
reported to the Directors quarterly.
The concentration of credit risk to any individual project did
not exceed 10% of the Company's portfolio as at the year end. The
Investment Advisor also monitors the concentration of risk based
upon the nature of each underlying project.
The concentration of credit risk associated with counterparties
is deemed to be low. The counterparties are typically public sector
entities which generate pre-determined, long term, public sector
backed revenues in the form of subsidy payments (FiT and ROCs
payments) for renewables transactions or unitary charge payments
for PFI transactions. In the view of the Investment Adviser and
Board, the UK Government has both the ability and willingness to
satisfy its obligations to these public sector entities.
The credit risk associated with each project company is further
mitigated because the cash flows receivable are secured over the
assets of the project company, which in turn has security over the
assets of the underlying projects. The debt instruments held by the
Company are held at fair value, and the credit risk associated with
these investments is one of the factors which the Valuation Agent
takes into account when valuing the financial assets.
The Investment Advisor regularly monitors the concentration of
risk based upon the nature of each underlying project to ensure
appropriate diversification and risk remains within acceptable
parameters.
Changes in credit risk affect the discount rate, the sensitivity
of the fair value of the financial assets at fair value through
profit or loss is disclosed below.
The Directors have assessed the credit quality of the portfolio
at the year end and based on the parameters set out above are
satisfied that the credit quality remains within an acceptable
range for long-dated debt.
19.6 Liquidity risk
Liquidity risk is defined as the risk that the Company will
encounter difficulty in meeting obligations associated with
financial liabilities that are settled by delivering cash or
another financial asset. Exposure to liquidity risk arises because
of the possibility that the Company could be required to pay its
liabilities or redeem its shares earlier than expected. The
Company's objective is to maintain a balance between continuity of
funding and flexibility through the use of bank deposits and
interest bearing loans and borrowings.
The following table analyses all of the Company's assets and
liabilities into relevant maturity groupings based on the remaining
period from 30 September 2016 to the contractual maturity date. The
Directors have elected to present both assets and liabilities in
the liquidity disclosure below to illustrate the net liquidity
exposure of the Company.
The cash flows are on an undiscounted basis.
Less than One to Three Greater
three to than
one month months twelve twelve Total
months months
30 September 2016 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------- --------- -------- ------- --------- ---------
Financial assets
Cash and cash equivalents 52,057 - - - 52,057
Other receivables and
prepayments - - 303 - 303
Financial assets at
fair value through
profit or loss 14,998 9,074 48,164 1,373,897 1,446,133
---------------------------- --------- -------- ------- --------- ---------
Total financial assets 67,055 9,074 48,467 1,373,897 1,498,493
---------------------------- --------- -------- ------- --------- ---------
Financial liabilities
Other payables and
accrued expenses - 1,998 - - 1,998
Interest bearing loans
and borrowings - 26,208 - - 26,208
---------------------------- --------- -------- ------- --------- ---------
Total financial liabilities - 28,206 - - 28,206
---------------------------- --------- -------- ------- --------- ---------
Net exposure 67,055 (19,132) 48,467 1,373,897 1,470,287
---------------------------- --------- -------- ------- --------- ---------
Less than One to Three Greater
three to than
one month months twelve twelve Total
months months
30 September 2015 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------- --------- ------- ------- --------- ---------
Financial assets
Cash and cash equivalents 4,906 - - - 4,906
Other receivables and
prepayments - - 49 - 49
Amount held on security - - - 1,230 1,230
Financial assets at
fair value through
profit or loss 5,164 33,319 46,863 1,242,288 1,327,634
---------------------------- --------- ------- ------- --------- ---------
Total financial assets 10,070 33,319 46,912 1,243,518 1,333,819
---------------------------- --------- ------- ------- --------- ---------
Financial liabilities
Other payables and
accrued expenses - 2,018 - - 2,018
Amounts held on security - - - 1,230 1,230
Interest bearing loans
and borrowings - 41,123 - - 41,123
---------------------------- --------- ------- ------- --------- ---------
Total financial liabilities - 43,141 - 1,230 44,371
---------------------------- --------- ------- ------- --------- ---------
Net exposure 10,070 (9,822) 46,912 1,242,288 1,289,448
---------------------------- --------- ------- ------- --------- ---------
19.7 Fair values of financial assets
Basis of determining fair value
The Valuation Agent carries out quarterly fair valuations of the
financial assets of the Company. These valuations are reviewed by
the Investment Adviser and the subsequent NAV is reviewed and
approved by the Directors on a quarterly basis (prior to 1 April
2016, the NAV was approved monthly). The basis for the Valuation
Agent's valuations is described in note 19.3.
Fair value measurements
Investments measured and reported at fair value are classified
and disclosed in one of the following fair value hierarchy levels
depending on whether their fair value is based on:
-- Level 1: quoted prices in active markets for identical assets or liabilities;
-- Level 2: inputs other than quoted prices included in level
one that are observable for the asset or liability, either directly
(as prices) or indirectly (derived from prices); and
-- Level 3: inputs for the asset or liability that are not based
on observable market data (unobservable inputs).
An investment is always categorised as Level 1, 2 or 3 in its
entirety. In certain cases, the fair value measurement for an
investment may use a number of different inputs that fall into
different levels of the fair value hierarchy. In such cases, an
investment level within the fair value hierarchy is based on the
lowest level of input that is significant to the fair value
measurement. The assessment of the significance of a particular
input to the fair value measurement requires judgement and is
specific to the investment.
The table below summarises all securities held by the Company
based on the fair valuation technique adopted:
30 September 30 September
Fair value 2016 2015
hierarchy GBP'000 GBP'000
-------------------------------- ----------- ------------ ------------
Financial assets at fair value
through profit or loss
Loan notes - PFI and renewables
excluding biomass Level 2 520,296 492,299
Loan notes - biomass Level 3 179,386 165,431
-------------------------------- ----------- ------------ ------------
The Directors have classified the financial instruments as Level
2 or Level 3 depending on whether or not there is a consistent data
set of comparable and observable market transactions. Due to the
limited number of comparable and observable market transactions in
the biomass sector, the Directors have classified the Company's
investments in biomass projects as Level 3. Discount rates of 9.7%
and 9.84% were applied to the two investments secured against
underperforming biomass projects with impaired expected future cash
flows.
The following table shows a reconciliation of all movements in
the fair value of financial instruments categorised within Level 3
between the beginning and end of the year:
30 September 30 September
2016 2015
GBP'000 GBP'000
------------------------------------------ ------------------- ------------
Opening balance 165,431 389,036
------------------------------------------ ------------------- ------------
Purchases 29,827 224,453
Repayments (7,125) (20,819)
Unrealised gain on investments at fair
value through profit or loss 1,081 -
Unrealised loss on investments at fair
value through profit or loss (9,828) (5,011)
Decrease in intercompany loan - 70,066
Merger of subsidiary - (657,725)
Introduction of loan notes through merger - 165,431
------------------------------------------ ------------------- ------------
Closing balance 179,386 165,431
------------------------------------------ ------------------- ------------
In the prior year, all amounts were considered to be Level 3,
being the investment in the subsidiary up to the date of the merger
on 30 September 2015.
For the Company's financial instruments categorised as Level 3,
changing the discount rate used to value the underlying instruments
alters the fair value. A change in the discount rate used to value
the Level 3 investments would have the following effect on profit
before tax:
30 September 2016
Change in discount rate 0.50% 0.25% 0.00% (0.25%) (0.50%)
-------------------------- -------- -------- -------- -------- --------
Valuation of financial
assets at fair value
(GBP'000) 173,882 176,600 179,386 182,245 185,176
Change in valuation of
financial assets at fair
value (GBP'000) (5,504) (2,786) - 2,858 5,789
-------------------------- -------- -------- -------- -------- --------
In determining the discount rate for calculating the fair value
of financial assets at fair value through profit or loss, movements
to Pound Sterling interest rates, comparable credit markets and the
observable yield on comparable instruments could give rise to
changes in the discount rate.
The Directors consider the inputs used in the valuation of
investments and the appropriateness of their classification in the
fair value hierarchy. In particular the Directors are satisfied
that significant inputs into the discount rate, other than in
respect of biomass investments as noted above, are market
observable. Should the valuation approach change causing an
investment to meet the characteristics of a different level of the
fair value hierarchy, it will be reclassified accordingly. During
the period there were no transfers of investments between levels
therefore, no further disclosure is considered necessary by the
Directors.
20. Related party disclosures
As defined by IAS 24 Related Party Disclosures, parties are
considered to be related if one party has the ability to control
the other party or exercise significant influence over the other
party in making financial or operational decisions.
Directors
The non-executive Directors of the Company are considered to be
the key management personnel of the Company. Directors'
remuneration including expenses for the year totalled GBP327,000
(30 September 2015: GBP298,000). As at 30 September 2016,
liabilities in respect of these services amounted to GBP67,000 (30
September 2015: GBP47,000).
From 30 September 2015 to 31 March 2016, Mr Paul De Gruchy held
an indirect interest in the Company via GCP Infrastructure OEIC
Limited. He held a direct interest of 284,309.45 ordinary
accumulation shares and an indirect interest in 396,461.30 ordinary
accumulation shares of GCP Infrastructure OEIC Limited. Following
GCP Infrastructure OEIC Limited's decision to wind up its affairs,
these holdings were redeemed on 31 March 2016. As at 30 September
2016, Mr De Gruchy, together with his family members held 453,825
ordinary shares in the Company.
On 25 July 2016, Mr Clive Spears became a shareholder of the
Company. As at 30 September 2016, Mr Spears held 25,000 ordinary
shares.
Investment Adviser
The Company is party to an Investment Advisory Agreement with
the Investment Adviser, amended and restated in November 2015,
pursuant to which the Company has appointed the Investment Adviser
to provide advisory services relating to the assets on a day-to-day
basis in accordance with its investment objectives and policies,
subject to the overall supervision and direction of the Board of
Directors. As a result of the responsibilities delegated under this
Investment Advisory Agreement the Company considers it to be a
related party by virtue of being "key management personnel".
For its services to the Company, the Investment Adviser receives
an annual fee at the rate of 0.9% (or such lesser amount as may be
demanded by the Investment Adviser at its own absolute discretion)
multiplied by the sum of:
-- the NAV of the Company; less
-- the value of the cash holdings of the Company pro rata to the
period for which such cash holdings have been held.
The Investment Adviser is also entitled to claim for expenses
arising in relation to the performance of certain duties and at its
discretion 1% of the value of any transactions entered into by the
Company (where possible the Investment Adviser seeks to charge this
fee to the borrower).
During the year, the Company expensed GBP5,754,000 (30 September
2015: GBP4,740,000) in respect of investment advisory fees and
expenses. As at 30 September 2016, liabilities in respect of these
services amounted to GBP1,540,000 (30 September 2015:
GBP1,381,000).
Partners of the Investment Adviser also sit on the boards of and
control several SPVs through which the Company invests. The Company
has delegated to the Investment Advisor through the Investment
Advisory Agreement, the day-to-day operations of these SPVs.
The voting partners of the Investment Adviser hold directly or
indirectly, and together with their family members, 2,478,351
ordinary shares in the Company.
The non-voting partners of the Investment Adviser hold directly
or indirectly, and together with their family members, 2,473,440
ordinary shares in the Company.
21. Reconciliation of NAV
There is no difference between the NAV published on 7 October
2016 which was calculated in the accordance with the terms of the
prospectus and the net asset value reported in the financial
statements.
22. Contingent liabilities
At 30 September 2016, there were no contingent liabilities (30
September 2015: GBPnil).
23. Subsequent events after the report date
On 10 October 2016, the Company announced that it has committed
to subscribe for two loan notes of up to GBP60 million in
aggregate, the proceeds of which will be used to finance supported
living units for occupation by adults with learning or physical
difficulties. The first loan note, for up to GBP50 million, of
which GBP37.4 million has been subscribed by the Company post year
end, has an expected term of c.35 years. The second loan note, for
up to GBP10 million of which GBP1 million has been subscribed by
the Company post year end, has a term of up to two years. The loan
notes were issued by GCP Programme Funding 1 Limited and these were
secured on a senior basis against the underlying physical
properties.
On 18 November 2016, the Company announced the placing of
ordinary shares targeting gross proceeds of c.GBP60 million. The
placing was successfully closed on 28 November 2016 raising gross
proceeds of GBP90 million. The issue price was 123.50 pence per
ordinary share. The Company has 37.2 million ordinary shares
remaining under the Placing Programme.
A further GBP8.4 million has been advanced to project companies
under existing loan facilities since the year end.
Post year end, the Company has repaid the Facility in full on 7
December 2016/ (see note 16).
As at 27 November 2016, Mr Paul De Gruchy, together with his
family members held an indirect interest of 460,411 ordinary shares
in the Company following a scrip issue allotment of 6,586
shares.
As at 27 November 2016, Mr Clive Spears held 25,381 ordinary
shares in the Company following a scrip issue allotment of 381
shares.
24. Ultimate controlling party
It is the view of the Directors that there is no ultimate
controlling party.
25. Non-consolidated SPVs
The following SPVs have not been consolidated in these financial
statements, as a result of applying IFRS 10 and
Investment Entities (Amendments to IFRS 10, IFRS 12 and IAS 27).
The Company as an investment entity has measured these SPVs at fair
value through profit or loss.
All of the below non-consolidated SPVs are incorporated and
domiciled in the United Kingdom.
Ownership interest
SPV Company Name in loan notes
---------------------------------------- ------------------
GCP Asset Finance 1 Limited 100%
GCP Biomass 1 Limited 100%
GCP Biomass 2 Limited 100%
GCP Biomass 3 Limited 100%
GCP Biomass 4 Limited 100%
GCP Biomass 5 Limited 100%
GCP Cardale PFI Limited (formerly
GCP Programme Funding Limited) 100%
GCP Commercial Solar 1 Limited 100%
GCP Education 1 Limited 100%
GCP Green Energy 1 Limited 100%
GCP Healthcare 1 Limited 100%
GCP Hydro 1 Limited 100%
GCP Onshore Wind 1 Limited 100%
GCP Onshore Wind 3 Limited 100%
GCP RH1 Boiler 1 Limited 100%
GCP Rooftop Solar 1 Limited 100%
GCP Rooftop Solar 2 Limited 100%
GCP Rooftop Solar 3 Limited 100%
GCP Rooftop Solar 4 Limited 100%
GCP Rooftop Solar 5 Limited 100%
GCP Rooftop Solar 6 Limited(1) 37.7%
GCP Social Housing 1 Limited 100%
GCP Programme Funding 1 Limited 100%
FHW Dalmore (Salford Pendleton Housing)
Plc(1) 13.2%
---------------------------------------- ------------------
1. The Company owns the entirety of the subordinated loan note class issued by the SPV.
Forward-looking statements
The contents of this announcement include statements that are,
or may be deemed to be "forward looking statements". These
forward-looking statements can be identified by the use of
forward-looking terminology, including the terms "believes",
"estimates", "anticipates", "expects", "intends", "may", "will" or
"should". They include the statements regarding the target
aggregate dividend. By their nature, forward looking statements
involve risks and uncertainties and readers are cautioned that any
such forward-looking statements are not guarantees of future
performance. The Company's actual results and performance may
differ materially from the impression created by the
forward-looking statements. The Company undertakes no obligation to
publicly update or revise forward-looking statements, except as may
be required by applicable law and regulation (including the Listing
Rules). No statement in this announcement is intended to be a
profit forecast.
Annual General Meetings
It is anticipated that the Company's next AGM will be held on 10
February 2017, at which the Annual Report and consolidated
financial statements for the year ended 30 September 2016 will be
tabled for approval. The Notice of Meeting will be delivered to
shareholders in due course.
National Storage Mechanism
A copy of the Annual Report and Financial Statements will be
submitted shortly to the National Storage Mechanism ("NSM") and
will be available for inspection at the NSM, which is situated at:
www.hemscott.com/nsm.do.
ENDS
Neither the contents of the Company's website nor the contents
of any website accessible from hyperlinks on this announcement (or
any other website) is incorporated into, or forms part of, this
announcement.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR KXLFFQLFXFBV
(END) Dow Jones Newswires
December 14, 2016 02:00 ET (07:00 GMT)
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