Annual report
and accounts 2023
Overview
1 Welcome
2 Performance highlights
3 At a glance
4 A top quartile track record
5 Chair’s statement
7 Review from the Managing Partners
9 Our business model
14 Our approach
18 Low carbon energy – Infinis
19 Improving the aviation ecosystem – TCR
20 Our strategy
21 Our objectives and KPIs
Our portfolio
23 Our portfolio
36 Portfolio review
Accounts and other information
122 Independent auditor’s report
to the members of 3i Infrastructure plc
134 Statement of comprehensive income
135 Statement of changes in equity
136 Balance sheet
138 Cash flow statement
139 Reconciliation of net cash flow
to movement in net debt
140 Significant accounting policies
148 Notes to the accounts
178 Investment policy (unaudited)
179 Portfolio valuation methodology (unaudited)
181 Information for shareholders
183 Glossary
Sustainability report
46 Sustainability report
Financial review and Risk report
58 Financial review
68 Risk report
81 Directors’ duties
Governance
84 Introduction to Governance
86 Board leadership and purpose
99 Division of responsibilities
100 Composition, succession and evaluation
106 Audit, Risk and Internal Control
113 Relationship with Investment Manager
115 Remuneration
116 Additional statutory and corporate
governance information
This Annual report and accounts contains Alternative
Performance Measures (‘APMs’), which are financial
measures not defined in International Financial Reporting
Standards (‘IFRS’). These include Total return on opening
net asset value (‘NAV’), NAV per share, Total income
and non-income cash, Investment value including
commitments, Total portfolio return percentage,
Total liquidity and Portfolio debt to enterprise value.
The definition of each of these measures isshown
onpage 67. The Total return for the year shown in
thePerformance highlights is the total comprehensive
income for the year under IFRS. The Total return on
opening NAV is a Key Performance Indicator (‘KPI’).
The Strategic report on pages 1 to 82 and the
Governance information on pages 83 to 120 for the year
to 31 March 2023 have been drawnup in accordance with
applicable English law and Jersey law and the liabilities
of the Directors inconnection with this information shall
be subject to thelimitations and restrictions provided by
such law.
This Annual report and accounts contains statements
about the future outlook for 3i Infrastructure plc (‘3i
Infrastructure’, ‘3iN’ or the ‘Company’). Although the
Directors believe their expectations are based on
reasonable assumptions, any statements aboutthe future
outlook may be influenced by factorsthat could cause
actual outcomes and resultstobe materially different.
The Company is managed by 3i Investments plc
(the‘Investment Manager’ or ’3i’).
Inside this report
92
3iN Board
values
Legacy
Accountability
Integrity
Objectivity
Watch video online
www.3i-infrastructure.com
Cover image: GCX
Page 27
23
New
investment
5
Chair’s
statement
46
Sustainability
report
58
Financial
review
Hear more about
what this means
Scott Moseley and
Bernardo Sottomayor
Managing Partners and Co-Heads
ofEuropean Infrastructure
3i Investments plc
Welcome
Our purpose
We invest responsibly in infrastructure,
delivering long-term sustainable
returns to shareholders andhaving
apositive influence onourportfolio
companies andtheirstakeholders.
Watch video online
3i Infrastructure plc Annual report and accounts 2023 1
Overview
Performance highlights
Consistent delivery against our target
NAV return of 8% to 10% per annum.
Total return for the year
£394m
March 2022: £404m
2024 Target dividend per share
11.90p
+6.7%
Total return on opening NAV
14.7%
2019
2020
2021
2022
2023
15.4%
11.4%
9.2%
17.2%
14.7%
NAV
£3,101m
+14.7%
2019
2020
2021
2022
2023
£1,902m
£2,269m
£2,390m
£2,704m
£3,101m
Full year dividend per share
11.15p
+6.7%
2019
2020
2021
2022
2023
8.65p
9.20p
9.80p
10.45p
11.15p
NAV per share
336.2p
+10.8%
2019
2020
2021
2022
2023
234.7p
254.5p
268.1p
303.3p
336.2p
2
Overview
13%
11%
8%
4%
5%
9%
8%
5%
15%
7%
8%
6%
1%
At a glance
High quality, diverse
and differentiated
portfolio.
Assets
13
Portfolio value
£3.6bn
2022: £3.2bn (including commitments)
Megatrends*
Energy transition
42%
Digitalisation
22%
Globalisation
22%
Demographic change
8%
Renewing social
infrastructure
6%
* Refer to page 15 for details
on megatrends.
Portfolio value by investment
Read more in Our portfolio
Pages 23 to 35
3i Infrastructure plc Annual report and accounts 2023 3
Overview
08 09 10 11
12
13 14
1615
17 18
19
20
21 22
2423
5.00
5.30
5.50
5.72
5.94
6.49
6.70
7.00
7.25
7.55
7.85
8.65
9.20
9.80
10.45
11.15
11.90
4.6% p.a.
1
10.2%
p.a.
2
6.6% p.a.
3
Financial year
1. Annualised growth rate in NAV per share including ordinary and special dividends over the period.
2. IRR calculation based on historic returns of European Infrastructure funds. Source: Pitchbook.
1. Annualised growth rate in ordinary dividends to FY18.
2. One-off step up in FY19 following sale of Elenia and AWG.
3. Annualised growth rate in ordinary dividends FY19 to FY24.
Consistent growth in
NAV per share since IPO.
The dividend has grown
every year since IPO.
6.4%
6.6%
6.5%
10.2%
Special dividends (pence per share)
Ordinary dividends (pence per share)
FY23 dividend proposed (pence per share)
FY24 dividend target (pence per share)
6.7%
08
09 10 11
12
13 14
1615
Financial year
17 18
19
20
21 22
23
109.3
112.9
117.7
121.9
121.0
125.2
126.4
149.9
161.0
169.0
211.0
234.7
254.5
268.1
303.3
336.2
14% net annualised return¹
Median peer return: 8%²
19% net annualised return¹
Median peer return: 8%²
Core-plus strategy
6.7%
A top quartile track record
17.0
41.4
4
Overview
Chair’s statement
I am delighted to report that we achieved
another year of outperformance, with
atotalreturn of 14.7% in the year ended
31 March 2023. That return is well ahead
ofour target to provide shareholders with
atotal return of 8% to 10% per annum,
to beachieved over the medium term.
Our total return forthe three years since
March 2020, the Covid-19 and post-Covid
period, was an impressive 13.7% per annum.
We have built a unique portfolio, which
benefits from inflation linkage and is
aligned with long-term megatrends.
Our companies, supported by the
engaged asset management approach
of3i, our Investment Manager, are
generating attractive and accretive
growthinvestment opportunities.
We made another step forward with our
sustainability objectives this year, supported
by the establishment of a dedicated
environmental, social and governance
(‘ESG’) team at the Investment Manager
bringing greater focus and increased
engagement with our portfolio companies.
3i Infrastructure continues to deliver
long-term sustainable returns, with
anotheryear ofoutperformance.
I am grateful to shareholders and the
Boardof Directors for their support during
the year, including during our equity raise in
February 2023, as well as to the Investment
Manager’s team for their continued hard
work under the leadership of Scott Moseley
and Bernardo Sottomayor.
Our purpose
Our purpose, as set out on page 1, is
to invest responsibly in infrastructure,
delivering long-term sustainable returns
to shareholders and having a positive
influence on our portfolio companies
andtheir stakeholders.
We invest across a broad range of
infrastructure investment themes and
highlight the strong growth prospects
ofour portfolio companies in this report.
Our portfolio companies invest in,
develop and actively manage essential
infrastructure. Examples of how our
portfolio companies have a positive influence
are included in the Sustainability report.
Another excellent
year,withconfidence
inthefuture.”
Richard Laing
Chair, 3i Infrastructure
3i Infrastructure plc Annual report and accounts 2023 5
Overview
Chair’s statement continued
Performance
The Company generated a total return
of£394 million in the year ended 31 March
2023, or 14.7% on opening NAV, ahead
of our target of 8% to 10% per annum
to be achieved over the medium term.
This is discussed in more detail in the Review
fromthe Managing Partners on page 7.
The NAV per share increased to 336.2 pence.
Our share price has not kept pace with the
growth in our NAV, which resulted in a Total
Shareholder Return (‘TSR’) of negative 6.9%
in the year, ahead of the FTSE 250, which
returned negative 7.9% in the same period.
Since IPO, the Company’s annualised TSR
is 11.7%, comparing favourably with the
broader market (FTSE 250: 6.1% annualised
over the same period).
Dividend
Following the payment of the interim
dividend of 5.575 pence per share in January
2023, the Board is recommending a final
dividend for the year of 5.575 pence per
share, meeting our target for the year of
11.15pence per share, 6.7% above last year’s
total dividend. We expect the final dividend
to be paid on 10 July 2023.
Directors’ duties
The Directors have a duty to act honestly
and in good faith with a view to the best
interests of the Company and to exercise
the care, diligence and skill that areasonably
prudent person would exercise in
comparable circumstances.
In accordance with the AIC Code of
Corporate Governance 2019 (the ‘AIC
Code’), the Board does this through
understanding the views of the Company’s
key stakeholders and carefully considering
how their interests and the matters set out
in section 172 of the Companies Act 2006 of
England and Wales have been considered
in Board discussions and decision making.
More detail can be found in the Directors’
duties and Section 172 statement sections
later in this document.
Capital raise and liquidity
We were pleased with the results of our
capital raise and would like to thank our
shareholders for their continued support.
The equity raise proceeds of £100 million
were used to pay down part of the drawings
on the revolving credit facility (‘RCF’)
and partly used to fund the £28 million
acquisition of Future Biogas. This provides
additional flexibility to fund attractive
discretionary growth opportunities in
our portfolio.
Consistent with our progressive dividend
policy, we are announcing a total dividend
target for the year ending 31 March 2024
of 11.90 pence per share, representing
anincrease of 6.7%.
Corporate governance
The Company’s 2022 Annual General Meeting
(‘AGM’) was held on 7 July 2022. All resolutions
were approved by shareholders, including the
re-election of the existing Directors.
This year’s AGM will be held on 6 July 2023.
Further details are provided in the Notice
of Meeting and on the Company’s website,
www.3i-infrastructure.com. In September, we
were delighted to welcome Stephanie Hazell
as a non-executive Director. Stephanie
brings a broad strategic experience in the
infrastructure sector from her previous roles
at National Grid, Orange and Virgin Group.
We manage our balance sheet actively,
seeking efficiency through low levels of
uninvested cash with a range of funding
options available to the Company for
further investment as described in the
Financial review.
Outlook
The past year has seen significant volatility in
both equity and credit markets and in energy
and power prices. Against this backdrop,
the Company has remained disciplined in its
investment approach, maintaining adequate
liquidity and an appropriate level of gearing
in the Company’s portfolio.
Our portfolio consists of resilient businesses
providing essential services to their
customers and the communities they serve,
often benefitting from long-term sustainable
trends. These businesses are generating
discretionary growth opportunities that are
accretive to our investment cases, leaving
us well positioned to continue to build on
ourstrong performance.
Richard Laing
Chair, 3i Infrastructure plc
9 May 2023
20232007
In the 16 years since the initial public
offering(‘IPO’) the Company has
deliveredatotal shareholder return of
11.7%
per annum
6
Overview
Review from the Managing Partners
This was another strong
year for the Company,
materially exceeding
itstarget return.
The Company’s top quartile
track record is the result
of our deliberate strategy.”
Scott Moseley and Bernardo Sottomayor
Managing Partners, Co-Heads of European Infrastructure
3i Investments plc
We delivered another strong total return
of14.7% this year.
Since 2015, when we adopted our
currentstrategy of focusing on core-plus
infrastructure investments, NAV per share
including dividends has grown by 19%
per annum. Since 3iN’s inception in 2007,
we have grown NAV pershare including
dividends by 14% per annum.
The Company’s top quartile track record
isthe result of our deliberate strategy.
We have carefully selected our portfolio,
identifying infrastructure companies that
benefit from long-term structural growth
trends in their underlying markets.
We work actively with the management
teams at our portfolio companies todefine
and execute plans to capitalise onthose
growth dynamics. Growing markets provide
the catalyst for us to continue to reinvest in
our portfolio companies at returns that are
likely to outperform 3iN’s portfolio target.
Our portfolio companies’ earnings are also
typically positively correlated to inflation,
aswell as growing in real terms.
The resulting compounding growth
dynamics, together with the resilience that
our portfolio companies have displayed
throughout the cycle, including during the
recent Covid-19 pandemic, demonstrate
that the Company offers shareholders very
high quality risk-adjusted returns.
Our active management approach also
ensured that we locked in attractive debt
financing across the portfolio before
the recent increases in financing costs.
The average level of gearing within our
portfolio companies is a relatively modest
33% of enterprise value and there are no
material refinancing requirements within
theportfolio before 2026.
3i Infrastructure plc Annual report and accounts 2023 7
Overview
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Review from the Managing Partners continued
These conservative levels of gearing
within our portfolio companies, combined
with strong operational cash generation,
available credit in the RCF and the recent
£100 million equity raise, ensures that
our portfolio companies are well placed
to finance these growth investment
opportunities as they arise.
Sustainability
The importance of sustainability and meeting
ESG standards continues to increase.
This year we created a new team to lead
ESG and sustainability initiatives across
the portfolio. The additional focus that
this new team brings helps us to engage
on ESG topics in a more meaningful way,
to maintain appropriate oversight over
new and developing ESG legislation and
to collate relevant data regarding the
performance of the portfolio companies
against certain sustainability indicators.
Our companies are now reporting
Scope 1 and 2 greenhouse gas (‘GHG’)
emissions and considering opportunities
toreduce these.
In the year ahead we plan to build on
this progress by working with portfolio
companies to measure Scope 3 GHG
emissions, further develop Paris-aligned
decarbonisation plans and where
possibleset science-based targets.
Compounding growth dynamics
Outlook
Our portfolio is generating strong earnings growth which we are confident is set to
continue. Additionally, we continue to see strong demand for high quality infrastructure
investments, such as those held by 3iN, amongst private market investors. Our active
management strategy includes planning selectively to divest our portfolio companies
at anoptimal moment in time. The scarcity value of our assets and favourable growth
positioning provide confidence in the outlook for continued value creation.
Scott Moseley and Bernardo Sottomayor
Managing Partners and Co-Heads of European Infrastructure, 3i Investments plc
9 May 2023
Investment and divestment activity
During the year we completed a number of transactions as shown in the table below:
Date Activity
May 2022 Syndication of a 17% stake in ESVAGT for proceeds of £87 million
June 2022 Sale of the European Projects portfolio for £106 million
September 2022 Closing of the acquisition of c.100% stake in GCX for £318 million
October 2022 Further investment in TCR, acquiring the 48% stake owned
byfunds managed by DWS for £338 million
November 2022 Syndication of 28% of 3iN’s stake in TCR for proceeds of £190 million
December 2022 Investment of a further £15 million to fund DNS:NET’s fibre roll-
out programme
February 2023 Investment of £28 million to acquire FutureBiogas
March 2023 Investment of a further £30 million in Infinis to fund the development
of its solar roll-out programme
8
Overview
Our business model
An active investor
Unique offering for shareholders
The Company remains unique,
providingpublic market investors with
access to private infrastructure businesses
across a variety of megatrends, sectors
and geographies.
Origination approach
We remain a disciplined investor and,
wherepossible, seek opportunities to
transact off-market, only participating in
competitive processes where we believe
wehave a distinct advantage.
We have a large and focused investment
team, with a broad network and access
across the geographies in which we
invest. Our reputation, local presence
and the relationships we develop with
management teams provide us with
competitive advantages. This allowed
us to be successful in signing our new
investment this year in Future Biogas
onattractive terms.
Asset management
We maintain a significant focus on active
asset management and investment
stewardship. We identify high calibre
management teams and look to implement
a clear business strategy. We help identify
accretive growth opportunities to the
portfolio companies, and actively help them
to convert those, including executing add-
on M&A opportunities and putting in place
adequate capital structures and capex
facilities to fund the associated investments.
We actively look to enhance the
infrastructure characteristics of the
businesses we acquire, ensuring that,
wherepossible, capex is focused on
immediate contracted revenue generating
assets, improving the infrastructure
characteristics of the business to attract
competitive financing, adding elements of
service that create customer stickiness, and
often implementing operational efficiency
programmes to optimise EBITDA margins.
All of this helps us position our businesses
into the core infrastructure space, thus
maximising the potential exit value.
We execute all of the above through
ownership control, effective board presence
and governance and by being involved
directly in the companies’ key workstreams.
Competition for new investment primarily
comes from private infrastructure funds.
Most other UK listed infrastructure funds
typically target smaller investments in
finite life contracted assets like operational
and greenfield Public Private Partnership
(‘PPP’) projects or operational renewable
portfolios, which are outside our
investment focus.
Our primary investment focus remains mid-
market core-plus with controlling majority
or significant minority positions and strong
governance rights, whilst adhering to a set
of core investment characteristics and risk
factors. More information on our business
model can be found on page 10.
Market segmentation and investment focus
Operational
PPP projects
Core
infrastructure
Core-plus
infrastructure
Return
Risk
3i Infrastructure plc Annual report and accounts 2023 9
Overview
Our business model continued
Read more
Pages 12 to 13
Read more
Page 11
Read more
Pages 11 and 20
Financial
14.7%
Total return on time-weighted
opening netasset value
11.15p
Ordinary dividend
per share
19%
Asset IRR (sinceinception)
Non-financial
2
Further investments inportfolio
companies tofund growth
+9%
Increase in installed
renewable energy capacity
12
Portfolio companies reporting
ongreenhouse gas emissions
Value createdEnablers Investment
characteristics
How we create value
3i Group network
Reputation andbrand
Robust policies
and procedures
Efficient balance sheet
Investment
Manager’s team
Engaged asset
management
High ESG standards
We invest responsibly in infrastructure
to create long-term value for stakeholders.
Asset-intensive
business
Asset bases that
are hard to replicate
Provide essential
services
Established
market position
Good visibility
of future cash flows
An acceptable element
of demand or marketrisk
Opportunities
for further growth
Sustainability
Strategic
priorities
5
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10
Overview
Our business model continued
Characteristics we look for in new investments How we create value
We look to build and maintain a diversified portfolio of assets, across a range of geographies
and sectors, whilst adhering to a set of core investment characteristics and risk factors.
The Investment Manager has a rigorous process for identifying, screening and selecting
investments to pursue. We look for businesses that combine a base of strong cash flow
resilience (eg. contracted revenues) with high through-cycle underlying market growth
fundamentals and operational improvements and M&A opportunities, which allows us to
deliver above target returns. Although investments may be made into a range of sectors,
theInvestment Manager typically focuses on identifying investments that meet most
orallofthe following criteria and are aligned with identified megatrends:
We have a rigorous approach to identify the best
investment opportunities and then actively manage
our portfolio companies to drive sustainable growth
and value creation.
Asset-intensive business
Owning or having exclusive access under
long-term contracts to assets that are
essentialtodeliver the service
Good visibility of future cash flows
Long-term contracts or sustainable demand
thatallow us to forecast future performance
withareasonable degree of confidence
Asset bases that are hard to replicate
Assets that require time and significant
capitalortechnical expertise to develop,
withlow risk oftechnological disruption
An acceptable element
of demand or market risk
Businesses that have downside protection,
butthe opportunity for outperformance
Provide essential services
Services that are an integral part of a
customer’sbusiness or operating requirements,
orare essential to everyday life
Opportunities for further growth
Opportunities to grow or to develop
thebusiness into new markets, either
organically orthrough targeted M&A
Established market position
Businesses that have a long-standing
position,reputation and relationship with
theircustomers – leading to high renewal
andretention rates
Sustainability
Businesses that meet our Responsible
Investing criteria, with opportunities to
improvesustainability and ESG standards
Buy well
• Effective use of
3i’s network
• Comprehensive
due diligence
• Consistent with
return/yield targets
• Fits risk appetite
Execute plan
• Ongoing support
• Monitor performance
• Review further
investment
opportunities
• Facilitate and
execute M&A
Strong governance
• Make immediate
improvements
• Appropriate board
representation and
composition
• Incentivise and align
management teams
Realisation
• (Re)position business
and enhance
infrastructure
characteristics to
maximise exit value
• Long-term view but
will sell tomaximise
shareholder value
Optimise strategy
• Agree
strategic direction
• Develop action plan
• Right capital structure
to fund growth plan
What we do is
framed by our
strategic priorities
Read more
Page 20
3i Infrastructure plc Annual report and accounts 2023 11
Overview
Our business model continued
What enables us to create value
Strengthen
portfolio company
management
teams
Invest in and
develop companies
to support
a sustainable
future
Grow
our platform
businesses
through further
investments
The Company is managed by an
experienced and well-resourced team.
The European infrastructure team was
established by 3i Group plc (‘3i Group’) in
2005 and now comprises over 50 people,
including over 30investment professionals.
This is one of the largest and most
experienced groups of infrastructure
investment professionals in Europe,
supported by dedicated finance, tax,
legal,operations, sustainability and
strategyteams.
We create value from our investments through the Investment Manager’s engaged asset
management approach. Through this approach, the Investment Manager partners with
our portfolio companies’ management teams to develop and execute a strategy to create
long-term value in a sustainable way. Examples of this partnership include developing
strategies that support investment in the portfolio company’s asset base over the long
term; continued improvements in operational performance; and establishing governance
models that promote an alignment of interests between management and stakeholders.
We develop and supplement management teams, often bringing in a non-executive
chairearly in our ownership.
Examples of this engaged asset management approach can be found on our website,
www.3i-infrastructure.com.
3i Group has a network of offices, advisers
and business relationships across Europe.
The investment management team
leverages this network to identify, access
and assess opportunities to invest in
businesses, on a bilateral basis where
possible, and to position the Company
favourably in auction processes.
Investment Manager’s team 3i Group’s network Engaged asset management
12
Overview
Our business model continued
What enables us to create value continued
The Investment Manager and the
Company have built a strong reputation
and track record as investors by investing
responsibly, managing their business and
portfolio sustainably, and by carrying out
activities according to high standards of
conduct and behaviour. This has been
achieved through upholding the highest
standards of governance, at the Investment
Manager, the Company and in investee
companies. This in turn has earned the
trust of shareholders, other investors and
investee companies, and has enabled
the InvestmentManager to recruit and
developemployees who share those
valuesand ambitions for the future.
The Board seeks to maintain this strong
reputation through a transparent
approachto corporate reporting,
includingon our progress on driving
sustainability through our operations
and portfolio. We are committed
to communicating in a clear, open
and comprehensive manner and
to maintainingan open dialogue
with stakeholders.
Established investment and asset
management processes are supported by
the Investment Manager’s comprehensive
set of best practice policies, including
governance, conduct, cyber security
andanti-bribery.
The Company’s flexible funding model
seeks to maintain an efficient balance
sheet with sufficient liquidity to make
new investments. In order to capitalise
ondiscretionary growth opportunities
inthe portfolio, during the year we
raisednew equity of £100 million.
Since FY15 the Company has raised
equity three times and returned
capital to shareholders twice
followingsuccessful realisations.
In FY23, the Investment Manager created
a new team to lead ESG and sustainability
initiatives across the portfolio. This will
enable an acceleration of the delivery of the
Company’s ambitions around sustainability.
The new team’s role is to ensure the
Company’s approach is right for the portfolio
and to drive genuine ambition and progress
at portfolio company level. Dedicated ESG
resource enables us to identify, monitor
and realise the value creation opportunities
linked to sustainability for each portfolio
companymore effectively.
The team supports each portfolio
companyon its respective sustainability
journey and consideration of the Company’s
objectives at portfolio company level.
The team also leads ESG reporting forthe
Company and delivers the annual ESG
review of the portfolio.
By interfacing with the Company’s strategy,
the team supports the Board to set the
Sustainability strategy and objectives for the
Company, and aligns with key stakeholders
such as 3i Group, particularly on climate-
related risks and opportunities.
Sustainability and ESG standards are
discussed throughout this report. Please
refer to Our approach on pages 14 to 17,
the Sustainability report on pages 46 to 56
andthe Risk report on pages 68 to 80.
Reputation and brand Dedicated ESG team Robust policies and procedures
Efficient balance sheet
There is a strong link between
companies that have high
ESGstandards and those that
are able to achieve long-term
sustainable business growth.”
Anna Dellis
Partner, 3i Investments plc
3i Infrastructure plc Annual report and accounts 2023 13
Overview
Core Core-plus Value added
Dec 19Dec 18 Dec 20 Dec 21 Dec 22
Unlisted infrastructure: dry powder by primary strategy (December 2018–2022)
350
300
250
200
150
100
50
0
Dry powder (US$ bn)
Source: Preqin Pro.
Our approach
The infrastructure market
Competitive landscape
2022 was another very strong year for
fundraising in the unlisted infrastructure
space, with over US$300 billion raised
in the core, core-plus and value added
segments, as shown in the chart
below. Fundraising has become more
concentratedaround successful managers,
with fewer funds being raised but the
average fund size rising. This makes
competition for suitable larger equity
investments more intense.
In this environment, demand for
infrastructure assets typically increases due
to the essential nature of the services they
provide and downside protection as they
can act as a hedge with revenues directly
orindirectly linked to inflation.
Our portfolio companies benefit from
direct contract indexation and strong
market positions providing pricing power.
This is partially offset by the increase in
operational costs experienced by a number of
those companies.
Macro environment
The past year has seen a structural shift
in the macroeconomic environment with
significant inflation, increases in interest
rates and volatile equity markets. This has
slowed down M&A activity and impacted
stock market performance.
Central banks raised interest rates in
response to rising inflation. The impact on
our portfolio has been limited, with over
95% of our portfolio company debt either
fixed rate or hedged at 31 March2023,
and with no material refinancing due
before 2026.
These trends, and our response to them,
are discussed in more detail within the
Riskreport on page 76.
Interest rates Credit Inflation Power prices
• Over 95%
of portfolio
company debt
is fixed rate
or hedged at
31 March 2023
• No material
near-term
refinancing risk
in the portfolio
• Nearly 90%
of portfolio
company debt
matures beyond
the next three
financial years
• Portfolio returns
positively
correlated
to inflation
• Balanced mix of
direct indexation
and strong
market positions
provide
pricing power
• Energy
generating
assets
benefitted
from the
high and volatile
power price
environment
14
Overview
Megatrends
Megatrends are shaping the world around
us, influencing decision making and
changing the demands placed on our
economy and services. Identifying the
potential for change is a key driver of
our investment decision making – from
the businesses, sectors and countries
we invest in, to the way we go about
finding opportunities.
As the Company’s portfolio continues to
grow, we seek to diversify our investments
across a range of megatrends that will
provide a supportive environment for long-
term sustainable returns to shareholders.
We also continually assess underlying
risk factors, both when considering new
investment opportunities and in managing
the existing portfolio and its exposure to
certain risks, such as commodity prices and
foreseeable technological disruptions.
Electrification/energy transition
The transition towards a low-carbon
economy is gathering pace. Rising
electricity consumption is increasing
the demand for related equipment and
services such as those provided by
Joulz,which has expanded its offering
to include solar and EV charging products.
Global trade
and transport
Automation,
digital operations and
increasing connectivity
Renewable energy
generation
Electrification/
energy transition
Shared resources
Waste treatment
and recycling
Demand for
healthcare
Investment themeMegatrend Our portfolio
Energy
transition –
low-carbon
and circular
economy
Digitalisation
and technology
disruption
Demographic
change
Globalisation
Renewing
social
infrastructure
Urbanisation and
smart cities
Investment themes
Our approach continued
The infrastructure market continued
Renewable energy generation
There is increasing demand for energy
generated from renewable sources such
as wind and solar to support the energy
transition. Our investments in Infinis,
Attero, and Valorem all generate energy
from avariety of renewable sources and
their combined installed capacity has grown
significantly during our ownership.
3i Infrastructure plc Annual report and accounts 2023 15
Overview
Our approach continued
The infrastructure market continued
Shared resources
Developed economies are experiencing
a shift towards a shared resources model.
This can lead to significant cost savings
for users of capital intensive assets
and also reduce overall GHG emissions.
In the case of TCR, which provides pooled
ground support equipment at airports,
this has reduced the amount
ofequipment required.
Demand for healthcare
Increasing life expectancy
and an ageing population
are increasing the demand
for healthcare-related
services and infrastructure.
Our investment in Ionisos,
which provides cold
sterilisation services to the
medical and pharmaceutical
industries, is aligned to
this trend.
Global trade
and transport
Businesses are seeking to
increase supply resilience
and achieve long-term price
stability by establishing
deeper, more diversified
supplier bases for goods
and services. This can help
mitigate disruptions from
extreme weather events and
other localised situations.
Advario Singapore
(Oystercatcher) supports
its customers storing and
blending the gasoline used
to transport these goods.
Urbanisation
and smart cities
Technology is increasingly
being used to enhance
the efficiency and safety of
urban areas. SRL’s products
allow for greater control
of traffic flows, which in
turn reduces congestion
around roadworks and
improves safety.
Waste treatment and recycling
There is a trend towards increasing
levels ofrecycling driven by regulatory
requirements and consumer preferences.
Attero is one of the largest waste
treatmentand disposal companies in
theNetherlands and is benefitting from
thisincreased demand for its services.
Investment themes (continued)
Automation, digital operations
and increasing connectivity
Technology is developing rapidly,
changing operating models and
digitalising industrial processes.
Business is increasingly mobile and
data driven, which requires increasing
levels of connectivity through digital
infrastructure. Our communications
infrastructure investments, Tampnet,
GCX and DNS:NET, are benefitting
fromthis increased demand.
16
Overview
Our approach continued
Our influence
As active owners weseek to ensure that our
investee companies arerun responsibly and
that they can makea positive contribution to
their employees, customers, suppliers and
the local communities in which they operate.
This includes supporting and empowering
management teams to develop resilient
business strategies.
We create a culture at our portfolio companies
where the Company’s expectation that
management teams embed sustainability
intotheir strategy is well known.
We facilitate and encourage the exchange
of best practices by portfolio companies
by connecting companies that are
more advanced in certain sustainability
initiatives with others who can benefit
fromtheir expertise.
We seek to manage material ESG risks
andopportunities during the period of
theCompany’s investment. This includes
enhancing portfolio companies’
corporategovernance and reporting,
andencouraging them to improve their
performance over time onsustainability
issues that are material tothem, with a
particular focus on healthandsafety, and
climate change.
We require all our portfolio companies
tomeasure their GHG emissions.
We encourage them to identify
decarbonisation strategies. This year, we
asked an initial subset ofour portfolio
companies to develop GHG emission
reduction targets that are aligned with
theobjectives of the Paris Agreement.
Our portfolio
Many infrastructure businesses have
sustainability at their core, providing or
enabling the provision of essential services
to society, interconnectivity and the
appropriate management of resources.
Whilst the Company does not pursue a
sustainability-driven investment strategy,
it does use its influence in the investments
it makes, where appropriate, to seek to
contribute positively to environmental and
social sustainability objectives, such as
transitioning to a low carbon and circular
economy, enabling a healthy and safe
society and fostering inclusive growth.
We believe such contributions, alongside
good ESG performance of our portfolio, can
protect and potentially enhance value forthe
Company’s shareholders.
We have a positive
influence on our
portfolio companies.
Contributing to a low-carbon future
• Invest in the production
ofclean energy
• Engage with suppliers onlow-
carbon innovation
• Support customers to
decarbonisetheir operations
• Develop GHG emissions
reduction strategies
Supporting safety and good health
• Adhere to high health and safety
standards that protect employees
• Enable safe operations for customers
• Embed a safety culture across
the organisation
• Contribute to high quality healthcare
through Ionisos
Fostering inclusive growth
• Adhere to high governance and ethical
work standards
• Be an employer of choice supported
byadiverse and inclusive culture
• Create job opportunities and engage
withlocal communities
• Support local and international connectivity
through our telecommunication businesses
Read more in the
Sustainability report
Pages 46 to 56
Sustainability in action
Examples
of our portfolio
companies’
sustainability
strategies
3i Infrastructure plc Annual report and accounts 2023 17
Overview
Low carbon energy – Infinis
Infinis is now a leading,
diversified, low-carbon
generation platform.”
Tim Short
Partner, 3i Infrastructure
In conversation with
3i Partner Tim Short
and Infinis CEO,
ShanePickering.
Q Tell us about Infinis
SP Infinis is a leading generator of low-
carbon energy with over 150 sites
across the UK. We capture methane
from landfill sites and disused mines
and weutilise that methane as a fuel
sourceto generate electricity.
Methane is a very powerful greenhouse
gas; it is 25 times more potent and
damaging to the earth’s atmosphere
than carbon dioxide. So, by capturing
the methane and utilising that to
generate electricity, we are preventing
the release of more than 6million
tonnes per annum of carbon dioxide
into the atmosphere.
Q What attracted you to Infinis and
how has it developed since 2016?
TS When we invested in Infinis in 2016, it
was exclusively a landfill gas business,
but we’ve now grown the business to
become a leading, diversified, low-
carbon generation platform. We now
have three strands to the business:
the landfill gas and disused mines
business, the solar business and a
flexible generation business – that’s
batteries and power response –
to support the UK’s electricity grid
as more and more intermittent
renewables come on line.
Q What benefits has 3iN brought
toInfinis?
SP 3i Infrastructure is a long-term and
supportive partner. From 2016, we’ve
built up excellent relationships with
3i and theInfinis board members.
In fact, Tim and I were here from the
very outset, along with some of the
otherboard members.
3i Infrastructure has supported multiple
follow-on investments, including
refinancings and acquisitions.
In 2018, they funded the acquisition
of Alkane Energy which added
160MW of capacity to the business.
It’s a real partnership and, forme,
this is one of the main reasons why
Infinis is so successful.
Q What does the future look
likeforInfinis?
SP Our mission is to grow Infinis into
a more diversified, renewable and
low-carbon energy business. We’re
developing 1.5GW of new low-
carbon energy projects, including
solar energy parks, and our
continued investment in renewable
energy is helping the UK reduce its
reliance on fossil fuels and reducing
electricity costs for consumers.
It’s really exciting to see our vision
of generating a low-carbon future
become a reality and it’s great to
be helping the UK’s energy sector
transition to net zero.
18
Overview
TCR is a unique business
with a strong asset base and
leading market position.”
Céline Maronne
Director, 3i Infrastructure
In conversation with
3i Director Céline
Maronne and TCR
CEO, Tom Bellekens.
Q What does TCR do and how
doesitfitwith 3iN’s strategy?
TB TCR rents ground support
equipment, which is the equipment
that moves around the airport to
load and offloadpassenger and
cargo aircraft. We own the largest
independent fleet in the world,
which consists of c.35,000 pieces
of equipment on 180 airports in20
countries in four continents.
CM TCR is a unique business that is
extremely difficult to replicate.
It fits our strategy of investing in
businesses with strong asset bases
and market positions, but where
we also see significant opportunities
to grow.
Q What role does TCR play
in energy transition?
TB For us, sustainability means helping
theentire aviation ecosystem to
reducetheir GHG emissions and
become greener, which we can help
them do invarious ways. One is to
encourage our customers to use
greener equipment. Another way is by
using smart technology to enable our
customers touse less equipment.
Q Why did you choose
to partner with3iN?
TB What differentiates 3iN is that
they have a very long-term partner
approach, which matches our long-
term partner approach with customers.
Where we have found themparticularly
supportive is whenitcomes to
financing, strategyand M&A activities.
We also appreciate that the people
we have on the Board today were
the people that six or seven years
ago were there when the acquisition
took place, which has created very
fruitfulrelationships.
Q What is next for TCR?
TB Whilst we are the market leader
today,there is still more to go
forin terms of further geographic
expansion as well as further market
share expansion in the places where
wearealready present.
We also want to further develop our
ESG strategy. The advantage is that
the bigger we are, the more we have
the capacity to invest in the safety
anddecarbonisation of our fleet.
Improving the aviation ecosystem – TCR
3i Infrastructure plc Annual report and accounts 2023 19
Overview
Our strategy
Strategic priorities
Our strategy is
to maintain a
balanced portfolio
of infrastructure
investments delivering
an attractive mix of
income yield and
capital appreciation
for shareholders.
Delivering an attractive mix of income
yieldand capital growth for shareholders.
Investing in a diversified portfolio in
developed markets, with a focus on
theUKand Europe.
Minimising return dilution to shareholders
from holding excessive cash, while
retaining a good level of liquidity for
future investment.
Ensuring that our investment decisions
and asset-management approach consider
both the risks and opportunities presented
by sustainability.
Focusing selectively on investments that
are value-enhancing to the Company’s
portfolio and with returns consistent
withour objectives.
Driving value from our portfolio through
ourengaged asset-management approach.
Delivering growth through
platform investments.
15%
Largest single
investment by value
Read more
Pages 23 to 35
£404m
Total liquidity
Read more
Page 64
979MW, +9%
Installed renewable
energy capacity, increase in year
Read more
Page 49
£ 452m
New investments less amounts
syndicated in the financial year
Read more
Pages 23 to 35
2
Follow-on investments
in portfolio companies
Read more
Pages 23 to 35
2
Portfolio companies
refinanced
Maintaining a
balanced portfolio
Maintaining an
efficient balance sheet
Sustainability a key
driver of performance
Disciplined approach
to new investment
Managing the
portfolio intensively
Overview
20
Our objectives and KPIs
Our objectives
are to provide
shareholders with:
a total return of 8%
to10% per annum,
tobe achieved over
the medium term
a progressive annual
dividend per share
Our KPIs
2019
2020
2021
2022
2023
Target
15.4%
11.4%
9.2%
17.2%
14.7%
8-10%
Target
To provide shareholders with a total return of8%to
10%per annum, to be achieved over themedium term.
Met or exceeded target
for 2023 and every prior year shown
Total return (% on opening NAV)
2019
2020
2021
2022
2023
2024 Target
8.65p
9.20p
9.80p
10.45p
11.15p
11.90p
Target
Progressive dividend per share policy.
FY24 dividend target of 11.90 pence per share.
Dividend per share increased
every year since IPO
Annual distribution (pence per share)
Rationale and definition
• Total return is how we measure the overall financial
performance of the Company
• Total return comprises the investment return from
theportfolio and income from any cash balances,
netof management and performance fees and
operating and finance costs. It also includes
foreignexchange movement and movement
inthefair valueof derivatives and taxes
• Total return, measured as a percentage, is calculated
against the opening NAV, net of the final dividend for
the previous year, and adjusted (on a time-weighted
average basis) to take into account any equity issued
and capital returned in the year
Performance over the year
• Total return of £394 million in the year, or 14.7%
ontime-weighted opening NAV and equity issued
• The portfolio showed good resilience overall
withstrong performance in particular from TCR,
Infinis and Tampnet
• The hedging programme continues to reduce the
volatility in NAV from exchange rate movements
• Costs were managed in line with expectations
Rationale and definition
• This measure reflects the dividends distributed
toshareholders each year
• The Company’s business model is to generate
returns from portfolio income and capital returns
(through value growth and realised capital profits).
Income, other portfolio company cash distributions
and realised capital profits generated are used
tomeet the operating costs of the Company and
tomake distributions to shareholders
• The dividend is measured on a pence per share
basis,and is targeted to be progressive
Performance over the year
• Proposed total dividend of 11.15 pence per share,
or £101 million, is in line with the target set at the
beginning of the year
• Income generated from the portfolio and cash
deposits, including non-income cash distributions
and other income from portfolio companies,
totalled£202 million for the year
• Operating costs and finance costs used to assess
dividend coverage totalled £66 million in the year
• The dividend was fully covered for the year
• Setting a total dividend target for FY24 of
11.90penceper share, 6.7% higher than for FY23
3i Infrastructure plc Annual report and accounts 2023 21
Overview
Our
portfolio
22
Our portfolio
New investment
Investment rationale
• Future Biogas is one of the largest anaerobic
digestion (‘AD’) plant developers and biogas
producers in the UK, operating 11 AD plants
on behalf of institutional investors under long-
term contracts
• There is strong political support and growing
corporate demand for domestically-produced
biomethane, which, as a direct substitute for
fossil natural gas, has an essential role to play in
decarbonising some of the UK’s gas-dependent
sectors such as heat, transport and manufacturing
• On a national scale, the use of biomethane (vs.
natural gas) allows the existing gas infrastructure
tohelp meet the UK government’s net zero
andenergy security targets without any change
tothe existing system
• Future Biogas will develop a new generation
ofunsubsidised AD plants and sell the
resulting biomethane under long-term
offtakeagreementstocorporate buyers
• In the longer term, Future Biogas intends to enter
thenascent but high potential voluntary carbon
offset market through carbon capture and storage
• Future Biogas has a highly experienced management
team with a strong track record in the sector
Characteristics
Essential role in the UK’s decarbonisation agenda
Biomethane from AD is a ready-to-use and commercially
viable solution for hard to decarbonise industrial sectors.
It does not require any upgrade to the existing UK gas
infrastructure. Energy produced by AD plants is carbon
neutral, as the CO
2
released during the process matches
the CO
2
absorbed from the atmosphere by the feedstock.
In the future, carbon capture and storage could be
introduced to make the process carbon negative.
Established market position
Future Biogas is one of the largest producers of
biomethane in thenascent UK market and a highly
experienced developer and operator of AD plants, with
full-service capabilities indevelopment, construction
and operations.
Supply/demand of biomethane
The challenge to decarbonise industrial and manufacturing
sectors, and the disparity in biomethane supply and
demand, is expected to sustain a very strong market
forgreen gas in the long term.
Acceptable element of gas price risk
Future Biogas is exposed to a degree of gas price
volatilitythrough its existing management contracts.
However, new AD plants are core to our investment
thesisand will be underpinned by long-term offtake
agreements with corporates.
Sustainable farming practices
By promoting a regenerative farming approach,
feedstockfrom energy crops can be sustainably
integratedinto agricultural systems. The circular process
of returning digestate back to land can help replenish soil
nutrients and carbon, and displaces demand for carbon-
intensive artificial fertilisers.
Opportunities for growth
The investment in Future Biogas, whilst modest
today, creates an opportunity for significant follow-on
investmentin new AD plants at attractive returns.
3i Infrastructure plc Annual report and accounts 2023
Our portfolio
23
Performance (£m)
TCR is the largest independent lessor
of airport ground support equipment
(‘GSE’) and operates at over 180 airports
worldwide. TCR has defined the market
for leased GSE, providing high quality
assets under full-service leasing, as well as
maintenance and fleet management to its
clients (predominantly independent ground
handling companies, airlines and airports).
Read more online
304
537
28
Total
cost
Closing
value
Distributions
and hedging
Our portfolio continued
24
Performance (£m)
329
485
Total
cost
Closing
value
ESVAGT is the pioneer and market leader
in the provision of purpose-built, high
performance maintenance vessels (‘SOVs’) to
offshore wind farms, with nine in operation
and one further vessel under construction.
SOVs provide efficient maintenance platforms
to wind turbines and other offshore wind
equipment, under long-term contracts.
ESVAGT is also a leading provider of
emergency rescue and response vessels
(‘ERRVs’) to the offshore oil industry, in and
around the North Sea and the Barents Sea.
Read more online
Our portfolio continued
3i Infrastructure plc Annual report and accounts 2023 25
Our portfolio
Performance (£m)
Infinis is the largest generator of low-carbon
electricity from captured methane in the
UK, with a portfolio of renewable baseload
and low-carbon flexible generation across
150 sites and a total installed capacity
of 442MW. The business is rapidly
transforming through an active solar and
battery development pipeline.
Read more online
352
407 187
Total
cost
Closing
value
Distributions
and hedging
Our portfolio continued
26
Performance (£m)
GCX owns one of the most comprehensive
fibre-optic subsea cable networks globally.
Its 66,000km of cables constitute one of
the few networks with significant available
capacity to serve the rapidly growing
demand for data traffic on the Europe-Asia
and inter-Asia routes.
Read more online
318
323
Total
cost
Closing
value
Our portfolio continued
Our portfolio
273i Infrastructure plc Annual report and accounts 2023
Performance (£m)
Ionisos is the third largest cold sterilisation
provider globally. It has developed a
highly diversified customer base and
delivers a critical service for the medical,
pharmaceutical and cosmetics industries for
which cold sterilisation is an essential step
in the manufacturing process. It is typically
applied to single-use products that would
be damaged by the heat and/or humidity
ofhot sterilisation methods.
Read more online
186
298 10
Total
cost
Closing
value
Distributions
and hedging
Our portfolio continued
28
Performance (£m)
Tampnet owns and operates the
world’s largest offshore, high-capacity
communication network, which is located
in the North Sea and the Gulf of Mexico.
It provides customers with mission-critical
reliable communications, including
high-speed, low-latency and resilient
data connectivity offshore through an
established and comprehensive network
of fibre-optic cables, 4G base stations,
andmicrowave links.
Read more online
187
292 13
Total
cost
Closing
value
Distributions
and hedging
Our portfolio continued
3i Infrastructure plc Annual report and accounts 2023 29
Our portfolio
195
287 26
Total
cost
Closing
value
Distributions
and hedging
Performance (£m)
Joulz is a provider of essential energy
infrastructure equipment and services to
industrial and commercial customers in the
Netherlands. It owns and leases medium-
voltage electricity infrastructure alongside
a metering business which owns and
leases electricity and gas meters. Since we
acquired it, Joulz has extended its offering
to electric vehicle charging points and solar
power installations through acquisitions.
Read more online
Our portfolio continued
30
Performance (£m)
Oystercatcher is the holding company
through which the Company holds a 45%
interest in Advario Singapore Limited (‘ADS’).
ADS is a 1.3 million cubic metre facility
focused on blending and storing refined
petroleum products for a range of blue-
chip customers. With a premier location on
Jurong Island, it has pipeline connectivity
to neighbouring businesses in the Jurong
Island petrochemicals complex. Its customers
access the facility by pipeline, seagoing
vessel and barge.
Read more online
139
254 193
Total
cost
Closing
value
Distributions
and hedging
Our portfolio continued
3i Infrastructure plc Annual report and accounts 2023 31
Our portfolio
191
219 3
Total
cost
Closing
value
Distributions
and hedging
Performance (£m)
SRL is the largest temporary traffic
equipment rental company in the
UK. Its market-leading reputation is
underpinned by its network of 30 depots
nationwide, providing a 24/7, 365 days
a year service on which customers rely
for quick deployment and reactive
maintenance work.
Read more online
Our portfolio continued
32
Performance (£m)
Valorem is a leading independent European
renewable energy developer and power
producing company. It is one of the largest
independent onshore wind developers
in France, having developed over 1GW of
capacity over the last15 years. Since 3iN’s
investment, the business has focused
on developing its owned asset base,
and diversified into solar and hydro and
internationally into Finland and Greece.
Read more online
81
188 22
Total
cost
Closing
value
Distributions
and hedging
Our portfolio continued
3i Infrastructure plc Annual report and accounts 2023 33
Our portfolio
Performance (£m)
DNS:NET is an independent
telecommunications provider based in
Berlin, where it has an existing FTTC
network. In 2019 it moved its focus to rolling
out a FTTH network in the vicinity of Berlin,
Brandenburg and Saxony Anhalt. These are
all areas with limited high-speed broadband
connectivity at present. It is the largest
alternative broadband service provider in its
home regionand a well-known local brand.
Read more online
205
179 6
Total
cost
Closing
value
Distributions
and hedging
Our portfolio continued
34
Performance (£m)
Attero is the leading Dutch operator in
the waste treatment market. It owns two
of the largest and most efficient energy-
from-waste (‘EfW’) plants in Western
Europe, anaerobic digestion facilities,
composting facilities and landfills. It also
operates a full range of recycling solutions,
including a polymer recycling plant, which
enables it to recycle up to 25,000 tonnes
a year of used plastic packaging into high
quality regranulate.
Read more online
88
144 53
Total
cost
Closing
value
Distributions
and hedging
Our portfolio continued
3i Infrastructure plc Annual report and accounts 2023 35
Our portfolio
Portfolio review
The portfolio is generating
strong growth momentum
supported by long-term
tailwinds. We are confident
that it will continue to
generate attractive further
investment opportunities and
is well positioned to deliver
our target returns.
The Company’s portfolio was valued
at £3,641 million at 31 March 2023
(2022: £2,873 million) and delivered a total
portfolio return in the year of £501 million,
including income and allocated foreign
exchange hedging (2022: £509 million).
Table 1 summarises the valuations and
movements in the portfolio, as well as the
return for each investment, for the year.
Table 1: Portfolio summary (31 March 2023, £m)
Portfolio assets
Directors’
valuation
31 March
2022
Investment
in the year
Divestment
in the year
Accrued
income
movement
Value
movement
Foreign
exchange
translation
Directors’
valuation
31 March
2023
Allocated
foreign
exchange
hedging
Underlying
portfolio
income in
the year
Portfolio
total return
in the year¹
TCR 279 352
2,4
(190)
3
4 86 6 537 (2) 18 108
ESVAGT 548 44
2
(87)
3
(2) 7 (25) 485 22 46 50
Infinis 332 30
5
(9)
6
2 52 – 407 – 16 68
GCX – 318
4
– 19 – (14) 323 15 18 19
Ionisos 237 – – 9 43 9 298 (7) 9 54
Tampnet 241 6
2
– – 52 (7) 292 13 6 64
Joulz 241 6
2
– – 30 10 287 (7) 6 39
Oystercatcher 230 – (12)
6
– 17 19 254 (14) 4 26
SRL 200 18
2
(1)
6
– 2 – 219 – 19 21
Valorem 144 – – – 38 6 188 (4) 4 44
DNS:NET 202 22
2,5
– – (54) 9 179 (6) 8 (43)
Attero 116 – (23)
6
– 47 4 144 (3) 1 49
Future Biogas – 28
4
– – – – 28 – – –
Economic
infrastructure
portfolio 2,770 824 (322) 32 320 17 3,641 7 155 499
Projects 103 – (104) (1) – 2 – (1) 1 2
Total portfolio
reported in the
Financial statements 2,873 824 (426) 31 320 19 3,641 6 156 501
1 This comprises the aggregate of value movement, foreign exchange translation, allocated foreign exchange hedging and underlying portfolio income
inthe year.
2 Capitalised interest totalling £95 million across the portfolio.
3 Syndication of investments in ESVAGT (£87 million) and TCR (£190 million).
4 New acquisitions of GCX (£318 million), Future Biogas (£28 million) and further stake in TCR (£338 million).
5 Follow-on investments in Infinis (£30 million) and DNS:NET (£15 million).
6 Shareholder loan/share premium repayment (non-income cash).
36
Our portfolio
Total portfolio return
TCR
ESVAGT
Infinis
GCX*
Ionisos
Tampnet
Joulz
Oystercatcher
SRL
DNS:NET
Valorem
Attero
Future Biogas*
Projects**
Chart 1: Portfolio return by asset (year to 31 March 2023)
15.1%
25.3%
10.9%
18.9%
16.4%
11.1%
(19.6)%
10.3%
0.6%
1.9%
30.5%
42.1%
6.0%
26.4%
22.8%
The total portfolio return in the year of
£501million was 15.1% (2022: £509 million,
19.8%) of the aggregate of the opening
value of the portfolio and investments
less amounts syndicated in theyear
(excluding capitalised interest), which
totalled£3,325 million.
Performance was strong across the
portfolio,driven by outperformance from
a number of portfolio companies, but
particularly TCR, Tampnet, Ionisos, Attero
and Valorem, each of which continues to
benefit from positive underlying growth
trends. The other portfolio companies
performed inline with expectations, with
theexception of DNS:NET, which continues
to face challenges with its fibrenetwork
roll out.
Chart 1 shows the portfolio returninthe
year for each asset as a percentage ofthe
aggregate of the opening value of the asset
and investmentsin, and syndication of,
the assetin the year (excluding capitalised
interest). Note thatthis measure does
nottime-weight for investments and
syndications in the year and includes
foreign exchange movements net
of hedging.
* GCX acquired in August 2022 and Future Biogas acquired in February 2023 and return not annualised.
** Divested in June 2022 and return not annualised.
Portfolio review continued
3i Infrastructure plc Annual report and accounts 2023 37
Our portfolio
Portfolio review continued
Movements in portfolio value
The movements in portfolio value were
driven principally by the delivery of planned
cash flows and other asset outperformance
as well as new and follow-on investments
and syndications made during the year.
A reconciliation of the movement in
portfolio value is shown in Chart 2 below.
The portfolio summary shown in Table 1
on page 36 details the analysis of these
movements byasset. Changes to portfolio
valuations arise due to several factors, as
shown in Table 2 onpage 41.
Infinis had a very strong year, generating
a value gain of £52 million driven by higher
forecast future power prices and price
volatility which benefitted the power
response assets in particular. Its power
response assets experienced higher running
hours driven by the UK’s power generation
capacity constraints.
Infinis made significant progress in
further establishing a 1.5GW solar energy
generation and battery storage pipeline
across various stages of development.
The portfolio generated a value gain of
£320 million in the year, alongside income
of£156 million.
Portfolio activity
Our renewable energy generating companies,
Infinis, Valorem and Attero, performed
strongly in the year and have made
substantial progress in developing their
pipelines of new projects towards and into
operation. This is reflected in an overall
increase in installed capacity from 898MW
to 979MW over the year, as shown in the
Sustainability report.
In March 2023, we invested a further
£30 million of equity to support the
development of this pipeline, with the
remainder of the funding coming from
the company’s own cash generation
anddebt facilities.
Valorem materially outperformed the prior
year despite the French government’s 90%
windfall tax. Its closed capacity now totals
778MW of wind and solar projects including
new projects in France and Finland and
its first project in Greece. It has a healthy
5.7GW pipeline of wind and solar projects
inEurope as well as long-term feed-in
tariffs unaffected by the windfall tax.
The market fundamentals in France and
the EU for renewable developers remains
strong, particularly due to recent availability
issues experienced by the French nuclear
power sector and France’s renewables
development targets. French solar and wind
auction tariffs increased by c.25% in 2022
versus 2021.
Chart 2: Reconciliation of the movement in portfolio value (year to 31 March 2023, £m)
4,000
3,000
2,000
1,000
0
Value
movement
Accrued
income
movement
Exchange
movement
2
Opening
portfolio value at
1 April 2022
Closing
portfolio value at
31 March 2023
Divestment/
capital repaid
Investment
1
19
3,641
2,873
(426)
824
320
31
1 Includes capitalised interest.
2 Excludes movement in the foreign exchange hedging programme (see Chart 8 in the Financial review).
38
Our portfolio
Attero also benefitted from high power
prices although its hedging strategy
insulates it from short-term price volatility.
Despite waste supply volumes being
slightly lower than expectations due to
lower economic activity, the company
outperformed the prior year due to
the higher electricity price outlook
andgoodavailability at its EfW plants.
The £47 million value increase in Attero
is due to several waste supply contracts
recontracted at increased gate fees and
forlonger periods, as well as the higher
longer-term electricity price outlook.
Preparations for a potential divestment
ofAttero are at an advanced stage.
Any saleproceeds are expected to
contribute towards partially repaying
drawings on the Company’s RCF.
TCR materially outperformed expectations,
increasing in value by £86 million, due to
a number of significant contract wins and
extensions, higher utilisation rates of the
fleet, and stronger than expected repair
andmaintenance activity.
This outperformance reflects a sustained
rebound of air traffic levels as well as
an increased post-pandemic demand
for its full-service rental model globally.
TCR added over 35 airports to its portfolio
ambitions, representing an incremental
step up in earnings.
The pipeline for further new SOVs in the
North Sea and the rapidly accelerating
US wind market is strong and we expect
anumber of tenders will take place over
thenext 12 months.
ESVAGT’s ERRV segment continued to
seegood momentum due to the improved
oil and gas markets, attractive supply/
demand dynamics and an increased
focuson security of supply in Europe.
Joulz performed ahead of expectations
due to strong growth in the order book,
including for its large integrated Energy
Transition Solutions. The business made
considerable progress diversifying its
supplier base to mitigate the risk of delays
previously experienced in completing
newinstallations, primarily due to key
hardware suppliers struggling to keep
upwith rising demand.
The company’s long-term contracts
aredirectly linked to inflation, andthis
provided good protection forhigher
operating and capital costs.
In December 2022, Joulz successfully
raised debt financing, which was utilised
to replenish its revolving credit facility,
supporting the funding of further
growth opportunities. As part of a
in 2022 and its off-lease rate has reverted
topre-Covid-19 levels.
In November 2022, TCR completed the
bolt-on acquisition of Adaptalift, an
Australian-headquartered ground service
equipment lessor, adding incremental
contracted EBITDA at an attractive
valuation with strong expected synergies.
TCR successfully raised additional debt
from existing and new lenders to support
itsnext growth phase.
ESVAGT and Joulz, which indirectly
contribute to the energy transition, have
performed well and are benefitting from
thetailwinds in this sector.
ESVAGT had a good year, benefitting
from contract rates in excess of our
expectations and high utilisation levels.
Inflation is generally positive for ESVAGT
due to its index-linked contracts, although
cost inflation, in particular fuel costs,
acceleratedinthe year.
In January 2023, ESVAGT’s joint venture in
the United States, CREST, won its first SOV
contract inthe US offshore wind market.
The 15-year SOV contract is with Siemens
Gamesa, servicing the Coastal Virginia
Offshore Windfarm, the largest offshore
wind projectin the US (2.6GW), and was an
important milestone in ESVAGT’s growth
planned transition, a new CEO joined
thebusinessinMarch 2023.
Our communications infrastructure
investments, Tampnet, GCX and DNS:NET,
are taking advantage of the acceleration
indigitalisation trends.
Tampnet performed well in the year,
increasing in value by £52 million,
driven by higher forecast revenues due
to the signing of new private network
contracts, identification of new potential
growth opportunities and extended life
assumptions resulting from higher energy
prices and the increased focus on security
of energy supply by governments in Europe
and the US. It exceeded budgeted revenue
and EBITDA targets due to increased
offshore activity on the back of improved
sentiment in the energy markets and
stronger demand for bandwidth upgrades.
Portfolio review continued
3i Infrastructure plc Annual report and accounts 2023 39
Our portfolio
Tampnet is progressing a number of new
fibre projects in the North Sea and the
Gulf of Mexico and signed a number of
important new contracts in both regions.
The company is also in discussions with
several carbon capture and storage projects
in the North Sea which are located within
Tampnet’s existing network. The digitisation
proposition offered by Tampnet (combining
low-latency connectivity with services such
as Private Networks) is continuing to prove
popular with customers, and we expect
to see an acceleration of the short-term
penetration of digitisation projects.
GCX had a good year with strong growth
in lease revenues, although indefeasible
right of use sales are behind schedule.
The business secured a significant managed
services contract during the year and
is experiencing increasing demand for
bandwidth capacity across its network.
The business is evaluating a number of
opportunities to expand its subsea network
as well as the development of terrestrial
assets. GCX and Tampnet announced
a strategically important partnership
which supports the increasing network
connectivity demands of the data centre
market in the Nordics.
DNS:NET continues to experience delays
in the roll out of its fibre network in the
Berlin area and specifically in connecting
and activating customers. We have updated
the forecasts to reflect more conservative
roll-out assumptions, which has led to
a£54 million value decrease in the year.
Operational performance was
belowexpectations as delays to connect
and activate new homes persist, which
we see as an industry-wide challenge.
The delivery of a network built by a local
authority to be transferred to DNS:NET
under concession contract isalso running
behind schedule.
During the year, we invested a further
£15 million to support the business’s roll
out and have worked with the company to
optimise its business model and strengthen
the management team in order to minimise
and recover the roll out delays. A new
CFO was appointed in January 2023. He is
overseeing the implementation of a new
ERP system and other initiatives. Hiring to
further strengthen the management team
is also underway, aimed at providing the
bandwidth and experience to accelerate
the network roll out.
Ionisos delivered meaningful growth
against prior year due to strong volume
growth, notably in the medical and
pharmaceutical segments, resulting
ina£43 million gain in value.
In order to meet growing demand,
Ionisos progressed various expansion
opportunities, including extending
existing sterilisation facilities, acquiring
the Daniken E-Beam plant in Switzerland,
and a new greenfield EO plant in Kleve,
Germany, which became operational in
January 2023. In a capacity constrained
market, these initiatives will increase
Ionisos’s ability to address and meet strong
underlying demand growth for sterilisation,
whilst diversifying its technology mix
and expanding the geographic footprint
from which it will service its medical and
pharmaceutical client base.
Oystercatcher performed well in the year.
ADS’s customer activity levels were high
and all available capacity was let. This was
despite a backdrop of a backwardation
market structure for petroleum products.
Our positive medium-term outlook
remains unchanged given the terminal is
the premier gasoline blending terminal in
Singapore and the wider region.
A strategic transition to some green fuel
storage is progressing well. In 2022, a first
agreement was signed with a customer
to start storing and blending sustainable
aviation fuel (‘SAF’) at ADS. The project to
convert existing storage to accommodate
SAF is ontrack and is expected to be
operational in mid-2023. We believe this
gives ADS a first mover advantage forSAF-
related business in Singapore.
SRL performed broadly in line with plan
during the financial year. Whilst higher than
in the previous year, activity levels were
slightly lower than expected due to delays
in capital expenditure programmes in the
public sector and construction sectors
resulting in fewer days on hire than forecast.
The Investment Manager is working closely
with management to professionalise
account management processes and
optimise fleetutilisation and build.
Portfolio review continued
40
Our portfolio
Table 2: Components of value movement (year to 31 March 2023, £m)
Value movement component Value movement in the year Description
Planned growth 175 Net value movement resulting from the passage of time, consistent with the
discount rate and cash flow assumptions at the beginning of the year less
distributions received and capitalised interest in the year.
Other asset performance 99 Net value movement arising from actual performance in the year and changes
to future cash flow projections, including financing assumptions and changes to
regulatory assumptions.
Discount rate movement (6) Value movement relating to changes in the discount rate applied to the
portfoliocash flows.
Macroeconomic assumptions 52 Value movement relating to changes to macroeconomic out-turn or
assumptions, eg. power prices, inflation, interest rates and taxation
rates. Thisincludes changes to regulatory returns that are directly
linkedtomacroeconomic variables.
Total value movement before exchange 320
Foreign exchange retranslation 19 Movement in value due to currency translation to year-end date.
Total value movement 339
Summary of portfolio
valuation methodology
Investment valuations are calculated at
thehalf-year and at the financial year end by
the Investment Manager and then reviewed
by the Board. Investments are reported at
the Directors’ estimate of fair value at the
relevant reporting date.
The valuation principles used are based
on International Private Equity and Venture
Capital (‘IPEV’) valuation guidelines, generally
using a discounted cash flow (‘DCF’)
methodology (except where a market quote
is available), which the Investment Manager
considers to be the most appropriate
valuation methodology for unquoted
infrastructure equity investments.
Where the DCF methodology is used,
the resulting valuation is checked against
other valuation benchmarks relevant
to the particular investment, including,
for example:
• earnings multiples;
• recent transactions; and
• quoted market comparables.
In determining a DCF valuation, we
consider and reflect changes to the two
principal inputs, being forecast cash flows
from theinvestment and discount rates.
We consider both the macroeconomic
environment and investment-specific
valuedrivers when deriving a balanced
base case of cash flows and selecting
anappropriate discount rate.
Inflation in the UK and Europe has risen
sharply which has put pressure onsupply
chain and employee costs.
The portfolio is positively correlated
to inflation, but the ability to pass cost
inflation to customers varies by portfolio
company sowe take a granular approach
tomodellingthe effects of inflation.
Higher longer-term power prices have
positively affected the valuation of our energy
generating portfolio companies, although
the majority of our power price exposure
washedged in the short to medium term.
Future power price projections are taken
from independent forecasters and changes in
these assumptions will affect the future value
of these investments. Recently introduced
taxes on renewable electricity generators
vary in their applicability and we have
considered their impact on each company
individually, based on their circumstances.
Portfolio review continued
3i Infrastructure plc Annual report and accounts 2023 41
Our portfolio
TCR operates in the aviation sector, which has
been severely affected by travel restrictions
over the past three years.
The value of TCR assumes a full recovery
in air traffic to pre-Covid-19 levels in 2024,
consistent with the assumptions made
intheprior year.
As a ‘through-the-cycle’ investor with a
strong balance sheet, we consider valuations
in the context of the longer-term value of the
investments. This includes consideration of
climate change risk and stranded asset risk.
Factors considered include physical risk,
litigation risk linked to climate change and
transition risk (for example, assumptions on
the timing and extent of decommissioning
ofNorth Sea oil fields, which affects
Tampnet and ESVAGT).
We take a granular approach to these
risks,for example each relevant offshore
oiland gas field has been assessed
individually toforecast the market over
thelong term and a low terminal value
has been assumedat the end of the
forecast period.
In the case of stranded asset risk,
we consider long-term threats that
may impactvalue materially over
Portfolio review continued
13.8
12.4
12.5
12.0
10.2
9.9
10.0
10.5
11.8
13.2
12.6
11.3
10.8
10.8
Chart 3: Portfolio weighted average discount rate (31 March, %)
Mar
10
Mar
09
Mar
08
Mar
11
Mar
12
Mar
13
Mar
14
Mar
15
Mar
16
Mar
17
Mar
18
Mar
19
Mar
20
Mar
21
Mar
23
Mar
22
10.9
11.3
13.2
10.0
ourinvestment horizon, for example,
technological evolution, climate
change,orsocietal change.
For ESVAGT, which operates ERRVs in the
North Sea servicing sectors, including the
oil and gas market, we do not assume any
new vessels or replacement vessels in our
valuation for that segment of the business.
A number of our portfolio companies
are set to benefit from these long-term
megatrends and, in the base case for each
of our valuations, we take a balanced view
of potential factors that we estimate are
as likely to result in underperformance
as outperformance.
Discount rate
Chart 3 shows the movement in the
weighted average discount rate applied
to the portfolio at the end of each year
since the Company’s inception and the
position as at March 2023. The weighted
average discount rate increased over the
course of FY23 due to the evolution of
the portfolio mix following the realisation
of the European Projects portfolio and
the completion of theGCX and Future
Biogas acquisitions.
The range of discount rates used in
individual valuations at 31 March 2023 is
also shown, which is broadly consistent
withthe prior year.
During the year, we witnessed an increase
in risk-free rates across Europe as central
banks took action in response to higher
inflation. Given the significant risk premium
included in our long-term discount rates
and the continued appetite for high-quality
infrastructure businesses, rising risk-free
rates did not impact the discount rates
used to value our portfolio companies
at31 March 2023.
42
Our portfolio
26-30%<25% 31-35% 36-40%
Net debt/Enterprise
value (‘LTV’)
Chart 4: Portfolio company leverage* (3iN value at 31 March 2023, £m)
1,200
1,000
800
600
400
200
0
Average LTV
1
33%
1 LTV is calculated as the aggregate Net Debt to Enterprise Value ratio of the individual portfolio companies.
* This analysis excludes Future Biogas, which was acquired in February 2023, and Valorem, which is financed at the
project level. Project financing typically employs higher levels of gearing.
Portfolio review continued
Investment track record
As shown in Chart 5, since its launch in 2007,
3i Infrastructure has built a portfolio that
has provided:
• significant income, supporting the
delivery of a progressive annual dividend;
• consistent capital growth; and
• strong capital profits from realisations.
These have contributed to a 19%
annualisedasset Internal Rate of Return
(‘IRR’) since the Company’s inception.
The European portfolio has generated
strong returns, in line with, or in many
casesahead of, expectations.
Portfolio company debt
Our portfolio companies are funded by long-
term senior-secured debt alongside equity
from the Company and other shareholders.
Valorem also uses project financing in its
portfolio of renewable energy projects.
There were no mezzanine or junior debt
structures within our portfolio at 31 March
2023 (2022: none).
In recent years, the Investment Manager
proactively refinanced facilities across the
portfolio, extending the term of the debt
and securing low fixed rates or hedged
interest rates.
These returns were underpinned by
substantial cash generation in the form
ofincome or capital profits.
The value created through this robust
investment performance has been
crystallised in a number of instances
throughwell-managed realisations,
shownas‘Realised assets’ in Chart 5.
While the Company is structured to hold
investments over the long term, it has
sold assets where compelling offers will
generate additional shareholder value.
Portfolio asset returns in Chart 5 include
an allocation of foreign exchange hedging
where applicable.
When considering the appropriate
quantum of debt for a portfolio company,
we typically look for an investment grade
level of risk. Some portfolio companies
have an investment grade credit rating
from a credit rating agency. Chart 4 below
shows the average loan-to-value (‘LTV’) ratio
across the portfolio as well as the portfolio
value analysed across a range of loan-to-
value levels. The average loan-to-value
ratio is 33% (2022: 34%) with all portfolio
companies below a ratio of 40% at 31 March
2023 (2022: below 45%).
3i Infrastructure plc Annual report and accounts 2023 43
Our portfolio
Portfolio review continued
Chart 5: Portfolio asset returns throughout holding period (since inception, £m)
Existing portfolio (Total return) Realised assets (Total return)
Money multiple Money multiple IRR
1.5x
1.7x
1.9x
1.6x
1.6x
1.7x
3.2x
0.9x
1.2x
2.6x
2.2x
1.0x
1.0x
1.7x
5.9x
4.5x
3.3x
3.3x
1.9x
1.2x
0.6x
27%
40%
31%
16%
41%
22%
8%
(6%)
Total cost Value including accrued income
Proceeds on disposals/capital returns Cash income
Portfolio asset returns include allocation of foreign
exchange hedging where applicable. Dates of asset
realisations refer to completion dates.
1 Others includes junior debt portfolio, T2C and Novera.
485
407 88 99
537 244
292
13
2 24
298 10
287
254 47 146
179 6
219 12
191
81
88
205
139
186
195
187
304
188
22
144 28
352
329
265
21431
63
38332
195
173
151
289
138
766 106
154
114391
24145
446
410
103
ESVAGT
Infinis
TCR
Tampnet
Ionisos
Joulz
Oystercatcher
DNS:NET
SRL
Valorem
Attero
WIG
(realised December 2019)
Elenia
(realised February 2018)
XLT
(realised March 2019)
AWG
(realised February 2018)
Eversholt
(realised April 2015)
Projects
(realised assets)
Others
1
28
28
25
Future Biogas
318
323
GCX
108
61
India Fund
Asset IRR to 31 March 2023
19%
Since inception
Total cost Value including accrued income
Proceeds on disposals/capital returns Cash income
Portfolio asset returns include allocation of foreign
exchange hedging where applicable. Dates of asset
realisations refer to completion dates.
1 Others includes junior debt portfolio, T2C and Novera.
485
407 88 99
537 244
292
13
2 24
298 10
287
254 47 146
179 6
219 12
191
81
88
205
139
186
195
187
304
188
22
144 28
352
329
265
21431
63
38332
195
173
151
289
138
766 106
154
114391
24145
446
410
103
ESVAGT
Infinis
TCR
Tampnet
Ionisos
Joulz
Oystercatcher
DNS:NET
SRL
Valorem
Attero
WIG
(realised December 2019)
Elenia
(realised February 2018)
XLT
(realised March 2019)
AWG
(realised February 2018)
Eversholt
(realised April 2015)
Projects
(realised assets)
Others
1
28
28
25
Future Biogas
318
323
GCX
108
61
India Fund
44
Our portfolio
Sustainability
report
3i Infrastructure plc Annual report and accounts 2023 45453i Infrastructure plc Annual report and accounts 2023
In FY23 the Investment Manager created
a dedicated ESG team with specialist
sustainability resource. This has improved
the rigour of our assessment of sustainability
factors in our investment process and
throughout the holding period, enhanced
the quality of our engagement with our
portfolio companies on sustainability issues,
and accelerated the implementation of
arange of sustainability initiatives across
ourinvestment team and portfolio.
This new team also provides the Company
with updates on new regulations and
emerging themes around sustainability.
As owners of infrastructure businesses
withmajority or significant minority
holdingsand representation on their
boards, we recognise our ability to
influenceour portfolio companies to
ensurethey act responsibly. We operate
with high standards ofstewardship.
The Company made a step change
initsapproach to sustainability in FY23
withadedicated team now in place.
We see a strong link between companies
with good ESG performance and those that
can achieve long-term sustainable business
growth and we believe that a responsible
approach to investment adds value to
our portfolio.
We invest selectively in a small number of
businesses every year, giving consideration
to the sustainability aspects of investee
companies’ activities, opportunities and
challenges before deploying capital.
For example, the decision to invest in
FutureBiogas considered the UK net
zerostrategy, biomethane demand,
andlinks to regenerative farming.
Responsible investing
The Investment Manager has been
a signatory to the UN Principles for
Responsible Investment since 2011.
Responsibility starts when we first
consider investing in a company.
We screen investment opportunities
against 3i’s Responsible Investment
policy. The policy sets out the type
of businesses in which the Company
will not invest, as well as minimum
standards in relation to ESG matters
which we expect new portfolio
companies to either meet or commit to
meeting over areasonable time period.
The Responsible Investment policy
applies to all investments, irrespective
oftheir country or sector.
The Company embeds an assessment
ofESG risks and opportunities at all
stages of the investment, portfolio
management and value creation
processes. We seek to identify material
ESG risks and opportunities at the
point we invest, and we put in place
appropriate and robust plans to
mitigate the risks or capitalise on the
opportunities during ownership and exit.
The Board is responsible for overseeing
the Company’s Sustainability strategy
with day-to-day accountability resting
with the Investment Manager.
The Board has reviewed the Responsible
Investment and other sustainability
policies of the Investment Manager
andis satisfied that the adoption of
these policies meets the Company’s
objectives in this area.
To read the Responsible Investment
policy and for more information
onthe Investment Manager’s other
sustainability policies, please refer
tothe3i Group website:
ww w.3i.com/sustai nability
Sustainability report
46
Sustainability report
Fully embed
sustainability
objectives in the
organisation
Develop
a Sustainability
strategy
sponsored by
the CEO
Measure
GHG emissions
and develop
decarbonisation
roadmap
Identify
appropriate
senior individuals
to lead on
ESG topics
Implement
full suite
of governance
policies
The ESG review focused on ESG-related
levers that can positively influence our
ability to realise revenue opportunities and
growth, cost optimisation, and value at exit.
We also consider reputational and specific
ESG risks for each company including
health and safety, climate change and
cybersecurity during our ownership.
We see a number of common sustainability-
related themes and challenges faced by
ourportfolio. We facilitate the sharing of
best practices, innovation and solutions
across our portfolio through ad-hoc
connections and through workshops.
We proactively engage with
ourportfolio to create value
The Company seeks to leverage value
creation opportunities presented by
sustainability considerations, and does
not view sustainability in isolation from
investment performance.
The ESG performance of the portfolio
isdiscussed periodically by the
InvestmentManager and the Board.
We held a dedicated annual ESG review
of the portfolio, which provided a
portfolio-levelview ofESG performance,
emergingtrends, prioritiesand actions.
We remain focused
on the climateagenda
Climate change continues to be a topic
of increasing urgency for government,
regulators and other stakeholders and
willbekey to protecting and creating
valueinour portfolio.
Therefore, this year, our focus has
remainedon GHG emissions and climate-
related risks and opportunities.
Sustainability pathway
We use our influence to encourage our portfolio companies to mature their approach to ESG under our ownership,
and we support them viaregular interactions that leverage knowledge and best practices across the portfolio.
Sustainability report continued
69%
of the portfolio have dedicated ESG resources
62%
have a Sustainability strategy
38%
produce a Sustainability report
92%
report on Scope 1 and 2 GHG emissions
3i Infrastructure plc Annual report and accounts 2023 47
Sustainability report
Sustainability report continued
The Company is embarking on
itsdecarbonisation journey
We supported our portfolio companies
to implement a GHG emissions inventory
covering Scopes 1 and 2. Next year, we
plan to encourage our portfolio companies
to obtain third-party assurance for their
carbon footprint and to measure Scope 3
GHG emissions.
We asked our portfolio companies to
identify GHG emissions reduction initiatives
andtodevelop a five-year decarbonisation
plan for Scope 1 and 2 GHG emissions.
With support from a specialist consultancy,
we undertook an initial assessment of
each portfolio company’s GHG emissions
and decarbonisation pathway in relation
to the Science Based Target initiative
(‘SBTi’). This assessment highlighted
which companies are positioned to set
science based targets (‘SBTs’) for either
the near or long term, and the extent
of further work required to apply for
appropriate accreditation.
Interactive workshops were held to train
the Investment Manager’s team on the
SBTi framework, giving them confidence
toengage with portfolio companies
on setting decarbonisation strategies
and SBTs.
Similar training sessions were also
conducted with a subset of portfolio
companies this year.
Developing our approach
to climate-related risks
andopportunities
The assessment of both the risk and
financial impact of climate change
over the short, medium and long term,
promotes more informed investment
andstrategic decisions.
Following an initial, top-down climate
scenario analysis, the Investment Manager
has engaged a specialist consultancy to
help it design and carry out a second
phase of this work. The objective in this
second phase will be to perform a more
detailed, bottom-up analysis on a number
of our portfolio companies to inform our
engagement with them on climate-related
factors. As best practice and modelling
tools evolve, the work in this area will be
iterative in nature and develop over time.
Please refer to our voluntary climate-related
disclosures for more information.
Key actions taken by the Investment Manager this year
Category Outcome
Governance
andresources
The new ESG team supported each portfolio company on its sustainability
journey and consideration of the Company’s objectives at portfolio company
level. The team also led the ESG reporting for the Company and delivered the
annual ESG review of the portfolio.
Portfolio data
collection and
management
The Investment Manager improved the quality of the sustainability and
GHGemissions data collected from the portfolio by refining the ESG
questionnaires completed by portfolio companies
The Investment Managerselected a new software tool which will be used
to gather, organise and analyse ESGdata from the portfolio with better
consistency. This tool will be rolled out duringthenext financial year.
GHG
emissions
For the second year, the Investment Manager worked with our portfolio
companies tomeasure, refine and report Scope 1 and Scope 2 GHG emissions.
We made progress in the collection of Scope 3 datafrom the portfolio.
We worked with a third-party specialist firm toreview data collection
governance and controls at each portfolio company and suggest areas
forimprovement.
Transition
plans and
targets
We worked with portfolio companies to consider and implement opportunities
to reduce their Scope 1 and 2 GHG emissions over time, where possible
developing decarbonisation plans.
With support from a consultancy, we assessed the ability ofportfolio companies
to set near-term targets aligned with the objectives of the Paris Agreement.
On 5 April 2023, the Investment Manager wrote to the SBTi to indicate its
commitment to set up science-based targets. That commitment will require the
Company’s portfolio companies to set SBTs over time.
Climate
scenario
analysis
This year, the Investment Manager carried out its initial, top-down scenario
analysisto model the impact of climate change on our portfolio companies,
in line with TCFD recommendations. It is currently refining and improving
its approach to scenario analysis to better understand climate physical
andtransition risks in our portfolio.
48
Sustainability report
Sustainability report continued
Sustainability in action
The Company has invested in several
businesses that support the transition
towards a low-carbon economy in
different ways.
The Company has invested in businesses
which contribute directly to the energy
transition through the production of
renewable and low-carbon energy.
More recently this includes Joulz, which has
broadened its service offering to include
rooftop solar development and operations.
The total renewable energy installed
capacity across these businesses is now
979MW, enough to power almost two-thirds
of the households in London.
The chart below shows the growth in our
portfolio companies’renewable energy
generating capacity over the past seven
financial years.
We invest in businesses that can beagents
of change within their own industries by
addressing the decarbonisation challenges
of their customers through innovation and
the provision of low and zero-emission
infrastructure assets.
For example, in the maritime sector,
ESVAGT is pioneering the transition
to green support operation vessels
in partnership with renewable
energycompany Ørsted.
We also support our businesses in
transitioning towards more resilient
andfuture-proof business models, for
example, diversifying from oil and gas
and building tomorrow’s low-carbon
infrastructure. For example, Tampnet
is increasingly serving offshore wind
customers and ADS is moving intostorage
and blending ofsustainableaviation fuel.
Contributing to
a low-carbon future
Valorem has grown its operational
renewable assets base from 157MW
at acquisition in 2016 to 508MW, with
a further 270MW under construction.
This includes onshore wind, solar and
hydro-electric generation. The business
is also making investments into green
hydrogen, battery storage, and
floatingoffshore wind.
Valorem Infinis Attero Joulz
Mar 19Mar 18Mar 17 Mar 20 Mar 21 Mar 22 Mar 23
Renewable energy installed capacity (at 31 March, MW)
157
287
177
304
233
177
483
508
22
238
272
177
177
216
294
289
177
387
350
287
1
,000
900
800
700
600
500
400
300
200
100
0
3i Infrastructure plc Annual report and accounts 2023 49
Sustainability report
Its temporary traffic solutions enable
greater segregation and control of
traffic flows, in turn improving safety
andreducing congestion around
roadworks. On a congested junction,
SRL’s system reduces average journey
times by up to 22%. This improves
satisfaction for road users and
local communities, enabling more
sustainable cities.
Sustainability report continued
Sustainability in action continued
A number of the businesses we invest in
contribute to a healthy and safe society
through the provision of safe services
and, for one business, Ionisos, through
direct support of the medical and
pharmaceutical industries.
For most of our businesses, safety is key
totheir social licence to operate. Many of
our businesses facilitate safe operations
for their customers through the provision
of appropriate equipment and services.
Through our influence on the portfolio
company boards, we support all of
ourbusinesses in upholding high health
andsafety standards in their operations
to protect their employees, contractors
and customers.
Supporting safety
and good health
Making the sea a safe place to work has
been ESVAGT’s mission from day one.
The business has a strong track record
of health and safety supported by a
comprehensive programme of initiatives
for employees and customers. In 2022,
thebusiness experienced zero lost time
incidents – asignificant achievement.
The business supports public health
by providing essential services to the
medical and pharmaceutical industries
through cold sterilisation. This ensures
medical devices are safe for all touse.
In 2022, 65% of its revenues were derived
from customers in these industries.
50
Sustainability report
Sustainability report continued
Sustainability in action continued
Our businesses often support economic
growth where they operate, for example
through job creation and increased
investment. In 2022, our portfolio
companies collectively employed over
5,400 people.
We expect our businesses to have
high governance standards in place
with policies that protect employees,
promoting safety, fairness and appropriate
working conditions.
Many of our portfolio companies have
identified being an employer of choice as
a key pillar of their sustainability strategies,
promoting an inclusive culture and
engagement with local communities.
We facilitate the sharing of best practices
and support our businesses in pursuing
continuous improvements to become
more inclusive.
Fostering
inclusive growth
The business is a mission-driven company
that aims to support local and inclusive
economic growth and job creation,
with a particular focus on the long-term
unemployed with a certain number of
on-site working hours reserved for them
each year. In 2022, 12% of working hours
on Valorem’s solar PV sites were reserved
forthe long-term unemployed.
The company has launched a
“WomeninTech” programme
dedicatedto attracting female
employees, and has public targets
toimprove the representation of
femaleemployees across its business
andin management by 2025.
TCR operates across 180 airports in over
20 countries. Its workforce comprises
over 56 nationalities and speaks over 48
languages. English has been adopted as
TCR’s working language.
3i Infrastructure plc Annual report and accounts 2023 51
Sustainability report
Sustainability report continued
2023 voluntary climate-related disclosures
This section of the Annual report sets out
how we incorporate climate-related risks and
opportunities into our governance, strategy,
risk management, metrics andtargets, and
isguided by, but is not intended to comply
with, the recommendations of the TCFD.
The Company continues to make good
progress in its voluntary climate-related
financial disclosures as recommended by
theTCFD. For a listed investment company,
these are not required by the UK Listing
Rules, but will be a disclosure responsibility of
the Investment Manager.
We have cross-referenced the relevant
sections under each of the headings below.
For an investment company, the majority
of the disclosures relate to the Company’s
portfolio of investments rather than to
theCompany itself.
We expect that the Company’s reporting
ofTCFD disclosures will continue to evolve
over time, consistent with the requirement
forthe Investment Manager to publish
a TCFD product report in respect of the
Company by June 2024.
The following should be read in conjunction
with the restof the Annual report and
accounts and3iGroup’s disclosures under
the TCFD framework, available in their
annual reports.
Governance
The management of climate-related risks
and opportunities is embedded throughout
the Company’s processes and operations,
including investment and portfolio
management activities, with clear oversight
by the Board and delegated authority to
the Investment Manager. In determining the
Company’s strategy and approach to climate
change, both the Board and the Managing
Partners, assisted by a number of committees
and the ESG team, take into account the laws
and regulations of the countries in which
the Company and its portfolio companies
operate, as well as the perspectives of the
different stakeholders involved.
The Board’s oversight of climate-
relatedrisks and opportunities
The Board is responsible for overseeing the
Company’s overall approach to sustainability
and related policies. The Board has adopted
the Responsible Investment policy of the
Investment Manager. It delegates day-to-day
accountability for sustainability, including
climate change-related issues, tothe
Investment Manager.
The Board receives a formal update on
the Company’s performance on relevant
ESG riskmatters, including climate change,
once a year as part of the annual ESG
portfolio review. In addition, the Investment
Manager regularly updates theBoard on
the Company’s ESG approachand progress
towards agreed sustainability objectives
forthe year.
The Board discharges its responsibilities
for overseeing and monitoring policies
andprocedures and to address issues if they
arise through the Company’s Audit andRisk
Committee. The Audit and Risk Committee is
responsible for:
• overseeing and reviewing internal controls
and risk management by the Investment
Manager, including the appropriate
assessment and management of ESG
risksand opportunities in the portfolio;
• ensuring compliance with applicable
ESGlegislation and regulation; and
• reviewing and approving the
Company’s voluntary disclosures
undertheTCFD framework.
The Board receives frequent updates on ESG
matters and climate-related issues from the
Managing Partners and the ESG team as they
become relevant and material. Further detail
on risk governance can befound in the Risk
report on page 68.
The Investment Manager’s role
inassessing and managing climate-
related risks and opportunities
The Investment Committee of the
Investment Manager is responsible for
the implementation of the Responsible
Investment policy, as well as for making
decisions concerning the acquisition,
management, ongoing monitoring and
saleof investments, and for making
decisionsconcerning major investments
made by ourportfolio companies.
52
Sustainability report
Sustainability report continued
2023 voluntary climate-related disclosures continued
In evaluating new and existing investments,
the Investment Manager takes account
of certain climate-related risks and
opportunities where relevant.
This may include the impact of climate
change on the markets each company serves
and demand for its services, the climate
change resilience of each company’s assets,
and, in the case of GHG emissions-intensive
industries, the feasibility and potential cost of
GHG emissions abatement. The Investment
Manager is informed about climate-related
risks and opportunities via its regular
interactions with each portfolio company
and portfolio company board updates
throughout the year.
The 3i Group Risk Committee oversees
theInvestment Manager’s risk management
framework. The 3i Group ESG Committee
advises the Group CEO, directly through the
Group Risk Committee and the Investment
Committee, on ESG-related matters.
Participation in Industry
WorkingGroups
In July 2022, the Investment Manager joined
the Initiative Climat International (‘iCI’), a
global, practitioner-led community of over
200 private markets firms and investors
representing over US$3.2 trillion in assets
under management thatseeks to improve
the understanding andmanagement of the
risks associated withclimate change.
Since joining the group, the Investment
Manager has contributed feedback towards
the guide published by iCI and the British
Private Equity & Venture Capital Association
(‘BVCA’) on the implementation of TCFD
and the working group in relation to
developing the guidance for the calculation
of the Scope 3 GHG emissions of portfolio
companies and on the development of
decarbonisation strategies.
Please refer to the 3i Group’s TCFD
disclosures for more information on
the Investment Manager’s governance
framework and further participation in
working groups.
Strategy
Climate-related risks and opportunities
identified over the short, medium, and
long term and the impact on businesses,
strategy, and financial planning
Our investment strategy is to make a
limited number of new investments each
year, selected within our target sectors and
geographies on the basis of their compatibility
with our return targets and fit with the existing
portfolio. The Company does not operate
asustainability-driven investment strategy.
However, it seeks to identify investments that
benefit from long-term trends, many of which
link to environmental sustainability themes,
including circularity and the transition
toalow-carbon economy.
As set out earlier in this report, the Company,
through its Investment Manager, screens
all investments against the requirements of
3i Group’s Responsible Investment policy,
and embeds an assessment of ESG factors,
including climate-related factors, at all stages
of the investment and value creation journey.
We can screen out opportunities that have an
unsustainable impact on the environment and
societies in which they operate, inconsistent
with generating long-term value.
Once invested, we use our influence
at portfolio companies to encourage
the monitoring of climate-related risks
and opportunities.
We are continuously evolving our approach
as a responsible investor to improve our
assessment of climate risks and opportunities
within our investment and portfolio
management processes.
During the year, portfolio companies
continued to measure their GHG emissions
and, where possible, to develop a
decarbonisation plan.
We are now working with portfolio
companies to refine these plans and
develop science-based GHG emissions
reduction targets where feasible.
Resilience of the organisation’s
strategy, taking into consideration
different climate-related scenarios,
including a2°Cor lower scenario
As a company that invests over the
medium to long term in infrastructure
assets that, by definition, provide essential
and long-term services to society, we
recognise the importance of investing
in the energy transition and that this will
ultimately impact all the sectors in which
we invest.
Early in FY23, the Investment Manager
carried out its first climate scenario
analysis on its Private Equity portfolio and
Economic infrastructure assets, including
those owned by the Company, with the
help of an external consultant.
This high level top-down analysis
suggested that the Company’s portfolio
has limited exposure to material climate-
related risks, and also highlighted that the
Company’s portfolio is exposed to the
energy transition and thus may stand to
benefit in both an orderly and a disorderly
net zero scenario.
3i Infrastructure plc Annual report and accounts 2023 53
Sustainability report
Sustainability report continued
2023 voluntary climate-related disclosures continued
The Investment Manager has now engaged
a specialist consultancy to help design and
carry out a second phase of climate scenario
analysis, which it expects to complete
in FY24. Its objective will be to perform
a deeper dive, bottom-up analysis on a
number of the portfolio companies to inform
engagement with the portfolio on climate-
related factors. Please refer to the 3i Group’s
TCFD disclosures for more details.
We also assess the potential financial impact
of climate change on the Company through
our annual viability assessment (see pages
79 and 80). Our analysis shows that the
Company remains viable over the medium
term from a climate change stress scenario
on our portfolio.
Risk management
The Company has a comprehensive risk
governance framework and compliance
processes and procedures to ensure that all
risks, including ESG and climate-related risks,
are monitored and managed with due care
and diligence and that the Company is fully
compliant with all applicable environmental
legislation. This is further described in the
Risk report on pages 68 to 70.
Processes for identifying and
assessingclimate-related risks
The Investment Manager monitors relevant
portfolio risks, including climate-related
risks and changing consumer preferences in
response to environmental issues, notably
carbon taxes and the risk of stranded
assets due to the energy transition, through
its investment assessment and portfolio
monitoring processes. This is critical to
protecting and enhancing the value of our
assets and is at the core of our investment
management process.
The Investment Manager undertakes ESG
due diligence where appropriate, including
environmental due diligence, before making
new investments and monitors ESG risks
throughout the life of our investments.
If appropriate this includes the engagement
of specialist external firms to provide advice
on specific sectors or topics. This process is
supported by the new specialist ESG team.
During the year, the Investment Manager
further developed the ESG assessment that
is incorporated into the investment process,
to provide a more detailed view of each
company’s ESG performance.
We continue to develop our governance
and risk management framework to
ensure that sustainability-related risks and
particularly climate-related risks are treated
as a priority by our portfolio company
management teams.
Processes for managing climate-related
risks and integration into overall risk
management
The Audit and Risk Committee ensures that
the processes for managing climate-related
risks are appropriate. This includes the
development and integration of the data,
tools and capabilities needed to support
disclosure, risk identification and monitoring
for ESG-related risks, including climate-
related risks, across the whole portfolio.
This year the Investment Manager created
a dedicated ESG team with specialist
sustainability resource. This has improved the
rigour of our assessment of sustainability
factors in our investment process and
throughout the holding period, enhanced
the quality of our engagement with our
portfolio companies on sustainability issues,
and accelerated the implementation of a
range of sustainability initiatives across our
investment team and portfolio.
To improve data consistency and
comparability, the Investment Manager
selected a new software tool which will
be used to gather, organise and analyse
ESG data from the portfolio withbetter
automation and consistency. This tool, which
will improve significantly onexisting systems,
will be rolled out duringthe course of FY24.
3i Infrastructure itself is not exposed
to material environmental risks.
The Companyhas no employees.
The business of the Company is conducted
through the Investment Manager and
Jersey administrator, which do not have any
office locations dedicated to the Company.
As the regulatory environment is constantly
evolving, the Investment Manager actively
considers and monitors existing and
emerging regulatory requirements related to
climate change (eg. limits on GHG emissions
and carbon taxes) as these requirements
may affect both the Company and our
portfolio companies.
54
Sustainability report
Sustainability report continued
2023 voluntary climate-related disclosures continued
Metrics and targets
Metrics used to assess climate-related
risks and opportunities
We monitor the environmental sustainability
of each portfolio company as we would
any other critical business activity, in
an integrated and consistent manner.
The Investment Manager monitors the
environmental performance of our portfolio
companies on an annual basis, and uses
its influence as an investor to promote a
commitment in our portfolio companies
to minimise their environmental footprint,
invest in the mitigation of their environmental
impact and implement energy efficiency
measures. This is an important part not
only of our portfolio risk management
procedures, but also of the value creation
plan for each of our investments.
During the year, the Investment Manager
worked with our portfolio company
management teams to continue to measure
and report their GHG footprint.
There is a legal requirement for UK listed
companies and UK large unquoted
companies to provide certain climate-related
disclosures, including in relation to GHG
emissions. This applies to Infinis, which
provides this reporting as part of its own
annual report and accounts, which can be
found on www.infinis.com.
Our portfolio companies aim to include
objectives for reducing GHG emissions
orintensity (depending on the sector) in their
sustainability strategies. The objectives for
each portfolio company will differ depending
on the sector in whichthey operate.
On 5 April 2023, the Investment Manager
wrote to the SBTi to indicate its commitment
to set SBTs that will affect the Company.
The Investment Manager is now working to
formulate its targets, with the intention to
submit these to SBTi for validation during
the course of FY24. Its SBTs will cover its
direct Scope 1 and 2 GHG emissions and the
Scope 3 GHG emissions associated with its
portfolio, including the Company’s portfolio,
and will be formulated in line with the
guidance published by SBTi for the Private
Equity sector.
GHG emissions reporting
As noted above, the Company itself
has a very limited direct impact
on the environment and is not a
significant producer of GHG emissions.
The Company consumed less than
40 megawatt hours of energy in the
financial year and is therefore exempt from
the UK Streamlined Energy and Carbon
Reporting disclosure requirements.
We report Scope 1 and Scope 2 GHG
emissions for our portfolio companies for
the second time in this report. These are
being disclosed voluntarily in order to
provide a useful view on GHG emissions
across our portfolio.
We supported portfolio companies
with implementing GHG emissions
reporting and worked with a third-party
specialist firm during the year to review
controls and governance associated with
GHG data collection at each portfolio
company. This will allow us to improve
the consistency and quality of the
methodology and GHG emissions data
in the next financial year. Two companies
have GHG emissions certified by a
third party and we will encourage the
companies across our portfolio to do this.
Company
2021 2022
Scope 1 Scope 2 Scope 1 Scope 2
Attero 792,245 37,729
1
792,669 14,192
2
ESVAGT 99,248 331
2
120,847 272
1
Infinis 66,591 2,822
1
102,167 2,502
1
Ionisos 3,502 1,952
1
2,221 3,418
2
TCR 1,656 2,031
1
1,921 1,830
2
SRL – – 1,793 151
2
DNS:NET 418 1,880
1
530 1,916
2
Joulz 533 98
1
436 86
2
Tampnet 31 103
1
47 341
2
Oystercatcher 14 1,717
1
36 3,101
1
Valorem 13 106
2
14 77
1
GCX – – 0 701
1
1 Location-based, using grid-average GHG emissions factors.
2 Market-based, using contract-specific GHG emissions factors.
3i Infrastructure plc Annual report and accounts 2023 55
Sustainability report
Sustainability report continued
2023 voluntary climate-related disclosures continued
We will continue to work with portfolio
company management teams to refine
their data collection and calculation
methodologies over time, including the
calculation of Scope 3 GHG emissions.
The work performed to collect Scope
1 and Scope 2 GHG emissions helped
identify several potential opportunities
for reduction across the portfolio. We are
continuing to work with the portfolio
companies to consider and implement
GHG emissions reduction initiatives
over time.
GHG emissions data for calendar year
2022 have been collected for all portfolio
companies, excluding Future Biogas, which
was acquired in February 2023.
The most significant sources of Scopes 1
and 2 GHG emissions across the portfolio
relate to specific operations that support
the essential nature of the businesses in
our portfolio.
• Attero continues to be the largest
direct emitter in the portfolio, with GHG
emissions primarily resulting from its
waste processing activities and its owned
and operated landfills. Since 2019, Attero
has fully offset its GHG emissions by
the volume of emissions avoided. It is
committed to increasing its avoided
emissions to one million tonnes of CO
2
by 2025 by increasing the production of
renewable energy and recycled materials.
Attero is working to develop Carbon
Capture and Storage capabilities, which
would enable a significant reduction in
GHG emissions
• ESVAGT’s Scope 1 GHG emissions
relate to the fuels used in its vessels,
which it aims to transition to renewable
sources of fuel and electrical power.
ESVAGT has set itself an environmental
goal to become operationally carbon
neutral by 2035 and to have zero carbon
emissions by 2050. To help achieve
this, ESVAGT has several innovations in
progress. ESVAGT increasingly supports
the offshore wind industry through
its operations
• Infinis’s Scope 1 GHG emissions
primarily relate to the natural gas used
in its Power Response business, which
provides highly responsive power during
times of peak demand. This is a critical
activity to help overcome the current
gaps in the UK’s electricity supply from
renewable power sources and has
been particularly important to meet UK
energy demand following the Ukraine
conflict and resulting impact on UK
gas supplies in 2022. Infinis has begun
developing battery projects that will
allow renewable energy to be stored to
meet peaks in demand. This will lessen
reliance on natural gas to fill gaps in
supply. Infinis also generates renewable
energy through solar energy parks,
which does not contribute any GHG
emissions. In addition, Infinis’s captured
landfill methane and captured mineral
methane operations contributed to the
capture of 230,000 tonnes of methane
in FY23, equivalent to preventing the
emission of 5,700,000 tonnes of CO
2
,
more than 55 times the company’s Scope
1 GHG emissions
This year the Investment Manager
developed its GHG emissions and ESG
data collection method further. The annual
questionnaire was distributed to all the
portfolio companies, requesting data
across a broad range of emissions, health
and safety, governance, compliance and
other ESG topics for calendar year 2022.
The GHG emissions data was subsequently
reviewed by a specialist consultancy
which performed an assessment of the
governance and processes surrounding
GHG emissions data collection at each
portfolio company.
The review also provided guidance
on improving GHG emissions data
collection robustness going forward.
Improvements include third-party review
of all collected data, provision of formal
GHG emissions training for portfolio
company employees responsible for
data collection, and separation of data
preparation and data review.
Across the portfolio, seven companies
calculated Scope 3 GHG emissions
for 2022, with a range of in-house or
consultant-led methods. A range of
Scope 3 categories were considered
based on materiality for each portfolio
company. We will continue working with
the portfolio companies throughout
FY24 to expand this reporting and align
on key categories.
56
Sustainability report
Financial
review and
Risk report
3i Infrastructure plc Annual report and accounts 2023 57
Financial review
We continued to deliver
on our objectives, with
strong NAV growth and
anincreased dividend.”
James Dawes
CFO, Infrastructure
The Company delivered strong NAV growth
and continues to grow its dividend per share.
Key financial measures (year to 31 March) 2023 2022
Total return
1
£394m £404m
NAV £3,101m £2,704m
NAV per share 336.2p 303.3p
Total income £158m £133m
Total income and non-income cash £202m £143m
Portfolio asset value £3,641m £2,873m
Cash balances £5m £17m
Total liquidity
2
£404m £786m
1 IFRS Total comprehensive income for the year.
2 Includes cash balances of £5 million (2022: £17 million) and £399 million (2022: £769 million) undrawn balances
available under the Company’s total revolving credit facility of £900 million.
58
Financial review and Risk report
Financial review continued
The Company delivered another year
ofoutperformance, with the portfolio
generating strong capital growth and
income materially higher than the prior
year. The dividend was well covered by
netincome this year. The target dividend
forFY24 of 11.90 pence per share is an
increase of 6.7% over FY23.
Total net investment in the year was
£452 million, including the closing of
theinvestments in GCX, TCR and Future
Biogas, the syndication of a portion of
the investments in ESVAGT and TCR and
further investments in DNS:NET and Infinis.
The Company maintained low levels of
uninvested cash throughout the year and
actively managed its liquidity position
through its £900 million RCF facility and a
£100 million capital raise in February 2023.
Returns
Total return
The Company generated a total return
for the year of £394 million, representing
a 14.7% return on time-weighted opening
NAV and equity issued net of the prior year
final dividend (2022: £404 million, 17.2%).
This performance is significantly ahead of
the target return of 8% to 10% per annum
tobe achieved over the medium term.
Derivatives
£18m
Borrowings
£501m
Other net
liabilities
£87m
Portfolio
assets
£3,641m
Derivatives
£57m
Other
net assets
£4m
Cash
£5m
Shareholders’
equity
£3,101m
Capital
return
£320m
Portfolio
income
£156m
Costs
£109m
Total
return
£394m
Dividends
£101m
Available for
reinvestment
when realised
£293m
Other income
£2m
Foreign
exchange
£19m
Movements
in derivatives
and exchange
on EUR
borrowings
£6m
Balance sheet (as at 31 March 2023) Income statement (year to 31 March 2023)
Composition of balance sheet and income statement (year to 31 March 2023)
Portfolio return
Composition of balance sheet and income statement (year to 31 March 2023)
3i Infrastructure plc Annual report and accounts 2023 59
Financial review and Risk report
Financial review continued
This outperformance was driven by
strong performance across the portfolio,
particularly from TCR, Tampnet, Valorem,
Attero and Ionisos, partially offset by
underperformance from DNS:NET.
Changes in the valuation of the Company’s
portfolio assets are described in the
Movements inportfolio value section of
the Portfolio review. The investment cases
of our portfolio companies reflected in the
valuations at 31 March 2023 are fully funded,
with the exception of the DNS:NET fibre roll
out. Our companies continue to generate
discretionary growth opportunities that are
accretive to our investment cases.
Total income and non-income cash of
£202 million in the year was significantly
higher than last year, due to income
fromnew investments in GCX, ESVAGT,
TCR andSRL (2022: £143 million).
Non-income cash receipts reflect
distributions from underlying portfolio
companies, which would usually be income
to the Company, but which are distributed
as a repayment of investment for a variety
of reasons. Whilst non-income cash does
not form part of the total return shown in
Table 3, it is included when considering
dividend coverage.
An analysis of the elements of the total
return for the year is shown in Table 3.
Table 3: Summary total return (year to 31 March, £m)
2023 2022
Capital return (excluding exchange) 320 375
Foreign exchange movement in portfolio 19 9
Capital return (including exchange) 339 384
Movement in fair value of derivatives and exchange on EUR borrowings 6 (2)
Net capital return 345 382
Total income 158 133
Costs
1
(109) (111)
Total return 394 404
1 Includes non-portfolio related exchange gain of £2 million (2022: loss of £3 million).
3,500
3,000
2,500
2,000
1,500
Chart 6: Reconciliation of the movement in NAV (year to 31 March 2023, £m)
Opening
NAV at
1 April
2022
1
Adjusted
opening
NAV
Capital
return
Equity
raised in
February
2023
Net foreign
exchange
movement
2
Total
income
Net costs
including
management
fees
3
NAV before
distributions
Distribution to
shareholders
Closing
NAV at
31 March
2023
2,657
100
2,757
3,151
320
25
158
(109)
(50)
3,101
1 Opening NAV of £2,704 million net of final dividend of £47 million for the prior year.
2 Foreign exchange movements are described in Chart 8.
3 Includes non-portfolio related exchange gain of £2 million.
60
Financial review and Risk report
Financial review continued
Capital return
The capital return is the largest element
ofthe total return. The portfolio generated
a value gain of £320 million in the year to
31 March 2023 (2022: £375 million), as shown
in Chart 6. There was a positive contribution
across the majority of the portfolio and the
largest contributors were TCR (£86 million),
Infinis (£52 million) and Tampnet (£52 million).
The only negative contribution was
from DNS:NET (£54 million). These value
movements are described in the Portfolio
review section.
Income
The portfolio generated income of
£156 million in the year (2022: £127 million).
Of this amount, £1 million was through
dividends (2022: £24 million) and
£155 million through interest on shareholder
loans (2022: £103 million). An additional
£2 million of interest was accrued on the
vendor loan notes issued in lieu of WIG
proceeds (2022: £6 million) together with
afurther £0.5 million of interest receivable
on deposits (2022: £0.1 million).
Total income and non-income cash is shown
in Table 4.
Table 4: Total income and non-income cash
(year to 31 March, £m)
2023 2022
Total income 158 133
Non-income cash 44 10
Total 202 143
A strong income contribution from the new
investments in GCX and SRL and higher
non-income cash receipts, particularly from
Attero, offset the reduction in income from
the divestment of the European Projects
portfolio. A breakdown of portfolio income
is provided in Chart 9 on page 62, together
with an explanation of the change from
prior year.
Interest income from the portfolio was
significantly higher than prior year due to
the new investments in GCX, SRL, TCR and
ESVAGT. Dividend income was lower than
prior year due to a high level of dividend
income from Tampnet in the prior year as
liquidity preserved during the pandemic
was released.
Foreign exchange impact
The portfolio is diversified by currency
asshown in Chart 7. We aim to deliver
steady NAV growth for shareholders,
andthe foreign exchange hedging
programme helps us to do this by
reducingour exposure to fluctuations
intheforeign exchange markets.
Portfolio foreign exchange movements,
after accounting for the hedging
programme, increased the net capital
return by £25 million (2022: increased
by£7 million).
As shown in Chart 8, the reported foreign
exchange gain on investments of£19 million
(2022: £9 million) included a gain of
£13 million from the Company’s exposure
tothe US dollar, largely through Tampnet,
which was not hedged in the first half
of the year. This was accompanied by a
£6 million gain on the hedging programme
(2022: loss of £2 million). The positive
hedge benefit resulted from favourable
interest rate differentials onthe euro
hedging programme.
Chart 7: Portfolio value by currency
(
at 31 March 2023)
EUR 52%
18%
13%
9%
GBP
DKK
USD
8%NOK
Hedged assets (EUR/SGD/DKK/USD/NOK)
Unhedged assets for part of the year (USD)
Chart 8: Impact of foreign exchange (‘FX’)
movements onportfolio value
(year to 31 March 2023, £m)
FX gain before
hedging
FX gain after
hedging
25
20
15
10
5
0
6
13
12
13
3i Infrastructure plc Annual report and accounts 2023 61
Financial review and Risk report
Financial review continued
46
28
18
13
19
6
7
6
17
16
4
4
4
1
5
18
9
17 5
6
9
ESVAGT
Infinis
Tampnet
SRL
TCR
Ionisos
Joulz
Oystercatcher
Attero
Projects Portfolio
Chart 9: Breakdown of portfolio income (year to 31 March, £m)
Explanation of variances
Further investment in FY22
FY22 release of liquidity retained
Additional non-income cash of £23m
Full year of ownership
Further investment in October 2022
Interest (FY23) Interest (FY22)Dividend (FY23) Dividend (FY22)
DNS:NET
Further investment in FY22 and FY23
1
1
3
1
1
2 5
3
Valorem
GCX
8
New investment in FY23
Divestment in June 2022
62
Financial review and Risk report
Financial review continued
Costs
Management and performance fees
During the year to 31 March 2023,
the Company incurred management
fees of £47 million (2022: £43 million),
including transaction fees of £3 million
(2022: £10 million). The fees, payable to
3i plc, consist of a tiered management
fee, and a one-off transaction fee of 1.2%
payable in respect of new investments.
The management fee tiers range from 1.4%,
reducing to 1.2% for anyproportion of gross
investment valueabove £2.25 billion.
An annual performance fee is also payable
by the Company, amounting to 20% of
returns above a hurdle of 8% of the total
return. This performance fee is payable
inthree equal annual instalments, with the
second and third instalments only payable
if certain future performance conditions
are met. This hurdle was exceeded for
the year ended 31 March 2023, resulting
in a performance fee payable to 3i plc in
respect of the year ended 31 March 2023
of£45 million (2022: £54 million).
The first instalment, of £15 million, will be
paid in May 2023 along with the second
instalment of £18 million relating to the
previous year’s performance fee and
thethird instalment of £2 million relating
totheFY21 performance fee.
For a more detailed explanation of how
management and performance fees are
calculated, please refer to Note 18 of
the accounts.
Fees payable
Fees payable on investment activities
include costs for transactions that did not
reach, or have yet to reach, completion and
the reversal of costs for transactions that
have successfully reached completion and
were subsequently borne by the portfolio
company. For the year to 31 March 2023,
fees payable totalled less than £1 million
(2022: £3 million).
Other operating and finance costs
Operating expenses, comprising Directors’
fees, service provider costs and other
professional fees, totalled £3 million
intheyear (2022: £3 million).
Finance costs of £16 million (2022: £5 million)
in the year comprised arrangement and
commitment fees for the Company’s
£900 million RCF and interest on drawings.
Finance costs were higherthan in FY22 due
to an increase in interest rates and a greater
average drawn balance.
Ongoing charges ratio
The ongoing charges ratio measures
annualoperating costs, as disclosed
inTable 5 below, against the average
NAVover the reporting period.
The Company’s ongoing charges ratio
is calculated in accordance with the
Association of Investment Companies
(‘AIC’) recommended methodology and
was 1.64% for the year to 31 March 2023
(2022: 1.41%). The ongoing charges ratio
is higher in periods where new investment
levels are high and new equity is raised
or capital is returned toshareholders.
Realisation of assets reduces the
ongoingcharges ratio. The cost items
thatcontributed to the ongoing charges
ratio are shown below.
The AIC methodology does not include
transaction fees, performance fees or finance
costs. However, the AIC recommends
that the impact of performance fees on
the ongoing charges ratio is noted, where
performance fees are payable. The ratio
including the performance fee was 3.19%
(2022: 3.52%). The total return of 14.7% for
the year is after deducting this performance
fee andongoing charges.
Table 5: Ongoing charges (year to 31 March, £m)
2023 2022
Investment Manager’s fee 44.6 32.6
Auditor’s fee 0.8 0.6
Directors’ fees and expenses 0.5 0.5
Other ongoing costs 1.9 2.4
Total ongoing charges 47.7 36.1
Ongoing charges ratio 1.64% 1.41%
3i Infrastructure plc Annual report and accounts 2023 63
Financial review and Risk report
The movement from March 2022 is due
toan increase in the performance fee
payable of £45 million, following the
outperformance in the period. £26 million
of prior year performance fees were
paid during the period. The vendor loan
note of£98 million, included as an asset
within other net assets at March 2022,
wasredeemed in July 2022.
Borrowings
The Company increased the commitments
under its RCF in July 2022 from £700 million
to £900 million in order to maintain a good
level and maturity of liquidity for further
investment whilst minimising returns
dilution from holding excessive cash
balances. This is a three-year facility, with a
maturity date of November 2025. A further
one-year extension option is available under
the facility agreement. At 31 March 2023,
thetotal amount drawnwas £501 million.
An additional credit facility of £300 million
available at the beginning of this financial
year, with a maturity of less than one year,
was cancelled in July 2022 at the same
time as the commitments under the RCF
were increased.
Capital raise
In February 2023, the Company
successfully completed a capital raise,
with net proceeds of £100 million, by
way of a placing of ordinary shares in the
capital ofthe Company at 330pence per
share. The placing price represented a
discount of approximately 3.4% to the
share price immediately prior to the
announcement of the placing. A total
of 30,915,990 newordinary shares were
admitted to trading on the London Stock
Exchange main market for listed securities
on 14 February 2023. The Company
now hasatotal of922,350,000 shares in
issue,anincrease of 3.5%. Soft pre-emption
was followed where possible in allocating
the shares.
NAV per share
The total NAV per share at 31 March
2023 was 336.2 pence (2022: 303.3
pence). This reduces to 330.6 pence
(2022: 298.1pence) after the payment
of thefinal dividend of 5.575 pence
(2022: 5.225 pence). There are no
dilutivesecurities in issue.
Dividend and dividend cover
The Board has proposed a dividend
for the year of 11.15 pence per
share, or£101 million in aggregate
(2022: 10.45pence; £93 million).
This is inline with the Company’s
targetannounced in Maylast year.
Balance sheet
The NAV at 31 March 2023 was
£3,101 million (2022: £2,704 million).
The principal components of the NAV are
the portfolio assets, cash holdings, the fair
value of derivative financial instruments,
borrowings under the RCF and other
netassets and liabilities. A summary
balance sheet is shown in Table 6.
At 31 March 2023, the Company’s
netassetsafter the deduction of
theproposed final dividend were
£3,050 million (2022: £2,657 million).
Cash and other assets
Cash balances at 31 March 2023 totalled
£5 million (2022: £17 million).
Cash on deposit was managed actively
by the Investment Manager and there
are regular reviews of counterparties
andtheirlimits. Cash is principally held
inAAA-rated money market funds.
Other net assets and liabilities
predominantly comprise a performance
fee accrual of £83 million (2022: £64 million),
including amounts relating to prior
year fees.
Table 6: Summary balance sheet (at 31 March, £m)
2023 2022
Portfolio assets 3,641 2,873
Cash balances 5 17
Derivative financial instruments 39 8
Borrowings (501) (231)
Other net (liabilities) / assets (83) 37
NAV 3,101 2,704
Financial review continued
64
Financial review and Risk report
Financial review continued
When considering the coverage of the
proposed dividend, the Board assesses
the income earned from the portfolio,
interest received on cash balances and any
additional non-income cash distributions
from portfolio assets which do not follow
from a disposal of the underlying assets,
as well as the level of ongoing operational
costs incurred in the year. The Board
also takes into account any surpluses
retained from previous years, and net
capital profitsgenerated through asset
realisations,which it considers available
asdividend reserves for distribution.
Table 7 shows the calculation of
dividendcoverage and dividend
reserves.The dividend was fully
coveredfortheyear with a surplus
of£35 million (2022:no surplus).
The retained amount available for
distribution, following the payment of
thefinal dividend, the realised profit over
cost relating to the sale of the European
Projects portfolio and the performance
fee will be £814 million (2022: £794 million).
This is a substantial surplus, which is
available to support the Company’s
progressive dividend policy, particularly
should dividends not be fully covered
byincome in a future year.
A shortfall could arise, for example, due
to holding substantial uninvested cash
orthrough lower distributions being
received from portfolio companies
inordertopreserve liquidity.
Chart 10 shows that the Company
has consistently covered the dividend
overthelast five years.
Sensitivities
The sensitivity of the portfolio to key
inputsto our valuations is shown in Chart
11and described in more detail in Note 7
tothe accounts. The portfolio valuations
arepositively correlated to inflation.
The longer-term inflation assumptions
beyond two years remain consistent with
central bank targets, eg. UK CPI at 2%.
The sensitivities shown in Chart 11 on page
66 are indicative and are considered in
isolation, holding all other assumptions
constant. Timing and quantum of price
increases will vary across the portfolio
and the sensitivity may differ from that
modelled. Changing the inflation rate
assumption maynecessitate consequential
changes toother assumptions used in the
valuationof each asset.
Table 7: Dividend cover (year to 31 March, £m)
2023 2022
Total income, other income and non-income cash 202 143
Operating costs, including management fees (66) (50)
Dividends paid and proposed (101) (93)
Dividend surplus for the year 35 –
Dividend reserves brought forward from prior year 794 868
Realised gain/(loss) over cost on disposed assets 30 (20)
Performance fees (45) (54)
Dividend reserves carried forward 814 794
1
80
1
60
1
40
1
20
1
00
80
60
40
20
0
165
70
82
105
87 87
136
101
93 93
Chart 10: Dividend cover (five years to 31 March 2023, £m)
Mar 19 Mar 20 Mar 21 Mar 22 Mar 23
1 Net income is Total income, other income and non-income cash less operating costs.
Net income
1
Dividend
3i Infrastructure plc Annual report and accounts 2023 65
Financial review and Risk report
Alternative Performance
Measures (‘APMs’)
We assess our performance using a variety
of measures that are not specifically defined
under IFRS and are therefore termed APMs.
The APMs that we use may not be directly
comparable with those used by other
companies. These APMs provide additional
information of how the Company has
performed over the year and are all financial
measures of historical performance.
The APMs are consistent with those
disclosed in prior years but this year we
have added two new APMs, Total liquidity
and Portfolio debt to enterprise value.
The Directors monitor total liquidity to
assess the Company’s ability to make
further investments, the efficiency of the
balance sheet, and short-term viability.
Portfolio debt to enterprise value is
monitored to assess the underlying gearing
of portfolio companies, the consequential
risk in the forecast cashflows of those
companies and the ability of portfolio
companies to fund capital expenditure
fromtheir own resources.
• Total return on opening NAV reflects
the performance of the capital
deployed by the Company during the
year. This measure is not influenced
by movements in share price or
ordinary dividends to shareholders.
This is a common APM used by
investment companies
• The NAV per share is a measure of the
underlying asset base attributable to
each ordinary share of the Company
and is a useful comparator to the share
price. This is a common APM used
byinvestment companies
• Total income and non-income cash is
used to assess dividend coverage based
on distributions received and accrued
from the investment portfolio
• Investment value including commitments
measures the total value of shareholders’
capital deployed by the Company
• Total portfolio return percentage reflects
the performance of the portfolio assets
during the year
• Total liquidity is a measure of the
Company’s ability to make further
investments and meet its short-
term obligations
• Portfolio debt to enterprise value is a
measure of underlying indebtedness
ofthe portfolio companies
Chart 11: Portfolio sensitivities (year to 31 March 2023)
Discount rate
Inflation
(for two years)
Interest rate
£(182m) (5.0%)
£175m 4.8%
£47m 1.3%
£(52m) (1.4%)
£(296m) (8.1%)
£343m 9.4%
+1%
-1%
+1%
-1%
+1%
-1%
10
%
0 2% 4% 6%-2%-4%-6%-8%-10% 8%
Financial review continued
66
Financial review and Risk report
Financial review continued
The definition and reconciliation to IFRS of the APMs is shown below.
APM Purpose Calculation Reconciliation to IFRS
Total return on
openingNAV
A measure of the overall financial
performance of the Company.
For further information see the
KPIsection.
It is calculated as the total return of £394 million, as shown in the
Statement of comprehensive income, as a percentage of the opening
NAV of £2,704 million net of the final dividend for the previous year of
£47 million, adjusted on a time-weighted basis for the receipt of the
£100million capital raise on 14 February 2023. An adjustment to increase
the opening NAV by £13 million is required for this time weighting.
The calculation uses IFRS measures.
NAV per share A measure of the NAV per share
inthe Company.
It is calculated as the NAV divided by the total number of shares in
issueat the balance sheet date.
The calculation uses IFRS measures and is set out in Note 14
tothe accounts.
Total income and
non-incomecash
A measure of the income
and other cash receipts by
the Company which support
the payment of expenses
anddividends.
It is calculated as the total income from the underlying portfolio and
otherassets plus non-income cash being the repayment of shareholder
loans not resulting from the disposal of an underlying portfolio asset.
Total income uses the IFRS measures Investment income and
Interest receivable. The non-income cash, being the proceeds
from partial realisations of investments, are shown in the Cash
flow statement. The realisation proceeds which result from a
partial sale of an underlying portfolio asset are not included
within non-income cash.
Investment value
includingcommitments
A measure of the size of the
investment portfolio including
thevalue of further contracted
future investments committed
bythe Company.
It is calculated as the portfolio asset value plus the amount of the
contracted commitment. At 31 March 2023, the Company had no
investment commitments.
The portfolio asset value is the ‘Investments at fair value
through profit or loss’ reported under IFRS. The value of
futurecommitments is set out in Note 16 to the accounts.
Total portfolio
returnpercentage
A measure of the financial
performance of the portfolio.
It is calculated as the total portfolio return in the year of £501 million,
asshown in Table 1, as a percentage of the sum of the opening value
ofthe portfolio and investments less amounts syndicated in the year
(excluding capitalised interest) of £3,325 million.
The calculation uses capital return (including exchange),
movement in fair value of derivatives, underlying portfolio
income, opening portfolio value and investment in the year.
The reconciliation of all these items to IFRS is shown in Table 1,
including in the footnotes.
Total liquidity A measure of the Company’s
ability to make further
investments and meet its short-
term obligations.
It is calculated as the cash balance of £5 million plus the undrawn
balanceavailable under the Company’s revolving credit facility
of£399million.
The calculation uses the cash balance, which is an IFRS measure
and undrawn balances available under the Company’s revolving
credit facility, which are described in Note 11 to the accounts.
Portfolio debt to
enterprise value
A measure of underlying
indebtedness of the portfolio
companies.
It is calculated as total debt as a percentage of the enterprise value of
the portfolio companies, and does not include indebtedness of the
Company.
The calculation is a portfolio company measure and therefore
cannot be reconciled to the Company’s accounts under IFRS.
3i Infrastructure plc Annual report and accounts 2023 67
Financial review and Risk report
Risk report
Thoughtful risk management
is a cornerstone of our risk
governance framework.”
Wendy Dorman
Chair, Audit and Risk Committee
Against the backdrop of the current
geopolitical and macroeconomic
environment, the Company has continued
to perform strongly, supported by our
risk management framework and process,
which enables appropriate and responsive
decision making.
The following sections explain how we
identify and manage risks to the Company.
We outline the key risks, our assessment
of their potential impact on the Company
and our portfolio in the context of the
current environment and how we seek
tomitigate them.
Our risk review process follows a three-year
cycle, whereby once every three years we
carry out a detailed review involving each
Director independently assessing the risks
This was the second year of a three-year cycle
of risk reviews, whereby the Audit and Risk
Committee (the ‘Committee’), alongside the
Investment Manager, conducted a thorough
review to identify and consider the impact and
likelihood of the key, principal and emerging
risks facing the Company today.
facing the Company, then collating and
comparing the results, which we refer to as
the ‘blank sheet of paper exercise’. This was
performed last year as it was the first year of
the cycle.
This year, a number of risks were
reassessed to reflect developments in
the year, and the list of emerging risks
was refreshed. The Committee updated
the risk register and risk matrix as a
result of the analysis conducted during
the year, and considered the alignment
of the principal risks identified to the
Company’sstrategic objectives.
68
Approach to risk governance
The Board is ultimately responsible for
the risk management of the Company.
It seeks to achieve an appropriate balance
between mitigating risk and generating
long-term sustainable risk-adjusted returns
for shareholders. Integrity, objectivity
and accountability are embedded in the
Company’s approach to risk management.
The Board exercises oversight of the risk
framework, methodology and process
through the Committee. The risk framework
is designed to provide a structured and
consistent process for identifying, assessing
and responding to risks. The Committee
ensures that there is a consistent
approach to risk across the Company’s
strategy, business objectives, policies
and procedures.
The Company is also reliant on the risk
management frameworks of the Investment
Manager and other key service providers,
aswell as on the risk management
operationsofeach portfolio company.
The Board manages risks through
reports from the Investment Manager
and other service providers and through
representation on all portfolio companies’
boards by the Investment Manager’s
team members.
Risk report continued
There were no significant changes to the
overall approach to risk governance or its
operation in FY23, but we continued to
refine our framework for risk management
where appropriate.
Risk appetite
The Committee discusses the Company’s
risk appetite annually and this year
concluded that it remained broadly stable.
As an investment company, the Company
seeks to take investment risk. The appetite
for investment risk is described previously
in the Our business model section, and
in the Investment policy towards the end
of this document. Investments are made
subject to the Investment Manager’s
Responsible Investment policy, which
addresses an important element of our
appetite for investment risk. Given the
strong competition for new investments,
investment discipline remains a
key consideration.
The target risk-adjusted objective of
delivering 8% to 10% return per annum
over the medium term remains consistent
with our current portfolio investment cases,
including our recent new investments.
It is expected that, as the portfolio expands,
the range of expected returns in individual
investment cases may also expand to
include higher risk/return ‘value add’ cases
and lower risk/return ‘core’ investments.
We recognise that this has the potential to
result in greater volatility inreturns on an
individual asset basis.
The benefits of diversification across
sectors, countries and types of underlying
economic risk will mitigate this volatility,
and the Company has sought to build
a diverse portfolio while considering
carefully the underlying risks to which
our portfolio companies are exposed.
The Committee concluded that the risk
appetite of the Company for core-plus
infrastructure investments has not changed,
and remains appropriate for our investment
mandate and target returns. The Covid-19
pandemic provided a severe test of the
appropriateness of the Company’s risk
appetite, and its attractiveness to investors.
The portfolio overall has been resilient,
and benefitted from diversification across
infrastructure subsectors and types of
underlying risks.
Risk framework
Risk-related reporting
Internal
• Monthly management
accounts
• Internal and external
audit reports
• Service provider
control reports
• Risk logs
• Compliance reports
• Risk-related reporting
External – Annual report
• Risk appetite
• Viability statement
• Resilience statement
• Internal controls
• Going concern
• Statutory/accounting
disclosures
3i Infrastructure plc Annual report and accounts 2023 69
Financial review and Risk report
Risk report continued
The key tools used by the Committee to
define the Company’s risk appetite and
todetermine the appetite for key risks
arethe risk register and the risk matrix.
The process of creating and reviewing the
risk register and risk matrix is described
below, together with a discussion of the
Company’s appetite for each of the key
risks. Beyond the appetite for investment
risk discussed above, the Company seeks
tolimit or manage exposure to other risks
to acceptable levels.
Risk review process
The Company’s risk review process
includes the monitoring of key strategic
and financial metrics considered to be
indicators of potential changes in its risk
profile. The review takes place three times a
year, with the last review in April 2023, and
includes, but is not limited to, the following:
• infrastructure and broader
market overviews;
• key macroeconomic indicators and
theirimpact on the performance and
valuation of portfolio companies;
• regular updates on the operational
and financial performance of
portfolio companies;
• experience of investment
anddivestment processes;
• compliance with regulatory obligations,
including climate-related regulations;
• analysis of new and emerging
regulatory initiatives;
• liquidity management;
• assessment of climate risks to
the portfolio, including physical,
transitionand litigation risks;
• consideration of scenarios that may
impact the viability of the Company;
• assessment of emerging risks; and
• review of the Company’s risk log.
The Committee uses the risk framework
to identify emerging and key risks, and
to evaluate changes in risks over time.
The framework is designed to manage
rather than eliminate the risk of failure to
achieve objectives and breaches of risk
appetite. Developments during the year in
the more significant key risks or ‘principal
risks’ are discussed later in this document.
These are risks that the Committee considers
to have the potential to materially impact
thedeliveryof our strategic objectives.
The Committee evaluates the probability
of each identified risk materialising and the
impact it may have, with reference to the
Company’s strategy and business model.
The review process assesses the
likelihood and impact of each risk over
two timeframes, within three years and
beyond three years. The evaluation of
these key risks is then presented on a risk
matrix. Mitigating controls have been
developed for each risk and the adequacy
of the mitigation is then assessedand,
if necessary, additional controls are
implemented and reviewed by the
Committee at a subsequent meeting.
An emerging risk is one that may in future
be likely to have a material impact on the
performance of the Company and the
achievement of our long-term objectives,
but that is not yet considered to be a key
risk and is subject to uncertainty as to
nature, impact and timing.
A key risk is considered currently to
pose the risk of a material impact on
theCompany. Risks may be identified as
emerging risks and subsequently become
key risks. Identified key risks may cease
tobe considered key risks over time.
The Committee maintains a risk matrix,
onto which the key risks are mapped by
impact and likelihood. The principal risks
are identified on the risk matrix as those
with the highest combination of impact
andlikelihood scores.
Emerging risks Key risks Principal risks
Risk categorisation
The Committee uses the following categorisation to describe risks that are identified during the risk review process.
70
Financial review and Risk report
The Committee considers the identified
principal risks in greater detail in the
assessment of the Company’s viability.
A number of scenarios have been developed
to reflect plausible outcomes should the
principal risks be experienced, as well as
consideration of stressed scenarios that could
result in the Company ceasing to be viable.
As the Company is an investment company,
the stressed scenarios reflect reduced
cash flows from the Company’s investment
portfolio, such that debt covenants are
breached and liabilities not met.
The Investment Manager models the
impact of these scenarios on the Company
and reports the results to the Committee.
The resulting assessment of viability is
included in this Risk report.
Review during the year
In October 2022, the Committee reassessed
the identified key risks and considered any
update to the list of emerging risks currently
facing the Company. This involved a ‘blank
sheet of paper’ exercise where each Director,
and several members of the Investment
Manager’s team, identified the top emerging
risks facing the Company, and discussed
changes to the impact and likelihood of
theprincipal risks.
In December 2022, the Investment Manager
analysed the data collected and identified
the emerging and principal risks facing the
Company, scoring the principal risks for
impact and likelihood (within a three-year
period and beyond a three-year period).
In January 2023, the results of the principal risk
scoring were considered and assessed by the
Committee and additional changes made.
In April 2023, the Committee reviewed the
updated risk register and riskmatrix and the
Company’s appetite foreach of the key risks.
We have a relatively diverse spread of
assets in the portfolio and it is important
that risk diversity is maintained as we evolve
the portfolio through new investments,
realisations and syndications.
Future realisations and syndications may
continue the evolution of risk in the portfolio in
line with our strategy and allow the Company
to manage its exposure to more sensitive
assets, or to take account of where the risk
profile of an asset has changed over time.
We are confident that the portfolio remains
defensive and resilient, and in a position
to benefit from accretive but discretionary
growth opportunities as highlighted in the
Investment Manager’s review. We believe
the current appetite for risk is appropriate.
Emerging risks
The Company is a long-term investor and
therefore needs to consider the impact of
both identified key risks, as detailed below,
and risks that are considered emerging or
longer-term.
Risk categorisation, including the definition
of emerging risk, is shown onpage 70.
The Board and the Investment Manager
consider these factors when reviewing the
performance of the portfolio and when
evaluating new investments, seeking to
identify which factors present a potential
risk and can either be mitigated or
converted into opportunities.
As part of the ongoing risk identification
and management of the Company, the
Committee considers whether these
emerging risks should be added to the
Company’s risk register. The risk register
is a ‘live’ document that is reviewed and
updated regularly by the Committee
as new risks emerge and existing risks
change. Examples of emerging risks
that were considered during the year
include the impact of energy price caps,
UK political change, escalation of the
conflict in Ukraine, divergence between
the UK and the EU regulation increasing
friction over trade in goods and services,
and escalating regulatory reporting
requirements, including climate-related
reporting requirements. In some cases,
emerging risks may already be considered
within abroader identified key risk, such
asmarketand economic risk.
Risk report continued
Risk register review process
October 2022
Directors identify potential
emerging or new key risks
facing the Company
December 2022
Analysis and
interpretation
of responses
January 2023
Impact and likelihood
of the identified
risks considered
April 2023
Risk register and
risk matrix updated
3i Infrastructure plc Annual report and accounts 2023 71
Financial review and Risk report
Key risks
Key risks are mapped by impact and
likelihood on a risk matrix. During the
year, the Committee considered the
development of all the key risks in
detail. Within the category of key risks,
the principal risks identified by the
Committee in the financial year are set
out in the Principal risks and mitigation
table on pages73 to 75 alongside how
theCompanyseeks to mitigate these risks.
The risk review showed a high level of
consistency with the prior year, with a
small number of changes in the key risks
identified. The assessment of likelihood
and impact of the key risks resulted
in some changes to the principal risks
facingthe Company.
Market and economic risk was considered
the top risk facing the Company and was
considered to have increased during the
year. This includes the consequences of
sanctions on Russia and Russian companies,
increased commodity and energy prices,
rising inflation and interest rates, supply
chain constraints and a heightened risk
of recession.
Following the high level of new investment,
the management of liquidity risk is
considered to have increased.
The risk of an inappropriate rate of
investment and loss of senior Investment
Manager staff is considered to have
increased this year, given this liquidity risk.
These changes are reflected in the
Principalrisks and mitigations table.
Fraud and cyber risk
We remain vigilant to cyber- and other
IT-related issues which could result in
disruption to the Company, loss of data and/
or reputational damage. The Investment
Manager has a robust fraud risk assessment
and anti-fraud programme in place.
The latter includes fraud prevention work by
their Internal Audit team, mandatory training
to maintain vigilance and awareness, and
provision of an independent reporting
service or ‘hotline’ accessible by all staff.
The Investment Manager’s cyber security
programme also aims to identify and
mitigate the risks of third-party frauds, for
example ransomware and phishing attacks,
through the use of IT security tools and
regular staff training. There is also a detailed
business continuity and disaster recovery
plan, should a significant event occur.
The Company asks its service providers
toinform it of any significant cyber events
that they experience.
Environmental sustainability
andclimate risk
Environmental sustainability and ESG are
anincreasingly important focus amongst
our shareholders and in the wider market.
Climate risk includes the short- to medium-
term impacts, including transitional
changes (for example, regulation and
financial) aswell as the long-term emerging
risk ofclimate change (for example,
flooding events). Failure to identify and
mitigate risks at this stage could result in a
reduction in the attractiveness of our assets,
reputational damage and a reduction
invalue of our portfolio in the future.
Although there is still much uncertainty
around the extent and timing of the impact
of climate change, government and societal
action, and future regulations, we recognise
that climate-related risk is a key risk as well
as an investment theme for the Company.
We have separated climate-related risk
intotwo distinct but related risks.
Climate regulation risk addresses the
regulatory risk to the Company and the
portfolio associated with the transition
to a low-carbon economy. Climate risk
addresses the physical and transition
risksfrom climate change on the portfolio.
ESG and sustainability is increasingly
important in the context of our
strategic and investment objectives.
Further information on work done in
relation to ESG reporting, including climate-
related disclosures, and our approach to
climate-related risk and opportunities can
be found in our Sustainability report on
pages 46 to 56. All of the companies in
our portfolio recognise the importance
of considering climate change and of
evolving a sustainable business model.
As discussed in the Sustainability report,
the physical andtransition climate-related
risks are alsoseen as opportunities for
allcompaniesin our portfolio.
There are no acute physical nor transition
risks identified in the portfolio that would
suggest that climate risk is a principal
risk, although an example of the impact
of a transition risk is the introduction of a
tax on imported waste or a carbon tax in
the Netherlands, which impacts Attero,
and therisk of early decommissioning of
oil andgas assets, which impacts some
customers of Tampnet and ESVAGT.
We consider that the mitigating controls at
the Company and the Investment Manager
over climate regulation risk prevent this
from being a principal risk at the moment.
Risk report continued
72
Financial review and Risk report
Risk report continued
Principal risks and mitigations
External
Principal risk Risk description Risk mitigation
Market/economic
• Macroeconomic or market volatility, such as may arise from the
consequencesofthe conflict in Ukraine and from the effects on economies
of post-pandemic demand and supply imbalances, flows through to
pricing, valuations and portfolio performance
• Fiscal tightening impacts market environment
• Risk of sovereign default lowers market sentiment and increases volatility
• Misjudgement of inflation and/or interest rate outlook
• Resources and experience of the Investment Manager on deal-making,
assetmanagement and hedging solutions to market volatility
• Periodic legal and regulatory updates on the Company’s markets and in-depth
market and sector research from the Investment Manager and other advisers
• Portfolio diversification to mitigate the impact of a downturn in any geography
or sector or portfolio company-specific effects
• The permanent capital nature of an investment trust allows us to look
throughmarket volatility and the economic cycle
Risk exposure
movement in
the year
Increased
Link to Strategic
priorities
Manage portfolio
intensively
Competition
• Increased competition for the acquisition of assets in the Company’s
strategicfocus areas
• Deal processes become more competitive and prices increase
• New entrants compete with a lower cost of capital
• Continual review of market data and review of Company return target
comparedto market returns
• Ongoing analysis of the competitor landscape
• Origination experience and disciplined approach of Investment Manager
• Strong track record and strength of the 3i Infrastructure brand
Risk exposure
movement in
the year
No significant
change
Link to Strategic
priorities
Disciplined approach
Debt markets deteriorate
• Debt becomes increasingly expensive, eroding returns
• Debt availability is restricted
• The Company’s RCF or portfolio company debt cannot
berefinancedduetolack of appetite from banks
• The Investment Manager maintains close relationships with a number
ofbanksand monitors the market through transactions and advice
• Regular reporting of Company liquidity and portfolio company
refinancing requirements
• Investment Manager has extensive experience in raising debt finance
forportfolio companies, alongside an in-house Treasury team to provide
adviceontreasury issues
• Active management of portfolio company debt facilities, with fixed rates
andlong duration of debt
Risk exposure
movement in
the year
No significant
change
Link to Strategic
priorities
Manage portfolio
intensively
Our Strategic priorities
Maintain balanced
portfolio
Disciplined
approach
Manage portfolio
intensively
Efficient
balance sheet
Sustainability
key driver
3i Infrastructure plc Annual report and accounts 2023 73
Financial review and Risk report
Risk report continued
Principal risks and mitigations continued
Strategic
Principal risk Risk description Risk mitigation
Management of liquidity
• Failure to manage the Company’s liquidity, including cash and available
credit facilities
• Insufficient liquidity to pay dividends and operating expenses or to make
new investments
• Hold excessive cash balances, introducing cash drag on the
Company’s returns
• Regular reporting of current and projected liquidity
• Investment and planning processes consider sources of liquidity
• Flexible funding model, where liquidity can be sought from available cash
balances including reinvestment of proceeds from realisations, committed
credit facilities which can be increased with approval from our lenders,
andtheissue of new share capital
• Growth opportunities can be part or fully funded by portfolio company
cashbalances and/or available debt facilities
Risk exposure
movement in
the year
Increased
Link to Strategic
priorities
Disciplined approach
Deliverability
ofreturn target
• Failure to ensure the investment strategy can deliver the return
targetanddividend policy of the Company
• Failure to adapt the strategy of the Company to changing
market conditions
• Market returns are reviewed regularly
• The Investment Manager and other advisers to the Company report
onmarket positioning
• Investment process addresses expected return on new investments
andtheimpact on the portfolio
• Consideration of megatrends in the investment process
• Consideration of risks, including ESG and climate risks, in the
investment process
Risk exposure
movement in
the year
No significant
change
Link to Strategic
priorities
Maintain
balanced portfolio
Sustainability
key driver
Operational
Principal risk Risk description Risk mitigation
Loss of senior Investment
Manager staff
• Members of the deal team at the Investment Manager leave,
and ‘deal-doing’ and portfolio management capability in the
short to medium term is restricted
• Performance-linked compensation packages, including an element of
deferred remuneration
• Notice periods within employment contracts
• Strength and depth of the senior team and strength of the 3i Group brand
• Careful management and robust planning of senior management transition
Risk exposure
movement in
the year
Increased
Link to Strategic
priorities
Maintain
balanced portfolio
Sustainability
key driver
Our Strategic priorities
Maintain balanced
portfolio
Disciplined
approach
Manage portfolio
intensively
Efficient
balance sheet
Sustainability
key driver
74
Financial review and Risk report
Risk report continued
Principal risks and mitigations continued
Investment
Principal risk Risk description Risk mitigation
Security of assets
• An incident, such as a cyber or terrorist attack
• Unauthorised access to information and operating systems
• Regulatory and legal risks from failure to comply with cyber-related
lawsandregulations, including data protection
• Regular review of the Company and key service providers
• Regular review and update of cyber due diligence for potential investments
• Review of portfolio companies for cyber risk management and
incident readiness
Risk exposure
movement in
the year
No significant
change
Link to Strategic
priorities
Maintain
balanced portfolio
Sustainability
key driver
Poor investment
performance
• Misjudgement of the risk and return attributes of a new investment
• Material issues at a portfolio company
• Poor judgement in the realisation of an asset
• Robust investment process with thorough challenge of the investment
casesupported by detailed due diligence
• Investment Manager’s active asset management approach, including
proactivemanagement of issues arising at portfolio company level
• Experience of the Investment Manager’s team in preparing for and
executingrealisations of investments
Risk exposure
movement in
the year
No significant
change
Link to Strategic
priorities
Maintain
balanced portfolio
Sustainability
key driver
Our Strategic priorities
Maintain balanced
portfolio
Disciplined
approach
Manage portfolio
intensively
Efficient
balance sheet
Sustainability
key driver
3i Infrastructure plc Annual report and accounts 2023 75
Financial review and Risk report
Risk report continued
Development of significant
keyrisks in the year
The disclosures in the Risk report are not
an exhaustive list of risks and uncertainties
faced by the Company, but rather a
summary of significant key risks which
are under active review by the Board.
These significant key risks have the potential
to affect materially the achievement of the
Company’s strategic objectives and impact
its financial performance. This disclosure
shows developments in these significant key
risks for the year. The risks that have been
identified as principal risks are described
in more detail in the Principal risks and
mitigations table.
External risks – market
andcompetition
In the face of rising interest rates and
macroeconomic uncertainty, infrastructure
assets have proven relatively resilient
when compared to the dislocation in other
markets, but a difficult GDP environment
remains a key risk for the Company.
Infrastructure’s fundamental characteristics
as an asset class anchored by predictable,
long-term revenue streams that are often
linked to inflation have positioned the
sector well to withstand recessionary
riskand volatile markets.
Inflation in the UK and Europe has risen
sharply in the year, driven by rising energy
costs, supply chain bottlenecks, labour and
raw material shortages and the reopening
of economies from pandemic-related
lockdowns. The portfolio is positively
correlated to inflation as most portfolio
companies have revenues at least partially
linked to inflation, although higher inflation
may also result in increased costs and
supply chain disruption and, should it
persist, is generally bad for economies as
a whole. Sensitivities to macroeconomic
assumptions are discussed in the Financial
review and in Note 7 to the accounts.
Central bank base rates increased during
the year in response to higher inflation and,
although there is evidence, particularly in
Europe, that this is bringing inflation back
towards target levels, there is a risk that
inflation will return to a level either above
orbelow our long-term assumptions.
There are no material refinancing
requirements in the portfolio until 2026
andover 95% of long-term debt facilities
are either hedged or fixed rate at 31 March
2023. This mitigates the risk from further
near-term interest rate rises.
The urgency of tackling climate change
hasalso made investment in some
sectors, such as those with a focus on
energy transition, relatively insulated
from macro headwinds. As a result,
the European infrastructure market
continues to experience strong demand
for new investments. Private funds
with a core-plus infrastructure focused
mandate have significant amounts of dry
powder and these are the Company’s
primary competition for new investment.
Fundraising has increased at a faster
pace than the number of funds raised,
resulting in larger fund sizes creating
intense competition for suitable
infrastructure targets. There remains a risk
that pricing does change for core-plus
infrastructure in the medium term, but at
this point we are not seeing any upward
pressure on discount rates for core-plus
infrastructure investments as these tend
to have greater discount rate headroom
to risk-free rates and strong inflation
protection features. In this environment,
the Investment Manager continues to
leverage its network and skills to look
forinvestments that can deliver attractive
and sustainable risk-adjusted returns to
theCompany’s shareholders.
The Company is exposed to movements
insterling exchange rates against a number
ofcurrencies, most significantly the euro.
The Company operates a hedging
programme which substantially offsets
volatility in returns from exchange
rate movements. The Board monitors
the effectiveness of the Company’s
hedgingpolicy on a regular basis.
The valuation of our portfolio companies
that generate electricity is affected by
the evolution of long-term power price
forecasts and by fluctuations in the spot
power price. Medium-term power price
forecasts have also increased considerably
during the year, driven by gas supply
concerns, record carbon prices, low wind
levels and higher commodity prices,
particularly for gas. This has benefitted
those portfolio companies that generate
electricity and typically sell it on a forward
basis in order to avoid spot market volatility:
Infinis, Attero and Valorem.
Sanctions on Russia and Russian
companies, together with the recovery from
the Covid-19 pandemic, led to an increase
inoilprices, peaking in June 2022.
76
Financial review and Risk report
Risk report continued
Since then prices have come down, due
to a softer economic environment and
reduced trans-shipment volumes, but the
market continues to be backwardated.
For Oystercatcher, this may maintain some
short-term downward pressure on pricing
ofcontract renewals.
Ionisos is a provider of cold sterilisation
and ionising radiation treatment services
tothe medical, pharmaceutical, plastics
and cosmetics industries. Gamma radiation,
one of the three methods of cold
sterilisation used, relies on the radioactive
decay of Cobalt-60, a scarce resource.
Although a worldwide shortage of
Cobalt-60 is expected until 2028, resulting
from increased demand and the permanent
closure of a large Russian reactor, Ionisos is
in a good position to maintain its capacity
as it has recently expanded its supplier base
and is in advanced discussions with one
supplier for a five-year supply agreement.
During the past three years, TCR was
affected by air traffic movements and
passenger numbers being substantially
below the levels seen before the
Covid-19 pandemic.
The French and Dutch governments
introduced taxes on merchant revenues
above a price cap for 2023. The effect
of current and proposed legislation
is reflected in the valuations of these
portfolio companies.
Strategic risks
The Company manages its balance sheet
and liquidity position actively, seeking to
maintain adequate liquidity to pursue new
investment opportunities, while not diluting
shareholder returns by holding surplus
cash balances. At 31 March 2023 there was
£5 million available in cash, with drawings of
£501 million under the RCF. During the year
the Company raised a further £100 million
through an equity placing and extended
the maturity of its RCF facility to
November 2025.
The portfolio is diversified across sector
and geography, with no investment above
15% of portfolio value.
We are pleased with the performance of
TCR over the duration of the pandemic and
the strong performance this year and we
have maintained our assumption of a return
to pre-pandemic levels of air travel by 2024.
DNS:NET is being affected by the industry-
wide challenge of rolling out a FTTH
network in Germany due to thecomplexity
of the construction process and difficulty
in obtaining permits for construction,
alongside cost inflation. The German
government is planning to accelerate the
roll out through a simpler and digitalised
approval process.
External risks – regulatory and tax
The Company’s investments in Infinis,
Valorem and Attero are exposed to
electricity market regulation risk in their
respective countries. On 1 January 2023,
the UK government introduced a levy or
price cap on extraordinary returns from
electricity generation (the ‘EGL’).
The EGL is an exceptional and time-limited
measure that is due to expire in 2028.
Investment risks
As part of our investment due diligence
and active portfolio management, the
Investment Manager uses specialist
cyber security advisers to ensure that our
companies remain vigilant and continue
to focus on effective operations of controls
against possible cyber-attacks. Some of our
portfolio companies do experience fraud
attempts, some of which are successful, but
none have had a material impact on any of
our companies.
Operational risks
The key areas of operational risk include
attracting and retaining key personnel at
the Investment Manager, and whether the
Investment Manager’s team can continue
to support the delivery of the Company’s
objectives. The team has strength
and depth, and the transition in senior
management has been carefully managed.
The Board monitors the performance
of the Investment Manager through the
Management Engagement Committee.
It also monitors the performance of key
service providers, receiving reports of
anysignificant control breaches.
3i Infrastructure plc Annual report and accounts 2023 77
Financial review and Risk report
Resilience statement
Our resilience comes from the effective
implementation of our business model,
described on pages 9 to 13. Key elements
of our business model relating to resilience
include the Investment Manager’s
disciplined approach to new investment
and engaged asset management, the
defensive characteristics of our portfolio
of investments, high ESG standards, our
flexible funding model and efficient balance
sheet, and the capability ofthe Investment
Manager’s team.
This is underpinned by the strong
institutional culture and values of our
Investment Manager, high standards
of corporate governance, and effective
risk management.
Over the life of the Company, the
Investment Manager has built a resilient
and diversified portfolio with good growth
potential and downside protection that
delivers an attractive mix of income yield
and capital appreciation for shareholders.
This has been achieved through consistent
delivery of our strategic priorities,
described on page 20.
The Directors manage the Company’s
liquidity actively, reviewing reports
on current and forecast liquidity from
the Investment Manager, alongside
recommendations for seeking additional
liquidity when appropriate. The Directors
approved the issue of new equity during the
year, raising £100 million net of issue costs,
and the extension of the RCF to £900 million
of commitments. Further discussion on the
RCF can be found in the Financial review
onpage 64.
The identification of material uncertainties
that could cast significant doubt over
theability of the Company to continue
as agoing concern forms the basis of the
Going concern statement below.
Going concern
The Company’s business activities, together
with the factors likely to affect its future
development, performance and position
are set out in the Strategic report and in
the Financial statements and related Notes
to our Annual report and accounts to
31 March 2023. The financial position of the
Company, its cash flows, liquidity position
and borrowing facilities are also described
in the Financial statements and related
Notes to the accounts.
Short-term resilience
The Directors assess the Company’s
short-term resilience through monitoring
portfolio, pipeline and finance reports.
These are prepared monthly, and discussed
at quarterly scheduled board meetings and
board update calls held between scheduled
meetings. Six-monthly detailed investment
reviews are prepared by the Investment
Manager and discussed with the Board, as
part of the half-yearly and annual valuation
and reporting processes. These reviews
describe sources of risk at portfolio
company level, and mitigating actions
being taken or considered.
The resilience of key suppliers, including
the Investment Manager, is considered
annually or more frequently if appropriate.
The Audit and Risk Committee is provided
with relevant extracts of reports from
the Investment Manager’s internal
audit team, which includes an annual
report on the Investment Manager’s
European infrastructure investment team.
Further detail is included in the Governance
section on page 111.
In addition, Note 9 to the accounts includes
the Company’s objectives, policies and
processes for managing its capital, its
financial risk management objectives,
details of its financial instruments and
hedging activities, and its exposures to
credit risk and liquidity risk.
The Directors have made an assessment
of going concern, taking into account the
Company’s cash and liquidity position,
current performance and outlook, which
considered the impact of the higher
inflationary and interest rate environment,
using theinformation available up to the
date ofissue of these Financial statements.
The Company has liquid financial
resourcesand a strong investment
portfolio providing a predictable income
yield and an expectation of medium-term
capital growth.
Risk report continued
78
Financial review and Risk report
The Company manages and monitors
liquidity regularly, ensuring that it
is sufficient.
At 31 March 2023, liquidity remained
strong at £404 million (2022: £786 million).
Liquidity comprised cash and deposits of
£5 million (2022: £17 million) and undrawn
facilities of £399 million (2022: £769 million).
The £900 million revolving credit facility
matures beyond 12 months of the date
ofthis report.
The Company had no contracted
investment commitment at 31 March
2023. However, the Company expects to
make follow-on investments in portfolio
companies to fund growth opportunities.
The Company had ongoing charges of
£48 million in the year to 31 March 2023,
detailed in Table 5 in the Financial review,
which are indicative of the ongoing run
rate in the short term. In addition, the
FY23 performance fee of £45 million
(2022: £54 million) is due in three equal
instalments with the first instalment payable
in the next 12 months along with the second
instalment of FY22’s performance fee and
the third instalment of FY21’s performance
fee, and a proposed final dividend for
FY23of £51 million which is expected
tobepaid in July.
Medium-term resilience
The assessment of medium-term
resilience,which includes modelling of
stressed scenarios and reverse stress tests,
considers the viability and performance
of the Company in the event of specific
stressed scenarios which are assumed
tooccur over a three-year horizon.
This stress testing forms the basis of
theViability statement.
The Directors consider that a three-year
period to March 2026 is an appropriate
period to review for assessing the Company’s
viability. This reflects greater predictability
of the Company’s cash flows over that
time period and increased uncertainty
surrounding economic, political and
regulatory changes over thelonger term.
The stress testing focuses on the principal
risks, but also reflects those new and
emerging risks that are considered to
be of sufficient importance to require
active monitoring by the Audit and Risk
Committee. The scenarios used are
described in the Viability statement.
The medium-term resilience of the
Company is assessed through analysing
the impact of these scenarios on key
metrics such as total return, income yield,
net asset value, covenants on the RCF
andavailable liquidity.
Although not a commitment, the Company
has announced a dividend target for FY24
of 11.90 pence per share. Income and non-
income cash is expected to be received
from the portfolio investments during
the coming year, some of which will be
required to support the payment of this
dividend target and the Company’s other
financial commitments.
The Directors have acknowledged their
responsibilities in relation to the Financial
statements for the year to 31 March
2023. After making the assessment on
going concern, the Directors considered
it appropriate to prepare the Financial
statements of the Company on a going
concern basis.
The Company has sufficient financial
resources and liquidity and is well-
positioned to manage business risks in the
current economic environment and can
continue operations for a period of at least
12 months from the date of this report.
This is supported by the scenario analysis
and stress testing described in the medium-
term resilience section and the Viability
statement. Accordingly, the Directors
continue to adopt the going concern
basis in preparing the Annual report
and accounts.
Viability statement
The Directors consider the medium-term
prospects of the Company to be favourable.
The Company has a diverse portfolio of
infrastructure investments, producing
good and reasonably predictable levels of
income which cover the dividend and costs.
The defensive nature of the portfolio and of
the essential services that the businesses in
which we invest provide to their customers
are being demonstrated in the current
climate. The Investment Manager has a
strong track record of investing in carefully
selected businesses and projects and of
driving value through an engaged asset
management approach. The Directors
consider that this portfolio can continue
tomeet the Company’s objectives.
The Directors have assessed the viability
of the Company over a three-year period
to March 2026. The Directors have taken
account of the current position of the
Company, including its liquidity position,
with £5 million of cash and £399 million of
undrawn credit facilities, and the principal
risks it faces, which are documented in this
Risk report on pages 73 to 75.
Risk report continued
3i Infrastructure plc Annual report and accounts 2023 79
Financial review and Risk report
The Directors have considered the potential
impact on the Company of a number of
scenarios in addition to the Company’s
business plan and recent forecasts, which
quantify the financial impact of the principal
risks occurring. These scenarios represent
severe yet plausible circumstances that the
Company could experience, including a
significant impairment in the value of the
portfolio and a reduction in the cash flows
available from portfolio companies from a
variety of causes.
The assessment was conducted over
several months, during which the proposed
scenarios were evaluated by the Board,
the assumptions set, and the analysis
produced and reviewed. Analysis included
the impact of an escalation of the conflict in
Ukraine on our portfolio companies and the
impact of a resulting economic downturn.
Other considerations included the possible
impact of climate-related events and
transition risks, widespread economic
turmoil, a reduction in cash distributions
from portfolio companies to the Company,
a tightening of debt markets and the failure
of a large investment.
Based on this assessment, 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 three-year period to
March 2026.
Long-term resilience
As described above, the long-term
resilience of the Company, beyond the
Viability statement period, comes from the
effective implementation of our business
model and consistent delivery of our
strategic objectives.
Our approach to origination and portfolio
construction, focus on price discipline and
engaged asset management approach
enable us to adapt in response to new and
emerging risks and challenges, including
climate change and developments
in megatrends.
The characteristics that we look for in
infrastructure investments, described on
page 11, support the long-term resilience
of the Company. The performance of the
portfolio through the Covid-19 pandemic
provided good evidence of this.
The assumptions used to model these
scenarios included a fall in value of some or
all of the portfolio companies, a reduction
in cash flows from portfolio companies, a
reduction in the level of new investment
and/or realisations, the imposition of
additional taxes on distributions from, or
transactions in, the portfolio companies, an
increase in the cost of debt and restriction
in debt availability, and an inability for the
Company to raise equity. The implications
of changes in the inflation, interest rate and
foreign exchange environment were also
considered, separately and in combination.
The results of this assessment showed that
the Company would be able to withstand
the impact of these scenarios occurring
over the three-year period. The Directors
also considered scenarios that would
represent a serious threat to its liquidity and
viability in that time period. These scenarios
were considered to be remote, such as a fall
in equity value of the portfolio of materially
more than 50% whilst being fully drawn
on the RCF including the accordion, or an
equivalent fall in income.
The underlying megatrends supporting
the longer-term resilience of each portfolio
company are identified in the Our approach
section on page 15.
We have a long-term investment time
horizon made possible by our permanent
capital base that is unconstrained
by the fixed investment period and
fundraising cycle seen in private limited
partnership funds.
Although the scenarios and stress testing
to support the Viability statement are
modelled over a three-year time horizon,
the resilience shown by the Company, and
its ability to recover from these stressed
situations, supports the assessment of
our resilience over a longer term than
three years.
Risk report continued
80
Financial review and Risk report
Directors’ duties
Section 172 statement
The Company adheres to the AIC Code
of Corporate Governance (the ‘AIC Code’)
and it is the intention of the AIC Code that
the matters set out in section 172 ofthe
Companies Act 2006 (‘s172’) are reported
on to the extent they do not conflict with
Jersey law.
We recognise that our business can only
grow and prosper by acting in the long-
term interests of our key stakeholders
and that a good understanding of the key
issues affecting stakeholders should be
an integral part of the Board’s decision-
making process. The insights that the
Board gains through the stakeholder
engagement mechanisms it has in place
form an important part of the context for
all the Board’s discussions and decision-
making processes.
As an externally managed investment
trust, the Company has no employees or
customers and its key stakeholders are
its shareholders, third-party professional
advisers and service providers (most
notably the Investment Manager),
portfolio companies, communities in
which the Company operates, lenders,
andgovernment and regulatory bodies.
Under Jersey Law, the Directors are obliged to act honestly and in good faith with a view to the best interests of the Company;
andtoexercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances.
Pursuant to s172, a Director of a company must act in the way they consider, in good faith, would most likely promote the success
ofthecompany for the benefit of its members, and in doing so have regard (amongst other matters) to:
The likely consequences of any
decisionsinthe long term
Our purpose and strategy, combined
withtheresponsible investment approach
ofthe Investment Manager, focus
onsustainable returns and outcomes.
Read more
Pages 5, 20 and 46
The impact of the Company’s operations
onthe community and environment
We use our influence to promote a
commitment in our portfolio companies
tomitigate any adverse environmental
andsocial impacts, and to enhance
positiveeffects on their communities
andthe environment.
Read more
Pages 46 to 56
The interests of the Company’s employees
Whilst we do not have any employees,
ourpurpose includes the intention to havea
positive influence on our portfolio companies
and their stakeholders, whichincludes the
employees of those portfolio companies.
Read more
Page 51
The desirability of the Company
maintaininga reputation for high
standardsof business conduct
Our success relies on maintaining a strong
reputation, and our values and ethics are
aligned to our purpose, our strategy and
ourways of working.
Read more
Page 13
The need to foster the Company’s
businessrelationships with suppliers,
customers and others
We engage with all our stakeholders
eitherdirectly or through the
Investment Manager.
Read more
Pages 95 to 98
The need to act fairly between membersof
the Company
The Board actively engages with its
shareholders and considers their interests
when implementing our strategy.
Read more
Pages 95 to 98
3i Infrastructure plc Annual report and accounts 2023 81
Financial review and Risk report
Directors’ duties continued
Section 172 statement continued
Day-to-day engagement with our
stakeholders is principally managed by
the Investment Manager although, where
appropriate, the Directors have direct
touchpoints with stakeholders during
the year.
Throughout this Annual report we provide
examples of how the Directors promote the
success of the Company for the benefit of
its members in line with our purpose and
our strategy, while taking into account the
likely consequences of decisions in the long
term, the need to build relationships with
stakeholders, and ensuring that business
is conducted responsibly. In particular,
pages 95 to 98 set out the Company’s
stakeholders and how the Board considered
matters under s172 during its deliberations.
Our purpose
Page 1
Our strategy
Pages 20 and 21
This Strategic report, on pages 1 to 82,
is approved by order of the Board.
Authorised signatory
3i plc
Company Secretary
9 May 2023
82
Financial review and Risk report
GovernanceGovernance
83
Robust corporate governance
practices are integral to creating
long-term value and success for
thebenefit of our shareholders.”
Richard Laing
Chair, 3i Infrastructure plc
Introduction to Governance
On behalf of the Board, I am
pleased to present the Company’s
Governance report for the
financial year ended 31March
2023. Given the current global
macro environment, having
astrong governance framework
has never been asimportant; our
effective governance processes
have ensured the continued
implementation of our strategy
whilst mitigating risks.
84
Governance
Introduction to Governance continued
Compliance with the AIC Code
The Board has considered the principles and provisions
oftheAIC Code of Corporate Governance (the ‘AIC Code’),
which addresses the principles and provisions set out in the
UKCorporate Governance Code 2018 (the ‘UK Code’), as
theyapply to investment trust companies. It considers that
reporting against the AIC Code, therefore, provides more
appropriate information to the Company’s shareholders.
The Board confirms that the Company has complied with
theprinciples and provisions of the AIC Code (and the
associated disclosures under the applicable provisions
ofparagraph 9.8.6 of the Listing Rules), in so far as they
applytothe Company’s business, throughout the year
underreview. Details of how the Company has complied
withtherelevant principles andprovisions of the AIC
Codeareset out below.
Board leadership and purpose
The Board is responsible for leading the business in a
waywhichsupports its purpose of investing responsibly
ininfrastructure, delivering long-term sustainable returns
toshareholders and having a positive influence on our
portfoliocompanies and their stakeholders.
Read more
Pages 86 to 98
Division of responsibilities
We ensure that responsibilities of the Chair and non-executive
Directors are clear and transparent in order to lead the
Company effectively, supported by both strong governance
arrangements and the work of the Investment Manager.
Read more
Page 99
Composition, succession and evaluation
We aim to have a balanced Board with the appropriate skills and
experience to govern the business. We have an effective board
evaluation process and a succession plan monitored by the
Nomination Committee.
Read more
Pages 100 to 105
Audit, Risk and Internal Control
The Audit and Risk Committee, supported by the Investment
Manager and other key stakeholders, identifies potential risks
and how best to mitigate them. The Audit and Risk Committee
isappointed to oversee this process on behalf of the Board.
Read more
Pages 106 to 112
Remuneration
The Remuneration Committee ensures a fair reward structure
forthe non-executive Directors.
Read more
Page 115
Both the Covid-19 pandemic and the
current volatile market environment have
reinforced the importance of established
governance principles, along with having
a clear purpose and values aligned with
our strategy.
The following pages of this report provide
an insight into the activities of the Board
and Committees over the year and how
corporate governance underpins and
supports our business and the decisions
we make. Market conditions, including
economic and political uncertainty,
are challenging, but the Board is well-
positioned to support the Investment
Manager in generating value for the
Company from its portfolio.
I am grateful to my fellow Board
members for their continued support
and commitment and to the Investment
Manager for implementing our effective
corporate governance framework and
working on executing our purpose.
Richard Laing
Chair, 3i Infrastructure plc
3i Infrastructure plc Annual report and accounts 2023 85
Governance
Board leadership and purpose
Board of Directors
Richard Laing Paul Masterton Wendy Dorman Doug Bannister
Samantha Hoe-Richardson Ian Lobley Stephanie Hazell
86
Governance
Board leadership and purpose continued
Board of Directors continued
Appointed January 2016. Chair of the Nomination,
Disclosure, and Management Engagement
Committees, and member of the Remuneration
Committee. UK resident.
Skills and experience contributing to the Board
• As an experienced non-executive Director and
senior executive, has broad strategic insights
• Long-standing experience of investing in
international infrastructure
• Deep knowledge of investment companies
• As a previous CFO, understands complex financial
and funding matters
• Fellow of the Institute of Chartered Accountants
inEngland and Wales
Current roles
• Non-executive Director of Tritax Big Box REIT plc
• Non-executive Director of JP Morgan Emerging
Markets Investment Trust plc
• Trustee and Deputy Chair of Leeds Castle Foundation
Past roles
• Non-executive Director and Chair of Perpetual
Income and Growth Investment Trust plc
• Non-executive Director of Murray Income Trust plc
• Non-executive Director and Chair of Miro Forestry
Company Limited
• Non-executive Director of London Metal Exchange
• 11 years at CDC Group plc with the last seven years
as Chief Executive
• 15 years at De La Rue latterly as Group
Finance Director
• Commercial roles in agribusiness and Marks
&Spencer
• Chartered accountant at PricewaterhouseCoopers
(‘PwC’)
Senior Independent Director
Appointed April 2013. Chair of the Remuneration
Committee and member of the Audit and Risk,
Management Engagement, Nomination, and
Disclosure Committees. Jersey resident.
Skills and experience contributing to the Board
• Extensive experience in leading and developing
large companies, and of mergers and acquisitions
• Particularly experienced from an international
business perspective, having worked in the USA,
Europe and Asia
• Knowledge of digital technology through chairing
and leading the formation of Digital Jersey
• Deep experience as a non-executive director,
including board governance and remuneration
• Leadership and team development, including
coaching and mentoring
• Focus on corporate social responsibility
Current roles
• Chair of Insurance Corporation CI
• Chair of States of Jersey Development Company
• Senior Independent Director of Jersey Competition
& Regulatory Authority
• Trustee of Digital Jersey
• Chair of Governors for Jersey College of Higher
Education and University of Jersey
Past roles
• Over 25 years at RR Donnelley, including as president
of company’s businesses in Europe, Russia and India
• Chief Executive of Durrell Wildlife Conservation Trust
Appointed March 2015. Chair of the Audit and
Risk Committee and member of the Management
Engagement, Nomination, Remuneration, and
Disclosure Committees. Jersey resident.
Skills and experience contributing to the Board
• Over 28 years’ experience as a chartered accountant
and tax adviser
• Particular expertise in the taxation of UK and
offshore investment funds, including the tax aspects
of fund structuring
• Extensive knowledge of risk mitigation, compliance
and corporate governance
Current roles
• Non-executive Director and Chair of Audit & Risk
Committee of Jersey Electricity plc
• Non-executive Director and Chair of Audit &
Risk Committee of CQS New City High Yield
Fund Limited
Past roles
• Head of PwC Channel Islands tax practice for
seven years
• Non-executive Director of Jersey Finance Limited
• President of Jersey Society of Chartered and
Certified Accountants
• Chair of Jersey Institute of Directors
Chair Independent non-executive Directors
Richard Laing Paul Masterton Wendy Dorman
3i Infrastructure plc Annual report and accounts 2023 87
Governance
Board leadership and purpose continued
Board of Directors continued
Independent non-executive Directors Non-executive Director
Appointed January 2015. Member of the Audit and
Risk, Management Engagement, Remuneration,
andDisclosure Committees. UK resident.
Skills and experience contributing to the Board
• Over 30 years’ experience in the international
transportation and distribution sectors
• In-depth knowledge of leading asset-intense
operational businesses
• Experienced senior executive with broad
international experience
• Knowledge in turnaround, mergers and acquisition
integration, restructuring and transformation of
capital-intensive businesses
Current roles
• Chief Executive of Dover Harbour Board
• Deputy Chair of British Ports Association
Past roles
• Group CEO of Ports of Jersey (Airports & Harbours)
• Commercial roles at P&O Nedlloyd and Maersk Line
Appointed February 2020. Member of the Audit and
Risk, Management Engagement, Remuneration,
andDisclosure Committees. UK resident.
Skills and experience contributing to the Board
• Senior executive with 18 years’ experience
inglobalmining and infrastructure
• In-depth understanding of environmental
andsustainability issues
• Broad based non-executive Director experience
• Chartered accountant
Current roles
• Non-executive Director of Assured Guaranty UK Ltd
• Independent Group Adviser on Climate Change &
Sustainability to Laing O’Rourke
• Non-executive Director of Kew Soda Ltd
Past roles
• Non-executive Director and Chair of the Audit
Committees at Lancashire Holdings Limited and
Lancashire Insurance UK Limited
• Non-executive Director and Chair of Audit
Committee of Unum Limited
• Head of Environment and Sustainable Development
of Network Rail
• Head of Environment at Anglo American plc
• Trustee of the Royal School of Needlework
Appointed September 2022. Member of the Audit
and Risk, Management Engagement, Remuneration,
andDisclosure Committees. UK resident.
Skills and experience contributing to the Board
• Over 25 years of experience across energy,
infrastructure and telecoms sectors
• Broad non-executive Director experience
Current roles
• Non-executive Director of Atlasconnect Limited
• Non-executive Director of Neos Networks Limited
• Non-executive Director of North Sea Midstream
Partners Limited (Jersey)
• Non-executive Director of NNXYZ Limited
• Non-executive Director of Open Utility Limited
(Piclo)
• Non-executive Director of Renew Holdings plc
• Advisory Board Member for Shell New Energy
Past roles
• Director, Strategy and Corporate Development,
ExCo Member of National Grid
• Principal Consultant, Telecoms and Media at PwC
• Various senior positions at Virgin Management
• Various senior positions at Orange Group
Appointed May 2014 as the 3i Group nominated
Director. UK resident.
Skills and experience contributing to the Board
• Valuable experience and insight into the
assessment of new investments and management
ofthe portfolio
• Extensive knowledge of ESG matters
• Experienced non-executive Director across
sectors,continents and ownership models
• Significant experience, as an investor and engineer,
of disruptive technologies across multiple
end markets
Current roles
• 3i Group Managing Partner – Asset Management
• Non-executive Director of AES Engineering Ltd
• Non-executive Director of Cirtec Medical
Holdco LLC
• Senior Independent Director of BSI Group
• Non-executive Director of Tato Holdings Ltd
Past roles
• Long-term member of 3i Group plc
Investment Committee
• Active investor and experienced board member
in a variety of companies across Europe, Asia and
the USA
• Leadership of technology investing and portfolio
management activities
• Engineer at BOC Speciality Gases
• Non-executive Director of Boketto Holdco
Limited (Audley Travel)
Doug Bannister Samantha Hoe-Richardson Stephanie Hazell Ian Lobley
88
Governance
Board leadership and purpose continued
Investment Management team
Scott Moseley
John Cavill
Thomas Fodor
Bernardo Sottomayor
Aaron Church
Stéphane Grandguillaume
James Dawes
Anna Dellis
Tim Short
3i Infrastructure plc Annual report and accounts 2023 89
Governance
Board leadership and purpose continued
Investment Management team continued
Joined 3i Group in 2007. Managing Partner and
Co-Head of European Infrastructure since July 2022.
Current roles
• Member of 3i Group’s Executive Committee,
Investment Committee and Group Risk Committee
• Extensive experience in European infrastructure,
spanning utilities, transportation and
social infrastructure
• Investments include GCX, Tampnet, ESVAGT, Elenia,
CrossLondon Trains andEversholt Rail Group
• Led the successful divestments of Elenia and XLT
as well as previously being responsible for junior
debt investments in Arqiva, Associated British Ports,
Télédiffusion de France, Thames Water and Viridian
• Non-executive Director of Tampnet, ESVAGT
and GCX
Past roles
• Various roles within the capital markets teams
atWestLB and Crédit Agricole
Joined 3i Group in 2016. CFO of 3i’s
Infrastructure business.
Current roles
• Performs CFO duties for 3i Infrastructure
• Manages the operational, financial and reporting
requirements for 3i Group’s infrastructure business
• Non-executive Director of SRL Traffic Systems
Past roles
• Finance Director of LGV Capital from 2007 to 2015
• Senior finance roles with Legal & General
Investment Management
Joined 3i Group in 2015. Managing Partner and
Co-Head of European Infrastructure since July 2022.
Current roles
• Member of 3i Group’s Executive Committee,
Investment Committee and Group Risk Committee
• Led or co-led investments by the Company in Joulz,
TCR, Infinis, Attero, Alkane Energy, Ionisos and SRL
Traffic Systems
• Non-executive Director of TCR and 3i board
observer at Attero and Joulz
Past roles
• Over 20 years’ experience of investing and advising
in infrastructure
• Partner at Antin Infrastructure, which managed
funds investing in infrastructure opportunities
across Europe
• Managing Director, Head of Acquisitions for
Deutsche Bank’s European infrastructure fund
• Head of M&A at Energias de Portugal public
utilities company
• M&A advisory with UBS and Citigroup
Managing Partners CFO
Scott Moseley Bernardo Sottomayor James Dawes
90
Governance
Board leadership and purpose continued
Investment Management team continued
Joined 3i Group in 2013 and is a partner
intheLondoninfrastructure business.
Current roles
• Non-executive Director of SRL Traffic Systems
• Leads the assets management activity for the
Projects portfolio
• Responsible for setting the strategy oversight of
asset management activities
• Overseas the implementation of value
protection and enhancement activities, and
performance reporting
Past roles
• Non-executive Director of WIG and XLT
• Director at Barclays Infrastructure, St Modwen
Properties plc, Land Securities Trillium and
Vinci Investments
Joined 3i Group in 2013 and is a partner
intheLondoninfrastructure business.
Current roles
• Focuses on origination, execution and asset
management of economic infrastructure investments
• Extensive infrastructure investing experience across
the transport, utilities, energy and waste sectors
• Senior deal team member on the acquisitions of
Joulz, Attero, Tampnet, Infinis and ESVAGT, and
thesale of the Oystercatcher European terminals
• Non-executive Director of Joulz, Attero and
Advario Singapore
Past roles
• Infrastructure investor at HRL Morrison & Co
inEurope and Australasia
• Started career at Boston Consulting Group
Anna Dellis
Joined 3i Group in 2006 and is a partner
intheLondon infrastructure business.
Current roles
• Leads asset management for the portfolio
ofeconomic infrastructure investments
• Led the successful exit of Oystercatcher’s
investments in Advario terminals in
Amsterdam,Terneuzen, Ghent and Malta
• Non-executive Director of Advario Singapore
• Focused on new deals over the period 2006–2017,
prior to assuming current portfolio focus
Past roles
• Advised on infrastructure transactions
andfinancingat PwC in London
• Fellow of the Institute of Chartered
AccountantsofEngland and Wales
Joined 3i Group in 2016 and is a partner
intheLondoninfrastructure business.
Current roles
• Leads investor relation and fundraising efforts
acrossthe 3i European infrastructure business
• First point of contact for shareholders in 3i
Infrastructure plc
• Oversees co-investment activities in the 3i
infrastructure portfolio
Past roles
• Private Capital Advisory at HSBC
• Started career at Lehman Brothers
Stéphane Grandguillaume
Joined 3i Group in 2013 and is a partner
intheParisinfrastructure business.
Current roles
• Leads 3i’s Infrastructure business in France
• Responsible for origination, execution and
fundraising in relation to project opportunities
across Europe
• Non-executive Director of Valorem and Ionisos
Past roles
• Headed Barclays Infrastructure in Paris
• Headed Egis Investment Partners
Joined 3i Group in 2007 and is a partner
intheLondon infrastructure business.
Current roles
• Focuses on the origination, execution and debt
financing of infrastructure investments
• Transaction experience includes the acquisitions
and financing of Attero, Elenia, ESVAGT, GCX, Infinis,
Ionisos, Joulz, Oystercatcher, Tampnet, TCR and WIG
• Non-executive Director of Infinis
Past roles
• Financial restructuring at Houlihan Lokey
Partners
John Cavill Aaron Church Thomas Fodor Tim Short
3i Infrastructure plc Annual report and accounts 2023 91
Governance
Board leadership and purpose continued
Company purpose, values
andculture
We invest responsibly in infrastructure,
delivering long-term sustainable returns
to shareholders and having a positive
influence on our portfolio companies and
their stakeholders. This purpose is central
to Board discussions when we review our
business model, financial performance and
performance against strategic objectives.
The Board recognises that tone and culture
are set from the top and individually
we always strive to do the right thing in
all stakeholder interactions. The Board
individually and collectively acts in
accordance with the Board values of
Integrity, Objectivity, Accountability and
Legacy and expects the same from the
professional advisers and service providers
it engages. The Chair encourages Directors
to express differences of perspective and
to challenge views and opinions but always
in a respectful, open, supportive and
collaborative fashion. Board behaviours
are also evaluated as part of the annual
Board evaluation. The Board’s culture and
values are complemented by the strong
institutional culture and values of our
Investment Manager.
Role of the Board
The Board’s role is to lead the Company
in achieving its purpose. The Board
is also responsible for overseeing the
implementation of the Company’s strategy
of maintaining a balanced portfolio of
infrastructure investments delivering an
attractive mix of income yield and capital
appreciation to shareholders. See pages
95 to 98 for further information on the
Board’s key decisions and areas of focus
affecting stakeholders.
The Board is ultimately accountable to our
shareholders and the Directors ensure that
both their decisions and the actions of the
Investment Manager are aligned with the
Company’s and wider stakeholders’ interests.
It determines the Investment policy, the
appointment of the Investment Manager,
financial strategy and planning, approval of
the results and dividends, and oversees the
maintenance of internal controls and the risk
management framework, membership of the
Board, Director remuneration and adherence
to the corporate governance framework.
3iN
Board
values
Legacy
Accountability
Integrity
Objectivity
Integrity
The Board acts with honesty, dedication
and consistency, with the courage to
do the right thing in every situation.
The Board manages its relationships
based on trust and respect.
Objectivity
The Board applies a fair, transparent and
balanced approach to decision making.
The Board values diversity of opinion
and encourages different perspectives
to bring constructive challenge as it
discharges its responsibilities.
Accountability
The Board acts in the interest of all
stakeholders of the Company, ensuring
that obligations to shareholders are
understood and met. It is mindful of its
responsibility to act as a good steward
of its portfolio and of the influence that
the Company can have on society, the
communities in which it operates and
the environment.
Legacy
The Board seeks to develop a company
and portfolio that delivers long-term,
sustainable value for our shareholders
and society.
92
Governance
Board leadership and purpose continued
The Company has no employees and
its investment and portfolio monitoring
activities have been delegated by the Board
to 3i Investments plc in its role as Investment
Manager. The Board ensures that the
Investment Manager has the resources and
capabilities to support the delivery of the
Company’s purpose and strategy. Under the
Investment Management Agreement (‘IMA’)
the Investment Manager has sole discretion
to make decisions on investments and
divestments, other than those decisions
which relate to transactions which reach
certain financial thresholds, in particular in
relation to investments or divestments which
represent 15% or more of the gross assets of
the Company, which require Board approval.
The Board also maintains a Schedule of
Matters Reserved to the Board, which are
considered significant to the Company due
to their strategic, financial or reputational
implications and consequences.
The Investment Manager prepares
reports and papers that are circulated to
the Directors electronically in advance of
Board and Board Committee meetings.
These papers are supplemented by
information specifically requested by
the Directors and additional papers and
presentations from the Investment Manager,
Company Secretary and other professional
advisers and service providers.
The Chair is responsible for the leadership
of the Board and ensuring its effectiveness.
In addition to the Chair, there are currently
five independent non-executive Directors
and one 3i Group nominated Director,
who is not considered independent.
The Board’s core values of Integrity,
Accountability, Objectivity and Legacy
underpin its open and collaborative culture
and are supplemented by the skills that each
individual Director brings to the Company.
Board Committees
The Board is assisted in its activities by a
number of standing Committees of the
Board and, in discharging its duties, it
delegates certain authorities and decisions
to these Committees. The Board reviews
the membership of these Committees
on a regular basis. The Board Committee
structure, together with a summary of the
roles and composition of the Committees, is
outlined in the table below. All Committees
have Terms of reference, which are available
on www.3i-infrastructure.com. The Board,
on the advice of the Company Secretary,
annually reviews the Committees’ Terms
of reference and the Schedule of Matters
Reserved to the Board to ensure they
remain appropriate and compliant with
thelegal and regulatory environment.
3i Infrastructure plc
Audit and Risk
Committee
Remuneration
Committee
Nomination
Committee
Management
Engagement Committee
Disclosure
Committee
Financial
reporting, risk and
internal controls
Director
remuneration
Board appointments
and size and composition
ofthe Board
Monitoring of the
performance of the
Investment Manager
Monitoring compliance
with disclosure
requirements
Wendy Dorman
(Chair)
Doug Bannister
Stephanie Hazell
Samantha Hoe-Richardson
Paul Masterton
Paul Masterton
(Chair)
Doug Bannister
Wendy Dorman
Stephanie Hazell
Samantha Hoe-Richardson
Richard Laing
Richard Laing
(Chair)
Wendy Dorman
Paul Masterton
Richard Laing
(Chair)
Doug Bannister
Wendy Dorman
Stephanie Hazell
Samantha Hoe-Richardson
Paul Masterton
Richard Laing
(Chair)
Doug Bannister
Wendy Dorman
Stephanie Hazell
Samantha Hoe-Richardson
Paul Masterton
Board Committees
3i Infrastructure plc Annual report and accounts 2023 93
Governance
Board leadership and purpose continued
Meetings
Directors are expected to attend all
Board and Committee meetings, but in
certain exceptional circumstances, such
as pre-existing commitments or illness,
it is recognised that Directors may be
unable to attend. In these circumstances,
the Directors receive relevant papers
and, where possible, will communicate
to the Chair or Company Secretary any
comments and observations in advance
of the meeting for raising as appropriate
during the meeting. They are updated
on any developments after the meeting
by the Chair of the Board or Committee,
as appropriate.
During the year, there were six scheduled
meetings of the Board of Directors and
seven additional ad-hoc Board meetings
arranged at short notice to consider time-
critical matters such as the refinancing
of the Company’s RCF and the equity
issuancecompleted in February 2023.
The Board also held a Strategy Day(in
addition to strategic matters which are
considered at every Board meeting) where
the Board worked with theInvestment
Manager to consider in more detail matters
of a strategic or wide-ranging nature.
The Board also has regular update calls with
the Investment Manager in order to stay
informed of the activities of the Investment
Manager between Board meetings.
Meetings of the Board
The table below sets out the attendance of the Directors at the scheduled Board meetings
(excluding ad hoc Board meetings) and the attendance of Committee members at the
relevant Committee meetings held during the financial year.
Board
Audit and Risk
Committee
Remuneration
Committee
Nomination
Committee
Management
Engagement
Committee
Richard Laing 6 (6) * 1 (1) 3 (3) 2 (2)
Doug Bannister 6 (6) 2 (3) 1 (1) – 2 (2)
Wendy Dorman 6 (6) 3 (3) 1 (1) 3 (3) 2 (2)
Stephanie Hazell** 3 (3) 2 (2) 1(1) – 1(1)
Samantha Hoe-Richardson 6 (6) 3 (3) 1 (1) – 2 (2)
Ian Lobley 5 (6) * – – –
Paul Masterton 6 (6) 3 (3) 1 (1) 3 (3) 2 (2)
* Richard Laing and Ian Lobley attend the Audit and Risk Committee meetings by invitation.
** Stephanie Hazell was appointed effective 29 September 2022.
The table above indicates the number of meetings attended and, in brackets, the number of meetings the
Director was eligible to attend. Non-attendance at meetings was due to unavoidable prior commitments or illness.
Directors are invited to attend the meetings of Committees of which they are not members.
No Disclosure Committee meetings were convened during the year. On occasion and where appropriate the
Board itself considered matters relating to the treatment of price-sensitive information, rather than convening
a separate Disclosure Committee. This was particularly the case during the non pre-emptive capital raise when
careful consideration was given at all appropriate moments as to whether the Company was in possession of price-
sensitive information and if so, what steps should be taken.
94
Governance
Stakeholder interests and
Boarddecision-making
As an externally managed investment trust,
the Company does not have employees or
customers. Its main stakeholders therefore
comprise its shareholders, third-party
professional advisers and service providers
(most notably the Investment Manager),
portfolio companies, communities in
which the Company operates, lenders,
and government and regulatory bodies.
A strong understanding of our stakeholders
and their views is integral to the Company’s
strategic planning and achievement of its
strategic objectives. The Board recognises
the importance of keeping the interests of
the Company’s stakeholders central in its
key decision making.
The Board has limited direct engagement
with certain stakeholders as most
engagement takes place through the
Investment Manager. Where there is no
direct engagement at Board level, the
Investment Manager regularly reports to
the Board on key areas and stakeholder
views to ensure that Board decisions are
well informed.
The Board carefully considers the interests
of all of its stakeholders as well as the other
factors referred to in s172 of the Companies
Act 2006 in deciding what actions would
be likely to promote the success of the
Company for the benefit of its members as
a whole. See pages 81 and 82 for our s172
statement. Set out below are examples
of the Board’s key decisions and areas of
focus over the last year and details of how
the interests of stakeholders were taken
into account.
Board leadership and purpose continued
3i Infrastructure plc Annual report and accounts 2023 95
Governance
Who and why? How? Key decisions and areas of focus affecting stakeholders Outcomes
Shareholders
Understanding the views of investors
enables the Company to take account
of such views when developing future
strategy. It is vital for the success of
theCompany to have the support
ofitsshareholders.
The Investment Manager and the Company’s brokers complete a
programme of investor relations activities throughout the year, including
an annual Capital Markets Event. This programme provides existing
andpotential investors with relevant information to enable them to
understand the Company’s activities, strategy and financial performance.
An analysis of the Company’s shareholder register is provided to the
Directors at each Board meeting along with updates on any investor
engagement activities or direct/indirect communication with investors.
Reports from the Company’s brokers are submitted to the Board on
investorsentiment and industry issues.
The Chair and the Chairs of all Committees are available to meet with
investors when requested. The Capital Markets Event provides an additional
opportunity for the Chair and Chair of the Audit and Risk Committee to
engage with shareholders.
The Company uses its AGM as an opportunity to communicate with
itsshareholders and all Directors are available to answer questions
fromshareholders.
The Company’s website provides details of forthcoming events for
shareholders and analysts. In addition, videos of results presentations,
presentations from the Capital Markets Event and portfolio activities are
onthe Company’s website, which all shareholders can access and view.
Individual shareholders are encouraged to engage with the Company
andprovide feedback through the Investor Relations team, who can be
contacted at Thomas.fodor@3i.com or by telephone on +44 (0)20 7975 3469.
Liquidity management, including refinancing theRCF.
Approval of the non pre-emptive capital raise.
Approval of Financial statements.
Approval of interim and final dividend.
Strategy in the context of the external
economicandpolitical environment.
The Board balances the desire for consistent
shareholderreturns against the financial
needs ofthe Company to promote long-term
sustainable growth. See the Chair’s statement on
page 5 for further discussion onourcommitment
to our shareholders todeliverlong-term
sustainable returns.
The Board considered the Company’s overall
balancesheet strategy along with the terms of
the RCF and the additional credit facility. Having
appropriate levels of liquidity available supports
the Company in delivering on its purpose for the
benefit of allstakeholders. Further discussion
on the RCFcan befound in theFinancial review
onpage 64.
The Board considered that it was appropriate to
raise capital in the market in order to pay down
RCF drawings and provide liquidity to fund
potential pipeline investments to support further
growth of the Company. For further details of the
results of the capital raise, please see page 64 of
the Financial Review.
Ensuring that the presentation of the Financial
statementsprovides shareholders with a
fair andbalanced view of the Company’s
performance, strategyand operations.
Oversight of risk management, the principal risks
and mitigations and the internal control framework
operates to protect shareholder investment. See
the Risk Report on page 68 and the Audit and
Risk Committee report on page 106 for further
information on risk management and controls.
Board leadership and purpose continued
96
Governance
Who and why? How? Key decisions and areas of focus affecting stakeholders Outcomes
Investment Manager
The Company’s principal supplieris the
Investment Manager, who is responsible for
managing the Company’s assets in order
toachieve its stated investment objective.
The Directors believe that fostering
constructive and collaborative relationships
with the Investment Managerwill assist
in their promotion ofthe success of the
Company for thebenefit of all shareholders.
At each Board and Audit and Risk Committee meeting, representatives
fromthe Investment Manager present verbal and written reports covering
theiractivity, portfolio and investment performance over the preceding
period. The Board also has regular scheduled update calls with the Investment
Manager between Board meetings. The Board and the Investment Manager
operate in a supportive, co-operative and open environment.
The relationship with, and the performance of, the Investment Manager
ismonitored by the Management Engagement Committee. For further
details see pages 113 and 114.
Assessed the performance of, and considered the
continued appointment of, the Investment Manager.
A mutually beneficial relationship promotes
the long-term success of the Company.
Engagement with the Company’s Investment
Manager is necessary to evaluate their
performance against the Company’s stated
strategy and to understand any risks or
opportunities this may present.
This ensures that the Company and its portfolio
assets are well managed, the Company
adheres to its strategy, and the Board
receives appropriate and timely management
andsupport services fromthe Investment
Manager.
Other professional advisers
andserviceproviders
The Company contracts with
professionaladvisers and third parties
forservices, including the external
auditor, the brokers, the depositary,
legal advisers, the financial adviser, the
financial PR adviser, the Registrar, the
Jersey administrator and with3i plc for
company secretarial, treasury, accounting
and internal audit services. Provision
ofthese services is necessary to ensure
theCompany’s compliance with its
legaland regulatoryobligations.
The key third-party professional advisers and service providers work
closelyday-to-day with the Investment Manager. This interaction provides
anenvironment where issues can be dealt with efficiently. On an annual
basis,the Board reviews both the arrangements that are in place with
all keythird-party service providers and monitors their performance.
Inparticular, the Audit and Risk Committee reviews the performance
andservices provided by the external auditor and the Jersey administrator.
Key service providers attend Board and Committee meetings as
appropriateto advise the Board on specific matters.
The Company’s brokers present to the Board at least annually to advise on all
aspects of their remit, particularly in relation to feedback from shareholders
and potential investors. The Investment Manager meets regularly with the
brokers who keep them up to date on both wider financial market-related
matters. This year the brokers have provided specific advice to the Board
andthe Investment Manager on the Company’s access to liquidity.
The Jersey administrator attends one Audit and Risk Committee
meetingperyear in person (the rest are attended via video conference)
andpresents its compliance report at each such Committee meeting.
See the Audit and Risk Committee report on page 106 for further
discussionon the annual review of professional service providers,
includingthe Jersey administrator.
Performed an annual review of the performance,
anti-money laundering procedures, sustainability
procedures and business continuity arrangements for all
service providers in order to assess their performance
and consider the appropriateness of their continued
appointment.
The Board appointed a new Jersey administrator
following a review of service levels and requirements.
The work of the key professional advisers
and third-party service providers ensures
compliance by the Company with its legal
and regulatory obligations in addition to the
maintenance of the Company’s reputation
andhigh standards of business conduct.
The brokers promote the Company as an
attractive investment trust and work to
ensureliquidity in the Company’s shares.
The Company’s Jersey administrator
provides effective Jersey compliance
services through the provision of a dedicated
Money LaunderingReporting Officer,
Money Laundering Compliance Officer
andCompliance Officer.
Board leadership and purpose continued
3i Infrastructure plc Annual report and accounts 2023 97
Governance
Board leadership and purpose continued
Who and why? How? Key decisions and areas of focus affecting stakeholders Outcomes
Portfolio companies
The companies in which we invest are
the source of returns to shareholders.
Wedrive value though our engaged asset
management approach as detailed in
ourBusiness model(see pages 9 to 13).
The principal engagement with portfolio companies is through the
Investment Manager’s team. One or more of its investment professionals
sitson the board of each portfolio company (or acts as a board observer)
andengagement with a portfolio company takes place both formally
at board level and informally by the Investment Manager’s team on
anongoingbasis.
At each scheduled Board meeting the Board reviews
portfolio company performance and discusses thematic
issues that affect portfolio companies such as the impact
of macroeconomic risks. See also the Risk reporton page
68 for further information on the Board’s oversight of the
risks andopportunitiesaffecting portfolio companies.
The engagement enhances the value of the
portfolio companies for the benefit of their,
andour, stakeholders.
Government and regulatorybodies
Being a UK listed and Jersey
registeredCompany, the Board views
compliance with regulations as of the
utmostimportance.
The Company works in a regulated environment and, through the Jersey
administrator, the Company engages with the Jersey regulators to ensure
compliance with Jersey law and regulation. In addition, the Company adheres
to the AIC Code and soengages with the AIC on matters related to corporate
governance.
As a UK listed company the Company Secretary ensures ongoing compliance
with the FCA’s Listing Rules and Disclosure Guidance and Transparency Rules.
Through the Investment Manager, the Company responds to government
consultations on issues relevant to its business.
The Board considers reports from the Company Secretary,
advisers, the Jersey administrator and the Investment
Manager on legal and regulatory developments affecting
the Company. In this context theBoard undertakes an
annual review and approval process for its Schedule of
Matters Reserved for the Board and the Terms of Reference
of its Committees toensure that they remain fit for purpose
and adhere tobest practice.
The Company continues to operate in
compliance with relevant law and regulation
and ensures the highest standards of corporate
governance for the benefit of allstakeholders.
Lenders and hedging
counterparties
The Company requires access
tobankborrowing to maintain its
financialstructure and liquidity.
The Investment Manager’s treasury team manages the engagement with
thelenders in the Company’s RCF and the Company’s hedge counterparties.
This year, with the support of its lenders, the Company was able to refinance
and extend its existing RCF onfavourable terms to support the acquisition
pipeline. Forfurtherdetailssee page 118.
The Board held two ad-hoc meetings to discuss in
detailthe refinancing of the RCF prior to providing
itsapproval.
Foreign exchange hedging is discussed at the annual
treasury update given to the Board.
Access to bank borrowing and hedging
instruments provides important flexibility and
resilience to the Company’s financial structure
and helps the Company tomaintain an efficient
balance sheet.
Access to hedge counterparties allows the
Company to mitigate foreign exchange risk.
Communities
The Company is committed to
contributing positively to the communities
in which it operates and details of this
arecontained in the Sustainability
reporton pages 46 to 56.
Engagement is primarily via the Investment Manager. One or more
ofitsinvestment professionals sits on the board of each portfolio
company(or acts as a board observer) and engagement with a
portfoliocompany takes place both formally at board level and
informallybytheInvestment Manager’s team on an ongoing basis.
Strong sustainable performance by portfolio
companiesbenefits their stakeholders and the
communities in whichthey operate. During the year,
theBoard discussedESG reporting requirements
including those under the TCFD framework.
Forfurtherdetails see theSustainability report
onpage46.
By investing in, developing and actively
managing infrastructure assets, we foster
growth and aim to provide a positive benefit
to the communities in which our portfolio
companies operate and the customers they
serve.
We are able to use our position as a
shareholderin the businesses we own
toinfluence and support management
tooperateresponsibly.
98
Governance
Division of responsibilities
The Board is the principal decision-
making body of the Company with
authority for specific matters being
delegated to Committees of the Board.
In compliance with the AIC Code, the
Board has established an Audit and Risk
Committee, a Nomination Committee and
a Remuneration Committee in addition to
a Management Engagement Committee
and a Disclosure Committee. This structure
allows the Board to focus on matters of
strategic importance. Each Committee
Chair provides regular reports to the Board
on the matters covered at each Committee
meeting. The Terms of Reference clearly
set out the remit and decision-making
powers for each of the Board’s Committees,
are reviewed annually by the Board and
are available to view on the Company’s
website. Matters and decisions that require
Board approval and which cannot be
delegated are set out in a formal Schedule
of Matters Reserved to the Board, which is
reviewed annually.
To ensure the Board performs effectively,
there is a clear division of responsibilities
between Board roles, set out in writing and
agreed by the Board. Key roles have been
defined in greater detail opposite:
Each of the Directors has an appointment
letter, copies of which are available from
the Company Secretary upon request.
No Director has a contract of employment
with the Company, nor are any such
contracts proposed. The Directors’
appointments can be terminated, without
compensation for loss of office, in
accordance with the Company’s Articles
of Association (the ‘Articles’). The Articles
further specify that each of the Directors
shall retire and may offer themselves for
re-election at each AGM of the Company.
Following the formal appraisal process of
Directors, and in accordance with Provision
7.2, paragraph 23 of the AIC Code, the
re-election of all current Directors will be
proposed at the forthcoming 2023 AGM.
The Company’s policy on Director tenure
is that a Director should normally serve
no longer than nine years on the Board
but, where it is in the best interests
of the Company, its shareholders and
stakeholders, the Board may approve a
Director serving for a longer tenure. In such
instances the Board will provide a clear
explanation in the Annual report as to their
reasoning. For further information see the
Nomination Committee report on pages
102 to 105.
Role Responsibilities
Chair
As Chair, Richard Laing:
• leads the Board in the determination and implementation of its purpose and strategy;
• promotes a culture of responsibility, scrutiny, challenge and support in Board
meetings, underpinned by the Board values of Integrity, Objectivity, Accountability
and Legacy;
• is responsible for organising the business of the Board, ensuring its effectiveness
and setting its agenda;
• facilitates the effective contribution of all Directors;
• actively encourages constructive relations between the Company’s advisers,
theInvestment Manager, and the Directors;
• ensures that the views of all stakeholders are understood and considered
appropriately in Board discussions and decision making; and
• leads the Board and Committee evaluations.
Senior Independent
Director
As Senior Independent Director, Paul Masterton:
• acts as a sounding board for the Chair;
• supports the Chair in the delivery of his responsibilities;
• acts as an intermediary with the Chair for the other Directors and shareholders;
• leads the appraisal of the Chair’s performance with the non-executive Directors; and
• is available to address shareholders’ concerns that have not been resolved through
the usual channels of communication.
Non-executive
Directors
The remaining non-executive Directors:
• provide constructive challenge during discussions and offer strategic guidance
tothe Board;
• bring independent judgement to the consideration of issues of strategy,
performance, investment appraisal, communication matters and standards
of conduct;
• ensure high standards of financial probity on the part of the Company; and
• scrutinise the performance of the Company and progress against
strategic objectives.
Company
Secretary
3i plc serves as the Company Secretary under the terms of the IMA. 3i plc’s
Group Secretariat:
• ensures compliance with Board procedures and corporate governance best practice;
• provides corporate governance advice and guidance to the Board and keeps the
Board updated on corporate governance developments;
• assists the Chair with meeting preparation; and
• ensures the Board has access to timely high-quality information in order to
function effectively and efficiently.
3i Infrastructure plc Annual report and accounts 2023 99
Governance
Composition, succession and evaluation
Composition and succession
The Board currently consists of seven
members, comprising the Chair, five
independent non-executive Directors and
one non-executive Director who is the 3i
nominated Director and not considered
to be independent. Biographies of the
Directors are set out on pages 87 and
88. The Board considers that there is an
appropriate balance of skills, experience
and independence on the Board to enable
it to discharge its duties.
The Nomination Committee oversees the
process of appointments and succession
planning of non-executive Directors.
The role of the Nomination Committee is
critical in ensuring that the composition
and balance of the Company’s Board and
Committees support both the Company’s
strategy and best practice in the area of
corporate governance. Further information
is set out in the Nomination Committee
report on pages 102 to 105.
These include temporary separation or
recusal from a relevant process or decision,
restriction of access to certain information
and sharing authority through collective
decision-making. In view of this practice,
the 3i Group nominated Director recuses
himself when matters in which 3i Group has
an interest are discussed. Ian Lobley is not a
member of the Management Engagement
Committee and so did not participate in the
Board’s evaluation of the performance of
the Investment Manager.
In accordance with the Articles and the
Companies (Jersey) Law 1991, the Board
can authorise any matter that would
otherwise result in a Director breaching his
or her duty to avoid a conflict of interest.
The Company’s Jersey administrator
maintains a conflict register covering
actual and potential conflicts and details
of the Board authorisation of any conflict.
When they are appointed, all Directors
are required to disclose any other
appointments or significant commitments.
They must also notify the Chair and
Company Secretary of any changes or
new appointments in order for the Board
to consider any potential conflicts of
interest prior to providing its approval
fornew appointments.
Conflicts of interest
andindependence
The Board assesses and reviews the
independence of each of the Directors at
least annually and considers whether or
not a Director has any interest, position,
association or relationship which is
likely to influence unduly or cause bias
in decision-making in the best interests
of the Company and its stakeholders.
The Board considers all Directors, with
the exception of Ian Lobley, who is the
3i Group nominated Director, to be
independent in character and judgement,
and free from conflicting business or other
interests that could interfere with the
exercise of their independent judgement.
The Chair was considered independent
on appointment and has no relationships
or circumstances which might create a
conflict of interest between his interests and
those of the shareholders. See page 103
of the Nominations Committee report for
further information.
Ian Lobley, the 3i Group nominated
Director, has a pre-approved conflict in
relation to the IMA. The Board ensures
the independence of all Directors and
it has at its disposal a range of conflict
management tools to manage potential
oractual conflicts.
Board evaluation
The Board recognises that it needs to
continually monitor and improve its
performance and the annual performance
evaluation provides the opportunity for
the Board and its Committees to consider
and reflect on the effectiveness of its
activities, the quality of its decision making,
and the collective contribution made by
each Board member. This year an internal
review of the performance of the Board, the
Audit and Risk Committee and the Chair
was conducted with the support of the
Company Secretary following the externally
facilitated review of 2022.
As an action from the external review of
FY22, the Board held a workshop led by
Satori, the external facilitator, to further
articulate and consider the Board’s purpose
and values in the context of the Company’s
strategic objectives. This year’s evaluation
included a review of the effectiveness of the
workshop and the outcome of the previous
year’s evaluation. Satori has no connection
with the Company.
100
Governance
All Directors and the Investment Manager
completed a confidential questionnaire,
which was similar to questionnaires used
in the past to ensure a comprehensive
review and provide assurance on progress
against actions. Anonymised reports were
subsequently prepared by the Company
Secretary and presented to the Board for
consideration. The Board had an extensive
discussion to identify progress made and
further actions to be taken. Each of the
Chair and Audit Committee Chair excused
themselves from the meeting when their
performance was discussed.
The conclusions of this year’s evaluation
have been positive and confirmed that
the Board remains effective. In particular,
the following progress and actions
were identified:
Director induction, training
anddevelopment
Upon joining the Board, all Directors
receive a formal induction to the Company,
which is designed to enable them to
understand the Company’s purpose,
values and strategy, the industry in which it
operates and the portfolio companies, so
that they can be effective Board members
from the outset. The induction programme
includes presentations on corporate
governance, Director duties relevant to a
Jersey-incorporated UK Listed Company,
the Company’s policies, meetings with
the wider Investment Management
team, external advisers, briefings and
reading materials.
During the year, Directors receive a full
programme of briefings across all areas of
the Company’s business with the objective
of ensuring that the Directors remain up to
date on all issues affecting the Company.
Briefings are led by the Investment
Manager, Company Secretary or external
service providers, such as the Company’s
auditors, and cover a wide variety of
sector-specific and business issues, as
well as legal and financial regulatory
developments relevant to the Company
and the Directors. Sessions during the
year included briefings on UK corporate
governance developments, changes
to laws and regulations in Jersey and
the UK, tax matters, fund raising, ESG
developments, and developments in the
infrastructure market. Detailed briefing
papers or presentations are provided
at each scheduled Board meeting or
at ad-hoc meetings and Directors have
the opportunity for formal and informal
meetings with the Investment Manager
orthe Company’s other advisers.
As part of their role, Directors are also
expected to personally identify any
additional training requirements they feel
would benefit them in performing their
duties to the Company. In accordance
with Jersey regulations the Directors are
required to undertake sufficient, relevant
and appropriate training and development
each year. Directors have access to the
advice and services of the Company
Secretary and, when deemed necessary,
the Directors can seek independent
professional advice. Furthermore,
training and development needs are
reviewed annually as part of the Board
evaluation process.
Progress since
2022evaluation
• The Board participated in a workshop on Board purpose and Board values
• The Board is devoting more time to strategic matters during meetings and
prioritisingstrategic topics on meeting agendas
• The succession of the Investment Manager’s Managing Partners and the
relationshipwith the new Managing Partners were managed effectively by
theChairand the Board as a whole
Actions for the
comingyear
• Funding and liquidity planning would continue being an area of focus
• The Nomination Committee and the Board should focus on succession
planning,especially in relation to ethnic diversity on the Board
• Refreshing the training and development framework for Directors
Composition, succession and evaluation continued
3i Infrastructure plc Annual report and accounts 2023 101
Governance
Composition, succession and evaluation continued
Nomination Committee report
During the year we
continued our focus on
succession planning for our
non-executive Directors,
keeping in mind the skills
and experience required
to support the Company’s
strategic objectives.”
Richard Laing
Chair, Nomination Committee
Role of the Committee
The Committee’s principal responsibility is
to ensure that, collectively and at any given
time, the members of the Board possess
the necessary balance of knowledge, skills
and experience to support and develop the
strategy of the Company. In seeking to achieve
this, it recommends new Board appointments
as and when appropriate and ensures that
effective succession planning processes are
in place. In accordance with the Committee’s
Terms of Reference, it is the Board as a
whole which is responsible for making new
appointments upon recommendation by the
Nomination Committee.
Members of the Committee do not vote
in decisions affecting their own position.
During the year the Committee reviewed
its compliance with the AIC Code and its
Terms of Reference and confirmed that it
remained compliant with all of its corporate
governance responsibilities.
Details of each of the Director’s skills
and experience which contribute to the
effective functioning of the Board and the
success of the Company can be found in
their biographies on pages 87 and 88 and
intheSkills Matrix below.
Composition and succession planning
As part of its review of composition and
succession planning, the Committee carefully
considered which skills and experience it
would require on the Board over the coming
years based on the perceived current and
future challenges facing the Company
and the tenure of all Directors. The review
identified that it would be in the interest
of the Company to appoint an additional
independent non-executive Director
with broad industry experience to the
Board. The Committee appointed Odgers
Berndtson, an independent executive
search and leadership consulting firm with
no connection to the Company or any
of its Directors, to support the search for
candidates. Following an extensive search,
Odgers Berndtson proposed candidates
fromas diverse a pool of candidates as
possible given the nature, responsibilities
and skills required for the role. The Board was
delighted that the exercise resulted in the
appointment of Stephanie Hazell, who joined
the Board in September 2022.
In order to facilitate the succession planning
process, the Nomination Committee
recommended the Directors’ appointment
letters be updated to incorporate provisions
for a formal review on the third and sixth
anniversaries of first appointment to discuss
whether it is appropriate to serve for a
furtherthree-year term.
5
7
3
I
nfrastructure
Investment trust
Fund management
Asset management
4
Financial/audit (recent and relevant)
3
Valuations
5
Risk and compliance
4
ESG
Legal and regulatory
Governance
Remuneration
Megatrends
Technology/next generation/digital
5
5
5
5
5
M&A/capital markets
7
7
International
5
Consumer markets 2
Directors’ Skills Matrix (Number of Directors)
102
The Board has agreed a maximum term
forany Director of nine years, subject to
anyexceptional circumstances that might
arise atthe relevant time.
Given that the Company was
considering moving its domicile to the
UK, as reportedlast year, the Board
had asked PaulMasterton to remain
on the Board for anadditional year
whilst it awaited the outcome of the
UK government’s consultation on UK
Corporate Redomiciliation.
In considering Paul’s status as an
independentnon-executive Director, the
Committee concluded that there were
nocircumstances which were likely to
impact, or could appear to impact, his
independence and he was considered
toremain an independent director.
The Committee has started the process to
recruit a successor for Paul. In addition, 3i
Group will, in accordance with the terms
of the relationship agreementbetween
3i Group and theCompany, nominate a
successor to IanLobley (who hasnow served
on the Boardfor nine years)later in 2023.
Diversity
The Board has adopted 3i Group’s
EqualOpportunities and Diversity policy
in so far as it is relevant to the Company
having only non-executive Directors and
no employees. The policy can be found
at www.3i.com. The Board, with the
support ofthe Committee, is committed
topromoting greater diversity on the
Boardtoenhance the effectiveness
ofthe Board.
As can be seen by the graph below,
thiscommitment has led to improved
gender diversity on the Board and has
already achieved the target set by the
FTSEWomenLeaders Review of having
40% of FTSE 350 board roles filled by
women by 2025.
The Board supports the targets set by
theParker Review for FTSE 250 Boards to
have at least one Board member from an
ethnic minority background by 2024 and
is working towards achieving this target
despite the complexities that it has faced
in this regard. The Board is disappointed
that it does not yet meet the Parker Review
target, however, this does not fairly reflect
the Board’s commitment to diversity.
Composition, succession and evaluation continued
Nomination Committee report continued
Board members by gender
Non-executive Directors’ tenure
Female (43%)
3
Male (57%)
4
0–3 years
2
4–6 years
0
7+ years
5
The Board, with the Committee’s support,
continues to take practical and purposeful
steps towards enhancing theBoard’s diversity.
The framework within which the Committee
assesses the composition of the Board, its
Committees and future Board appointments
is based on the Company’s strategic
objectives, regulatory requirements, the
Company’s status as aUK listed, Jersey
incorporated company and the specific
functions which non-executive Directors
would be required to fulfil on Committees.
This presents aparticular challenging and
sometimes conflicting set of requirements
to adhere to and which the Board has been
working towards overcoming.
In November 2022, the Association
of Investment Companies published
an articlesetting out the significant
challenges faced by Jersey registered,
UKListed companies due to the Jersey law
requirement of having two Jersey-resident
Directors on its boards.
The limited diverse candidate pool for Jersey
resident directors and the ongoing issues on
overboarding mean that there is a conflict
between the Jersey and UK regulatory
expectations, especially in relation to the
UK Listing Rule requirements for reporting
on diversity.
3i Infrastructure plc Annual report and accounts 2023 103
Governance
Composition, succession and evaluation continued
Nomination Committee report continued
The Company has been in discussion with
the Jersey Financial Services Commission
(‘JFSC’) regarding its succession plans
and the challenges it faces in satisfying
the requirement for two Jersey resident
directors. During FY24 the Board will
formally request the JFSC to grant the
Company a variance to the requirement
of having two Jersey resident Directors on
the Board. If granted, this would allow the
Nomination Committee to conduct future
searches for directors in a geographically
wider area, leading to a more diverse pool
of candidates from which to select.
The Parker Review update report published
in March 2023 also noted that many
investment trusts are based outside
mainland Great Britain (eg. in theChannel
Islands) where there are fewer residents
from ethnic minorities and their boards
often have fewer directors on them than
other companies.
Unless the JFSC requirement for two
Jersey resident directors is changed or
a variance is granted, the Company has
only four independent non-executive
Director rolesthat it could use to fulfil the
UK diversity requirements. The maximum
number of Directors allowed under
the Articles is seven, which is generally
considered to be a high number for an
investment trust with noemployees.
In addition, the Board has noinfluence
over the choice of candidates for
the appointment of the 3i Group
nominated Director.
Furthermore, the Board has previously
stated that it would consider redomiciling
the Company to the UK under a proposed
UK Corporate Redomiciliation regime, on
which the UK government consulted during
2021. The government’s proposal includes
a regime to allow overseas registered
companies to become UK registered
companies in a simpler and more cost-
effective process.
Should the Company decide to transfer
its domicile it would no longer require
two Jersey resident directors, which
would allow any future directors to be
sought from a much wider candidate
pool. Unfortunately there has been no
further update from the UK government on
these proposals.
Despite the challenges already mentioned,
diversity in all its forms remains a critical
consideration in the Board’s succession
planning processes.
In accordance with LR 9.8.6(9) of the FCA’s
Listing Rules, the tables on page 105 set out
details of the diversity of the individuals on
the Board and Executive Committee at the
date of this Report. The Listing Rules state
that, for purposes of the required disclosure
and assessment against targets, senior
board positions consist of the chair, chief
executive officer (CEO), senior independent
director (SID) or chief financial officer
(CFO)(LR 9.8.6R (9)(a)(ii)).
The Listing Rules make provision for
closed-ended investment funds, such as
the Company, who do not typically have
a CEO or CFO, to not report against the
target to have at least one of the senior
board positions held by a woman if it is
“inapplicable”. As an externally managed
investment company, 3i Infrastructure plc
does not have a CEO or CFO and therefore,
as allowed by the Rules, does not need to
report against this target. The Board does,
however, consider the role of the Chair of
any of its permanent Committees to be
senior positions on the Board.
Wendy Dorman is the Chair of the Audit
and Risk Committee and, in the Board’s
view, it therefore complies with the target
of having at least one senior Board position
held by a woman.
104
Governance
Gender identity or sex
Number of
Board members
Percentage
of the Board
Number of senior positions on the
Board (CEO, CFO, SID and Chair)
Men 4 57% 2
Women 3 43% 1
Not specified/
prefer not to say
– – –
Ethnic background*
Number of
Board members
Percentage
of the Board
Number of senior positions on the
Board (CEO, CFO, SID and Chair)
White British or other
white(including minority-
white groups)
7 100% 3
Mixed/Multiple
ethnicgroups
– – –
Asian/Asian British – – –
Black/African/
Caribbean/Black British
– – –
Other ethnic group,
including Arab
– – –
Not specified/
prefer not to say
– – –
* This information was collected through a self-identification exercise by all Directors and facilitated by the
Company Secretary. Permission was sought from the Directors to use the information for this purpose.
Appointment process
When considering candidates for
appointment as Directors of the Company,
a detailed job specification and candidate
profile is prepared, and consideration
is given to the existing experience,
knowledge and background of Board
members as well as the strategic and
business objectives of the Company. It is
the Company’s policy to use independent
external search agencies for all
Board recruitment.
Shortlisted candidates are invited to
interview with members of the Committee
and, if recommended by the Committee,
would be invited to meet the entire Board
before any decision is taken relating to
the appointment. Senior members of the
Investment Manager also meet potential
candidates and provide their views on such
candidate to the Committee.
The Committee is also responsible for
obtaining and verifying references prior
to any formal decision on appointment.
Appointments are therefore made on
personal merit and against objective
criteria with the aim of bringing new skills
and different perspectives to the Board
whilst considering the existing balance of
knowledge, experience and diversity.
Richard Laing
Chair, Nomination Committee
9 May 2023
Composition, succession and evaluation continued
Nomination Committee report continued
3i Infrastructure plc Annual report and accounts 2023 105
Governance
The Committee plays a
key role, overseeing the
integrity of the Company’s
financial reporting,
audit processes, and
riskmanagement and
internal controls.”
Wendy Dorman
Chair, Audit and Risk Committee
Audit, Risk and Internal Control
Audit and Risk Committee report
Membership and meetings
All the members of the Audit and Risk
Committee are independent non-executive
Directors who collectively have the
necessary range of financial, risk, internal
control and commercial experience
required to fulfil the Committee’s remit.
The Audit and Risk Committee Chair,
Wendy Dorman, is a Chartered Accountant,
and the Board is satisfied that she has
recent and relevant financial experience.
The Chair of the Board is not a member
of the Committee but attends meetings
by invitation.
In addition to the scheduled Committee
meetings, the Committee Chair has
regular discussions and meetings with the
Investment Manager, external auditor and
the Company’s Jersey administrator.
The Committee Chair provides a formal
update on the Committee’s work to
the Board at each scheduled Board
meeting. The performance of the
Committee and its Chair is evaluated
annually as part of the overall evaluation
of the Board and theBoard Committees
as further disclosedon page 100.
Overall the Committee continued
to perform wellandwas effective in
discharging its responsibilities.
The Committee held three scheduled
meetings this year, aligned with
the Company’s reporting cycle.
Meetings followan annual workplan
developed from the Committee’s Terms
of Reference in addition to any specific
business requirements.
Regular attendees at meetings are the
Board Chair, Ian Lobley, members of the
Investment Manager’s team, the external
auditor, Deloitte LLP (‘Deloitte’) and the
Company’sJersey administrator, Aztec
Financial Services (Jersey) Limited (‘Aztec’)
(Apex Financial Services (Alternative
Funds) Limited (‘Apex’) was previously
the Company’s Jersey administrator,
untilDecember 2022).
106
Governance
Role of the Committee
The role of the Audit and Risk Committee
is to assist the Board by establishing,
reviewing and monitoring policies and
procedures to ensure the integrity of
financial and narrative reporting, the
independence and effectiveness of the
external auditor, and the effectiveness of
the system of internal controls and of the
risk management framework. In addition,
the Committee manages the relationship
with the external auditor, reviews the
scopeand terms of its engagement,
andmonitors its performance through
regular effectiveness reviews.
In accordance with the Committee’s role
in scrutinising investment valuations,
the Committee reviews and challenges
the Investment Manager’s semi-annual
valuation assumptions, judgements and
resulting valuations of the Company’s
underlying portfolio of infrastructure
assets. More details on the Committee’s
role inscrutinising investment valuations
canbefound on page 108.
Internal audit
The Committee annually reviews the need
for an internal audit function and is satisfied
that the systems, processes and procedures
of the Company and the Investment
Manager provide sufficient assurance that
an appropriate level of risk management
and internal control is maintained.
The Committee has therefore concluded
that an internal audit function specific to
theCompany is currently not necessary.
Financial and narrative reporting
The Company, through the Investment
Manager, has in place internal control and
risk management arrangements to support
the financial and narrative reporting
process and to provide assurance that
the Company’s Half-yearly report and
Annual report and accounts are prepared
in accordance with applicable standards.
The Committee reviewed and made
recommendations to the Board regarding
significant accounting matters and the
accounting disclosures in the Half-yearly
report and Annual report and accounts
ofthe Company.
Fair, balanced and understandable
(‘FBU’) reporting
The Committee considered the
requirements of the AIC Code and
specifically reviewed this Annual report
andaccounts to conclude whether the
financial reporting is fair, balanced,
understandable, comprehensive and
consistent with how the Board assesses
theperformance of the Company’s
businessduring the financial year.
As part of this review, the Committee
considered whether the Annual report
and accounts provided the information
necessary to shareholders to assess
the Company’s position, performance,
strategyand business model and
reviewedthe description of the
Company’sKey Performance Indicators.
The Committee’s FBU process consists
ofreviewing the Annual report and
accounts at various stages of its production,
reviewing confirmation of the factual
verification process by the Investment
Manager and Company Secretary and
reviewing the work of the external auditor.
Key accounting estimates
andjudgements
An important responsibility of the
Committee is to review and agree the key
estimates, judgements and assumptions
which impact the Financial statements.
The key areas of judgement are set out
on page 108. After receiving reports on
the significant estimates and matters of
judgement from the Investment Manager,
and after considering the report on the
audit from Deloitte, the Committee agreed
that the judgements made were appropriate
and correctly reflected and presented in the
Annual report and accounts. More detailed
information on the Company’s accounting
policies can be found on pages 140 to 147.
Audit, Risk and Internal Control continued
Audit and Risk Committee report continued
3i Infrastructure plc Annual report and accounts 2023 107
Governance
Audit, Risk and Internal Control continued
Audit and Risk Committee report continued
Valuation of the
investment portfolio
The Committee noted that this year there were no changes to the principles of valuation
whichhave been consistently applied. All unquoted assets have been valued on a discounted
cash flow (’DCF’) basis with the exception of the 3i India Infrastructure Fund where the
valuationis taken as the Company’s share of the Fund’snet assets. Within the India Fund,
theremaining investment in Supreme Infrastructure is valued at nil.
The WADR of the portfolio was slightly higher at 11.3% (10.9% at March 2022), primarily
duetothe evolution of the portfolio mix following the completion ofthenew investments
inGCX and Future Biogas and the realisation of the EuropeanProjects portfolio.
The Committee considered the effect of a higher inflation and interest rate environment
on cost and revenue assumptions. Factors considered included theimpact on operating
costs, the cost of debt and capital expenditure, the abilitytopass cost inflation to customers
and company specific factors. These factorsare reflected in the cash flow projections of the
portfolio companies. The appropriateness of the discount rates in relation to these cash
flowprojections was also considered.
The Investment Manager, as the Company’s Alternative Investment Fund Manager, is
responsible for providing a valuation of the investment portfolio that has been prepared
properly and independently challenged. The Committee noted that 3i Investments plc’s
infrastructure valuations committee is considered independent of the Investment Manager’s
fund management activity and that it had approved the investment portfolio valuation as
at31 March 2023. The Committee discussed in detail the portfolio company valuations with
the Investment Manager and the external auditor, including the external auditor’s valuation
expert, and considered that the principles of valuation applied by the Investment Manager
tothe investmentportfolio had been applied correctly and consistently and recommended
thevaluations to the Board for approval.
Interest streaming
For an approved investment trust that has taxable profits arising from net interest income,
the UK tax rules provide an option to treat a part of the dividends it pays asinterest.
TheCommittee decided to designate 5.4 pence of the 5.575 pence interim dividend payable
as aninterest distribution. The Annual report and accounts have been prepared on the
assumption thatthe Company will not designate any of its final dividend as interest.
Investment entity
consideration
The Committee annually reviews the assessment that the Company continues tomeet
thecriteria of an investment entity.
Calculation of the
management and
performance fees
payable to the
Investment Manager
The Committee undertook a detailed review of the management and performance fee
calculation. The Committee also had access to a review of the calculation of the management
and performance fee carried out by the internal audit function of the Investment Manager
andengaged the external auditor to perform additional agreed-upon-procedures work
inrelation to the inputs to the management and performance feecalculation.
Valuation of derivative
financial instruments
and other receivables
The Committee considered and agreed with the Investment Manager’s valuations in relation
toderivative financial instruments and other receivables.
In addition to the above matters, the
Committee reviewed the following areas:
• the use of Alternative Performance
Measures (‘APMs’) and the balance
ofAPMs andGAAP measures in the
Annual report and accounts;
• the appropriateness of the sensitivity
rates applied in Note 9 of the
Financial statements;
• post balance sheet events; and
• other changes in presentation within
thereport to improve clarity for users.
The Committee presented its conclusions
on the above areas to the Board and advised
the Board that it considered the Annual
report and accounts, taken as a whole,
to be fair, balanced and understandable.
The Committee further advised that, so
far as it was aware, there was no relevant
audit information of which the external
auditor was unaware; that the Committee
had taken all reasonable steps to ascertain
any relevant audit information and ensure
that the external auditor was aware of such
information; and that the Annual report
and accounts provided the information
necessary for the shareholders to assess
theCompany’s position, performance,
business model and strategy.
External auditor
The Committee has primary responsibility
for overseeing the relationship with
Deloitte, the external auditor, including
assessing annually its performance,
effectiveness and independence.
Shareholders approved the re-appointment
of Deloitte as external auditor for the year
ended 31 March 2023 at the Company’s
July 2022 AGM following a competitive
external auditor selection process in 2017.
Stephen Craig has been the audit partner
for Deloitte since the conclusion of the
2022 audit. The Committee reviewed and
monitored Deloitte’s execution of the audit
plan and also considered Deloitte’s report
on its review of the half-yearly results and
its report on the FY22 audit. It discussed all
significant matters identified in Deloitte’s
final report on the FY22 audit, including
key accounting judgements taken by the
Investment Manager and the Investment
Manager’s responses to any audit findings.
108
Governance
External auditor effectiveness
The Audit and Risk Committee reviewed
the effectiveness of the FY22 external
audit process, considering performance,
objectivity, independence and relevant
experience demonstrated by reports and
presentations from the external audit
team and discussion with the Investment
Manager. The Committee monitors the
external auditor’s independence and
objectivity, taking into consideration
relevant professional and regulatory
requirements, the quality of the audit
process, and the use of Deloitte’s
valuation practice to support the
audit of the portfolio valuations, the
technical knowledge of the team and
staff turnover within the Deloitte audit
team. The Committee considered a
memorandum from the Investment
Manager regarding the external auditor’s
effectiveness, independence and
objectivity. The Committee considered
the Financial Reporting Council’s (‘FRC’)
2016 guidance to Audit Committees when
assessing the effectiveness of the whole
audit process.
The Committee noted the following
inrespect of the external auditor:
Assessment against the audit plan
• there were no areas where the
InvestmentManager or Company’s views
of the accounting treatment differed from
that of the external auditor;
• the level of engagement from the
audit partner was high throughout
theaudit process;
• the auditors met the agreed audit plan
and undertook work to address the
risks identified in their plan and any
subsequent risks identified;
• continuity of the audit team was
retained into the audit of the
Company’ssubsidiaries; and
• the audit matched the process
setoutinthe audit plan.
Evaluation of audit quality
Following the FRC’s Practice Aid for
audit committees on audit quality (2019)
the Committee considered the four key
elements that are necessary to support the
auditor in making sound judgement – (i)
Judgement, (ii) Mindset and Culture, (iii)
Skills, Character and Knowledge, and (iv)
Quality Control. In making its evaluation
theCommittee noted the following in
respect of the external auditor:
• the work undertaken by the external
auditor to address the risks identified
intheir plan and any subsequent risks
thathad later been identified;
• the external auditor’s focus on valuation
assumptions, particularly inflation rates
used in the individual asset models.
A significant amount of time was spent
on testing inflation linkage within each
asset model;
• the detailed audit work completed
onthecalculation of the management
and performance fees;
• the review of disclosures required
for the new resilience statement and
additional disclosure in the key estimation
uncertainties section such as cash flow
and terminal value assumptions;
• the use of data analytic tools to support
the conduct of the audit;
• the level and quality of challenge
received from the external auditor;
• a good knowledge of accounting
standards, governance requirements
andthe infrastructure market;
• the robust and perceptive handling of the
key accounting and audit judgements;
• the support received by the external
auditor from the external auditor’s
technical team;
• the focus of the external auditor on
compliance with the UK Investment
Trust Regulations and AIC Statement
ofRecommended Practice; and
• the final report was presented based on
a good understanding of the Company’s
business and included granularity around
the valuation assumptions.
Audit, Risk and Internal Control continued
Audit and Risk Committee report continued
3i Infrastructure plc Annual report and accounts 2023 109
Governance
Audit, Risk and Internal Control continued
Audit and Risk Committee report continued
Non-audit services and external
auditor independence
The Company’s Non-audit services policy
is reviewed annually to ensure that the
provision of such services by the external
auditor does not impair the external auditor’s
independence or objectivity. In order to
safeguard external auditor objectivity and
independence, the chair of the Audit and
Risk Committee is required to approve in
advance all non-audit work undertaken
by the external auditor for the Company
and its subsidiaries, and as a general rule
the external auditor will not be engaged
on investment-related work. However,
exceptions to this may be permitted if the
work is (i) for an affiliate of the Company
and an indirect service to the Company or
(ii) reporting accountant work, for example
in the case of a capital raise. In addition to
the Company’s policy, in accordance with
Deloitte internal controls, the audit partner
must also approve any non-audit services
provided by Deloitte to their audit client.
Deloitte and their associates provided
non-audit services to the Company for
feestotalling £95,891 for the year to
31 March2023 (2022: £104,635).
Risk management and
internalcontrol
The Board has overall responsibility for
the Company’s risk management and
internal control framework, including
the determination of the nature and
extent of the principal risks it is willing to
take to achieve its strategic objectives.
The Company’s overall risk management
and internal control process is regularly
reviewed by the Audit and Risk Committee
and complies with the Guidance on Risk
Management, Internal Control and Related
Financial and Business Reporting issued
bythe Financial Reporting Council.
During the year, the Committee reviewed
the Company’s risk management processes
primarily based on the Company’s
assessment of its principal risks and
uncertainties as set out in the Risk report
onpages 73 to 75.
As part of this the Committee:
• carried out a full review of the risk register
as part of the three-year risk review cycle
with the objectives of (i) identifying the
principal, key and emerging risks facing
the Company; (ii) considering the impact
and likelihood of these risks; (iii) ensuring
that risks identified were linked to the
Company’s strategic objectives; and
(iv)updating the risk register and risk
matrix as appropriate;
• conducted risk reviews as detailed
intheRisk report on pages 70 to 72;
• carried out horizon scanning to identify
new and emerging risks;
• reviewed the risk log at each
Committeemeeting, and discussed
themanagement of risks noted on
thelogwith the Investment Manager;
• considered the presentation of risk-
related matters in the Annual report
andaccounts; and
• considered the resilience, viability
statement andthe reverse stress test
analysis (formore detail see pages 78
to 80).
This related to agreed-upon procedures
on the management and performance
fees (£8,316), agreed-upon procedures
work in respect of sustainability KPIs
for the RCF reporting (£27,000) and a
review of the interim financial statements
(£60,575). In this financial year, in line with
the Company’s policy, Deloitte provided
non-audit services in relation to certain non-
consolidated investee companies. The fees
for these services areordinarily borne by
the underlying investee companies or
unconsolidated subsidiaries, and therefore
are not includedin the expenses of
the Company.
In assessing the external auditor’s
independence, the Committee reviews
thetotal amount of fees paid to the
externalauditor in accordance with the
Non-audit services policy, regardless
ofwhether they are borne bytheCompany
or by the investee companies.
The Committee concluded thatthe external
auditor remained independent and the
audit was effective, and that a resolution be
proposed to shareholders recommending
the re-appointment of Deloitte at the
2023 AGM.
110
Governance
A process of monitoring and oversight is
built into the existing delegated authority
structure through the role of the Board
and its Committees, including the Audit
and Risk Committee. The Company is
dependent on investment management,
financial and treasury, administrative and
other support services being provided by
third parties (the ‘Service providers’) and
those Service Providers are subject to their
own operational risk management and
controls. Independent monitoring is carried
out by the Service providers’ internal audit
teams and the Company receives copies
of Service provider reports on their own
internal controls as follows:
• annual independent review of the
Company’s business line operations by
the Investment Manager’s Internal Audit
and Group Compliance functions.
In particular, for the year under review
the Committee discussed reports
inrelation to the internal audit of the
Investment Manager’s Information and
Communication Technology (‘ICT’)
framework which focused on 3i’s cyber
maturity and general ICT security.
• during the year a review of 3i’s treasury
processes was also considered and
no material findings were reported.
Other service areas, such as tax, are
reviewed on a two- to three-year
rotation basis;
• the Company’s Registrar provides
an annual independent report on its
internal controls, which covers the
registrar services to the Company. This is
completed in accordance with Technical
Release AAF 01/20. The report is reviewed
by the Board, the Company Secretary
and Investment Manager and for the
year under review showed no weakness
in controls;
• the Company’s Jersey administrator
provides an annual report detailing
theirinternal control framework to
demonstrate their approach to internal
controls and their risk management
processes. The Jersey administrator
is regulated by the JFSC and must
provide acopy of their annual directors’
declaration to the JFSC of any material
breaches of the Codes of Practice for
Fund Services Business (inclusive of
internal systems and controls), audited
accounts, auditoropinion and ISA
260 letter.
For the year under review, Aztec had
received an unqualified ISAE 3402 report
and had recently been re-certified under
ISO 27001. ISAE 3402 and ISO 27001
are the global assurance standards for
internal control and information security,
which provides assurance to clients
over the robustness of the design and
application of Aztec’s internal controls.
During the year the Company’s previous
Jersey administrator, Apex, also provided
an internal control annual confirmation for
the period up to December 2022 detailing
the internal control framework that Apex
adheres to as a Fund Services Business
under the Financial Services (Jersey) Law
1998; and
• Deloitte provides an audit update report
which includes an assessment of the
design and implementation of controls
Deloitte identified as key controls.
• The nature of 3i’s business means there
are no ICT critical dependencies in terms
of day-to-day operations. Since the last
review, 3i’s IT governance, infrastructure
and operations have all remained stable
and systems performance and stability
have been good with no outages or cyber
security incidents reported. The Company
is reliant on its Service providers for
disclosing significant cyber attacks and
whether the Company’s information
hadbeen compromised or not;
• the Committee also considered a
reporton the findings of a review of the
European infrastructure team. The scope
of the review included the ongoing
application of the investment procedures
and portfolio management processes,
progress on sustainability objectives
and implementation of sustainability
strategies and GHG emissions reporting
and management of the Company’s
operating structure, including monitoring
of its investment trust status and
AIFMD relatedobligations. The overall
opinion onthe control environment was
unqualified with no material issues or
urgent actions noted;
Audit, Risk and Internal Control continued
Audit and Risk Committee report continued
3i Infrastructure plc Annual report and accounts 2023 111
Governance
Audit, Risk and Internal Control continued
Audit and Risk Committee report continued
Other internal control measures
Aztec succeeded Apex as the Company’s
Jersey administrator in December 2022.
The Company’s Compliance Officer,
Money Laundering Reporting Officer and
Money Laundering Compliance Officer
is an employee of Aztec. She presents a
compliance report at every Audit and Risk
Committee meeting and the Committee
is responsible for the assessment and
evaluation of these reports in the context
of the delegated investment management
and support services and for monitoring the
effectiveness of those internal controls.
Aztec maintains an annual Compliance
Monitoring Plan and reports to the
Committee on the results of its tests on the
Company, the Directors, the Investment
Manager and the Company’s suppliers,
amongst others. Aztec and Apex did not
identify any areas of concern during the
course of the year.
As a result of the above reviews, the
Audit and Risk Committee was able to
confirm to the Board that the Company’s
internal controls were working effectively
and no weaknesses or inefficiencies had
been identified.
Other matters
Other specific matters reviewed by
theCommittee during the year were:
• the Committee’s Terms of reference
inview of its responsibility for oversight
ofESG reporting; and
• the Company’s compliance with its
regulatory obligations in the UK as
a listed entity and in Jersey where
itis registered.
Wendy Dorman
Chair, Audit and Risk Committee
9 May 2023
On the recommendation of the Compliance
Officer and the Money Laundering
Compliance Officer, the Board approved
further updates to its Conduct of Business
Manual, Anti-Money Laundering Manual,
Business Risk Assessment and customer
due diligence processes during the year.
In addition, as part of the internal control
framework, the Company Secretary reports
to the Board on updates to those policies
which do not form part of the Conduct
of Business Manual and Anti-Money
Laundering Manual, namely the Non-audit
services policy, the Whistleblowing policy,
Treasury policy and 3i Group’s Equal
Opportunities and Diversity policy (in so
far as this particular policy applies to the
Directors of the Company).
The Chair of the Audit and Risk Committee
meets with the Compliance Officer, and
the Investment Manager’s Head of Internal
Audit and Head of Compliance periodically
to receive updates on the internal audit and
compliance processes and procedures of
the Investment Manager.
112
Governance
Relationship with Investment Manager
Management Engagement Committee report
The Committee continues
to monitor and review
the performance of the
Investment Manager and
ensures that the terms of
the Investment Management
Agreement are competitive,
fair and reasonable
forshareholders.”
Richard Laing
Chair, Management Engagement Committee
The principal function of the Management
Engagement Committee is to consider,
and recommend to the Board, whether the
continued appointment of the Investment
Manager is in the best interests of the
Company and its shareholders and to
give reasons for its recommendation.
Its remit includes managing all aspects of
the performance of and relationship with
the Investment Manager. The Committee
also reviews the terms of the Investment
Management Agreement (‘IMA’).
Investment Manager
The Investment Manager, 3i Investments
plc, is responsible for the implementation
of the agreed Investment policy and
for investment or divestment decisions,
subject to the investments or divestments
remaining below an agreed threshold.
Where the value of investments or
divestments is above the agreed
threshold,the Board is responsible
forapproving these transactions.
The Investment Manager keeps the
Board regularly updated on the progress
of the deal pipeline, and proposed and
completed transactions.
The Investment Manager discusses with the
Board potential investment opportunities
and proposed divestments, whether or not
they are within the Investment Manager’s
delegated authority.
The Investment Manager undertakes
origination activities, manages the
Company’s funding and hedging
requirements, and manages funding
requirements of the investment portfolio,
all of which is governed by the terms of
the IMA.
The IMA includes an exclusivity
arrangement in respect of investment
opportunities within the Company’s
Investment policy.
Fees under the IMA consist of a tiered
management fee and time weighting of
the management fee calculation, a one-off
transaction fee of 1.2% payable in respect
of new investments, and the payment of
a performance fee on a phased basis and
subject to future performance tests.
3i Infrastructure plc Annual report and accounts 2023 113
Governance
The applicable tiered rates are shown in the
table below:
Gross investment value Applicable tier rate
Up to £1.25bn 1.4%
£1.25bn to £2.25bn 1.3%
Above £2.25bn 1.2%
The IMA is terminable on service of
12 months’ notice by either party.
Further details on the management and
performance fees and the relationship
between the Company, 3i Investments plc
and 3i Group are described in more detail
in Note 18 in the Financial statements on
pages 168 and 169.
• reviewed the fees charged to the
Company by the Investment Manager
forthe provision of its management
services; and
• reviewed non-investment services
provided by the Investment Manager.
Following its assessment, and based on
the continued good performance of the
Investment Manager, the Committee
recommended to the Board, and the Board
agreed, that the continued appointment
of the Investment Manager on the terms
set out in Note 18 in the Financial statements
on pages 168 and 169 is in the interest of the
Company and its shareholders as a whole.
Richard Laing
Chair, Management Engagement Committee
9 May 2023
During the year, the Committee assessed
the overall relationship with the Investment
Manager and:
• monitored and reviewed the Investment
Manager’s performance against the
Company’s strategy and the general
market conditions;
• reviewed the quality, timeliness, accuracy
and relevance of the information
provided to the Board, including
recommendations on new investments
and divestments and reviews of portfolio
company performance;
• reviewed reports from industry analysts,
comparing the performance of listed
infrastructure investment companies,
including an analysis of the terms
of their management agreements
and fees charged relative to their
investment objectives;
Relationship with Investment Manager continued
Management Engagement Committee report continued
114
Governance
Remuneration
Remuneration Committee report
The fee structure for non-
executive Directors should
be transparent and reflect
the increasing complexity
of the Company, along
with the skill set and time
commitment required of
non-executive Directors.”
Paul Masterton
Chair, Remuneration Committee
It is the responsibility of the
RemunerationCommittee to recommend
to the Board a policy for non-executive
Director remuneration, to monitor its
implementation and to ensure that all
payments to non-executive Directors
aremade in accordance with the
agreed policy.
Remuneration policy
The Company’s policy is that smaller,
incremental increases to non-executive
Director fees is a preferable approach
toadjusting fees, rather than larger
increases atlonger frequencies.
The remuneration of each of the Directors
is subject to fixed fee arrangements
and none of the Directors received any
additional remuneration or incentives
inrespect of his or her services as a
Directorofthe Company.
The Remuneration Committee reviewed the
current level of the Directors’ fees, taking
account of the challenges in the global
macro environment, the impact of an
increasingly complex regulatory environment
on Directors, and time spent, including
but not limited to, attendance at meetings,
Board calls with the Investment Manager,
the strategy sessions and attending ad hoc
meetings. The Committee also reviewed
external benchmarking reports on Director
remuneration for both FTSE 250 companies
and, inparticular, investment trusts.
After careful consideration the Committee
recommended to the Board that the fees
for Directors, the Chair, the Chair of the
Audit and Risk Committee and the Senior
Independent Director be increased as
set out below, and this was subsequently
approved by the Board to take effect
from1 April 2023.
The Directors’ fees for the financial year to 31 March 2023 and fee increases from
1 April2023 are as follows:
Directors’ fees
Amount per annum
to be paid from
1 April 2023
£
Amount paid in
the year ended
31 March 2023
£
Amount paid in
the year ended
31 March 2022
£
Richard Laing 130,000 124,000 120,000
Doug Bannister 50,000 47,500 46,000
Wendy Dorman 62,000 58,500 56,000
Stephanie Hazell
1
50,000 23,750 0
Samantha Hoe-Richardson 50,000 47,500 46,000
Ian Lobley
2
50,000 47,500 46,000
Paul Masterton 58,000 55,000 53,000
1 Appointed with effect from 29 September 2022.
2 Fee payable to 3i plc.
Paul Masterton
Chair, Remuneration Committee
9 May 2023
3i Infrastructure plc Annual report and accounts 2023 115
Governance
Additional statutory and corporate
governance information
Principal activity
The Company is a closed-ended
UK investment trust that invests in
infrastructure businesses and assets.
The Directors do not anticipate any change
in the principal activity of the Company in
the foreseeable future. Its unconsolidated
subsidiaries are shown in Note 19 in the
Financial statements on pages 170 to 177.
Investment trust status
The Company is a UK approved investment
trust. The affairs of the Company are
directed to enable it to maintain its UK
tax domicile and its approved investment
trust company status, which it did during
the course of the year. This is managed
on an ongoing basis by the Investment
Manager and monitored by the Audit
andRisk Committee.
Appointment and re-election
ofDirectors
The appointment and re-election of
Directors is governed by the Articles, the
Companies (Jersey) Law 1991 and related
legislation. The Articles provide that at
each AGM of the Company all the Directors
at the date of notice convening the AGM
shall retire from office and each Director
may offer himself or herself for election
or re-election. In addition, under the AIC
Code, all Directors should be subject to
annual election by shareholders. As a
result, all Directors will retire and stand
for election or re-election at the next
AGM to be held on 6 July 2023. The Board
regularly considers the independence of
non-executive Directors as detailed on
page 100.
The Directors’ letters of appointment
were updated this year as further detailed
in the Nomination Committee report on
page 102.
Board’s responsibilities
andprocesses
The composition of the Board and its
Committees, as well as the Board’s key
responsibilities and the way in which it and
its Committees work, are described on
pages 92 to 94.
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 provisions
of relevant statutes, the Articles and any
directions given by special resolution of
the shareholders.
Matters reserved for the Board
The Board has approved a formal
Scheduleof Matters Reserved to it and
itsduly authorised Committees for
decision, as detailed on page 93.
Portfolio management
andvotingpolicy
In relation to unquoted investments, the
Company’s approach is to seek to add value
to the businesses in which it invests through
the extensive experience, resources and
contacts of the Investment Manager’s team.
In relation to quoted equity investments,
the Company’s policy is to exercise voting
rights on matters affecting the interests
ofthe Company.
Corporate governance
The Company is committed to upholding
the highest standards of corporate
governance. The Company observes the
requirements of the AIC Code, a copy of
which is available from The Association of
Investment Companies (the ‘AIC’) website
at www.theaic.co.uk. The provisions of
the AIC Code are more appropriate for a
closed-ended investment trust than the UK
Code because, amongst other things, it has
no executive directors and no employees.
The AIC website includes an explanation
of how the AIC Code adapts the principles
and provisions set out in the UK Code
to make them relevant for investment
companies. The Company complied with
all the provisions of the AIC Code for
the financial year ended 31 March 2023.
See page 85 for the Company’s Statement
ofCompliance with the AIC Code.
Directors’ duties
Details of compliance by Directors with
theirDirectors’ duties are set out on
pages81 and 82.
116
Governance
Additional statutory and corporate
governance information continued
Regulation
The Company is incorporated in Jersey
andis regulated by the Jersey Financial
Services Commission as a collective
investment fund under the Collective
Investment Funds (Jersey) Law 1988.
It hasaPremium Listing on the London
Stock Exchange’s Main Market.
Alternative Investment Fund
Managers Directive
For the purposes of the Alternative
Investment Fund Managers Regulations
2013 (the ‘Regulations’) and the EU
Alternative Investment Fund Managers
Directive, the Company is an alternative
investment fund (‘AIF’). The Investment
Manager is approved as an alternative
investment fund manager (‘AIFM’) by the
Financial Conduct Authority (the ‘FCA’)
for the purposes of the Regulations and is
the Company’s AIFM. The Depositary is
currently Citibank UK Limited.
In accordance with Part 5 of the Regulations
and the relevant requirements of the EU
Alternative Investment Fund Managers
Directive, the Investment Manager, as
an AIFM, requires all relevant controlled
portfolio companies to make available to
employees an annual report which meets
the applicable disclosure requirements.
These are available either on the portfolio
company’s website or through filing with
the relevant local authorities.
NMPI
As a UK investment trust, the Company’s
shares are excluded from the FCA rules
regarding the restrictions on the retail
distribution of unregulated collective
investment schemes and close substitutes
(‘non-mainstream pooled investments’,
or ‘NMPIs’) and therefore the restrictions
relating to NMPIs do not apply to its shares.
It is the Board’s intention that the Company
will continue to conduct its affairs in such
a manner that it maintains its approved
investment trust company status and that,
accordingly, the Company’s shares will
continue to be excluded from the FCA’s
rules relating to NMPIs.
Results and dividends
The Directors recommend that a final
dividend of 5.575 pence per share
(2022: 5.225 pence per share) be paid in
respect of the year to 31 March 2023 to
shareholders on the register at the close of
business on 16 June 2023. The Company
has chosen not to designate any of its final
dividend as an interest distribution.
The distribution of the dividend payments
between interim and final dividends
is evaluated by the Board each year,
according to the Company’s performance,
portfolio income generation and other
factors, such as profits generated on the
realisation of portfolio assets. The Company
will be targeting a dividend for FY24 of 11.90
pence per share.
The Investment Manager is a subsidiary of
3i Group and the Remuneration policy of
3i Group (which applies to the Investment
Manager) was last approved by 3i Group’s
shareholders in 2020. Details of the
Remuneration policy are set out in the 3i
Group Annual report and accounts for 2022.
The disclosures required by the Investment
Manager as an AIFM are contained in the
Annual report and accounts of 3i Group
(www.3i.com). These disclosures include
the remuneration (fixed and variable) of
all staff and all AIFM Identified Staff of the
Investment Manager. Due to 3i Group’s
operational structure, the information
needed to provide a further breakdown of
remuneration attributable to the staff and
the AIFM Identified Staff of the Investment
Manager as the Company’s AIFM is not
readily available and would not be relevant
or reliable.
Although certain investor disclosures
required by the FCA’s Investment
Funds sourcebook are made in this
Annual report, further disclosures are
summarised on the Company’s website at
www.3i-infrastructure.com. There have been
no material changes to these disclosures
during the financial year.
3i Infrastructure plc Annual report and accounts 2023 117
Governance
Additional statutory and corporate
governance information continued
Operations and management
arrangements
Details of the role and responsibilities of the
Investment Manager under the Investment
Management Agreement are set out in the
Management Engagement Committee
report on pages 113 and 114.
Other significant service
arrangements
In addition to the investment management
arrangements, 3i plc and 3i Investments
plc (both subsidiaries of 3i Group plc),
in relation to certain regulatory services,
have been appointed by the Company to
provide support services, including treasury
and accounting services, investor relations
and other support services. The amounts
payable under these arrangements are
described in more detail in Note 18 in
theFinancial statements on pages 168
and 169.
3i plc acts as Company Secretary to the
Company and Aztec Financial Services
(Jersey) Limited acts as the Company’s
Jersey fund administrator, which
includes provision of the Company’s
Compliance Officer, MoneyLaundering
Compliance Officer andMoney
LaunderingReporting Officer.
Major interests in ordinary shares
As at 31 March 2023 and 30 April 2023, the Company has received notification in
accordance with Chapter 5 of the FCA’s Disclosure Guidance and Transparency Rules
of thefollowing notifiable interests in the voting rights in the Company’s ordinary
share capital:
Interest in ordinaryshares
Number of
ordinary shares
1
as
at 31March 2023
% of issued
sharecapital
Number of
ordinary shares
1
as
at 30April2023
% of issued
sharecapital
3i Group plc (and subsidiaries) 269,242,685 29.19% 269,242,685 29.19%
Schroders plc 49,118,773 5.33% 51,367,262 5.57%
1 Each ordinary share carries the right to one vote.
Directors’ shareholding and share interests
Details of Directors’ interests (including interests of their closely associated persons)
intheCompany’s shares as at 31 March 2023* are shown in the table below.
Directors’ interests and beneficial interests
Ordinary shares at
31 March 2023
Ordinary shares at
31 March 2022
Richard Laing 35,000 35,000
Doug Bannister 20,000 20,000
Wendy Dorman 28,294 21,947
Stephanie Hazell 6,420 0
Samantha Hoe-Richardson 2,839 1,339
Ian Lobley 0 0
Paul Masterton 29,194 29,194
* There have been no changes in Directors’ shareholding and share interests since 31 March 2023.
Revolving credit facility
During the year, the Company extended
its existing Revolving CreditFacility
(‘RCF’) from £700 million to £900 million
and cancelled an additional £300 million
facility available at the beginning of the
financial year, with a maturity of less than
one year. The RCF has a maturity date of
November 2025 and has one remaining
one-year extension option. The RCF has
a margin of1.50% and a non-utilisation
fee. The facility is a sustainability-linked
RCF. It includes stretching targets across
ESG themes aligned with the Company’s
purpose. Performance againstthese
targets will adjust the margin for the
subsequent year.
Share capital
On 14 February 2023, following a non
pre-emptive capital raise, 30,915,990 new
ordinary shares of the Company were
admitted to the premium listing segment
of the Official List of the FCA and to trading
on the London Stock Exchange’s Main
Market. See page 64 of the Financial Review
for further details of the capital raise.
The issued share capital of the Company
asat 31 March 2023 was 922,350,000
ordinary shares (2022: 891,434,010).
The Company does not hold any
ordinaryshares in treasury.
118
Governance
Additional statutory and corporate
governance information continued
Directors’ authority to buy
backshares
The Company did not purchase any of its
own shares during the year. The current
authority of the Company to make market
purchases of up to 14.99% of the issued
ordinary share capital expires at the 2023
AGM. The Company will seek to renew such
authority until the end of the AGM in 2024,
specifying the maximum and minimum
price at which shares can be bought back.
Any buy back of ordinary shares will be
made in accordance with Jersey law and
the making and timing of any buy backs
will be at the discretion of the Directors.
Such purchases will also only be made in
accordance with the Listing Rules of the
FCA, which provide that the price paid must
not be more than the higher of: (i) 5% above
the average middle market quotations for
the ordinary shares for the five business
days before the shares are purchased; and
(ii) the higher of the last independent trade
and the highest current independent bid on
the London Stock Exchange at such time.
Directors’ indemnities
The Articles provide that, subject to the
provisions of the Statutes, every Director
of the Company shall be indemnified out
of the assets of the Company against all
liabilities and expenses incurred by him or
her in the actual or purported execution
or discharge of his or her duties. ‘Statutes’
here refers to the Companies (Jersey) Law
1991 and every other statute, regulation or
order for the time being in force concerning
companies registered under the Companies
(Jersey) Law 1991.
In addition, the Company has entered into
indemnity agreements for the benefit of its
Directors and these remain in force at the
date of this report. The Company also had
directors’ and officers’ liability insurance
inplace in the year.
Political donations
During the year to 31 March 2023 no
donations were made to political parties
or organisations, or independent election
candidates and no political expenditure
was incurred.
Information included in the
Strategic report
The Strategic report on pages 1 to 82
provides a review of the performance and
position of the Company, together with
a description of the principal risks and
uncertainties that it faces. Furthermore, the
Strategic report includes the Company’s
risk management objectives and policies;
likely future developments of the business;
GHG emissions; and the s172 statement.
The Directors’ Resilience statement is also
shown in the Strategic report on page 78.
Statement of Directors’
responsibilities
The Directors are responsible for
preparing the Annual report and accounts
in accordance with applicable law and
regulations and those International Financial
Reporting Standards (‘IFRSs’) which have
been adopted by the United Kingdom.
As a company listed on the London Stock
Exchange’s Main Market, 3i Infrastructure
plc is subject to the FCA’s Listing Rules and
Disclosure Guidance and Transparency
Rules, as well as to all applicable laws
and regulations of Jersey, where it
is incorporated.
Jersey company law requires the Directors
to prepare financial statements for each
financial period in accordance with
generally accepted accounting principles.
The Financial statements of the Company
are required by law to give a true and fair
view of the state of affairs of the Company
at the period end and of the profit or loss
ofthe Company for the period then ended.
In preparing these Financial statements,
theDirectors should:
• select suitable accounting policies
andthen apply them consistently;
• make judgements and estimates
thatare reasonable;
• specify which generally accepted
accounting principles have been
adoptedin their preparation; and
• prepare the Financial statements on
the going concern basis, unless it is
inappropriate to presume that the
Company will continue in business.
3i Infrastructure plc Annual report and accounts 2023 119
Governance
Additional statutory and corporate
governance information continued
The Directors are responsible for keeping
accounting records which are sufficient
to show and explain the Company’s
transactions and are such as to disclose
with reasonable accuracy at any time
the financial position of the Company
and enable them to ensure that the
Company’sFinancial statements comply
with the requirements of the Companies
(Jersey) Law 1991.
They are also responsible for
safeguardingthe assets of the Company
and hence for taking reasonable steps
for the prevention and detection of
fraudandother irregularities.
In accordance with the FCA’s Disclosure
Guidance and Transparency Rules, the
Directors confirm to the best of their
knowledge that:
• the Financial statements, prepared in
accordance with applicable accounting
standards, give a true and fair view of
the assets, liabilities, financial position
and profit or loss of the Company
takenasawhole; and
• the Annual report and accounts include
a fair review of the development and
performance of the business and the
position of the Company taken as a
whole, together with a description of
theprincipal risks and uncertainties
facedby the Company.
The Directors of the Company and their
functions are listed on pages 87 and 88
andpages 92 and 93 and page 99.
The Directors have acknowledged their
responsibilities in relation to the Financial
statements for the year to 31 March 2023.
By order of the Board
Authorised signatory
3i plc
Company Secretary
9 May 2023
Registered Office:
11-15 Seaton Place
St. Helier
Jersey JE4 0QH
Channel Islands
The Directors are also responsible
forpreparing the Annual report and
accounts and the Directors confirm that
they consider that, taken as a whole,
the Annual report and accounts are
fair, balanced and understandable and
providethe information necessary for
shareholders to assess the Company’s
performance, business model and strategy.
The Directors confirm that, so far as they
are each aware, there is no relevant audit
information of which the Company’s auditor
is unaware; and each Director has taken
all the steps that he or she ought to have
taken as a director to make him or herself
aware of any relevant audit information and
to establish that the Company’s auditor is
aware of that information.
120
Governance
121
Accounts
and other
information
Independent auditor’s report to the
members of 3i Infrastructure plc
Report on the audit of the Financial statements
1 Opinion
In our opinion the Financial statements of 3i Infrastructure plc (the ‘Company’):
• give a true and fair view of the state of the Company’s affairs as at 31 March 2023 and of the Company’s profit for the year then ended;
• have been properly prepared in accordance with United Kingdom adopted international accounting standards; and
• have been properly prepared in accordance with Companies (Jersey) Law, 1991.
We have audited the Financial statements which comprise:
• the Statement of comprehensive income;
• the Statement of changes in equity;
• the Balance sheet;
• the Cash flow statement;
• the Reconciliation of net cash flow to movement in net debt;
• the Statement of significant accounting policies; and
• the related notes 1 to 19.
The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom adopted international accounting standards.
122
Accounts and other information
Independent auditor’s report to the
members of 3i Infrastructure plc continued
2 Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described
inthe auditor’s responsibilities for the audit of the Financial statements section of our report.
We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the Financial statements in the UK, including the Financial Reporting
Council’s (the ‘FRC’s’) Ethical Standard as applied to listed public interest entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements.
The non-audit services provided to the Company for the year are disclosed in Note 3 to the Financial statements. We confirm that we have not provided any non-audit services
prohibitedby the FRC’s Ethical Standard to the Company.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
3 Summary of our audit approach
Key audit matters The key audit matter that we identified in the current year was the fair value of investments.
Within this report, key audit matters are identified as follows:
Similar level of risk
Materiality The materiality that we used for the Financial statements was £31 million which was determined on the basis of approximately 1% of the Company’s net assets.
A lower materiality threshold of £3.1 million based upon approximately 2% of investment income was applied to certain balances in the Statement
ofcomprehensive income and Balance sheet, excluding fair value of investments and derivatives balances and their associated fair value movements.
Scoping Audit work to respond to the risks of material misstatement was performed directly by the audit engagement team.
Significant changes
inourapproach
There have been no significant changes in our audit approach compared with the prior year.
3i Infrastructure plc Annual report and accounts 2023 123
Accounts and other information
Independent auditor’s report to the
members of 3i Infrastructure plc continued
4 Conclusions relating to going concern
In auditing the Financial statements, we have concluded that the Directors’ use of the going concern basis of accounting in the preparation of the Financial statements is appropriate.
Our evaluation of the Directors’ assessment of the Company’s ability to continue to adopt the going concern basis of accounting included:
• assessment of the financial position of the Company, including the cash balance of £5 million and £399 million undrawn on the £900 million revolving credit facility, which matures
beyond 12 months;
• review of the Directors’ liquidity forecast for the next 12 months, including the ability of the Company to meet its obligations under the Investment Management Agreement;
• assessment of the ability of the Company’s investments to generate cash income for the Company and the robustness of those cash flows to key risks;
• assessment of the Directors’ sensitivity analysis, including the consideration of a ‘reverse stress test’; and
• assessment of the model used to prepare the forecasts, testing of mathematical accuracy of those forecasts and our assessment of the historical accuracy of the forecasts prepared
bytheInvestment Manager.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt
ontheCompany’s ability to continue as a going concern for a period of at least 12 months from when the Financial statements are authorised for issue.
In relation to reporting on how the Company has applied the UK Corporate Governance Code, we have nothing material to add or draw attention to in relation to the Directors’
statement in the Financial statements about whether the Directors considered it appropriate to adopt the going concern basis of accounting.
Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant sections of this report.
124
Accounts and other information
Independent auditor’s report to the
members of 3i Infrastructure plc continued
5 Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the Financial statements of the current period and include the most
significant assessed risks of material misstatement (whether or not due to fraud) that we identified. These matters included those which had the greatest effect on: the overall audit
strategy; the allocation of resources in the audit; and directing the efforts of the engagement team.
These matters were addressed in the context of our audit of the Financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion
onthese matters.
5.1 Fair value of Investments
Key audit
matter
description
At 31 March 2023, the Company held investments totalling £3,641 million (2022: £2,873 million) in unquoted companies which are measured at
fair valuethrough profit and loss. These investments are classified at Level 3 within the IFRS fair value hierarchy and, for Economic Infrastructure
investments,their valuation requires significant judgement and estimation.
Certain assumptions used in the determination of fair value are a key source of estimation uncertainty, which is why we consider there to be a significant
risk of material misstatement as well as a potential fraud risk. As a liquid market does not exist for the investments, they are generally measured using
a discounted cash flow methodology. The complex nature of this methodology, combined with the number of significant judgements and estimates,
means there is a risk that the fair value of the investments could be misstated.
The key assumptions and estimates used in the determination of fair value for Economic Infrastructure investments have been summarised as:
• discount rates – the determination of the appropriate discount rate for Economic Infrastructure investments that is reflective of current market
conditions and the specific risks of the investment. The level of judgement required in respect of this is heightened by current market volatility;
• macroeconomic assumptions – forecast inflation rates; and
• forecasted future cash flows – specific investments contain certain assumptions in the cash flow forecasts that are particularly complex
and judgemental.
This key audit matter is also discussed on page 108 in the Audit and Risk Committee report and disclosed in the significant accounting policies
asakeysource of estimation uncertainty on pages 142 and 143 and in the portfolio valuation methodology on pages 41 and 42.
3i Infrastructure plc Annual report and accounts 2023 125
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Independent auditor’s report to the
members of 3i Infrastructure plc continued
5.1 Fair value of Investments continued
How the scope
of our audit
responded
to the key
audit matter
In response to the key audit matter identified, we performed the following procedures:
• tested the controls in respect of the valuation process adopted by the Investment Manager and the Board, including the review and approval processes
undertaken by the Investment Manager’s valuation committee;
• tested that the valuation methodology is compliant with IFRS 13 requirements;
• met with the Investment Manager’s Managing Partners, CFO and other partners and personnel responsible for preparing and reviewing the valuations
to understand the underlying performance of the businesses being valued and how the year-end valuation has been prepared, including key
valuation assumptions;
• involved our valuation experts to assess discount rates applied in the valuations by benchmarking to relevant peers and transactions and considering
theinherent risk profile of the underlying cash flows specific to each investment. As part of this assessment, we challenged the Investment Manager’s
assertion that recent increases in risk-free rates did not impact the discount rates used to value the portfolio;
• tested and challenged the macroeconomic assumptions included in the forecasts with reference to observable market data and external forecasts;
• assessed the forecasted cash flows and related assumptions for all investments, including movements since acquisition or the prior year and, where
applicable, used third-party evidence to challenge key assumptions;
• engaged with our valuation experts to apply an additional level of challenge to the investments identified as containing more judgemental forecast
cashflow assumptions;
• considered the Company’s identification and evaluation of climate change-related risks in respect of their investments;
• reviewed industry news and other external sources of information to identify evidence that may contradict the assumptions taken by the
Investment Manager;
• assessed the historical accuracy of the cash flow forecasts through comparison to actual results in order to assess the reliability of the forecasts;
• compared historical data included in the valuation to audited financial statements to check that forecasts are based on actual results where applicable;
• employed audit analytics to assess the integrity of the valuation models;
• evaluated whether the estimates made were, individually and in aggregate, reasonable and free of bias; and
• assessed the disclosures made in the notes to the Financial statements regarding the key sources of estimation uncertainty.
Key observations We consider the judgements and assumptions utilised in determining the fair value of the Company’s investments to be within an acceptable range,
andtherefore have concluded that the fair value of the Company’s investments as at 31 March 2023 is appropriate.
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6 Our application of materiality
6.1 Materiality
We define materiality as the magnitude of misstatement in the Financial statements that makes it probable that the economic decisions of a reasonably knowledgeable person would
bechanged or influenced. We use materiality both in planning the scope of our audit work and in evaluating the results of our work.
Based on our professional judgement, we determined materiality for the Financial statements as a whole as follows:
Materiality £31 million (2022: £25.9 million).
Basis for determining materiality Materiality is determined using approximately 1% of net asset value (‘NAV’).
Rationale for the benchmark applied We consider NAV to be the key financial statement benchmark used by shareholders of the Company in assessing financial performance.
NAV
Materiality
Materiality
£31m
Audit Committee
reporting threshold
£1.5m
NAV
£3,101m
A lower materiality threshold of £3.1 million (2022: £2.4 million) based on approximately 2% (2022: 2%) of investment income has also been used. This has been applied to certain balances
in the Statement of comprehensive income and Balance sheet, excluding fair value of investments and derivatives balances and their associated fair value movements, due to qualitative
factors of stakeholder interest.
3i Infrastructure plc Annual report and accounts 2023 127
Accounts and other information
Independent auditor’s report to the
members of 3i Infrastructure plc continued
6 Our application of materiality continued
6.2 Performance materiality
We set performance materiality at a level lower than materiality to reduce the probability that, in aggregate, uncorrected and undetected misstatements exceed the materiality for
the Financial statements as a whole. Performance materiality was set at 70% of materiality for the 2023 audit (2022: 70%). In determining performance materiality, we considered the
following factors:
• the quality of internal control in existence at the Company and the Investment Manager;
• the stability of the business;
• the low level of errors identified in prior years;
• the willingness of the Investment Manager to correct errors identified; and
• the stability and competence of the finance team.
6.3 Error reporting threshold
We agreed with the Audit and Risk Committee that we would report to the Committee all audit differences in excess of £1.5 million (2022: £1.3 million), as well as differences below
thatthreshold that, in our view, warranted reporting on qualitative grounds. We also report to the Audit and Risk Committee on disclosure matters that we identified when assessing
theoverall presentation of the Financial statements.
7 An overview of the scope of our audit
7.1 Scoping
Our audit was scoped by obtaining an understanding of the entity and its environment, including internal control, and assessing the risks of material misstatement. All audit work
torespond to the risks of material misstatement was performed directly by the audit engagement team.
7.2 Our consideration of the control environment
The Audit and Risk Committee report beginning on page 106 of the Annual Report provides details of the Committee’s consideration of the effectiveness of the internal
control environment.
We have obtained an understanding of the control environment and the relevant controls to address our significant risks and other key account balances and transactions including
thevaluation of investments, performance and management fees, investment income and financial reporting. This has included the control environment andrelevant controls
operatingat the Investment Manager as a key service provider to the Company.
We have also tested the controls in respect of the investment valuation process.
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7 An overview of the scope of our audit continued
7.3 Our consideration of climate-related risks
The Company has identified climate risk as a key risk as detailed in the Climate risk section of the Risk report on page 72. The primary area where climate risks could impact
theFinancialstatements is in respect of the fair value of investments as the investment portfolio companies face a range of climate change-related risks and opportunities.
In preparing the valuations, the Company has considered the impact of climate change. We have considered the Company’s identification and evaluation of climate-change risk
inrespect of their investments as highlighted in section 5.1 above. This assessment considered the risks and opportunities associated with the impact of energy transition, extreme
weather patterns and regulatory environments and their impact on the determination of fair value.
8 Other information
The other information comprises the information included in the Annual report, other than the Financial statements and our auditor’s report thereon. The Directors are responsible
fortheother information contained within the Annual report.
Our opinion on the Financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance
conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the Financial statements or our knowledge
obtained in the course of the audit, or otherwise appears to be materially misstated.
If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the Financial
statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
3i Infrastructure plc Annual report and accounts 2023 129
Accounts and other information
Independent auditor’s report to the
members of 3i Infrastructure plc continued
9 Responsibilities of Directors
As explained more fully in the Statement of Directors’ responsibilities, the Directors are responsible for the preparation of the Financial statements and for being satisfied that they
giveatrue and fair view, and for such internal control as the Directors determine is necessary to enable the preparation of financial statements that are free from material misstatement,
whether due to fraud or error.
In preparing the Financial statements, the Directors are responsible for assessing the Company’s ability to continue as a going concern, disclosing as applicable, matters related to going
concern and using the going concern basis of accounting unless the Directors either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so.
10 Auditor’s responsibilities for the audit of the Financial statements
Our objectives are to obtain reasonable assurance about whether the Financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue
an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always
detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of these Financial statements.
A further description of our responsibilities for the audit ofthe Financial statements is located on the FRC’s website. This description forms part of our auditor’s report.
11 Extent to which the audit was considered capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material
misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below.
11.1 Identifying and assessing potential risks related to irregularities
In identifying and assessing risks of material misstatement in respect of irregularities, including fraud and non-compliance with laws and regulations, we considered the following:
• the nature of the industry and sector, control environment and business performance including the design of the Investment Manager’s fee structure and performance targets;
• results of our enquiries of the Investment Manager, the Investment Manager’s internal audit function, the Directors and the Audit and Risk Committee about their own identification
and assessmentof the risks of irregularities, including those that are specific to the Company’s sector;
• any matters we identified having obtained and reviewed the Company’s documentation of their policies and procedures relating to:
– identifying, evaluating and complying with laws and regulations and whether they were aware of any instances of non-compliance;
– detecting and responding to the risks of fraud and whether they have knowledge of any actual, suspected or alleged fraud;
– the internal controls established to mitigate risks of fraud or non-compliance with laws and regulations;
• the matters discussed among the audit engagement team and relevant internal specialists, including valuations specialists, regarding how and where fraud might occur in the
Financialstatements and any potential indicators of fraud.
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11 Extent to which the audit was considered capable of detecting irregularities, including fraud continued
11.1 Identifying and assessing potential risks related to irregularities continued
As a result of these procedures, we considered the opportunities and incentives that may exist within the organisation for fraud and identified the greatest potential for fraud in the
valuation of the investment portfolio. In common with all audits under ISAs (UK), we are also required to perform specific procedures to respond to the risk of management override.
We also obtained an understanding of the legal and regulatory frameworks that the Company operates in, focusing on provisions of those laws and regulations that had a direct effect
on the determination of material amounts and disclosures in the financial statements. The key laws and regulations we considered in this context included the Companies (Jersey) Law,
Listing Rules, and UK Investment Trust tax legislation.
In addition, we considered provisions of other laws and regulations that do not have a direct effect on the financial statements but compliance with which may be fundamental to the
Company’s ability to operate or to avoid a material penalty. The key laws and regulations we considered in this context included the Alternative Investment Fund Managers Directive
asapproved by the Financial Conduct Authority.
11.2 Audit response to risks identified
As a result of performing the above, we identified the fair value of investments as a key audit matter related to the potential risk of fraud. The key audit matters section of our report
explains the matter in more detail and also describes the specific procedures we performed in response to that key audit matter.
In addition to the above, our procedures to respond to risks identified included the following:
• reviewing the financial statement disclosures and testing to supporting documentation to assess compliance with provisions of relevant laws and regulations described as having
adirect effect on the Financial statements;
• enquiring of management, the Audit and Risk Committee, the Investment Manager’s in-house legal counsel concerning actual and potential litigation and claims;
• performing analytical procedures to identify any unusual or unexpected relationships that may indicate risks of material misstatement due to fraud;
• reading minutes of meetings of those charged with governance, reviewing the Investment Manager’s internal audit reports pertaining to the Company’s activities, and reviewing
anycorrespondence with HMRC and the Financial Conduct Authority; and
• in addressing the risk of fraud through management override of controls, testing the appropriateness of journal entries and other adjustments; assessing whether the judgements
made in making accounting estimates are indicative of a potential bias; and evaluating the business rationale of any significant transactions that are unusual or outside the normal
course of business.
We also communicated relevant identified laws and regulations and potential fraud risks to all engagement team members, including internal specialists, and remained alert to any
indications of fraud or non-compliance with laws and regulations throughout the audit.
3i Infrastructure plc Annual report and accounts 2023 131
Accounts and other information
Independent auditor’s report to the
members of 3i Infrastructure plc continued
Report on other legal and regulatory requirements
12 Corporate Governance Statement
The Listing Rules require us to review the Directors’ statement in relation to going concern, longer-term viability and that part of the Corporate Governance Statement relating to the
Company’s compliance with the provisions of the UK Corporate Governance Code specified for our review.
Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the Corporate Governance Statement is materially consistent with the
Financial statements and our knowledge obtained during the audit:
• the Directors’ statement with regards to the appropriateness of adopting the going concern basis of accounting and any material uncertainties identified set out on pages 78
and 79;
• the Directors’ explanation as to its assessment of the Company’s prospects, the period this assessment covers and why the period is appropriate set out on page 79;
• the Directors’ statement on fair, balanced and understandable set out on page 120;
• the Board’s confirmation that it has carried out a robust assessment of the emerging and principal risks set out on page 110;
• the section of the Annual report that describes the review of effectiveness of risk management and internal control systems set out on page 110 and 111; and
• the section describing the work of the Audit and Risk committee set out on pages 106 to 112.
13 Matters on which we are required to report by exception
13.1 Adequacy of explanations received and accounting records
Under the Companies (Jersey) Law, 1991 we are required to report to you if, in our opinion:
• we have not received all the information and explanations we require for our audit; or
• proper accounting records have not been kept, or proper returns adequate for our audit have not been received from branches not visited by us; or
• the Financial statements are not in agreement with the accounting records and returns.
We have nothing to report in respect of these matters.
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14 Other matters which we are required to address
14.1 Auditor tenure
Following the recommendation of the Audit and Risk Committee, we were appointed by the shareholders on 6 July 2017 at the Annual General Meeting to audit the Financial statements
for the year ending 31 March 2018 and subsequent financial periods. The period of total uninterrupted engagement including previous renewals and reappointments of the firm is
sixyears, covering the years ending 31 March 2018 to 31 March 2023.
14.2 Consistency of the audit report with the additional report to the Audit and Risk Committee
Our audit opinion is consistent with the additional report to the Audit and Risk Committee we are required to provide in accordance with ISAs (UK).
15 Use of our report
This report is made solely to the Company’s members, as a body, in accordance with Article 113A of the Companies (Jersey) Law, 1991. Our audit work has been undertaken so that
wemight 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.
Stephen Craig, FCA
For and on behalf of Deloitte LLP
Recognised Auditor
London, United Kingdom
9 May 2023
3i Infrastructure plc Annual report and accounts 2023 133
Accounts and other information
Statement of comprehensive income
For the year to 31 March
Notes
Year to
31 March
2023
£m
Year to
31 March
2022
£m
Net gains on investments 7 339 384
Investment income 7 156 127
Fees payable on investment activities – (3)
Interest receivable 2 6
Investment return 497 514
Movement in the fair value of derivative financial instruments 5 18 (2)
Management and performance fees payable 2 (92) (97)
Operating expenses 3 (3) (3)
Finance costs 4 (16) (5)
Exchange movements (10) (3)
Profit before tax 394 404
Income taxes 6 – –
Profit after tax and profit for the year 394 404
Total comprehensive income for the year 394 404
Earnings per share
Basic and diluted (pence) 14 44.0 45.3
134
Accounts and other information
Statement of changes in equity
For the year to 31 March
For the year to 31 March 2023 Notes
Stated
capital
account
£m
Retained
reserves
1
£m
Capital
reserve
1
£m
Revenue
reserve
1
£m
Total
shareholders’
equity
£m
Opening balance at 1 April 2022 779 1,282 643 – 2,704
Issue of shares 100 – – – 100
Total comprehensive income for the year – – 316 78 394
Dividends paid to shareholders of the Company during the year 15 – – (19) (78) (97)
Closing balance at 31 March 2023 879 1,282 940 – 3,101
For the year to 31 March 2022 Notes
Stated
capital
account
£m
Retained
reserves
1
£m
Capital
reserve
1
£m
Revenue
reserve
1
£m
Total
shareholders’
equity
£m
Opening balance at 1 April 2021 779 1,282 330 (1) 2,390
Total comprehensive income for the year – – 324 80 404
Dividends paid to shareholders of the Company during the year 15 – – (11) (79) (90)
Closing balance at 31 March 2022 779 1,282 643 – 2,704
1 The Retained reserves, Capital reserve and Revenue reserve are distributable reserves. Retained reserves relate to the period prior to 15 October 2018. Further information can be found in Accounting policy H.
3i Infrastructure plc Annual report and accounts 2023 135
Accounts and other information
Balance sheet
As at 31 March
Notes
2023
£m
2022
£m
Assets
Non-current assets
Investments at fair value through profit or loss 7 3,641 2,873
Derivative financial instruments 10 29 6
Total non-current assets 3,670 2,879
Current assets
Derivative financial instruments 10 28 20
Trade and other receivables 8 4 104
Cash and cash equivalents 5 17
Total current assets 37 141
Total assets 3,707 3,020
Liabilities
Non-current liabilities
Derivative financial instruments 10 (10) (6)
Trade and other payables 12 (48) (38)
Loans and borrowings 11 (501) (231)
Total non-current liabilities (559) (275)
Current liabilities
Derivative financial instruments 10 (8) (12)
Trade and other payables 12 (39) (29)
Total current liabilities (47) (41)
Total liabilities (606) (316)
Net assets 3,101 2,704
136
Accounts and other information
Balance sheet continued
Notes
2023
£m
2022
£m
Equity
Stated capital account 13 879 779
Retained reserves 1,282 1,282
Capital reserve 940 643
Revenue reserve – –
Total equity 3,101 2,704
Net asset value per share
Basic and diluted (pence) 14 336.2 303.3
The Financial statements and related Notes were approved and authorised for issue by the Board of Directors on 9 May 2023 and signed on its behalf by:
Richard Laing
Chair
3i Infrastructure plc Annual report and accounts 2023 137
Accounts and other information
Cash flow statement
For the year to 31 March
Year to
31 March
2023
£m
Year to
31 March
2022
£m
Cash flow from operating activities
Purchase of investments (729) (761)
Proceeds from other financial assets 98 12
Proceeds from partial realisations of investments 322 140
Proceeds from full realisations of investments 104 8
Investment income
1
30 54
Fees rebated/(paid) on investment activities 1 (4)
Operating expenses paid (3) (4)
Interest received 3 –
Management and performance fees paid (72) (50)
Amounts (paid)/received on the settlement of derivative contracts (13) 27
Net cash flow from operating activities (259) (578)
Cash flow from financing activities
Fees and interest paid on financing activities (16) (6)
Proceeds from issue of share capital 102 –
Share issue expenses (2) –
Dividends paid (97) (90)
Drawdown of revolving credit facility 2,188 955
Repayment of revolving credit facility (1,918) (724)
Net cash flow from financing activities 257 135
Change in cash and cash equivalents (2) (443)
Cash and cash equivalents at the beginning of the year 17 462
Effect of exchange rate movement (10) (2)
Cash and cash equivalents at the end of the year 5 17
1 Investment income includes dividends of £1 million (2022: £24 million) and interest of £29 million (2022: £30 million).
138
Accounts and other information
Reconciliation of net cash flow to movement in net debt
For the year to 31 March
Notes
Year to
31 March
2023
£m
Year to
31 March
2022
£m
Change in cash and cash equivalents (2) (443)
Drawdown of revolving credit facility 11 (2,188) (955)
Repayment of revolving credit facility 11 1,918 724
Change in net debt resulting from cash flows (272) (674)
Movement in net debt (272) (674)
Net (debt)/cash at the beginning of the year (214) 462
Effect of exchange rate movement (10) (2)
Net debt at the end of the year (496) (214)
In the above reconciliation there were no non-cash movements.
3i Infrastructure plc Annual report and accounts 2023 139
Accounts and other information
Significant accounting policies
Corporate information
3i Infrastructure plc (the ‘Company’)
is acompany incorporated in Jersey,
Channel Islands. The Financial statements
for the year to 31 March 2023 comprise
the Financial statements of the Company
as defined in IFRS 10 Consolidated
Financial Statements.
The Financial statements were authorised
for issue by the Board of Directors on
9 May 2023.
Statement of compliance
These Financial statements have been
prepared in accordance with United
Kingdom adopted International Financial
Reporting Standards (‘IFRS’) and
InternationalAccounting Standards.
These Financial statements have also
been prepared in accordance with and
incompliance with the Companies
(Jersey)Law 1991.
Basis of preparation
In accordance with IFRS 10 (as amended),
entities that meet the definition of an
investment entity are required to fair
value certain subsidiaries through profit
or loss in accordance with IFRS 9 Financial
Instruments, rather than consolidate their
results. The Company does not have any
consolidated subsidiaries, which would
include subsidiaries that are not themselves
investment entities and provide investment-
related services to the Company.
The Financial statements of the Company
are presented in sterling, the functional
currency of the Company, rounded
to the nearest million except where
otherwise indicated.
The preparation of financial statements
inconformity with IFRS requires the
Boardto make judgements, estimates and
assumptions that affect the application of
policies and reported amounts of assets
and liabilities, income and expenses.
The estimates and associated assumptions
are based on experience and other factors
that are believed to be reasonable under
the circumstances, the results of which form
the basis of determining the carrying values
of assets and liabilities that are not readily
apparent from other sources. Actual results
may differ from these estimates.
Going concern
The Financial statements are prepared on
agoing concern basis as disclosed in the
Risk report, as the Directors are satisfied
thatthe Company has the resources to
continue in business for the foreseeable
future. The Directors have made an
assessment of going concern, taking
into account a wide range of information
relating to present and future conditions,
including the Company’s cash and
liquidity position, current performance
and outlook, which considered the impact
of the higher inflationary and interest
rate environment, ongoing geopolitical
uncertainties and current and expected
financial commitments, using the
information available up to the date of issue
ofthese Financial statements. As part of
thisassessment the Directors considered:
• the analysis of the adequacy of the
Company’s liquidity, solvency and capital
position. The Company manages and
monitors liquidity regularly, ensuring it
is adequate and sufficient. At 31 March
2023, liquidity remained strong at
£404 million (2022: £786 million).
Liquidity comprised cash and deposits
of£5 million (2022: £17 million) and
undrawn revolving credit facilities of
£399 million (2022: £769 million) with
amaturity date ofNovember 2025.
Income and non-income cash is
expected to be received from the
portfolio investments during the
coming year, a portion of which will be
required to support the payment of the
dividend target and the Company’s
otherfinancial commitments;
• uncertainty around the valuation of
the Company’s assets as set out in the
Key sources of estimation uncertainties
section. The valuation policy and process
was consistent with prior years. This year
a key focus of the portfolio valuations
at 31 March 2023 was an assessment
of the impact of the macroeconomic
environmenton the operational and
financial performance of each portfolio
company. In particular this focused on
increasing inflationary pressures, rising
interest rates and the impact on the
cost ofdebt, volatility in power prices
and ongoing geopolitical uncertainties.
We have incorporated into our cash
flowforecasts a balanced view of future
income receipts and expenses; and
140
Accounts and other information
Significant accounting policies continued
• the Company’s financial commitments.
The Company had no investment
commitments at 31 March 2023.
The Company had ongoing charges of
£48 million in the year to 31 March 2023,
detailed in Table 5 in the Financial review,
which are indicative of the ongoing run
rate in the short term. The Company
has a FY23 performance fee accrual of
£45 million, a third of which is payable
within the next 12 months. The Company
has a FY22 performance fee accrual of
£36 million relating to the second and
third instalments of the FY22 fee, the
second instalment being due within the
next 12 months, an accrual of £2 million
relating to the third instalment of the
FY21 fee due within the next 12 months
and a proposed final dividend for FY23
of £51 million. In addition, while not
a commitment at 31 March 2023, the
Company has a dividend target for FY24
of 11.90 pence per share.
In addition to the considerations listed
above there are a number of actions within
management control to enhance available
liquidity. These include the timing of certain
income receipts from the portfolio and
the level and timing of new investments
or realisations.
Having performed the assessment of
going concern, the Directors considered
it appropriate to prepare the Financial
statements of the Company on a going
concern basis. The Company has sufficient
financial resources and liquidity and is well
placed to manage business risks in the
current economic environment and can
continue operations for a period of at least
12 months from the date of approval of
theseFinancial statements.
Key judgements
The preparation of financial statements in
accordance with IFRS requires the Directors
to exercise judgement in the process of
applying the accounting policies defined
below. The following policies are areas
where a higher degree of judgement has
been applied in the preparation of the
Financial statements.
(i) Assessment as 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 them unless they
provided investment-related services
to the Company. To determine that
the Company continues to meet the
definition of an investment entity, the
Company is required to satisfy the
following three criteria:
(a) the Company obtains funds from one
or more investors for the purpose
of providing those investor(s) with
investment management services;
(b) the Company commits to its investor(s)
that its business purpose is to invest
funds solely for returns from capital
appreciation, investment income, or
both; and
(c) the Company measures and evaluates
the performance of substantially all of its
investments on a fair value basis.
The Company meets the criteria as follows:
• the stated strategy of the Company is
to deliver stable returns to shareholders
through a mix of income yield and
capital appreciation;
• the Company provides investment
management services and has several
investors who pool their funds to
gain access to infrastructure-related
investment opportunities that they might
not have had access to individually; and
• the Company has elected to measure
and evaluate the performance of all of its
investments on a fair value basis. The fair
value method is used to represent
the Company’s performance in its
communication to the market, including
investor presentations. In addition, the
Company reports fair value information
internally to Directors, who use fair value
as the primary measurement attribute to
evaluate performance.
3i Infrastructure plc Annual report and accounts 2023 141
Accounts and other information
Significant accounting policies continued
The Directors are of the opinion that the
Company has all the typical characteristics
of an investment entity and continues
to meet the definition in the standard.
This conclusion will be reassessed on an
annual basis.
(ii) Assessment of investments as
structured entities – A structured
entity is an entity that has been
designed so that voting or similar
rights are not the dominant factor
in deciding who controls the entity.
Additional disclosures are required
by IFRS 12 for interests in structured
entities, whether they are consolidated
or not. The Directors have assessed
whether the entities in which the
Company invests should be classified as
structured entities and have concluded
that none of the entities should be
classified as structured entities as
voting rights are the dominant factor in
deciding who controls these entities.
(iii) Assessment of consolidation
requirements – The Company holds
significant stakes in the majority of its
investee companies and must exercise
judgement in the level of control of
the underlying investee company that
is obtained in order to assess whether
the Company should be classified as
a subsidiary.
The Company must also exercise
judgement in whether a subsidiary provides
investment-related services or activities
and therefore should be consolidated or
held at fair value through profit or loss.
Further details are shown in significant
accounting policy ‘A Classification’ below.
During the year, the Company set up three
wholly owned subsidiary entities for the new
investment in Future Biogas. The Directors
have assessed whether any of these entities
provide investment-related services and
have concluded that they should not be
consolidated and that they should all be
held at fair value through profit or loss.
The adoption of certain accounting
policiesby the Company also requires the
use of certain critical accounting estimates
in determining the information to be
disclosed in the Financial statements.
Key sources of estimation
uncertainties
Valuation of the investment portfolio
The key area where estimates are
significantto the Financial statements and
have a significant risk of causing a material
adjustment to the carrying amounts of
assets and liabilities within thenext financial
year is in the valuation of the investment
portfolio. The portfolio is well-diversified
by sector, geography and underlying risk
exposures. The key risks to the portfolio are
discussed in further detail in the Risk report.
The majority of assets in the investment
portfolio are valued on a discounted cash
flow basis which requires assumptions to be
made regarding future cash flows, terminal
value and the discount rate to be applied
to these cash flows. The methodology for
deriving the fair value of the investment
portfolio, including the key estimates, is set
out in the Portfolio valuation methodology
section. Refer to Note 7 for further details
of the valuation techniques, significant
inputs to those techniques and sensitivity
of the fair value of these investments to the
assumptions that have been made.
The discount rate applied to the cash flows
in each investment portfolio company is
a key source of estimation uncertainty.
The acquisition discount rate is adjusted to
reflect changes in company-specific risks
to the deliverability of future cash flows
and is calibrated against secondary market
information and other available data points,
including comparable transactions.
The discount rates applied to the
investment portfolio at 31 March 2023
range from 10.0% to 13.2% (2022: 10.0% to
13.2%) and the weighted average discount
rate applied to the investment portfolio is
11.3% (2022: 10.9%). The increase in the year
is due to the evolution of the portfolio mix
following the realisation of the European
Projects portfolio and the completion of the
GCX and Future Biogas acquisitions. In the
prior year, the Projects portfolio was valued
on a sales basis and was removed from the
discount rate range.
142
Accounts and other information
Significant accounting policies continued
The cash flows on which the discounted
cash flow valuation is based are
derived from detailed financial models.
These incorporate a number of
assumptions with respect to individual
portfolio companies, including: forecast
new business wins or new orders; cost-
cutting initiatives; liquidity and timing
of debtor payments; timing of non-
committed capital expenditure and
construction activity; the terms of future
debt refinancing; and macroeconomic
assumptions such as inflation and energy
prices. Future power price projections are
taken from independent forecasters, and
changes in these assumptions will affect
the future value of our energy-generating
portfolio companies.
The Summary of portfolio valuation
methodology section onpages 41 and
42 provides further details on some of
the assumptions that have been made in
deriving a balanced base case of cash flows.
The terminal value attributes a residual
value to the portfolio company at the end
of the projected discrete cash flow period
based on market comparables. The terminal
value assumptions consider climate change
risk and stranded asset risk. The valuation
of each asset has significant estimation in
relation to asset specific items but there is
also consideration given to the impact of
wider megatrends such as the transition to a
lower-carbon economy and climate change.
The effects of climate change, including
extreme weather patterns or rising sea
levels in the longer term could impact the
valuation of the assets in the portfolio in
different ways. The Summary of portfolio
valuation methodology section earlier in
this document provides further details on
some of the assumptions that have been
made in deriving terminal values and some
of the risk factors considered in the cash
flow forecasts.
New and amended standards
adopted for the current year
Standards and amendments to standards
applicable to the Company that became
effective during the year and were adopted
by the Company on 1 April 2022 are
listed below:
Amendments to IFRS 17 Insurance
contracts(1 January 2023)
Disclosure of Accounting Policies
(Amendments to IAS 1 and IFRS Practice
Statement 2) (1 January 2023)
Deferred Tax related to Assets and
Liabilities arising from a Single Transaction
(Amendments to IAS 12) (1 January 2023)
Annual Improvement to IFRS Standards
2018-2020 Cycle – Amendments to IFRS
1 First-time Adoption of International
Financial Reporting Standards, IFRS 9
Financial Instruments, IFRS 16 Leases and
IAS 41 Agriculture
Amendments to IAS 1 Classification of
Liabilities as Current or Non-current
(1 January 2023)
Amendments to IAS 8 Accounting Policies,
Changes in Accounting Estimates and
Errors (1 January 2023)
Amendments to IAS 16 Property, Plant and
Equipment – Proceeds before Intended Use
(1 January 2022)
Amendments to IAS 37 Provisions,
Contingent Liabilities and Contingent
Assets – Onerous Contracts
(1 January 2022)
Amendments to IFRS 3 Business
Combinations (1 January 2022)
Standards and amendments
issued but not yet effective
As at 31 March 2023, the following new
oramended standards, which have not
beenapplied in these Financial statements,
had been issued by the International
Accounting Standards Board (‘IASB’)
butareyet to become effective:
Classification of Liabilities as Current
orNon-current (Amendments to IAS 1)
(1 January 2024)
Lease Liability in a Sale and Leaseback
(Amendments to IFRS 16) (1 January 2024)
Non-current Liabilities with Covenants
(Amendments to IAS 1) (1 January 2024)
3i Infrastructure plc Annual report and accounts 2023 143
Accounts and other information
Significant accounting policies continued
The Company intends to adopt these
standards when they become effective, but
does not currently anticipate thestandards
will have a significant impactonthe
Company’s Financial statements.
Current assumptions regardingthe impact
of future standards will remain under
consideration in light of interpretation
notesas and when theyare issued.
A Classification
(i) Subsidiaries – Subsidiaries are
entities controlled by the Company.
Control exists when the Company
is exposed, or has rights, to variable
returns from its involvement with the
subsidiary entity and has the ability to
affect those returns through its power
over the subsidiary entity. In accordance
with the exception under IFRS 10
Consolidated Financial Statements, the
Company only consolidates subsidiaries
in the Financial statements if they
are deemed to perform investment-
related services and do not meet the
definition of an investment entity.
Investments in subsidiaries that do
notmeet this definition are accounted
for as Investments at fair value through
profit or loss with changes in fair
value recognised in the Statement
ofcomprehensive income in the year.
The Directors have assessed all entities
within the structure and concluded
that there are no subsidiaries of the
Company that provide investment-
related services or activities.
(ii) Associates – Associates are those
entities in which the Company has
significant influence, but not control,
over the financial and operating policies.
Investments that are held as part of the
Company’s investment portfolio are
carried in the Balance sheet at fair value
even though the Company may have
significant influence over those entities.
(iii) Joint ventures – Interests in joint
ventures that are held as part of the
Company’s investment portfolio are
carried in the Balance sheet at fair value.
This treatment is permitted by IFRS 11
and IAS 28, which allows interests held
by venture capital organisations where
those investments are designated,
upon initial recognition, as at fair value
through profit or loss and accounted for
in accordance with IFRS 9 with changes
in fair value recognised in the Statement
of comprehensive income in the year.
B Exchange differences
Transactions entered into by the
Company in a currency other than its
functional currency are recorded at the
rates ruling when the transactions occur.
Foreign currency monetary assets and
liabilities are translated to the functional
currency at the exchange rate ruling
atthebalance sheet date.
Foreign exchange differences arising
on translation to the functional currency
are recognised in the Statement of
comprehensive income. Foreign exchange
differences relating to investments held at
fair value through profit or loss are shown
within the line Net gains on investments.
Foreign exchange differences relating
toother assets and liabilities are shown
within the line Exchange movements.
Non-monetary assets and liabilities that
are measured in terms of historical cost
in a foreign currency are translated using
the exchange rate at the date of the
transactions. Non-monetary assets and
liabilities denominated in foreign currencies
that are stated at fair value are translated
to the functional currency using exchange
rates ruling at the date the fair value was
determined with the associated foreign
exchange difference being recognised
within the unrealised gain or loss on
revaluation of the asset or liability.
C Investment portfolio
Recognition and measurement –
Investments are recognised and
de-recognised on a date where the
purchaseorsale of an investment
is underacontract whose terms
require thedelivery or settlement
ofthe investment.
The Company manages its investments
with a view to profiting from the receipt
of investment income and obtaining
capital appreciation from changes in the
fair value of investments. Therefore, all
unquoted investments are measured at
fair value through profit or loss upon initial
recognition and subsequently carried in
the Balance sheet at fair value, applying the
Company’s valuation policy. Acquisition-
related costs are accounted foras expenses
when incurred.
Net gains or losses on investments are the
movement in the fair value of investments
between the start and end of the
accounting period, or investment disposal
date, or the investment acquisition date and
the end of the accounting period, including
divestment-related costs where applicable,
converted into sterling using the exchange
rates in force at the end of the period;
and are recognised in the Statement
ofcomprehensive income.
144
Accounts and other information
Significant accounting policies continued
Income
Investment income is that portion of
incomethat is directly related to the return
from individual investments. It is recognised
to the extent that it is probable that there
will be an economic benefit and the
incomecan be reliably measured.
The following specific recognition
criteria must be met before the income
is recognised:
• dividends from equity investments
are recognised in the Statement of
comprehensive income when the
Company’s rights to receive payment
have been established. Special dividends
are credited to capital or revenue
according to their circumstances;
• interest income from loans that are
measured at fair value through profit
or loss is recognised as it accrues by
reference to the principal outstanding
and the effective interest rate applicable,
which is the rate that exactly discounts
the estimated future cash flows through
the expected life of the financial asset
to the asset’s carrying value or principal
amount. The remaining changes in the
fair value movement of the loans are
recognised separately in the line Net
gains on investments in the Statement
ofcomprehensive income;
• distributions from investments in Limited
Partnerships are recognised in the
Statement of comprehensive income
when the Company’s rights as a Limited
Partner to receive payment have been
established; and
• fees receivable represent amounts
earned from investee companies on
completion of underlying investment
transactions and are recognised on
anaccruals basis once entitlement
totherevenue has been established.
D Fees
(i) Fees – Fees payable represent fees
incurred in the process of acquiring
aninvestment and are measured
ontheaccruals basis.
(ii) Management fees – A management
fee is payable to 3i plc, calculated
as a tiered fee based on the Gross
Investment Value of the Company and
is accrued in the period it is incurred.
Further details on how this fee is
calculated are provided in Note 18.
(iii) Performance fee – The Investment
Manager is entitled to a performance
fee based on the total return generated
in the period in excess of a performance
hurdle of 8%. The fee is payable in three
equal annual instalments and is accrued
in full in the period it is incurred.
Further details are provided in Note 18.
(iv) Finance costs – Finance costs
associated with loans and borrowings
arerecognised on an accruals basis
usingthe effective interest method.
E Treasury assets and liabilities
Short-term treasury assets and short-
andlong-term treasury liabilities are used
to manage cash flows and the overall costs
of borrowing. Financial assets and liabilities
are recognised in the Balance sheet when
the relevant company entity becomes
a party to the contractual provisions
ofthe instrument.
(i) Cash and cash equivalents – Cash and
cash equivalents in the Balance sheet
and Cash flow statement comprise cash
at bank, short-term deposits with an
original maturity of three months or less
and AAA-rated money market funds.
Money market funds are accounted for
at amortised cost under IFRS 9.
However, due to their short-term and
liquid nature, this is the same as fair
value. Interest receivable or payable
oncash and cash equivalents is
recognised on an accruals basis.
(ii) Bank loans, loan notes and borrowings
– Loans and borrowings are initially
recognised at the fair value of the
consideration received, net of issue
costs associated with the borrowings.
Where issue costs are incurred in relation
to arranging debt finance facilities
these are capitalised and disclosed
within Trade and other receivables and
amortised over the life of the loan.
After initial recognition, loans and
borrowings are subsequently measured
at amortised cost using the effective
interest method, which is the rate
that exactly discounts the estimated
future cash flows through the expected
life of the liabilities. Amortised cost
is calculated by taking into account
anyissue costs and any discount or
premium on settlement.
3i Infrastructure plc Annual report and accounts 2023 145
Accounts and other information
(iii) Derivative financial instruments –
Derivative financial instruments are
used to manage the risk associated
with foreign currency fluctuations
in the valuation of the investment
portfolio. This is achieved by the use
of forward foreign currency contracts.
Such instruments are used for the
sole purpose of efficient portfolio
management. All derivative financial
instruments are held at fair value
through profit or loss.
Derivative financial instruments are
recognised initially at fair value on
the contract date and subsequently
remeasuredto the fair value at each
reporting date. All changes in the fair
valueof derivative financial instruments
are taken to the Statement of
comprehensive income.
The maturity profile of derivative contracts
is measured relative to the financial contract
settlement date of each contract and the
derivative contracts are disclosed in the
Financial statements as either current
ornon-current accordingly.
F Other assets
Assets, other than those specifically
accounted for under a separate policy, are
stated at their consideration receivable
less impairment losses. Such assets are
short-term in nature and the carrying
value of these assets is considered to be
approximate to their fair value. Assets are
reviewed for recoverability and impairment
using the expected credit loss model
simplified approach. The Company will
recognise the asset’s lifetime expected
credit losses at each reporting period
where applicable in the Statement of
comprehensive income. An impairment
loss is reversed at subsequent financial
reporting dates to the extent that the
asset’s carrying amount does not exceed
its carrying value, had no impairment
been recognised.
Assets with maturities less than 12 months
are included in current assets, assets with
maturities greater than 12 months after
theBalance sheet date are classified as
non-current assets.
G Other liabilities
Liabilities, other than those specifically
accounted for under a separate policy,
are stated based on the amounts which
are considered to be payable in respect
of goods or services received up to the
financial reporting date. Such liabilities
areshort-term in nature, the carrying
valueof these liabilities is considered
tobeapproximate to their fair value.
H Equity and reserves
(i) Share capital – Share capital issued
by the Company is recognised at
the fair value of proceeds received
and is credited to the Stated capital
account. Direct issue costs net of tax
are deducted from the fair value of
theproceeds received.
(ii) Equity and reserves – The Stated
capital account of the Company
represents the cumulative proceeds
recognised from share issues or new
equity issued on the conversion of
warrants made by the Company net of
issue costs and reduced by any amount
that has been transferred to Retained
reserves, in accordance with Jersey
Company Law, in previous years.
Share capital is treated as an equity
instrument, on the basis that no
contractual obligation exists for the
Company to deliver cash or other
financial assets to the holder of
the instrument.
On 15 October 2018, the Company became
UK tax domiciled and, with effect from that
date, was granted UK approved investment
trust status. Financial statements prepared
under IFRS are not strictly required to
apply the provisions of the Statements
of Recommended Practice issued
by the UK Association of Investment
Companies for the financial statements
of Investment Trust Companies (the ‘AIC
SORP’). However, where relevant and
appropriate, the Directors have looked to
follow the recommendations of the SORP.
From this date, the retained profits of the
Company have been applied to two new
reserves, being the Capital reserve and
the Revenue reserve. These are in addition
to the existing Retained reserves which
incorporate the cumulative retained profits
of the Company (after the payment of
dividends) plus any amounts that have been
transferred from the Stated capital account
of the Company to 15 October 2018.
Significant accounting policies continued
146
Accounts and other information
The Directors have exercised their
judgement in applying the AIC SORP
and a summary of these judgements
areas follows:
• Net gains on investments are applied
wholly to the Capital reserve as they
relate to the revaluation or disposal
of investments;
• Dividends are applied to the Revenue
reserve except under specific
circumstances where a dividend arises
from a return of capital or proceeds
froma refinancing, when they are
appliedto the Capital reserve;
• Fees payable are applied to the Capital
reserve where the service provided is, in
substance, an intrinsic part of an intention
to acquire or dispose of an investment;
• Movement in the fair value of derivative
financial instruments is applied to
the Capital reserve as the derivative
hedging programme is specifically
designed to reduce the volatility of
sterling valuations of the non-sterling
denominated investments;
• Management fees are applied to the
Revenue reserve as they reflect ongoing
asset management. Where a transaction
fee element is due on the acquisition
of an investment it is applied to the
Capital reserve;
• Performance fees are applied wholly
to the Capital reserve as they arise
mainly from capital returns on the
investment portfolio;
• Operating costs are applied wholly to
the Revenue reserve as there is no clear
connection between the operating
expenses of the Company and the
purchase and sale of an investment;
• Finance costs are applied wholly to
the Revenue reserve as the existing
borrowing is not directly linked to an
investment; and
• Exchange movements are applied to
theRevenue reserve where they relate
toexchange on non-portfolio assets.
(iii) Dividends payable – Dividends on
ordinary shares are recognised in
the period in which the Company’s
obligation to make the dividend
payment arises. For the period to
15 October 2018, dividends were
deducted from Retained reserves.
For subsequent periods, dividends are
deducted first from the Revenue reserve
and then from the Capital reserve
if required.
I Income taxes
Income taxes represent the sum of the
tax currently payable, withholding taxes
suffered and deferred tax. Tax is charged or
credited in the Statement of comprehensive
income, except where it relates to items
charged orcredited directly to equity,
in which case the tax is also dealt with
in equity.
The tax currently payable is based on the
taxable profit for the year. This may differ
from the profit included in the Statement of
comprehensive income because it excludes
items of income or expense that are taxable
or deductible in other years and it further
excludes items that are never taxable
or deductible.
To enable the tax charge to be based
on the profit for the year, deferred tax
is provided in full on temporary timing
differences, at the rates of tax expected to
apply when these differences crystallise.
Deferred tax assets are recognised only to
the extent that it is probable that sufficient
taxable profits will be available against
which temporary differences can be set
off. In practice, some assets that are likely
to give rise to timing differences will be
treated as capital for tax purposes.
Given capital items are exempt from tax
under the Investment Trust Company
rules, deferred tax is not expected to be
recognised on these balances. All deferred
tax liabilities are offset against deferred tax
assets, where appropriate, in accordance
with the provisions of IAS 12.
The carrying amount of deferred tax assets
is reviewed at each balance sheet date and
reduced to the extent that it is no longer
probable that sufficient taxable profits will
be available to allow all or part of the asset
to be recovered.
Significant accounting policies continued
3i Infrastructure plc Annual report and accounts 2023 147
Accounts and other information
Notes to the accounts
1 Operating segments
The Directors review information on a regular basis that is analysed by portfolio segment; being Economic infrastructure businesses, the Projects portfolio and the India Fund. In prior
years they also analysed the portfolio by geography. Since the India Fund reached the end of its life and moved into liquidation and because some of the investments such as GCX,
TCR, ESVAGT and Tampnet operate in multiple jurisdictions, this geographic distinction is no longer relevant and is therefore no longer reported. These segments are reviewed for the
purpose of resource allocation and the assessment of their performance. In accordance with IFRS 8, the segmental information provided below uses these segments for the analysis of
results as it is the most closely aligned with IFRS reporting requirements. The Company is an investment holding company and does not consider itself to have any customers.
The following is an analysis of the Company’s investment return, profit before tax, assets, liabilities and net assets by portfolio segment:
For the year to 31 March 2023
Economic infrastructure
businesses
£m
Projects
portfolio
£m
India
Fund
£m
Unallocated
1
£m
Total
£m
Investment return 492 3 – 2 497
Profit/(loss) before tax 511 2 – (119) 394
For the year to 31 March 2022
Investment return 486 18 5 5 514
Profit/(loss) before tax 483 19 5 (103) 404
As at 31 March 2023
Assets 3,698 – – 9 3,707
Liabilities (18) – – (588) (606)
Net assets/(liabilities) 3,680 – – (579) 3,101
As at 31 March 2022
Assets 2,796 105 – 119 3,020
Liabilities (18) (1) – (297) (316)
Net assets/(liabilities) 2,778 104 – (178) 2,704
1 Unallocated includes cash, management and performance fees payable, RCF drawn and other payables and receivables (including vendor loan notes) which are not directly attributable to the investment portfolio.
During the year, the Company generated 99% (2022: 95%) of its investment return from investments in Economic infrastructure businesses, 1% (2022: 4%) from investments in Projects
and none (2021: 1%) from its investment in the India Fund. Given the nature of the Company’s operations, the Company is not considered to be exposed to any operational seasonality or
cyclicality that would impact the financial results of the Company during the year or the financial position of the Company at 31 March 2023.
148
Accounts and other information
Notes to the accounts continued
Year to
31 March
2023
£m
Year to
31 March
2022
£m
Management fee 47 43
Performance fee 45 54
92 97
Total management and performance fees payable by the Company for the year to 31 March 2023 were £92 million (2022: £97 million). Note 18 provides further details on the calculation of
the management fee and performance fee.
3 Operating expenses
Operating expenses include the following amounts:
Year to
31 March
2023
£m
Year to
31 March
2022
£m
Audit fees 0.6 0.6
Directors’ fees and expenses 0.5 0.5
In addition to the fees described above, audit fees of £0.05 million (2022: £0.05 million) are payable by unconsolidated subsidiary entities for the year to 31 March 2023 to the
Company’s auditor.
2 Management and performance fees payable
3i Infrastructure plc Annual report and accounts 2023 149
Accounts and other information
Notes to the accounts continued
Services provided by the Company’s auditor
During the year, the Company obtained the following services from the Company’s auditor, Deloitte LLP.
Audit services
Year to
31 March
2023
£m
Year to
31 March
2022
£m
Statutory audit
1
Company 0.52 0.40
UK and Jersey unconsolidated subsidiaries
2
0.05 0.05
0.57 0.45
1 Amounts exclude VAT.
2 These amounts are payable from unconsolidated subsidiary entities and do not form part of operating expenses but are included in the net gains on investments.
Non-audit services
Deloitte LLP and their associates provided non-audit services for fees totalling £95,891 for the year to 31 March 2023 (2022: £104,635). This related to agreed-upon procedures work in
respect of the management and performance fees £8,316 (2022: £7,560), agreed-upon procedures work in respect of Sustainability KPIs for the RCF reporting £27,000 (2022: £27,000) and
the review of the interim financial statements £60,575 (2022: £55,575). In line with the Company’s policy, Deloitte LLP provided non-audit services to certain investee companies. The fees
for these services are ordinarily borne by the underlying investee companies or unconsolidated subsidiaries, and therefore are not included in the expenses of the Company. Details on
how such non-audit services are monitored and approved can be found in the Governance section of the Annual report and accounts.
3 Operating expenses (continued)
150
Accounts and other information
Notes to the accounts continued
4 Finance costs
Year to
31 March
2023
£m
Year to
31 March
2022
£m
Finance costs associated with the debt facilities 14 3
Professional fees payable associated with the arrangement of debt financing 2 2
16 5
The finance costs associated with the debt facilities have increased for the year to 31 March 2023 as a result of higher average drawings, increased SONIA and EURIBOR rates and
increases in the total available facilities. The average monthly drawn position during the year was £368 million (2022: £80 million) and the average monthly total available facilities was
£562 million (2022: £508 million).
5 Movement in the fair value of derivative financial instruments
Year to
31 March
2023
£m
Year to
31 March
2022
£m
Movement in the fair value of forward foreign exchange contracts 18 (2)
The movement in the fair value of derivative financial instruments is included within profit before tax but not included within investment return.
3i Infrastructure plc Annual report and accounts 2023 151
Accounts and other information
Notes to the accounts continued
Year to
31 March
2023
£m
Year to
31 March
2022
£m
Current taxes
Current year – –
Total income tax charge in the Statement of comprehensive income – –
Reconciliation of income taxes in the Statement of comprehensive income
The tax charge for the year is different from the standard rate of corporation tax in the UK, currently 19% (2022: 19%), and the differences are explained below:
Year to
31 March
2023
£m
Year to
31 March
2022
£m
Profit before tax 394 404
Profit before tax multiplied by rate of corporation tax in the UK of 19% (2022: 19%) 75 77
Effects of:
Non-taxable capital profits due to UK approved investment trust company status (67) (70)
Non-taxable dividend income – (5)
Dividends designated as interest distributions (9) (3)
Temporary differences on which deferred tax is not recognised 1 1
Total income tax charge in the Statement of comprehensive income – –
The Company’s affairs are directed so as to allow it to meet the requisite conditions to continue to operate as an approved investment trust company for UK tax purposes. The approved
investment trust status allows certain capital profits of the Company to be exempt from tax in the UK and also permits the Company to designate the dividends it pays, wholly or partly,
as interest distributions. These features enable approved investment trust companies to ensure that their investors do not ultimately suffer double taxation of their investment returns,
ieonce at the level of the investment fund vehicle and then again in the hands of the investors.
Under the UK Finance Act 2021, the UK corporation tax rate will increase for large companies from the current rate of 19% to 25% with effect from 1 April 2023. Should the Company
recognise any deferred tax assets and liabilities, a rate of 19% or 25% would be used depending on when the assets and liabilities are expected to be crystallised.
6 Income taxes
152
Accounts and other information
Notes to the accounts continued
All financial instruments for which fair value is recognised or disclosed are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is
significant to the fair value measurement as a whole:
Level Fair value input description Financial instruments
Level 1 Quoted prices (unadjusted and in active markets) Quoted equity investments
Level 2 Inputs other than quoted prices included in Level 1 that are observable in the market either
directly (ie as prices) or indirectly (ie derived from prices)
Derivative financial instruments held at fair value
Level 3 Inputs that are not based on observable market data Unquoted investments and unlisted funds
For assets and liabilities that are recognised in the Financial statements on a recurring basis, the Company determines whether transfers have occurred between levels in the hierarchy by
reassessing the categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) for each reporting period.
The table on page 154 shows the classification of financial instruments held at fair value into the fair value hierarchy at 31 March 2023. For all other assets and liabilities, their carrying
value approximates to fair value. During the year ended 31 March 2023, there were no transfers of financial instruments between levels of the fair value hierarchy (2022: none).
Trade and other receivables in the Balance sheet includes £4 million of deferred finance costs relating to the arrangement fee for the revolving credit facility and additional facilities
(2022: £2 million). This has been excluded from the table on the following page as it is not categorised as a financial instrument.
7 Investments at fair value through profit or loss and financial instruments
3i Infrastructure plc Annual report and accounts 2023 153
Accounts and other information
Notes to the accounts continued
Financial instruments classification
As at 31 March 2023
Level 1
£m
Level 2
£m
Level 3
£m
Total
£m
Financial assets
Investments at fair value through profit or loss – – 3,641 3,641
Trade and other receivables – – – –
Derivative financial instruments – 57 – 57
– 57 3,641 3,698
Financial liabilities
Derivative financial instruments – (18) – (18)
– (18) – (18)
As at 31 March 2022
Level 1
£m
Level 2
£m
Level 3
£m
Total
£m
Financial assets
Investments at fair value through profit or loss – – 2,873 2,873
Trade and other receivables – 102 – 102
Derivative financial instruments – 26 – 26
– 128 2,873 3,001
Financial liabilities
Derivative financial instruments – (18) – (18)
– (18) – (18)
7 Investments at fair value through profit or loss and financial instruments (continued)
154
Accounts and other information
Notes to the accounts continued
Reconciliation of financial instruments categorised within Level 3 of fair value hierarchy
Level 3 fair value reconciliation
As at
31 March
2023
£m
As at
31 March
2022
£m
Opening fair value 2,873 1,804
Additions 824 816
Disposal proceeds and repayment (426) (148)
Movement in accrued income 31 17
Fair value movement (including exchange movements) 339 384
Closing fair value 3,641 2,873
The fair value movement (including exchange movements) is equal to the Net gains on investments showing in the Statement of comprehensive income. All unrealised movements on
investments and foreign exchange movements are recognised in profit or loss in the Statement of comprehensive income during the year and are attributable to investments held at the
end of the year.
The holding period of the investments in the portfolio is expected to be greater than one year. Therefore, investments are classified as non-current unless there is an agreement
to dispose of the investment within one year and all relevant regulatory or other third-party approvals have been received. It is not possible to identify with certainty whether any
investments may be sold within one year.
Investment income of £156 million (2022: £127 million) comprises dividend income of £1 million (2022: £24 million) and interest of £155 million (2022: £103 million).
Unquoted investments
The Company invests in private companies which are not quoted on an active market. These are measured in accordance with the International Private Equity Valuation guidelines with
reference to the most appropriate information available at the time of measurement. Further information regarding the valuation of unquoted investments can be found in the Portfolio
valuation methodology section.
The Company’s policy is to fair value both the equity and shareholder debt investments in infrastructure assets together where they will be managed and valued as a single investment,
were invested at the same time and cannot be realised separately. The Directors consider that equity and debt share the same characteristics and risks and they are therefore
treated as a single unit of account for valuation purposes and a single class for disclosure purposes. As at 31 March 2023, the fair value of unquoted investments was £3,641 million
(2022: £2,873 million). Individual portfolio asset valuations are shown in the Portfolio summary on page 36.
7 Investments at fair value through profit or loss and financial instruments (continued)
3i Infrastructure plc Annual report and accounts 2023 155
Accounts and other information
Notes to the accounts continued
The fair value of the investments is sensitive to changes in the macroeconomic assumptions used as part of the portfolio valuation process. As part of its analysis, the Board has
considered the potential impact of a change in a number of the macroeconomic assumptions used in the valuation process. By considering these potential scenarios, the Board is well
positioned to assess how the Company is likely to perform if affected by variables and events that are inherently outside of the control of the Board and the Investment Manager.
The majority of the assets held within Level 3 are valued on a discounted cash flow basis, hence the valuations are sensitive to the discount rate assumed in the valuation of each asset.
Other significant unobservable inputs include the inflation rate assumption, the interest rates assumption used to project the future cash flows, and the forecast cash flows themselves.
The sensitivity to the inflation rate and interest rates is described below and the sensitivity to the forecast cash flows is captured in the Market risk section in Note 9.
A discussion of discount rates applied can be found in the Summary of portfolio valuation methodology section. Increasing the discount rate used in the valuation of each asset by
1% would reduce the value of the portfolio by £296 million (2022: £258 million). Decreasing the discount rate used in the valuation of each asset by 1% would increase the value of the
portfolio by £343 million (2022: £297 million).
The majority of assets held within Level 3 have revenues that are linked, partially linked or in some way correlated to inflation. The long-term CPI inflation rate assumption across all
jurisdictions is 2.0% (2022: 2.0%). The long-term RPI assumption for the UK is 2.5% (2022: 2.5%). The impact of increasing the short-term inflation rate assumption by 1% for the next two
years would increase the value of the portfolio by £47 million (2022: £43 million). Decreasing the inflation rate assumption used in the valuation of each asset by 1% for the next two years
would decrease the value of the portfolio by £52 million (2022: £46 million). The timing and quantum of price increases will vary across the portfolio and the sensitivity may differ from that
modelled. Changing the inflation rate assumption may result in consequential changes to other assumptions used in the valuation of each asset.
The valuations are sensitive to changes in interest rates, which may result from: (i) unhedged existing borrowings within portfolio companies; (ii) interest rates on uncommitted future
borrowings assumed within the asset valuations; and (iii) cash deposits held by portfolio companies. These comprise a wide range of interest rates from short-term deposit rates to
longer-term borrowing rates across a broad range of debt products. Increasing the cost of borrowing assumption for unhedged borrowings and any future uncommitted borrowing and
the cash deposit rates used in the valuation of each asset by 1% would reduce the value of the portfolio by £182 million (2022: £158 million). Decreasing the interest rate assumption for
unhedged borrowings used in the valuation of each asset by 1% would increase the value of the portfolio by £175 million (2022: £156 million). This calculation does not take account of any
offsetting variances which may be expected to prevail if interest rates changed, including the impact of inflation discussed above.
Over-the-counter derivatives
The Company uses over-the-counter foreign currency derivatives to hedge foreign currency movements. The derivatives are held at fair value which represents the price that would be
received to sell or transfer the instruments at the balance sheet date. The valuation technique incorporates various inputs, including foreign exchange spot and forward rates, and uses
present value calculations. For these financial instruments, significant inputs into models are market observable and are included within Level 2.
7 Investments at fair value through profit or loss and financial instruments (continued)
156
Accounts and other information
Notes to the accounts continued
Valuation process for Level 3 valuations
The valuations on the Balance sheet are the responsibility of the Board of Directors of the Company. The Investment Manager provides a valuation of unquoted investments, debt
and unlisted funds held by the Company on a half-yearly basis. This is performed by the valuation team of the Investment Manager and reviewed by the valuation committee of the
Investment Manager. The valuations are also subject to quality assurance procedures performed within the valuation team. The valuation team verifies the major inputs applied in the
latest valuation by agreeing the information in the valuation computation to relevant documents and market information. The valuation committee of the Investment Manager considers
the appropriateness of the valuation methods and inputs, and may request that alternative valuation methods are applied to support the valuation arising from the method chosen. On a
half-yearly basis, the Investment Manager presents the valuations to the Board. This includes a discussion of the major assumptions used in the valuations, with an emphasis on the more
significant investments and investments with significant fair value changes. Any changes in valuation methods are discussed and agreed with the Audit and Risk Committee before the
valuations on the Balance sheet are approved by the Board.
8 Trade and other receivables
Year to
31 March
2023
£m
Year to
31 March
2022
£m
Current assets
Vendor loan notes – 100
Other receivables including prepayments – 2
Capitalised finance costs 4 2
4 104
7 Investments at fair value through profit or loss and financial instruments (continued)
3i Infrastructure plc Annual report and accounts 2023 157
Accounts and other information
Notes to the accounts continued
9 Financial risk management
A full review of the Company’s objectives, policies and processes for managing and monitoring risk is set out in the Risk report. This Note provides further detail on financial risk
management, cross-referring to the Risk report where applicable and providing further quantitative data on specific financial risks.
Each investment made by the Company is subject to a full risk assessment through a consistent investment approval process. The Board’s Management Engagement Committee, Audit
and Risk Committee and the Investment Manager’s investment process are part of the overall risk management framework of the Company.
The funding objective of the Company is that each category of investment ought to be broadly matched with liabilities and shareholders’ funds according to the risk and maturity
characteristics of the assets, and that funding needs are to be met ahead of planned investment.
Capital structure
The Company has a continuing commitment to capital efficiency. The capital structure of the Company consists of cash held on deposit and in AAA-rated money market funds, borrowing
facilities and shareholders’ equity. The Company’s Articles require its outstanding borrowings, including any financial guarantees to support subsequent obligations, to be limited to 50%
of the gross assets of the Company. The type and maturity of the Company’s borrowings are analysed in Note 11 and the Company’s equity is analysed into its various components in
the Statement of changes in equity. Capital is managed so as to maximise the return to shareholders, while maintaining a strong capital base that ensures that the Company can operate
effectively in the marketplace and sustain future development of the business. The Board is responsible for regularly monitoring capital requirements to ensure that the Company is
maintaining sufficient capital to meet its future investment needs.
The Company is regulated by the Jersey Financial Services Commission under the provisions of the Collective Investment Funds (Jersey) Law 1988 as a listed closed-ended collective
investment fund and is not required as a result of such regulation to maintain a minimum level of capital.
Capital is allocated for investment in infrastructure across the UK and continental Europe. As set out in the Company’s investment policy, the maximum exposure to any one investment is
25% of gross assets (including cash holdings) at the time of investment.
158
Accounts and other information
Notes to the accounts continued
Credit risk
The Company is subject to credit risk on the debt component of its unquoted investments, cash, deposits, derivative contracts and receivables. The maximum exposure to credit risk as a
result of counterparty default equates to the current carrying value of these financial assets. Throughout the year and the prior year, the Company’s cash and deposits were held with a variety
of counterparties, principally in AAA-rated money market funds. The counterparties selected for the derivative financial instruments were all banks with a minimum of a BBB+ credit rating
with at least one major rating agency.
The credit quality of unquoted investments, which are held at fair value and include debt and equity elements, is based on the financial performance of the individual portfolio companies.
The credit risk relating to these assets is based on their enterprise value and is reflected through fair value movements. This incorporates the impact from macroeconomic factors such as
inflation and interest rate rises and the volatility in energy prices. The performance of underlying investments is monitored by the Board to assess future recoverability.
For those assets and income entitlements that are not past due, it is believed that the risk of default is small and capital repayments and interest payments will be made in accordance with
the agreed terms and conditions of the investment. If the portfolio company has failed and there is no expectation to recover any residual value from the investment, the Company’s policy
is to record an impairment for the full amount of the loan. When the net present value of the future cash flows predicted to arise from the asset, discounted using the effective interest rate
method, implies non-recovery of all or part of the Company’s investment, a fair value movement is recorded equal to the valuation shortfall.
As at 31 March 2023, the Company had no loans or receivables or debt investments considered past due (2022: nil).
The Company actively manages counterparty risk. Counterparty limits are set and closely monitored by the Board and a regular review of counterparties is undertaken by the Investment
Manager and reported to the Board. As at 31 March 2023, the Company did not consider itself to have a significant exposure to any one counterparty and held deposits and derivative
contracts with a number of different counterparties to reduce counterparty risk (2022: same).
Due to the size and nature of the investment portfolio there is the potential for concentration risk. This risk is managed by diversifying the portfolio by sector and geography.
9 Financial risk management (continued)
3i Infrastructure plc Annual report and accounts 2023 159
Accounts and other information
Notes to the accounts continued
Liquidity risk
Further information on how liquidity risk is managed is provided in the Risk report. The table below analyses the maturity of the Company’s contractual liabilities.
2023
Payable
on demand
£m
Due within
1 year
£m
Due between
1 and 2 years
£m
Due between
2 and 5 years
£m
Total
£m
Liabilities
Loans and borrowings
1
– (26) (26) (517) (569)
Trade and other payables (4) (35) (33) (15) (87)
Derivative contracts – (4) (6) (8) (18)
Financial commitments
2
– – – – –
Total undiscounted financial liabilities (4) (65) (65) (540) (674)
1 Loans and borrowings include undrawn commitment fees and interest payable on the RCF referred to in Note 11.
2 Financial commitments are described in Note 16 and are not recognised in the Balance sheet.
2022
Payable
on demand
£m
Due within
1 year
£m
Due between
1 and 2 years
£m
Due between
2 and 5 years
£m
Total
£m
Liabilities
Loans and borrowings
1
– (7) (5) (234) (246)
Trade and other payables (4) (26) (20) (18) (68)
Derivative contracts – (12) (3) (3) (18)
Financial commitments
2
(302) – – – (302)
Total undiscounted financial liabilities (306) (45) (28) (255) (634)
1 Loans and borrowings include undrawn commitment fees and interest payable on the RCF and additional facilities referred to in Note 11.
2 Financial commitments are described in Note 16 and are not recognised in the Balance sheet.
The derivative contracts liability shown is the net cash flow expected to be paid on settlement. In order to manage the contractual liquidity risk the Company has free cash and debt
facilities in place.
9 Financial risk management (continued)
160
Accounts and other information
Notes to the accounts continued
Market risk
The valuation of the Company’s investment portfolio is largely dependent on the underlying trading performance of the companies within the portfolio, but the valuation of the portfolio
and the carrying value of other items in the Financial statements can also be affected by interest rate, currency and market price fluctuations. The Company’s sensitivities to these
fluctuations are set out below.
(i) Interest rate risk
Further information on how interest rate risk is managed is provided in the Risk report.
An increase of 100 basis points in interest rates over 12 months (2022: 100 basis points) would lead to an approximate decrease in net assets and net profit of the Company of £5 million
(2022: £2 million). This exposure relates principally to changes in interest payable on the drawn RCF balance at the year end. The average cash balance of the Company, which is more
representative of the cash balance during the year, was £29 million (2022: £269 million) and the weighted-average interest earned was 1.62% (2022: 0.04%).
In addition, the Company has indirect exposure to interest rates through changes to the financial performance of portfolio companies caused by interest rate fluctuations as disclosed
in Note 7. This risk is considered a component of market risk described in section (iii). The Company does not hold any fixed rate debt investments or borrowings and is therefore not
exposed to fair value interest rate risk.
(ii) Currency risk
Further information on how currency risk is managed is provided in the Risk report. The currency denominations of the Company’s net assets are shown in the table below. The sensitivity
analysis demonstrates the exposure of the Company’s net assets to movements in foreign currency exchange rates. The hedging strategy is discussed in the Financial review.
As at 31 March 2023
Sterling
1
£m
Euro
£m
NOK
£m
DKK
£m
US dollar
£m
Total
£m
Net assets 506 1,486 293 489 327 3,101
Sensitivity analysis
Assuming a 10% appreciation in sterling against the euro, NOK, DKK and US dollar exchange rates:
Impact of exchange movements on net profit and net assets 159 (135) (27) (44) (30) (77)
1 Sterling impact relates to the impact of fair value movement in derivatives held by the Company to hedge foreign currency fluctuations in the valuation of the investment portfolio. The notional amount of the derivatives is disclosed in
Note 10.
9 Financial risk management (continued)
3i Infrastructure plc Annual report and accounts 2023 161
Accounts and other information
Notes to the accounts continued
As at 31 March 2022
Sterling
1
£m
Euro
£m
NOK
£m
DKK
£m
US dollar
£m
Total
£m
Net assets 456 1,457 243 548 – 2,704
Sensitivity analysis
Assuming a 10% appreciation in sterling against the euro, NOK, DKK and US dollar exchange rates:
Impact of exchange movements on net profit and net assets 139 (132) (22) (50) – (65)
1 Sterling impact relates to the impact of fair value movement in derivatives held by the Company to hedge foreign currency fluctuations in the valuation of the investment portfolio. The notional amount of the derivatives is disclosed in
Note 10.
The impact of an equivalent depreciation in sterling against the euro, NOK, DKK and US dollar exchange rates has the inverse impact on net profit and net assets from that shown above.
The risk exposure at the year end is considered to be representative of this year as a whole.
(iii) Market risk
Further information about the management of external market risk and its impact on price or valuation, which arises principally from unquoted investments, is provided in the Risk report.
A 10% increase in the fair value of those investments would have the following direct impact on net profit and net assets. The impact of a change in all cash flows has an equivalent
impact on the fair value, as set out below.
As at
31 March
2023
Investments
at fair value
£m
As at
31 March
2022
Investments
at fair value
£m
Increase in net profit and net assets 364 287
The impact of a 10% decrease in the fair value of those investments would have the inverse impact on net profit and net assets from that shown above. The risk exposure at the year end
is considered to be representative of this year as a whole.
By the nature of the Company’s activities, it has large exposures to individual assets that are susceptible to movements in price. This risk concentration is managed within the Company’s
investment strategy as discussed in the Risk report.
9 Financial risk management (continued)
162
Accounts and other information
Notes to the accounts continued
(iv) Fair values
The fair value of the investment portfolio is described in detail in the Portfolio valuation methodology section and in Note 7. The fair values of the remaining financial assets and liabilities
approximate to their carrying values (2022: same).
The sensitivity analysis in respect of the interest rate, currency and market price risks is considered to be representative of the Company’s exposure to financial risks throughout the
period to which they relate (2022: same).
10 Derivative financial instruments
As at
31 March
2023
£m
As at
31 March
2022
£m
Non-current assets
Forward foreign exchange contracts 29 6
Current assets
Forward foreign exchange contracts 28 20
Non-current liabilities
Forward foreign exchange contracts (10) (6)
Current liabilities
Forward foreign exchange contracts (8) (12)
Forward foreign exchange contracts
The Company uses forward foreign exchange contracts to minimise the effect of fluctuations in the investment portfolio from movements in exchange rates and also to fix the value
ofcertain expected future cash flows arising from distributions made by investee companies.
The fair value of these contracts is recorded in the Balance sheet. No contracts are designated as hedging instruments and consequently all changes in fair value are taken through
profitor loss.
As at 31 March 2023, the notional amount of the forward foreign exchange contracts held by the Company was £1,982 million (2022: £1,555 million).
9 Financial risk management (continued)
3i Infrastructure plc Annual report and accounts 2023 163
Accounts and other information
Notes to the accounts continued
The Company increased the commitments under its revolving credit facility (‘RCF’) in July 2022 from £700 million to £900 million. An additional facility of £300 million available at
the beginning of the financial year, with a maturity of less than one year, was cancelled in July 2022. In September 2022, the maturity of the RCF was extended to 3 November 2025.
The Company has the right to extend the RCF by a further year provided that existing lenders consent.
The RCF is secured by a floating charge over the bank accounts of the Company. Interest is payable at SONIA or EURIBOR plus a fixed margin on the drawn amount. This fixed margin
is subject to a small adjustment annually based upon performance against agreed sustainability metrics. As at 31 March 2023, the Company had £501 million of drawings under the RCF
(March 2022: £231 million). The RCF has one financial covenant, a loan-to-value ratio.
There was no change in total financing liabilities for the Company during the period as the cash flows relating to the financing liabilities were equal to the income statement expense.
Accordingly, no reconciliation between the movement in financing liabilities and the cash flow statement has been presented.
12 Trade and other payables
Year to
31 March
2023
£m
Year to
31 March
2022
£m
Non-current liabilities
Performance fee 48 38
Current liabilities
Management and performance fees 37 27
Accruals and other creditors 2 2
87 67
The carrying value of all liabilities is representative of fair value (2022: same).
11 Loans and borrowings
164
Accounts and other information
Notes to the accounts continued
As at 31 March 2023 As at 31 March 2022
Number £m Number £m
Authorised, issued and fully paid
Opening balance 891,434,010 1,496 891,434,010 1,496
Issue of ordinary shares 30,915,990 102 – –
Closing balance 922,350,000 1,598 891,434,010 1,496
Reconciliation to Stated capital account
As at 31 March 2023 As at 31 March 2022
£m £m
Proceeds from issue of ordinary shares 1,598 1,496
Transfer to retained reserves on 20 December 2007 (693) (693)
Cost of issue of ordinary shares (26) (24)
Stated capital account closing balance 879 779
On 14 February 2023, 30.9 million shares were admitted for trading further to the equity placing at an issue price of 330.0 pence per share or an aggregate amount of £102 million.
Issue costs of £2 million arising from this offer have been offset against the stated capital account. Therefore, as at 31 March 2023, the residual value on the stated capital account was
£879 million (2022: £779 million).
13 Issued capital
3i Infrastructure plc Annual report and accounts 2023 165
Accounts and other information
Notes to the accounts continued
The earnings and net asset value per share attributable to the equity holders of the Company are based on the following data:
Year to
31 March
2023
£m
Year to
31 March
2022
£m
Earnings per share (pence)
Basic and diluted 44.0 45.3
Earnings (£m)
Profit after tax for the year 394 404
Number of shares (million)
Weighted average number of shares in issue 895.2 891.4
Number of shares at the end of the year 922.4 891.4
As at
31 March
2023
As at
31 March
2022
Net asset value per share (pence)
Basic and diluted 336.2 303.3
Net assets (£m)
Net assets 3,101 2,704
14 Per share information
166
Accounts and other information
Notes to the accounts continued
Declared and paid during the year
Year to 31 March 2023 Year to 31 March 2022
Pence per share £m Pence per share £m
Interim dividend paid on ordinary shares 5.575 50 5.225 46
Prior year final dividend paid on ordinary shares 5.225 47 4.900 44
10.800 97 10.125 90
The Company proposes paying a final dividend of 5.575 pence per share (2022: 5.225 pence) which will be payable to those shareholders that are on the register on 16 June 2023. On the
basis of the shares in issue at year end, this would equate to a total final dividend of £51 million (2022: £47 million).
The final dividend is subject to approval by shareholders at the AGM in July 2023 and has therefore not been accrued in these Financial statements.
16 Commitments
As at
31 March
2023
£m
As at
31 March
2022
£m
Unquoted investments – 302
During the year, the Company invested in GCX and, as a result, the prior year commitment of US$398 million (£302 million) was extinguished.
15 Dividends
3i Infrastructure plc Annual report and accounts 2023 167
Accounts and other information
Notes to the accounts continued
17 Contingent liabilities
As at 31 March 2023, the Company had no contingent liabilities (2022: nil).
18 Related parties
Transactions between 3i Infrastructure and 3i Group
3i Group plc (‘3i Group’) holds 29.2% (2022: 30.2%) of the ordinary shares of the Company. This classifies 3i Group as a ‘substantial shareholder’ of the Company as defined by the Listing
Rules. During the year, 3i Group received dividends of £29 million (2022: £27 million) from the Company.
In 2007 the Company committed US$250 million to the India Fund to invest in the Indian infrastructure market. 3i Group also committed US$250 million to the India Fund. The India Fund
has reached the end of its life and moved into liquidation and the outstanding commitment is no longer callable. Therefore, no commitments were drawn down by the India Fund from
the Company during the year (2022: nil).
3i Investments plc, a subsidiary of 3i Group, is the Company’s Alternative Investment Fund Manager and provides its services under an Investment Management Agreement (‘IMA’).
3i Investments plc also acts as the investment manager of the India Fund. 3i plc, another subsidiary of 3i Group, together with 3i Investments plc, provides support services to the
Company (which are ancillary and related to the investment management service), which it is doing pursuant to the terms of the IMA.
Fees under the IMA consist of a tiered management fee and time weighting of the management fee calculation and a one-off transaction fee of 1.2% payable in respect of new
investments. The applicable tiered rates are shown in the table below. The management fee is payable quarterly in advance.
Gross investment value Applicable tier rate
Up to £1.25bn 1.4%
£1.25bn to £2.25bn 1.3%
Above £2.25bn 1.2%
For the year to 31 March 2023, £47 million (2022: £43 million) was payable, including one-off transaction fees payable in respect of new investments, and advance payments of £45 million
were made resulting in an amount due to 3i plc of £2 million at 31 March 2023 (2022: £1 million). In consideration of the provision of support services under the IMA, the Company pays
the Investment Manager an annual fixed fee. The cost for the support services incurred for the year to 31 March 2023 was £1 million (2022: £1 million). There was no outstanding balance
payable as at 31 March 2023 (2022: nil).
168
Accounts and other information
Notes to the accounts continued
Under the IMA, a performance fee is payable to the Investment Manager equal to 20% of the Company’s total return in excess of 8%, payable in three equal annual instalments.
The second and third instalments will only be payable if either (a) the Company’s performance in the year in which that instalment is paid also triggers payment of a performance fee in
respect of that year, or (b) if the Company’s performance over the three years starting with the year in which the performance fee is earned exceeds the 8% hurdle on an annual basis.
There is no high water mark requirement.
The performance hurdle requirement was exceeded for the year to 31 March 2023 and therefore a performance fee of £45 million was recognised (2022: £54 million). The outstanding
balance payable as at 31 March 2023 was £83 million (2022: £64 million), which includes the second instalment of the FY22 fee and the third instalment of the FY21 fee.
Year
Performance fee
(£m)
Outstanding balance at
31 March (£m) Payable in FY24 (£m)
FY23 45 45 15
FY22 54 36 18
FY21 7 2 2
Under the IMA, the Investment Manager’s appointment may be terminated by either the Company or the Investment Manager giving the other not less than 12 months’ notice in writing,
but subject to a minimum term of four years from 15 October 2018, unless 3i Investments plc has previously ceased to be a member of 3i Group, or with immediate effect by either party
giving the other written notice in the event of insolvency or material or persistent breach by the other party. The Investment Manager may also terminate the agreement on two months’
notice given within two months of a change of control of the Company.
Regulatory information relating to fees
3i Investments plc acts as the Alternative Investment Fund Manager (‘AIFM’) to the Company. In performing the activities and functions of the AIFM, the AIFM or another 3i company may
pay or receive fees, commissions or non-monetary benefits to or from third parties of the following nature:
• Payments for third-party services: The Company may retain the services of third-party consultants; typically this is for an independent director or other investment management
specialist expertise. The amount paid varies in accordance with the nature of the service and the length of the service period and is usually, but not always, paid or reimbursed by the
portfolio companies. The payment may involve a flat fee, retainer or success fee. Such payments, where borne by the Company, are included within Operating expenses. In some
circumstances, the AIFM may retain the services of third-party consultants which are paid for by the AIFM and not recharged to the Company.
• Payments for services from 3i companies: Other 3i companies may provide investment advisory and other services to the AIFM or other 3i companies and receive payment for
such service.
18 Related parties (continued)
3i Infrastructure plc Annual report and accounts 2023 169
Accounts and other information
Notes to the accounts continued
Name Place of incorporation and operation Ownership interest
Investment holding companies:
3i Tampnet Holdings Limited UK 100%
3iN Attero Holdco Limited UK 100%
3i Amalthea Topco Limited UK 100%
3i Green Gas Limited (formerly 3i LFG Topco Limited) Jersey 100%
3i Infrastructure (Luxembourg) S.à r.l. Luxembourg 100%
3i Infrastructure (Luxembourg) Holdings S.à r.l. Luxembourg 100%
3i India Infrastructure Fund A LP UK 100%
3i ERRV Denmark Limited (Dissolved in the year) Jersey 100%
ERRV Luxembourg Holdings S.à r.l. (Dissolved in the year) Luxembourg 100%
DNS:NET Group:
DNS Holdings GmbH Germany 64%
DNS Bidco GmbH Germany 64%
DNS:NET Internet Service GmbH Germany 64%
DNS:NET Netzgesellschaft I Verwalkungs GmbH Germany 64%
DNS:NET Netzgesellschaft I GmbH & Co. KG Germany 64%
DNS:NET Breitband Internet GmbH Germany 64%
Antennen-Schulze GmbH Germany 64%
ESVAGT Group:
ERRV Holdings ApS Denmark 83%
ERRV ApS Denmark 83%
ESVAGT A/S Denmark 83%
ESVAGT Holdings Inc USA 83%
ESVAGT Norge AS Norway 83%
ESVAGT Holdings Ltd UK 83%
ESVAGT UK Ltd UK 83%
Future Biogas Group:
Future Biogas Holdco Limited UK 81%
19 Unconsolidated subsidiaries and related undertakings
170
Accounts and other information
Notes to the accounts continued
Name Place of incorporation and operation Ownership interest
Future Biogas Midco Limited UK 81%
Future Biogas Bidco Limited UK 81%
Future Biogas Group Limited UK 81%
Future Biogas Limited UK 81%
Future Biogas Systems Limited UK 81%
F3B Limited UK 81%
Moor Bio-Energy Limited UK 81%
Fern Farming Limited UK 81%
FB Feedstocks Limited UK 81%
GCX Group:
GCX Topco Limited UK 98%
GCX Midco Limited UK 98%
GCX Bidco Limited UK 98%
GCX Holdings Limited Bermuda 98%
GCX Global Limited Bermuda 98%
FLAG Telecom Limited Bermuda 98%
FLAG Telecom Asia Limited Hong Kong 98%
FLAG Telecom UK Limited UK 98%
GCX India Services Limited India 98%
FLAG Atlantic France SAS France 98%
FLAG Telecom Deutschland GmbH Germany 98%
FLAG Atlantic UK Limited UK 98%
FLAG Telecom Nederland B.V. The Netherlands 98%
FLAG Telecom Singapore Pte Limited Singapore 98%
GCXG India Private Limited India 98%
FLAG Telecom Taiwan Limited Taiwan 59%
FLAG Telecom Development Limited Bermuda 98%
19 Unconsolidated subsidiaries and related undertakings (continued)
3i Infrastructure plc Annual report and accounts 2023 171
Accounts and other information
Notes to the accounts continued
Name Place of incorporation and operation Ownership interest
FLAG Telecom Hellas AE Greece 98%
FLAG Telecom Development Services Company LLC Egypt 98%
FLAG Telecom Network Services DAC Ireland 98%
FLAG Telecom Ireland DAC Ireland 98%
FLAG Telecom Ireland Network DAC Ireland 98%
FLAG Telecom Network USA Limited USA 98%
FLAG Telecom España Network SAU Spain 98%
FLAG Telecom Japan Limited Japan 98%
GCX Managed Services Limited Bermuda 98%
Vanco Group Limited UK 98%
Vanco UK Limited UK 98%
Vanco Global Limited UK 98%
Vanco International Limited UK 98%
Vanco ROW Limited UK 98%
Vanco GmbH Germany 98%
Vanco SAS France 98%
Vanco (Asia Pacific) Pte Limited Singapore 98%
Vanco SpZoo Poland 98%
Vanco NV Belgium 98%
Euronet Spain SA Spain 98%
Vanco Switzerland A.G. Switzerland 98%
Vanco Sweden AB Sweden 98%
Vanco Srl Italy 98%
Net Direct SA (Proprietary) Limited South Africa 98%
Vanco (Shanghai) Co. Ltd China 98%
Vanco Japan KK Japan 98%
Vanco Australasia Pty Limited Australia 98%
19 Unconsolidated subsidiaries and related undertakings (continued)
172
Accounts and other information
Notes to the accounts continued
Name Place of incorporation and operation Ownership interest
Vanco BV The Netherlands 98%
Vanco Deutschland GmbH Germany 98%
VNO Direct Limited UK 98%
Vanco US, LLC USA 98%
Vanco Solutions Inc. USA 98%
Yipes Holdings, Inc. USA 98%
Reliance Globalcom Services Inc. USA 98%
YTV Inc. USA 98%
Infinis Group:
Infinis Energy Group Holdings Limited UK 100%
Infinis Energy Management Limited UK 100%
Infinis Limited UK 100%
Infinis (Re-Gen) Limited UK 100%
Novera Energy (Holdings 2) Limited UK 100%
Novera Energy Generation No. 1 Limited UK 100%
Novera Energy Operating Services Limited UK 100%
Gengas Limited UK 100%
Bidston Methane Limited UK 100%
Novera Energy Generation No. 2 Limited UK 100%
Renewable Power Generation Limited UK 100%
Novera Energy Generation No. 3 Limited UK 100%
Mayton Wood Energy Limited UK 100%
Costessey Energy Limited UK 100%
Infinis Alternative Energies Limited UK 100%
Infinis Energy Services Limited UK 100%
Novera Energy Services UK Limited UK 100%
Infinis China (Investments) Limited UK 100%
19 Unconsolidated subsidiaries and related undertakings (continued)
3i Infrastructure plc Annual report and accounts 2023 173
Accounts and other information
Notes to the accounts continued
Name Place of incorporation and operation Ownership interest
Infinis Energy Storage Limited UK 100%
Infinis (Shoreside) Limited UK 100%
Barbican Holdco Limited UK 100%
Barbican Bidco Limited UK 100%
Alkane Energy Limited UK 100%
Alkane Energy UK Limited UK 100%
Seven Star Natural Gas Limited UK 100%
Regent Park Energy Limited UK 100%
Leven Power Limited UK 100%
Rhymney Power Limited UK 100%
Alkane Energy CM Holdings Limited UK 100%
Alkane Energy CM Limited UK 100%
Infinis Solar Holdings Limited UK 100%
Infinis Solar Developments Limited UK 100%
Durham Solar 1 Limited UK 100%
Infinis Solar Limited UK 100%
ND Solar Enterprise Limited UK 100%
Aura Power Solar UK6 Limited UK 100%
Ionisos Group:
Epione Holdco SAS France 96%
Epione Bidco SAS France 96%
Financière 3TA SAS France 96%
Financière 3TB SAS France 96%
Ionisos Holdco SAS France 96%
Ionisos Bidco SAS France 96%
Ionisos Mutual Services SAS France 96%
Ionisos SAS France 96%
19 Unconsolidated subsidiaries and related undertakings (continued)
174
Accounts and other information
Notes to the accounts continued
Name Place of incorporation and operation Ownership interest
Ionisos GmbH Germany 96%
Ionmed Esterilizacion SA Spain 96%
Scandinavian Clinics Estonia OÜ Estonia 96%
Steril Milano Srl Italy 96%
Joulz Group:
Joulz Holdco B.V. The Netherlands 99%
Joulz Manco B.V. The Netherlands 83%
Joulz Bidco B.V. The Netherlands 99%
Joulz Diensten B.V. The Netherlands 99%
Joulz Meetbedrijf B.V. The Netherlands 99%
Joulz Infradiensten B.V. The Netherlands 99%
Joulz Laadoplossingen B.V. The Netherlands 99%
Zonel Energy Group Holding B.V. The Netherlands 99%
Zonel Energy Systems B.V. The Netherlands 99%
Zonel Energy West B.V. The Netherlands 99%
Zonel Energy Services B.V. The Netherlands 99%
ZonWind Administration and Development Company B.V. The Netherlands 99%
Dutch Durables Energy 2 B.V. The Netherlands 99%
Dutch Durables Energy 5 B.V. The Netherlands 99%
Dutch Durables Energy 6 B.V. The Netherlands 99%
Oystercatcher Group:
Oystercatcher Holdco Limited UK 100%
Oystercatcher Luxco 1 S.à r.l. Luxembourg 100%
Oystercatcher Luxco 2 S.à r.l. Luxembourg 100%
SRL Traffic Systems Group:
Amalthea Holdco Limited UK 92%
Amalthea Midco Limited UK 92%
19 Unconsolidated subsidiaries and related undertakings (continued)
3i Infrastructure plc Annual report and accounts 2023 175
Accounts and other information
Notes to the accounts continued
Name Place of incorporation and operation Ownership interest
Amalthea Bidco Limited UK 92%
Jupiter Bidco Limited UK 92%
SRL Traffic Systems Limited UK 92%
SRL GmbH Germany 92%
SRL Traffic Systems Limited Ireland 92%
TCR Group:
3i Envol Limited Jersey 72%
Envol Holdings Limited Jersey 69%
Envol Midco Limited UK 69%
Envol Investments Limited UK 69%
TCR Group Shared Services SDN, BHD. Malaysia 69%
TCR New Zealand New Zealand 69%
TCR APAC (Singapore) Pte Limited Singapore 69%
TCR Ground Support Equipment Canada Inc. Canada 69%
DCL Aviation Group Inc. Canada 69%
TCR GSE Singapore Pte Limited Singapore 69%
TCR AD LLC UAE 69%
TCR Middle East LLC Saudi Arabia 69%
TCR CapVest S.A. Belgium 69%
TCR GSE Australia PLY Limited Australia 69%
EEM Solution PLY Limited Australia 69%
Adaptalift GSE Pty Limited Australia 69%
Adaptalift GSE Singapore Pte Limited Singapore 69%
TCR Solution SDN, BHD. Malaysia 69%
TCR International USA, Inc. USA 69%
TCR Americas LLC USA 69%
TCR International N.V. Belgium 69%
19 Unconsolidated subsidiaries and related undertakings (continued)
176
Accounts and other information
Notes to the accounts continued
Name Place of incorporation and operation Ownership interest
Trailer Construction & Repairing Netherland (TCR) B.V. The Netherlands 69%
TCR Belgium N.V. Belgium 69%
TCR France SAS France 69%
Aerobatterie SAS France 69%
Aerolima IMMS S.à.r.l. Luxembourg 69%
Aerolima Ingénierie SAS France 69%
TCR UK Limited UK 69%
Technical Maintenance Solutions UK Limited UK 69%
TCR-GmbH Trailer, Construction, Repairing and Equipment Rental Germany 69%
Trailer Construction & Repairing Ireland Limited Ireland 69%
TCR Italia S.p.A. Italy 69%
TCR Norway AS Norway 69%
TCR Sweden AB Sweden 69%
TCR Denmark ApS Denmark 69%
TCR Finland OY Finland 69%
Trailer Construction and Repairing Iberica S.A.U. Spain 69%
Dormant entities:
3i WIG Limited Jersey 100%
3i Osprey LP UK 69%
The list above comprises the unconsolidated subsidiary undertakings of the Company as at 31 March 2023.
There are no current commitments or intentions to provide financial or other support to any of the unconsolidated subsidiaries, including commitments or intentions to assist the
subsidiaries in obtaining financial support except for those disclosed in Note 16 (2022: none). No such financial or other support was provided during the year (2022: none).
19 Unconsolidated subsidiaries and related undertakings (continued)
3i Infrastructure plc Annual report and accounts 2023 177
Accounts and other information
The Company aims to build a diversified
portfolio of equity investments in entities
owning infrastructure businesses and
assets. The Company seeks investment
opportunities globally, but with a focus
onEurope, North America and Asia.
The Company’s equity investments will
often comprise share capital and related
shareholder loans (or other financial
instruments that are not shares but that,
in combination with shares, are similar
insubstance). The Company may also
investin junior or mezzanine debt in
infrastructure businesses or assets.
Most of the Company’s investments are
in unquoted companies. However, the
Company may also invest in entities owning
infrastructure businesses and assets whose
shares or other instruments are listed on
any stock exchange, irrespective of whether
they cease to be listed after completion
ofthe investment, if the Directors judge
that such an investment is consistent with
the Company’s investment objectives.
For most investments, the Company
seeksto obtain representation on the
boardof directors of the investee company
(or equivalent governing body) and in cases
where it acquires a majority equity interest
in a business, that interest may also be
acontrolling interest.
No investment made by the Company will
represent more than 25% of the Company’s
gross assets, including cash holdings, at
the time of making the investment. It is
expected that most individual investments
will exceed £50 million. In some cases, the
total amount required for an individual
transaction may exceed the maximum
amount that the Company is permitted
to commit to a single investment. In such
circumstances, the Company may consider
entering into co-investment arrangements
with 3i Group (or other investors who may
also be significant shareholders), pursuant
to which 3i Group and its subsidiaries (or
such other investors) may co-invest on the
same financial and economic terms as the
Company. The suitability of any such co-
investment arrangements will be assessed
on a transaction-by-transaction basis.
The Company will, in any case, invest no
more than 15% of its total gross assets in
other investment companies or investment
trusts which are listed on the Official List.
The Company may also consider investing
in other fund structures (in the event that
it considers, on receipt of advice from
the Investment Manager, that that is the
most appropriate and effective means
of investing), which may be advised or
managed either by the Investment Manager
or a third party. If the Company invests
in another fund advised or managed by
3i Group, the relevant proportion of any
advisory or management fees payable
by the investee fund to 3i plc will be
deducted from the annual management
fee payable under the Investment
Management Agreement and the relevant
proportion of any performance fee will be
deducted from the annual performance
fee, if payable, under the Investment
Management Agreement.
For the avoidance of doubt, there will be no
similar set-off arrangement where any such
fund is advised or managed by a third party.
Depending on the size of the relevant
investment and the identity of the
relevant co-investor, such a co-investment
arrangement may be subject to the
relatedparty transaction provisions
contained in the Listing Rules and may
therefore require shareholder consent.
The Company’s Articles require its
outstanding borrowings, including
any financial guarantees to support
subsequentobligations, to be limited to
50%of the gross assets of the Company
(valuing investments on the basis
includedin the Company’s accounts).
In accordance with Listing Rules
requirements, the Company will
onlymakeamaterial change to its
investment policy with the approval
of shareholders.
Investment policy (unaudited)
178
Accounts and other information
A description of the methodology used
to value the investment portfolio of the
Company is set out below in order to
provide more detailed information than is
included within the accounting policies and
the Investment Manager’s review for the
valuation of the portfolio. The methodology
complies in all material aspects with the
International Private Equity and Venture
Capital valuation guidelines which are
endorsed by the British Private Equity
and Venture Capital Association and
Invest Europe.
Basis of valuation
Investments are reported at the Directors’
estimate of fair value at the reporting
date in compliance with IFRS 13 Fair Value
Measurement. Fair value is defined as ‘the
price that would be received to sell an asset
or paid to transfer a liability in an orderly
transaction between market participants
atthe measurement date’.
General
In estimating fair value, the Directors
seek to use a methodology that is
appropriate in light of the nature, facts
and circumstances of the investment
and its materiality in the context of the
overall portfolio. The methodology that is
the most appropriate may consequently
include adjustments based on informed
and experience-based judgements, and
will also consider the nature of the industry
and market practice. Methodologies are
applied consistently from period to period
except where a change would result in a
better estimation of fair value. Given the
uncertainties inherent in estimating fair
value, a degree of caution is applied
in exercising judgements and making
necessary estimates.
Investments may include portfolio assets
and other net assets/liabilities balances.
The methodology for valuing portfolio
assets is set out below. Any net assets/
liabilities within intermediate holding
companies are valued in line with the
Company accounting policy and held
atfairvalue or approximate to fair value.
Quoted investments
Quoted equity investments are valued at
the closing bid price at the reporting date.
In accordance with International Financial
Reporting Standards, no discount is applied
for liquidity of the stock or any dealing
restrictions. Quoted debt investments will
be valued using quoted prices provided
by third-party broker information where
reliable or will be held at cost less fair
value adjustments.
Unquoted investments
Unquoted investments are valued using
oneof the following methodologies:
• Discounted Cash Flow (‘DCF’);
• Proportionate share of net assets;
• Sales basis; and
• Cost less any fair value
adjustments required.
DCF
DCF is the primary basis for valuation.
In using the DCF basis, fair value is
estimated by deriving the present value
of the investment using reasonable
assumptions and estimation of expected
future cash flows, including contracted
and uncontracted revenues, expenses,
capital expenditure, financing and taxation,
and the terminal value and date, and
the appropriate risk-adjusted discount
rate that quantifies the risk inherent
to the investment. The terminal value
attributes aresidual value to the investee
company atthe end of the projected
discrete cash flow period. The discount
rate will be estimated for each investment
derived fromthe market risk-free rate,
arisk-adjusted premium and information
specificto the investment or market sector.
Portfolio valuation methodology (unaudited)
3i Infrastructure plc Annual report and accounts 2023 179
Accounts and other information
Portfolio valuation methodology (unaudited) continued
Proportionate share of net assets
Where the Company has made investments
into other infrastructure funds, the value
of the investment will be derived from
the Company’s share of net assets of the
fund based on the most recent reliable
financial information available from the
fund. Where the underlying investments
within a fund are valued on a DCF basis,
the discount rate applied may be adjusted
by the Company to reflect its assessment
of the most appropriate discount rate
for the nature of assets held in the fund.
In measuring the fair value, the net asset
value of the fund is adjusted, as necessary,
to reflect restrictions on redemptions,
future commitments, illiquid nature of
theinvestments and other specific factors
ofthe fund.
Sales basis
The expected sale proceeds will be used
to assign a fair value to an asset in cases
where offers have been received as part of
an investment sales process. This may either
support the value derived from another
methodology or may be used as the primary
valuation basis. A marketability discount is
applied to the expected sale proceeds to
derive the valuation where appropriate.
Cost less fair value adjustment
Any investment in a company that has failed
or, in the view of the Board, is expected
to fail within the next 12 months, has the
equity shares valued at nil and the fixed
income shares and loan instruments
valued at the lower of cost and net
recoverable amount.
180
Accounts and other information
Designation of dividends
asinterest distributions
As an approved Investment Trust, the
Company is permitted to designate
dividends wholly or partly as interest
distributions for UK tax purposes.
Dividends designated as interest in this
way are taxed as interest income in the
hands of shareholders and are treated as
tax deductible interest payments made
by the Company. The Company expects
to make such dividend designations
in periods in which it is able to use the
resultant tax deduction to reduce the UK
corporation tax it would otherwise pay
on the interest income it earns from its
investments. The Board is not designating
any of the 5.575 pence final dividend
payable in respect of the year as an
interest distribution.
The Common Reporting Standard
Tax legislation under the Organisation for
Economic Co-operation and Development
(‘OECD’) Common Reporting Standard for
Automatic Exchange of Financial Account
Information requires investment trust
companies to provide personal information
about certain investors who hold shares
in investment trusts to HMRC. As an
investment trust company, 3i Infrastructure
plc is therefore required to provide
information annually to HMRC on certain
certificated shareholders and corporate
entities. This information includes country
of tax residency as well as details of shares
held and dividends received. HMRC may
in turn exchange the information with
the tax authorities of another country or
countries in which the shareholder may be
tax resident, where those countries (or tax
authorities in those countries) have entered
into agreements to exchange financial
account information.
Certain shareholders have been and will
infuture be sent a certification form for the
purposes of collecting required information.
Boiler room and other scams
Shareholders should be wary of any
unsolicited investment advice, offers to
buy shares at a discounted price or offers
to buy 3i Infrastructure plc shareholdings.
These fraudsters use persuasive and
high-pressure tactics to lure shareholders
into scams. We have become aware of
what appears to be an increase in calls
to current and former 3i Infrastructure
plc shareholders.
The Financial Conduct Authority (‘FCA’)
hasfound that victims of share fraud are
often seasoned investors with victims
losingan average of £20,000.
Please keep in mind that firms authorised
by the FCA are unlikely to contact you
unexpectedly with an offer to buy or
sell shares. You should consider getting
independent financial or professional
advice before you hand over any money
oreven share any information with them.
If you receive any unsolicited approaches
orinvestment advice, you should proceed
with caution. Steps that you might wish
totake could include the following:
• always ensure the firm is on the FCA
Register and is allowed to give financial
advice before handing over your money.
You can check at www.fca.org.uk/register;
• double-check the caller is from the firm
they say they are – ask for their name and
telephone number and say you will call
them back. Check their identity by calling
the firm using the contact number listed
on the FCA Register. This is important
as there have been instances where
an authorised firm’s website has been
cloned but with a few subtle changes,
such as a different phone number
orfalseemail address;
• check the FCA’s list of known unauthorised
overseas firms. However, these firms
change their name regularly, so even if
a firm is not listed it does not mean they
are legitimate. Always check that they
arelisted on the FCA Register; and;
• if you have any doubts, call the FCA
Consumer Helpline on 0800 111 6768.
If you deal with an unauthorised firm,
you will not be eligible to receive
payment under the Financial Services
Compensation Scheme.
Financial calendar
Ex-dividend date for final dividend 15 June 2023
Record date for final dividend 16 June 2023
Annual General Meeting 6 July 2023
Final dividend expected to be paid 10 July 2023
Half-yearly results November 2023
Information for shareholders
3i Infrastructure plc Annual report and accounts 2023 181
Accounts and other information
Information for shareholders continued
Registrars
The Company’s registrar is Link Market
Services (Jersey) Limited (the ‘Registrar’).
The Registrar’s main responsibilities
include maintaining the shareholder
register and making dividend payments.
Their registered address is as follows:
Link Market Services (Jersey) Limited
PO Box 532
St. Helier
Jersey JE4 5UW
Channel Islands
If you have any queries relating to your
3iInfrastructure plc shareholding you
should contact the Registrar as follows:
Online
www.signalshares.com. From here
youwill be able to securely email Link
withyour query.
Telephone
0371 664 0300
Overseas enquiries
+44 371 664 0300*
By post
Link
Central Square
29 Wellington Street
Leeds LS1 4DL
* Calls from outside the United Kingdom
will be charged at the applicable
international rate. Lines are open
between9.00am and 5.30pm, Monday
to Friday excluding public holidays
in England and Wales.
Investor relations
andgeneralenquiries
For all investor relations and general
enquiries about 3i Infrastructure plc,
please contact:
Thomas Fodor
Investor Relations
3i Infrastructure plc
16 Palace Street
London SW1E 5JD
email: thomas.fodor@3i.com
Telephone: +44 (0)20 7975 3469
For full up-to-date investor relations
information, including the latest share
price, recent reports, results presentations
and financial news, please visit the
investor relations page on our website.
www.3i-infrastructure.com
If you would prefer to receive shareholder
communications electronically,
including your Annual reports and
notices of meetings, please go to
www.3i-infrastructure.com/investors/
shareholder-centre for details of how
to register.
Frequently used Registrars’ forms
can be found on our website at
www.3i-infrastructure.com/investors/
shareholder-centre.
3i Infrastructure plc
Registered Office
11-15 Seaton Place
St. Helier
Jersey JE4 0QH
Channel Islands
www.3i-infrastructure.com
182
Accounts and other information
Glossary
Alternative Investment Fund (’AIF’)
3i Infrastructure plc is an AIF managed
by3iInvestments plc.
Alternative Investment Fund Manager
(‘AIFM’) is the regulated manager
ofanAIF. For 3i Infrastructure plc,
thisis3iInvestments plc.
Approved Investment Trust Company
This is a particular UK tax status maintained
by 3i Infrastructure plc. An approved
Investment Trust company is a UK tax
resident company which meets certain
conditions set out in the UK tax rules, which
include a requirement for the company
toundertake portfolio investment activity
that aims to spread investment risk and for
the company’s sharesto be listed on an
approved exchange. The ‘approved’ status
for an investment trust must be agreed by
the UK tax authorities and its benefit is that
certain profits of the company, principally
itscapital profits, are not taxable in the UK.
Asset IRR refers to the internal rate of
return of the existing and realised portfolio
since the inception of the Company.
The asset IRR to 31 March 2023 is 19%
(2022: 19%). This calculation incorporates
the cost of each investment, cash income,
proceeds on disposal, capital returns,
valuation as at 31 March 2023, including
accrued income and an allocation of
foreignexchange hedging.
Association of Investment Companies
(‘AIC’) The Association of Investment
Companies is a UK trade body for
closed-ended investment companies.
Board The Board of Directors of
the Company.
Capex refers to capital expenditure
whichismoney a company uses to acquire,
upgrade, and maintain physical assets such
as property, plants, buildings, technology,
or equipment. Capex is often used to
undertake new projects or investments
by acompany which add some future
economic benefit to the operation.
Capital reserve recognises all profits that
are capital in nature or have been allocated
to capital. These profits are distributable
byway of a dividend.
Company 3i Infrastructure plc.
Discounting The reduction in present value
at a given date of a future cash transaction
at an assumed rate, using a discount factor
reflecting the time value of money.
E-Beam refers to electron beams,
amethodof sterilisation used by Ionisos.
EO refers to ethylene oxide, a method
ofsterilisation used by Ionisos.
ERRV is an Emergency Rescue
andResponse Vessel.
ESG refers to environmental,
socialand governance.
External auditor The independent
auditor,Deloitte LLP.
Fair value through profit or loss (‘FVTPL’)
is an IFRS measurement basis permitted
for assets and liabilities which meet
certain criteria. Gains and losses on
assets and liabilities measured as FVTPL
are recognised directly in the Statement
ofcomprehensive income.
FTTC refers to fibre-to-the-cabinet.
This describes the fibre-optic cable in
place from the local telephone exchange
to a distribution point, commonly called
aroadside cabinet.
FTTH refers to fibre-to-the-home.
This describes the fibre-optic connection
toindividual homes or buildings.
FY15, FY18, FY19, FY21, FY22, FY23,
FY24 refers to the financial years to
31 March 2015, 31 March 2018, 31 March
2019, 31 March 2021, 31 March 2022,
31 March 2023 and 31 March2024,
respectively.
Initial Public Offering (‘IPO’) is the
mechanism by which a company
admits itsstock to trading on a public
stock exchange. 3i Infrastructure plc
completedits IPO in March 2007.
International Financial Reporting
Standards (‘IFRS’) are accounting
standards issued by the International
Accounting Standards Board (‘IASB’).
The Company’s Financial statements are
required to be prepared in accordance
withIFRS, as adopted by the UK.
Investment income is that portion
ofincome that is directly related to the
return from individual investments and is
recognised as it accrues. It is comprised
ofdividend income, income from loans
andreceivables, and fee income. It is
recognised to the extent that it is probable
that there will be an economic benefit and
the incomecan be reliably measured.
3i Infrastructure plc Annual report and accounts 2023 183
Accounts and other information
Glossary continued
IRR refers to the internal rate of return
andis a metric used to estimate the
profitability of investments.
Key Performance Indicator (‘KPI’)
is a measure by reference to which
the development, performance or
position ofthe Company can be
measured effectively.
Money multiple is calculated as the
cumulative distributions or realisation
proceeds plus any residual value
dividedbyinvested or paid-in capital.
Net annualised return is the annualised
growth rate in NAV per share to 31 March
2023, including ordinary and special
dividends paid. The net annualised return
since the inception of the Company to
31 March 2023 was 14% (2022: 14%) and
since the change in strategy in FY16 to
31 March 2023 was 19% (2022: 19%).
Net asset value (‘NAV’) is a measure
ofthe fair value of all the Company’s
assetsless liabilities.
Net assets per share (‘NAV per share’)
isthe NAV divided by the total number
ofshares in issue.
Net gains on investments is the
movement in the fair value of investments
between thestart and end of the accounting
period, or investment disposal date, or
the investment acquisition date and the
end of the accounting period, including
divestment related costs where applicable,
converted into sterling using the exchange
rates in force at the end of the period.
Ongoing charges A measure of the annual
recurring operating costs of the Company,
expressed as a percentage of average
NAVover the reporting period.
Paris Agreement is an international
treatyon climte change, adopted in 2015.
Public Private Partnership (’PPP’) is a
government service or private business
venture which is funded and operated
through a partnership of government and
one or moreprivate sector companies.
Retained reserves recognise the
cumulative profits to 15 October 2018,
together with amounts transferred
fromtheStated capital account.
Revenue reserve recognises all profits
that are revenue in nature or have been
allocated to revenue.
Revolving credit facility (‘RCF’)
A£900 million facility provided
bytheCompany’s lenders with a
maturitydateinNovember 2025.
SORP means the Statement of
Recommended Practice: Financial
Statements of Investment Trust
Companiesand Venture Capital Trusts.
SOV is a service operation vessel.
Stated capital account The Stated
capitalaccount of the Company
representsthe cumulative proceeds
recognised from share issues or new
equityissued on the conversion of
warrantsmade by the Company net
ofissuecosts and reduced by any
amountthat has been transferred to
Retained reserves, in accordance with
Jersey Company Law, inprevious years.
Sustainability KPIs Sustainability metrics
inrelation to the sustainability-linked
revolving credit facility. The facility
includestargets across ESG themes
alignedwith our purpose.
TCFD is the Task Force on Climate-
relatedFinancial Disclosures.
Total return measured as a percentage,
iscalculated against the opening NAV, net
of the final dividend for the previous year,
and adjusted (on a time weighted average
basis) to take into account any equity
issuedand capital returned in the year.
Total shareholder return (‘TSR’) is
the measure of the overall return to
shareholders and includes the movement
in the share price and any dividends
paid,assuming that all dividends are
reinvested on their ex-dividend date.
184
Accounts and other information
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