## Annual report ## and accounts 2023 ## Inside this report This Annual report and accounts contains Alternative Overview Sustainability report Governance Performance Measures (‘APMs’), which are financial 1 Welcome 46 Sustainability report 84 Introduction to Governance measures not defined in International Financial Reporting 2 Performance highlights 86 Board leadership and purpose Standards (‘IFRS’). These include Total return on opening 3 At a glance 99 Division of responsibilities net asset value (‘NAV’), NAV per share, Total income 4 A top quartile track record 100 Composition, succession and evaluation and non-income cash, Investment value including ## 5 Chair’s statement 46 106 Audit, Risk and Internal Control commitments, Total portfolio return percentage, | 7 Review from the Managing Partners | | 113 Relationship with Investment Manager | | | --- | --- | --- | --- | | | Sustainability | | Total liquidity and Portfolio debt to enterprise value. | | 9 Our business model | | 115 Remuneration | | | | report | | The definition of each of these measures isshown | | 14 Our approach | | 116 Additional statutory and corporate | | onpage 67. The Total return for the year shown in 18 Low carbon energy – Infinis governance information thePerformance highlights is the total comprehensive 19 Improving the aviation ecosystem – TCR income for the year under IFRS. The Total return on 20 Our strategy opening NAV is a Key Performance Indicator (‘KPI’). 21 Our objectives and KPIs ## 92 | | Integrity | The Strategic report on pages 1 to 82 and the | | --- | --- | --- | | 3iN Board | | Governance information on pages 83 to 120 for the year | | values | | to 31 March 2023 have been drawnup in accordance with | ## 5 Legacy applicable English law and Jersey law and the liabilities Chair’s of the Directors inconnection with this information shall statement Objectivity be subject to thelimitations and restrictions provided by such law. This Annual report and accounts contains statements Accountability about the future outlook for 3i Infrastructure plc (‘3i Infrastructure’, ‘3iN’ or the ‘Company’). Although the Directors believe their expectations are based on Our portfolio reasonable assumptions, any statements aboutthe future 23 Our portfolio outlook may be influenced by factorsthat could cause 36 Portfolio review actual outcomes and resultstobe materially different. Accounts and other information Financial review and Risk report 122 Independent auditor’s report The Company is managed by 3i Investments plc to the members of 3i Infrastructure plc (the‘Investment Manager’ or ’3i’). 58 Financial review 134 Statement of comprehensive income ## 23 68 Risk report 135 Statement of changes in equity 81 Directors’ duties New 136 Balance sheet investment 138 Cash flow statement 139 Reconciliation of net cash flow ## 58 to movement in net debt 140 Significant accounting policies Financial 148 Notes to the accounts review 178 Investment policy (unaudited) 179 Portfolio valuation methodology (unaudited) 181 Information for shareholders Watch video online Cover image: GCX 183 Glossary www.3i-infrastructure.com Page 27 3i Infrastructure plc Annual report and accounts 2023 1 ## Welcome ## Our purpose ## We invest responsibly in infrastructure, ## delivering long-term sustainable Overview ## returns to shareholders andhaving ## apositive influence onourportfolio ## companies andtheirstakeholders. ### Hear more about ### what this means Scott Moseley and Bernardo Sottomayor Managing Partners and Co-Heads ofEuropean Infrastructure 3i Investments plc Watch video online 2 ## Performance highlights ## Consistent delivery against our target ## NAV return of 8% to 10% per annum. Total return on opening NAV NAV NAV per share Full year dividend per share Overview | 14.7% | | | | | | £3,101m | | | | | 336.2p | | | | | 11.15p | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | | | | +14.7% | | | | | +10.8% | | | | | +6.7% | | | | | 2019 | | | | 15.4% | | 2019 | £1,902m | | | | 2019 | 234.7p | | | | 2019 | 8.65p | | | | 2020 | | 11.4% | | | | 2020 | | £2,269m | | | 2020 | | 254.5p | | | 2020 | 9.20p | | | | 2021 | 9.2% | | | | | 2021 | | £2,390m | | | 2021 | | 268.1p | | | 2021 | | 9.80p | | | 2022 | | | | | 17.2% | 2022 | | | £2,704m | | 2022 | | | 303.3p | | 2022 | | 10.45p | | | 2023 | | | 14.7% | | | 2023 | | | | £3,101m | 2023 | | | | 336.2p | 2023 | | | 11.15p | Total return for the year 2024 Target dividend per share ## £394m 11.90p March 2022: £404m +6.7% 3i Infrastructure plc Annual report and accounts 2023 3 ## At a glance Portfolio value by investment Megatrends* ## High quality, diverse Energy transition 42% ## and differentiated Digitalisation 22% ## portfolio. Globalisation 22% Demographic change 8% Portfolio value 6% Renewing social 6% Overview 13% infrastructure 8% ## £3.6bn * Refer to page 15 for details on megatrends. 2022: £3.2bn (including commitments) 7% 11% Assets 1% ## 13 15% 8% 5% 5% 4% 8% 9% Read more in Our portfolio Pages 23 to 35 4 ## A top quartile track record ## Consistent growth in The dividend has grown ## NAV per share since IPO. every year since IPO. 41.4 | | | | Special dividends (pence per share) | | | | 6.7% | | --- | --- | --- | --- | --- | --- | --- | --- | | Overview | | | | 17.0 | | | | | | 14% net annualised return¹ | | Ordinary dividends (pence per share) | | | 6.7% | | | | Median peer return: 8%² | | FY23 dividend proposed (pence per share) | | 6.6% | | | | | | 303.3 | | | | 11.15 | | FY24 dividend target (pence per share) 6.5% 6.4% 10.45 268.1 10.2% 254.5 9.80 234.7 9.20 336.2 211.0 11.90 8.65 7.85 | | | 169.0 | | | 7.55 | | --- | --- | --- | --- | --- | --- | | | 161.0 | | | 7.25 | | | 149.9 | | | 7.00 | | | 6.70 | | | | | | 126.4 | | 6.49 | | --- | --- | --- | --- | --- | --- | --- | --- | | | | 121.9 | | 125.2 | | | | | | 117.7 | | 121.0 | | | | | | 112.9 | | | | | | 5.94 | | 5.72 19% net annualised return¹ 5.50 5.30 Median peer return: 8%² 5.00 10.2% 1 2 3 4.6% p.a. p.a. 6.6% p.a. Core-plus strategy 109.3 09 10 11 12 13 14 1615 17 18 19 20 21 22 08 09 10 11 12 13 14 1615 17 18 19 20 21 22 2423 1. Annualised growth rate in ordinary dividends to FY18. 1. Annualised growth rate in NAV per share including ordinary and special dividends over the period. 2. One-off step up in FY19 following sale of Elenia and AWG. 2. IRR calculation based on historic returns of European Infrastructure funds. Source: Pitchbook. 3. Annualised growth rate in ordinary dividends FY19 to FY24. 08 23 Financial year Financial year 3i Infrastructure plc Annual report and accounts 2023 5 ## Chair’s statement ## 3i Infrastructure continues to deliver ## long-term sustainable returns, with ## Another excellent ## anotheryear ofoutperformance. ## year,withconfidence I am delighted to report that we achieved I am grateful to shareholders and the another year of outperformance, with Boardof Directors for their support during Overview ## inthefuture.” | atotalreturn of 14.7% in the year ended | the year, including during our equity raise in | | | | --- | --- | --- | --- | | 31 March 2023. That return is well ahead | February 2023, as well as to the Investment | | Richard Laing | | ofour target to provide shareholders with | Manager’s team for their continued hard | Chair, 3i Infrastructure | | | atotal return of 8% to 10% per annum, | work under the leadership of Scott Moseley | | | | to beachieved over the medium term. | and Bernardo Sottomayor. | | | Our total return forthe three years since Our purpose March 2020, the Covid-19 and post-Covid period, was an impressive 13.7% per annum. Our purpose, as set out on page 1, is to invest responsibly in infrastructure, We have built a unique portfolio, which delivering long-term sustainable returns benefits from inflation linkage and is to shareholders and having a positive aligned with long-term megatrends. influence on our portfolio companies Our companies, supported by the andtheir stakeholders. engaged asset management approach | of3i, our Investment Manager, are | We invest across a broad range of | | --- | --- | | generating attractive and accretive | infrastructure investment themes and | | growthinvestment opportunities. | highlight the strong growth prospects | ofour portfolio companies in this report. We made another step forward with our Our portfolio companies invest in, sustainability objectives this year, supported develop and actively manage essential by the establishment of a dedicated infrastructure. Examples of how our environmental, social and governance portfolio companies have a positive influence (‘ESG’) team at the Investment Manager are included in the Sustainability report. bringing greater focus and increased engagement with our portfolio companies. 6 ## Chair’s statement continued | Performance | | Directors’ duties | We manage our balance sheet actively, | | --- | --- | --- | --- | | | 20232007 | | seeking efficiency through low levels of | | The Company generated a total return | | The Directors have a duty to act honestly | | uninvested cash with a range of funding | of£394 million in the year ended 31 March | In the 16 years since the initial public | and in good faith with a view to the best | | | --- | --- | --- | --- | | | offering(‘IPO’) the Company has | | options available to the Company for | | 2023, or 14.7% on opening NAV, ahead | | interests of the Company and to exercise | | | | deliveredatotal shareholder return of | | further investment as described in the | | of our target of 8% to 10% per annum | | the care, diligence and skill that areasonably | | Financial review. to be achieved over the medium term. prudent person would exercise in This is discussed in more detail in the Review comparable circumstances. Outlook ## fromthe Managing Partners on page 7. 11.7% Overview In accordance with the AIC Code of The past year has seen significant volatility in per annum | The NAV per share increased to 336.2 pence. | Corporate Governance 2019 (the ‘AIC | both equity and credit markets and in energy | | --- | --- | --- | | Our share price has not kept pace with the | Code’), the Board does this through | and power prices. Against this backdrop, | | growth in our NAV, which resulted in a Total | understanding the views of the Company’s | the Company has remained disciplined in its | Consistent with our progressive dividend Shareholder Return (‘TSR’) of negative 6.9% key stakeholders and carefully considering investment approach, maintaining adequate policy, we are announcing a total dividend in the year, ahead of the FTSE 250, which how their interests and the matters set out liquidity and an appropriate level of gearing target for the year ending 31 March 2024 returned negative 7.9% in the same period. in section 172 of the Companies Act 2006 of in the Company’s portfolio. of 11.90 pence per share, representing Since IPO, the Company’s annualised TSR England and Wales have been considered anincrease of 6.7%. Our portfolio consists of resilient businesses is 11.7%, comparing favourably with the in Board discussions and decision making. providing essential services to their broader market (FTSE 250: 6.1% annualised Corporate governance More detail can be found in the Directors’ customers and the communities they serve, over the same period). duties and Section 172 statement sections The Company’s 2022 Annual General Meeting often benefitting from long-term sustainable later in this document. (‘AGM’) was held on 7 July 2022. All resolutions Dividend trends. These businesses are generating were approved by shareholders, including the Capital raise and liquidity discretionary growth opportunities that are Following the payment of the interim re-election of the existing Directors. accretive to our investment cases, leaving | dividend of 5.575 pence per share in January | | We were pleased with the results of our | | | --- | --- | --- | --- | | | This year’s AGM will be held on 6 July 2023. | | us well positioned to continue to build on | | 2023, the Board is recommending a final | | capital raise and would like to thank our | | | | Further details are provided in the Notice | | ourstrong performance. | | dividend for the year of 5.575 pence per | | shareholders for their continued support. | | of Meeting and on the Company’s website, share, meeting our target for the year of The equity raise proceeds of £100 million Richard Laing www.3i-infrastructure.com. In September, we | 11.15pence per share, 6.7% above last year’s | | were used to pay down part of the drawings | Chair, 3i Infrastructure plc | | --- | --- | --- | --- | | | were delighted to welcome Stephanie Hazell | | 9 May 2023 | | total dividend. We expect the final dividend | | on the revolving credit facility (‘RCF’) | | as a non-executive Director. Stephanie to be paid on 10 July 2023. and partly used to fund the £28 million brings a broad strategic experience in the acquisition of Future Biogas. This provides infrastructure sector from her previous roles additional flexibility to fund attractive at National Grid, Orange and Virgin Group. discretionary growth opportunities in our portfolio. 3i Infrastructure plc Annual report and accounts 2023 7 ## Review from the Managing Partners We work actively with the management ## This was another strong teams at our portfolio companies todefine and execute plans to capitalise onthose ## year for the Company, ## The Company’s top quartile growth dynamics. Growing markets provide the catalyst for us to continue to reinvest in ## materially exceeding our portfolio companies at returns that are ## track record is the result ## itstarget return. likely to outperform 3iN’s portfolio target. Our portfolio companies’ earnings are also Overview ## of our deliberate strategy.” typically positively correlated to inflation, We delivered another strong total return aswell as growing in real terms. of14.7% this year. Scott Moseley and Bernardo Sottomayor Managing Partners, Co-Heads of European Infrastructure The resulting compounding growth Since 2015, when we adopted our 3i Investments plc dynamics, together with the resilience that currentstrategy of focusing on core-plus our portfolio companies have displayed infrastructure investments, NAV per share throughout the cycle, including during the including dividends has grown by 19% recent Covid-19 pandemic, demonstrate per annum. Since 3iN’s inception in 2007, that the Company offers shareholders very we have grown NAV pershare including high quality risk-adjusted returns. dividends by 14% per annum. Our active management approach also The Company’s top quartile track record ensured that we locked in attractive debt isthe result of our deliberate strategy. financing across the portfolio before We have carefully selected our portfolio, the recent increases in financing costs. identifying infrastructure companies that The average level of gearing within our benefit from long-term structural growth portfolio companies is a relatively modest trends in their underlying markets. 33% of enterprise value and there are no material refinancing requirements within theportfolio before 2026. 8 ## Review from the Managing Partners continued These conservative levels of gearing Sustainability within our portfolio companies, combined Investment and divestment activity The importance of sustainability and meeting with strong operational cash generation, ESG standards continues to increase. During the year we completed a number of transactions as shown in the table below: available credit in the RCF and the recent This year we created a new team to lead £100 million equity raise, ensures that Date Activity ESG and sustainability initiatives across our portfolio companies are well placed May 2022 Syndication of a 17% stake in ESVAGT for proceeds of £87 million the portfolio. The additional focus that to finance these growth investment this new team brings helps us to engage June 2022 Sale of the European Projects portfolio for £106 million opportunities as they arise. on ESG topics in a more meaningful way, Overview September 2022 Closing of the acquisition of c.100% stake in GCX for £318 million to maintain appropriate oversight over new and developing ESG legislation and October 2022 Further investment in TCR, acquiring the 48% stake owned Compounding growth dynamics to collate relevant data regarding the byfunds managed by DWS for £338 million performance of the portfolio companies November 2022 Syndication of 28% of 3iN’s stake in TCR for proceeds of £190 million against certain sustainability indicators. | | n i | n g s | g r | o | | December 2022 Investment of a further £15 million to fund DNS:NET’s fibre roll- | | --- | --- | --- | --- | --- | --- | --- | | a | r | | | w t | Our companies are now reporting | | | E | | | | h | | | out programme Scope 1 and 2 greenhouse gas (‘GHG’) emissions and considering opportunities February 2023 Investment of £28 million to acquire FutureBiogas toreduce these. March 2023 Investment of a further £30 million in Infinis to fund the development | | | | In the year ahead we plan to build on | of its solar roll-out programme | | --- | --- | --- | --- | --- | | A | d | y | this progress by working with portfolio | | | | | t i | | | | c | n | | | | | c | a | c | | | | r | | a | companies to measure Scope 3 GHG | | | e | n | | | | p | t | | | | | | | o | a | emissions, further develop Paris-aligned | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | i v | | | | | | | i | | | | | | | | | | | | t | c | | | | e | | | | | | | a | t | decarbonisation plans and where | Outlook | | | c | | | | | r | | | | | | | | | | | | e | b | | | | | | a | | | | | n | e | | | | | | p | | | | | | | | possibleset science-based targets. | Our portfolio is generating strong earnings growth which we are confident is set to | | | | | | | e | | d | | | | | | | e | | | g | | | | | | | | | x | | | | d | | | | | | | | | | s h | | e | | | | continue. Additionally, we continue to see strong demand for high quality infrastructure | | | | | | a | s | | | | | | | | | | C | | a | | | | | | | | | | | r | e | | | | | | | | | | | c | | | | | | investments, such as those held by 3iN, amongst private market investors. Our active | | | | | i n | | | | | | | | management strategy includes planning selectively to divest our portfolio companies at anoptimal 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 3i Infrastructure plc Annual report and accounts 2023 9 ## Our business model ## An active investor | Unique offering for shareholders | Asset management | Competition for new investment primarily | Our primary investment focus remains mid- | | --- | --- | --- | --- | | | | comes from private infrastructure funds. | market core-plus with controlling majority | | The Company remains unique, | We maintain a significant focus on active | | | | | | Most other UK listed infrastructure funds | or significant minority positions and strong | | providingpublic market investors with | asset management and investment | | | | | | typically target smaller investments in | governance rights, whilst adhering to a set | | access to private infrastructure businesses | stewardship. We identify high calibre | | | | | | finite life contracted assets like operational | of core investment characteristics and risk | | across a variety of megatrends, sectors | management teams and look to implement | | | | | | and greenfield Public Private Partnership | factors. More information on our business | | and geographies. | a clear business strategy. We help identify | | | | | | (‘PPP’) projects or operational renewable | model can be found on page 10. | accretive growth opportunities to the Origination approach portfolios, which are outside our portfolio companies, and actively help them investment focus. Overview We remain a disciplined investor and, to convert those, including executing add- wherepossible, seek opportunities to on M&A opportunities and putting in place transact off-market, only participating in adequate capital structures and capex competitive processes where we believe facilities to fund the associated investments. Market segmentation and investment focus wehave a distinct advantage. We actively look to enhance the We have a large and focused investment infrastructure characteristics of the team, with a broad network and access businesses we acquire, ensuring that, across the geographies in which we wherepossible, capex is focused on Return invest. Our reputation, local presence immediate contracted revenue generating and the relationships we develop with assets, improving the infrastructure management teams provide us with characteristics of the business to attract competitive advantages. This allowed competitive financing, adding elements of us to be successful in signing our new service that create customer stickiness, and investment this year in Future Biogas often implementing operational efficiency onattractive terms. 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 Core-plus directly in the companies’ key workstreams. Operational Core infrastructure PPP projects infrastructure Risk 10 ## Our business model continued ## We invest responsibly in infrastructure ## to create long-term value for stakeholders. How we create value Value createdEnablers Investment Overview characteristics Asset-intensive Financial Non-financial Investment business | Manager’s team | | | | | n | 1 | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | | i o | | . | B | | | | | | | | | | t | | | u | | | | | | | | | s | a | | | y | | | | | | | Asset bases that | | i | | | | | | | | | | | | | l | | | | | w | | | | | | | | a | | | | | | | 14.7% | 2 | | | are hard to replicate | e | | | | | | | e | | | | | | R | | | | | | | l l | | | | 3i Group network | | . | | | | | | | | | | | | | 5 | | | | | | | | Total return on time-weighted | Further investments inportfolio | | | Provide essential | | | | | | | | | opening netasset value | companies tofund growth | services Engaged asset management Established 2 . | | market position | | | | | S | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | | Strategic | | t | | | | | | n | | | | r | | | | | | a | | | | o | | | | | | l | | priorities | | n | 11.15p | +9% | | Reputation andbrand | Good visibility | | | | | | | | | | | p | | | | g | | | | | of future cash flows | e | | | | | | | | | | t | | | | g | Ordinary dividend | Increase in installed | | | | u | | | | o | | | | | | | c | | v | | per share | renewable energy capacity | | | An acceptable element | | e | | e | | | | | High ESG standards | | | x | | r | | | | | | of demand or marketrisk | | E | | n | | | | | | | | . | | a | | | | | | | | 4 | | n | | | | c e Opportunities Robust policies for further growth | and procedures | | 3 | | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | . | | | | | | | 19% | 12 | | | | | O | | | | | y | | | | | | | p | t | | | g | | | | | | | | | i m | i | r a | t e | | | | | | | | | | s e | s t | | | | | | | Sustainability | | | | | | | | Asset IRR (sinceinception) | Portfolio companies reporting | ongreenhouse gas emissions Efficient balance sheet Read more Read more Read more Pages 12 to 13 Page 11 Pages 11 and 20 3i Infrastructure plc Annual report and accounts 2023 11 ## 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 ## We have a rigorous approach to identify the best and sectors, whilst adhering to a set of core investment characteristics and risk factors. ## investment opportunities and then actively manage 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 ## our portfolio companies to drive sustainable growth resilience (eg. contracted revenues) with high through-cycle underlying market growth ## fundamentals and operational improvements and M&A opportunities, which allows us to and value creation. Overview deliver above target returns. Although investments may be made into a range of sectors, theInvestment Manager typically focuses on identifying investments that meet most orallofthe following criteria and are aligned with identified megatrends: | | | | Buy well | Strong governance | Optimise strategy | | --- | --- | --- | --- | --- | --- | | | | • Effective use of | | • Make immediate | • Agree | | Asset-intensive business | Good visibility of future cash flows | 3i’s network | | improvements | strategic direction | | Owning or having exclusive access under | Long-term contracts or sustainable demand | • Comprehensive | | • Appropriate board | • Develop action plan | | long-term contracts to assets that are | thatallow us to forecast future performance | | | | | | | | due diligence | | representation and | | | essentialtodeliver the service | withareasonable degree of confidence | | | | • Right capital structure | composition • Consistent with to fund growth plan return/yield targets • Incentivise and align Asset bases that are hard to replicate An acceptable element management teams • Fits risk appetite Assets that require time and significant of demand or market risk capitalortechnical expertise to develop, Businesses that have downside protection, withlow risk oftechnological disruption butthe opportunity for outperformance Execute plan Realisation Provide essential services Opportunities for further growth Services that are an integral part of a Opportunities to grow or to develop • Ongoing support • (Re)position business customer’sbusiness or operating requirements, thebusiness into new markets, either and enhance What we do is • Monitor performance orare essential to everyday life organically orthrough targeted M&A infrastructure framed by our • Review further characteristics to strategic priorities investment Established market position Sustainability maximise exit value Read more opportunities Businesses that have a long-standing Businesses that meet our Responsible Page 20 • Long-term view but position,reputation and relationship with Investing criteria, with opportunities to • Facilitate and theircustomers – leading to high renewal improvesustainability and ESG standards will sell tomaximise execute M&A andretention rates shareholder value 12 ## Our business model continued What enables us to create value Investment Manager’s team 3i Group’s network Engaged asset management The Company is managed by an We create value from our investments through the Investment Manager’s engaged asset experienced and well-resourced team. management approach. Through this approach, the Investment Manager partners with The European infrastructure team was our portfolio companies’ management teams to develop and execute a strategy to create established by 3i Group plc (‘3i Group’) in long-term value in a sustainable way. Examples of this partnership include developing Overview 2005 and now comprises over 50 people, strategies that support investment in the portfolio company’s asset base over the long including over 30investment professionals. term; continued improvements in operational performance; and establishing governance models that promote an alignment of interests between management and stakeholders. This is one of the largest and most experienced groups of infrastructure We develop and supplement management teams, often bringing in a non-executive investment professionals in Europe, chairearly in our ownership. supported by dedicated finance, tax, Examples of this engaged asset management approach can be found on our website, legal,operations, sustainability and www.3i-infrastructure.com. strategyteams. 3i Group has a network of offices, advisers and business relationships across Europe. The investment management team Invest in and Grow leverages this network to identify, access Strengthen develop companies our platform and assess opportunities to invest in portfolio company to support businesses businesses, on a bilateral basis where management a sustainable through further possible, and to position the Company teams future investments favourably in auction processes. 3i Infrastructure plc Annual report and accounts 2023 13 ## Our business model continued What enables us to create value continued Reputation and brand Dedicated ESG team Robust policies and procedures | The Investment Manager and the | | | Established investment and asset | | | --- | --- | --- | --- | --- | | | In FY23, the Investment Manager created | Sustainability and ESG standards are | | | | Company have built a strong reputation | | | management processes are supported by | | | | a new team to lead ESG and sustainability | discussed throughout this report. Please | | | | and track record as investors by investing | | | the Investment Manager’s comprehensive | | | | initiatives across the portfolio. This will | refer to Our approach on pages 14 to 17, | | | | responsibly, managing their business and | | | set of best practice policies, including | | | | enable an acceleration of the delivery of the | the Sustainability report on pages 46 to 56 | | | | portfolio sustainably, and by carrying out | | | governance, conduct, cyber security | Overview | | | Company’s ambitions around sustainability. | andthe Risk report on pages 68 to 80. | | | | activities according to high standards of | | | andanti-bribery. | | | conduct and behaviour. This has been | The new team’s role is to ensure the | | | | | achieved through upholding the highest | Company’s approach is right for the portfolio | | | | | standards of governance, at the Investment | and to drive genuine ambition and progress | | | | | Manager, the Company and in investee | at portfolio company level. Dedicated ESG | | | | | companies. This in turn has earned the | resource enables us to identify, monitor | | | | | trust of shareholders, other investors and | and realise the value creation opportunities | | | | Efficient balance sheet investee companies, and has enabled linked to sustainability for each portfolio the InvestmentManager to recruit and companymore effectively. The Company’s flexible funding model developemployees who share those The team supports each portfolio seeks to maintain an efficient balance valuesand ambitions for the future. | | companyon its respective sustainability | sheet with sufficient liquidity to make | | --- | --- | --- | | The Board seeks to maintain this strong | journey and consideration of the Company’s | new investments. In order to capitalise | | reputation through a transparent | objectives at portfolio company level. | ondiscretionary growth opportunities | | approachto corporate reporting, | The team also leads ESG reporting forthe | inthe portfolio, during the year we | | includingon our progress on driving | Company and delivers the annual ESG | raisednew equity of £100 million. | | sustainability through our operations | review of the portfolio. | | Since FY15 the Company has raised and portfolio. We are committed By interfacing with the Company’s strategy, equity three times and returned to communicating in a clear, open There is a strong link between the team supports the Board to set the capital to shareholders twice and comprehensive manner and Sustainability strategy and objectives for the followingsuccessful realisations. companies that have high to maintainingan open dialogue Company, and aligns with key stakeholders ESGstandards and those that with stakeholders. such as 3i Group, particularly on climate- are able to achieve long-term related risks and opportunities. sustainable business growth.” Anna Dellis Partner, 3i Investments plc 14 ## Our approach ## The infrastructure market | Competitive landscape | Macro environment | In this environment, demand for | Central banks raised interest rates in | | --- | --- | --- | --- | | | | infrastructure assets typically increases due | response to rising inflation. The impact on | | 2022 was another very strong year for | The past year has seen a structural shift | | | | | | to the essential nature of the services they | our portfolio has been limited, with over | | fundraising in the unlisted infrastructure | in the macroeconomic environment with | | | | | | provide and downside protection as they | 95% of our portfolio company debt either | | space, with over US$300 billion raised | significant inflation, increases in interest | | | | | | can act as a hedge with revenues directly | fixed rate or hedged at 31 March2023, | | in the core, core-plus and value added | rates and volatile equity markets. This has | | | | | | orindirectly linked to inflation. | and with no material refinancing due | | segments, as shown in the chart | slowed down M&A activity and impacted | | | before 2026. below. Fundraising has become more stock market performance. Our portfolio companies benefit from concentratedaround successful managers, direct contract indexation and strong These trends, and our response to them, Overview | with fewer funds being raised but the | market positions providing pricing power. | are discussed in more detail within the | | --- | --- | --- | | average fund size rising. This makes | This is partially offset by the increase in | Riskreport on page 76. | | competition for suitable larger equity | operational costs experienced by a number of | | | investments more intense. | those companies. | | Interest rates Credit Inflation Power prices | Unlisted infrastructure: dry powder by primary strategy (December 2018–2022) | 350 | Source: Preqin Pro. | | | | | | --- | --- | --- | --- | --- | --- | --- | | | | | • Over 95% | • No material | • Portfolio returns | • Energy | | | | | of portfolio | near-term | positively | generating | 300 | | company debt | refinancing risk | correlated | assets | | --- | --- | --- | --- | --- | | 250 | is fixed rate | in the portfolio | to inflation | benefitted | | | or hedged at | | | from the | | 200 | | • Nearly 90% | • Balanced mix of | | | | 31 March 2023 | | | high and volatile | | | | of portfolio | direct indexation | | | 150 | | | | power price | | | | company debt | and strong | | environment 100 matures beyond market positions the next three provide 50 Dry powder (US$ bn) financial years pricing power 0 Dec 19Dec 18 Dec 20 Dec 21 Dec 22 Core Core-plus Value added 3i Infrastructure plc Annual report and accounts 2023 15 ## Our approach continued ## The infrastructure market continued Investment themeMegatrend Our portfolio Megatrends Investment themes Megatrends are shaping the world around Renewable energy Renewable energy generation us, influencing decision making and generation changing the demands placed on our There is increasing demand for energy economy and services. Identifying the generated from renewable sources such potential for change is a key driver of as wind and solar to support the energy our investment decision making – from Electrification/ Energy transition. Our investments in Infinis, the businesses, sectors and countries energy transition transition – Attero, and Valorem all generate energy Overview we invest in, to the way we go about from avariety of renewable sources and low-carbon finding opportunities. their combined installed capacity has grown and circular economy significantly during our ownership. As the Company’s portfolio continues to Shared resources grow, we seek to diversify our investments across a range of megatrends that will Electrification/energy transition provide a supportive environment for long- The transition towards a low-carbon Waste treatment term sustainable returns to shareholders. economy is gathering pace. Rising and recycling We also continually assess underlying electricity consumption is increasing risk factors, both when considering new the demand for related equipment and investment opportunities and in managing Digitalisation Automation, services such as those provided by the existing portfolio and its exposure to and technology digital operations and Joulz,which has expanded its offering certain risks, such as commodity prices and disruption increasing connectivity to include solar and EV charging products. foreseeable technological disruptions. Demographic Demand for change healthcare Global trade Globalisation and transport Renewing Urbanisation and social smart cities infrastructure 16 ## Our approach continued ## The infrastructure market continued Investment themes (continued) Shared resources Demand for healthcare Urbanisation Automation, digital operations and smart cities Developed economies are experiencing Increasing life expectancy and increasing connectivity a shift towards a shared resources model. and an ageing population Technology is increasingly Technology is developing rapidly, This can lead to significant cost savings are increasing the demand being used to enhance changing operating models and for users of capital intensive assets for healthcare-related the efficiency and safety of digitalising industrial processes. and also reduce overall GHG emissions. services and infrastructure. urban areas. SRL’s products Overview Business is increasingly mobile and In the case of TCR, which provides pooled Our investment in Ionisos, allow for greater control data driven, which requires increasing ground support equipment at airports, which provides cold of traffic flows, which in levels of connectivity through digital this has reduced the amount sterilisation services to the turn reduces congestion infrastructure. Our communications ofequipment required. medical and pharmaceutical around roadworks and infrastructure investments, Tampnet, industries, is aligned to improves safety. GCX and DNS:NET, are benefitting this trend. fromthis increased demand. 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 Waste treatment and recycling extreme weather events and There is a trend towards increasing other localised situations. levels ofrecycling driven by regulatory Advario Singapore requirements and consumer preferences. (Oystercatcher) supports Attero is one of the largest waste its customers storing and treatmentand disposal companies in blending the gasoline used theNetherlands and is benefitting from to transport these goods. thisincreased demand for its services. 3i Infrastructure plc Annual report and accounts 2023 17 ## Our approach continued performance over time onsustainability ## We have a positive issues that are material tothem, with a Sustainability in action particular focus on healthandsafety, and ## influence on our climate change. Contributing to a low-carbon future Supporting safety and good health portfolio companies. We require all our portfolio companies • Invest in the production • Adhere to high health and safety tomeasure their GHG emissions. ofclean energy standards that protect employees We encourage them to identify • Engage with suppliers onlow- • Enable safe operations for customers Our influence decarbonisation strategies. This year, we carbon innovation Overview • Embed a safety culture across As active owners weseek to ensure that our asked an initial subset ofour portfolio • Support customers to the organisation investee companies arerun responsibly and companies to develop GHG emission decarbonisetheir operations that they can makea positive contribution to reduction targets that are aligned with • Contribute to high quality healthcare their employees, customers, suppliers and theobjectives of the Paris Agreement. • Develop GHG emissions through Ionisos the local communities in which they operate. reduction strategies Our portfolio This includes supporting and empowering management teams to develop resilient Many infrastructure businesses have Examples business strategies. sustainability at their core, providing or of our portfolio Read more in the enabling the provision of essential services companies’ Sustainability report We create a culture at our portfolio companies to society, interconnectivity and the sustainability Pages 46 to 56 where the Company’s expectation that appropriate management of resources. strategies management teams embed sustainability intotheir strategy is well known. Whilst the Company does not pursue a sustainability-driven investment strategy, We facilitate and encourage the exchange it does use its influence in the investments of best practices by portfolio companies it makes, where appropriate, to seek to Fostering inclusive growth by connecting companies that are contribute positively to environmental and more advanced in certain sustainability • Adhere to high governance and ethical social sustainability objectives, such as initiatives with others who can benefit work standards transitioning to a low carbon and circular fromtheir expertise. economy, enabling a healthy and safe • Be an employer of choice supported society and fostering inclusive growth. byadiverse and inclusive culture We seek to manage material ESG risks andopportunities during the period of • Create job opportunities and engage We believe such contributions, alongside theCompany’s investment. This includes withlocal communities good ESG performance of our portfolio, can enhancing portfolio companies’ protect and potentially enhance value forthe • Support local and international connectivity corporategovernance and reporting, Company’s shareholders. through our telecommunication businesses andencouraging them to improve their 18 ## Low carbon energy – Infinis Q Tell us about Infinis Q What attracted you to Infinis and In 2018, they funded the acquisition ## In conversation with how has it developed since 2016? of Alkane Energy which added SP Infinis is a leading generator of low- 160MW of capacity to the business. ## 3i Partner Tim Short carbon energy with over 150 sites TS When we invested in Infinis in 2016, it It’s a real partnership and, forme, across the UK. We capture methane was exclusively a landfill gas business, this is one of the main reasons why ## and Infinis CEO, from landfill sites and disused mines but we’ve now grown the business to Infinis is so successful. and weutilise that methane as a fuel become a leading, diversified, low- ## ShanePickering. sourceto generate electricity. carbon generation platform. We now Q What does the future look Overview have three strands to the business: Methane is a very powerful greenhouse likeforInfinis? the landfill gas and disused mines gas; it is 25 times more potent and SP Our mission is to grow Infinis into business, the solar business and a damaging to the earth’s atmosphere a more diversified, renewable and flexible generation business – that’s than carbon dioxide. So, by capturing low-carbon energy business. We’re batteries and power response – the methane and utilising that to developing 1.5GW of new low- to support the UK’s electricity grid generate electricity, we are preventing carbon energy projects, including as more and more intermittent the release of more than 6million solar energy parks, and our renewables come on line. tonnes per annum of carbon dioxide continued investment in renewable into the atmosphere. Q What benefits has 3iN brought energy is helping the UK reduce its toInfinis? reliance on fossil fuels and reducing electricity costs for consumers. SP 3i Infrastructure is a long-term and | supportive partner. From 2016, we’ve | It’s really exciting to see our vision | | | --- | --- | --- | | built up excellent relationships with | | of generating a low-carbon future | | 3i and theInfinis board members. | | become a reality and it’s great to | | In fact, Tim and I were here from the | | be helping the UK’s energy sector | | very outset, along with some of the | | transition to net zero. | ## Infinis is now a leading, otherboard members. 3i Infrastructure has supported multiple ## diversified, low-carbon follow-on investments, including refinancings and acquisitions. ## generation platform.” Tim Short Partner, 3i Infrastructure 3i Infrastructure plc Annual report and accounts 2023 19 ## Improving the aviation ecosystem – TCR Q What role does TCR play Q What is next for TCR? ## In conversation with in energy transition? TB Whilst we are the market leader | 3i Director Céline | TB For us, sustainability means helping | | today,there is still more to go | | --- | --- | --- | --- | | | | theentire aviation ecosystem to | forin terms of further geographic | | Maronne and TCR | | reducetheir GHG emissions and | expansion as well as further market | | | | become greener, which we can help | share expansion in the places where | | CEO, Tom Bellekens. | | them do invarious ways. One is to | wearealready present. | Overview encourage our customers to use We also want to further develop our greener equipment. Another way is by ESG strategy. The advantage is that Q What does TCR do and how using smart technology to enable our the bigger we are, the more we have doesitfitwith 3iN’s strategy? customers touse less equipment. the capacity to invest in the safety TB TCR rents ground support anddecarbonisation of our fleet. Q Why did you choose equipment, which is the equipment to partner with3iN? that moves around the airport to TB What differentiates 3iN is that load and offloadpassenger and they have a very long-term partner cargo aircraft. We own the largest approach, which matches our long- independent fleet in the world, term partner approach with customers. which consists of c.35,000 pieces Where we have found themparticularly of equipment on 180 airports in20 supportive is whenitcomes to countries in four continents. financing, strategyand M&A activities. CM TCR is a unique business that is We also appreciate that the people extremely difficult to replicate. we have on the Board today were It fits our strategy of investing in ## the people that six or seven years TCR is a unique business businesses with strong asset bases ago were there when the acquisition and market positions, but where took place, which has created very we also see significant opportunities ## fruitfulrelationships. with a strong asset base and to grow. ## leading market position.” Céline Maronne Director, 3i Infrastructure 20 ## Our strategy Strategic priorities ## Our strategy is ## to maintain a Maintaining a Disciplined approach Managing the balanced portfolio to new investment portfolio intensively ## balanced portfolio Delivering an attractive mix of income Focusing selectively on investments that Driving value from our portfolio through ## of infrastructure yieldand capital growth for shareholders. are value-enhancing to the Company’s ourengaged asset-management approach. portfolio and with returns consistent ## Overview investments delivering Investing in a diversified portfolio in Delivering growth through withour objectives. developed markets, with a focus on platform investments. ## an attractive mix of theUKand Europe. ## income yield and ## 15% £ 452m 2 2 ## capital appreciation Largest single New investments less amounts Follow-on investments Portfolio companies investment by value syndicated in the financial year in portfolio companies refinanced ## for shareholders. Read more Read more Read more Pages 23 to 35 Pages 23 to 35 Pages 23 to 35 Maintaining an Sustainability a key efficient balance sheet driver of performance Minimising return dilution to shareholders Ensuring that our investment decisions from holding excessive cash, while and asset-management approach consider retaining a good level of liquidity for both the risks and opportunities presented future investment. by sustainability. ## £404m 979MW, +9% Total liquidity Installed renewable energy capacity, increase in year Read more Page 64 Read more Page 49 3i Infrastructure plc Annual report and accounts 2023 21 ## Our objectives and KPIs Our KPIs ## Our objectives Total return (% on opening NAV) Rationale and definition Performance over the year ## are to provide | | 2019 | | | 15.4% | | • Total return is how we measure the overall financial | | • Total return of £394 million in the year, or 14.7% | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | | | | | performance of the Company | ontime-weighted opening NAV and equity issued | | shareholders with: | 2020 | | 11.4% | | | | | | | | | | | | | • Total return comprises the investment return from | | • The portfolio showed good resilience overall | | | 2021 | 9.2% | | | | | theportfolio and income from any cash balances, | withstrong performance in particular from TCR, | | | | | | | | | netof management and performance fees and | Infinis and Tampnet | | | 2022 | | | | 17.2% | | operating and finance costs. It also includes | | • The hedging programme continues to reduce the foreignexchange movement and movement Overview 2023 14.7% volatility in NAV from exchange rate movements ## a total return of 8% inthefair valueof derivatives and taxes • Costs were managed in line with expectations Target 8-10% • Total return, measured as a percentage, is calculated ## to10% per annum, against the opening NAV, net of the final dividend for Target To provide shareholders with a total return of8%to the previous year, and adjusted (on a time-weighted tobe achieved over 10%per annum, to be achieved over themedium term. average basis) to take into account any equity issued and capital returned in the year Met or exceeded target ## the medium term for 2023 and every prior year shown Annual distribution (pence per share) Rationale and definition Performance over the year ## a progressive annual | | 2019 | 8.65p | | | | • This measure reflects the dividends distributed | | • Proposed total dividend of 11.15 pence per share, | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | | | | | toshareholders each year | or £101 million, is in line with the target set at the | | dividend per share | 2020 | 9.20p | | | | | | | | | | | | | | • The Company’s business model is to generate | | beginning of the year | | | 2021 | | 9.80p | | | | returns from portfolio income and capital returns | • Income generated from the portfolio and cash | | | | | | | | | (through value growth and realised capital profits). | deposits, including non-income cash distributions | | | 2022 | | 10.45p | | | | Income, other portfolio company cash distributions | and other income from portfolio companies, | | | | | | | | | and realised capital profits generated are used | totalled£202 million for the year | | | 2023 | | | 11.15p | | | | | | | | | | | | | tomeet the operating costs of the Company and | • Operating costs and finance costs used to assess | | | 2024 Target | | | | 11.90p | | tomake distributions to shareholders | dividend coverage totalled £66 million in the year | | | | | | | | • The dividend is measured on a pence per share | | • The dividend was fully covered for the year | Target Progressive dividend per share policy. basis,and is targeted to be progressive • Setting a total dividend target for FY24 of 11.90penceper share, 6.7% higher than for FY23 FY24 dividend target of 11.90 pence per share. Dividend per share increased every year since IPO 22 ## Our ## portfolio 3i Infrastructure plc Annual report and accounts 2023 23 ## Our portfolio ## New investment 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 Investment rationale infrastructure. Energy produced by AD plants is carbon • Future Biogas is one of the largest anaerobic neutral, as the CO 2 released during the process matches the CO 2 absorbed from the atmosphere by the feedstock. digestion (‘AD’) plant developers and biogas Our portfolio In the future, carbon capture and storage could be producers in the UK, operating 11 AD plants introduced to make the process carbon negative. on behalf of institutional investors under long- Established market position term contracts Future Biogas is one of the largest producers of biomethane in thenascent UK market and a highly • There is strong political support and growing experienced developer and operator of AD plants, with corporate demand for domestically-produced full-service capabilities indevelopment, construction biomethane, which, as a direct substitute for and operations. fossil natural gas, has an essential role to play in Supply/demand of biomethane decarbonising some of the UK’s gas-dependent The challenge to decarbonise industrial and manufacturing sectors, and the disparity in biomethane supply and sectors such as heat, transport and manufacturing demand, is expected to sustain a very strong market • On a national scale, the use of biomethane (vs. forgreen gas in the long term. natural gas) allows the existing gas infrastructure Acceptable element of gas price risk tohelp meet the UK government’s net zero Future Biogas is exposed to a degree of gas price volatilitythrough its existing management contracts. andenergy security targets without any change However, new AD plants are core to our investment tothe existing system thesisand will be underpinned by long-term offtake agreements with corporates. • Future Biogas will develop a new generation ofunsubsidised AD plants and sell the Sustainable farming practices By promoting a regenerative farming approach, resulting biomethane under long-term feedstockfrom energy crops can be sustainably offtakeagreementstocorporate buyers integratedinto agricultural systems. The circular process of returning digestate back to land can help replenish soil • In the longer term, Future Biogas intends to enter nutrients and carbon, and displaces demand for carbon- thenascent but high potential voluntary carbon intensive artificial fertilisers. offset market through carbon capture and storage Opportunities for growth • Future Biogas has a highly experienced management The investment in Future Biogas, whilst modest today, creates an opportunity for significant follow-on team with a strong track record in the sector investmentin new AD plants at attractive returns. 24 ## Our portfolio continued 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 Performance (£m) 304 537 Total Closing Distributions 28 cost value and hedging 3i Infrastructure plc Annual report and accounts 2023 25 ## Our portfolio continued Our portfolio 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 Performance (£m) 329 485 Total Closing cost value 26 ## Our portfolio continued 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 Performance (£m) 352 407 187 Total Closing Distributions cost value and hedging 273i Infrastructure plc Annual report and accounts 2023 ## Our portfolio continued Our portfolio 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 Performance (£m) 318 323 Total Closing cost value 28 ## Our portfolio continued 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 ofhot sterilisation methods. Read more online Performance (£m) 186 298 10 Total Closing Distributions cost value and hedging 3i Infrastructure plc Annual report and accounts 2023 29 ## Our portfolio continued Our portfolio 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, andmicrowave links. Read more online Performance (£m) 187 292 13 Total Closing Distributions cost value and hedging 30 ## Our portfolio continued 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 Performance (£m) 195 287 26 Total Closing Distributions cost value and hedging 3i Infrastructure plc Annual report and accounts 2023 31 ## Our portfolio continued Our portfolio 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 Performance (£m) 139 254 193 Total Closing Distributions cost value and hedging 32 ## Our portfolio continued 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 Performance (£m) 191 219 3 Total Closing Distributions cost value and hedging 3i Infrastructure plc Annual report and accounts 2023 33 ## Our portfolio continued Our portfolio 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 last15 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 Performance (£m) 81 188 22 Total Closing Distributions cost value and hedging 34 ## Our portfolio continued 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 regionand a well-known local brand. Read more online Performance (£m) 205 179 6 Total Closing Distributions cost value and hedging 3i Infrastructure plc Annual report and accounts 2023 35 ## Our portfolio continued Our portfolio 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 Performance (£m) 88 144 53 Total Closing Distributions cost value and hedging 36 ## Portfolio review Table 1: Portfolio summary (31 March 2023, £m) ## The portfolio is generating | | | | Directors’ | | | | | | | | | | | | Directors’ | | Allocated | Underlying | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | strong growth momentum | | valuation | | | | | | | Accrued | | | | Foreign | valuation | | foreign | | portfolio | Portfolio | | | | | 31 March | | Investment | | Divestment | | | income | | | Value | exchange | 31 March | | exchange | income in | | total return | | | supported by long-term | Portfolio assets | | 2022 | in the year | | in the year | | | movement | | movement | | translation | | 2023 | hedging | | the year | in the year¹ | | | | | | | | 2,4 | | | 3 | | | | | | | | | | | | | | | TCR 279 352 | | | | | | (190) | | | 4 86 6 537 (2) 18 108 | | | | | | | | | | | | tailwinds. We are confident | | | | | 2 | | | 3 | | | | | | | | | | | | | | | ESVAGT 548 44 | | | | | | (87) | | | (2) 7 (25) 485 22 46 50 | | | | | | | | | | | | | | | | | 5 | | | 6 | | | | | | | | | | | | | | | Infinis 332 30 | | | | | | | (9) | | 2 52 – 407 – 16 68 | | | | | | | | | | | Our portfolio | that it will continue to | | | | | | | | | | | | | | | | | | | | 4 GCX – 318 – 19 – (14) 323 15 18 19 ## generate attractive further Ionisos 237 – – 9 43 9 298 (7) 9 54 2 | | Tampnet 241 6 | | – – 52 (7) 292 13 6 64 | | --- | --- | --- | --- | | investment opportunities and | | 2 | | | | Joulz 241 6 | | – – 30 10 287 (7) 6 39 | 6 | | Oystercatcher 230 – (12) | | | – 17 19 254 (14) 4 26 | | --- | --- | --- | --- | --- | | is well positioned to deliver | | 2 | 6 | | | | SRL 200 18 | | (1) | – 2 – 219 – 19 21 | Valorem 144 – – – 38 6 188 (4) 4 44 ## our target returns. 2,5 DNS:NET 202 22 – – (54) 9 179 (6) 8 (43) 6 | | Attero 116 – (23) | | | – 47 4 144 (3) 1 49 | | --- | --- | --- | --- | --- | | The Company’s portfolio was valued | | 4 | | | | | Future Biogas – 28 | | – – – – 28 – – – | | at £3,641 million at 31 March 2023 Economic | (2022: £2,873 million) and delivered a total | infrastructure | | --- | --- | | portfolio return in the year of £501 million, | portfolio 2,770 824 (322) 32 320 17 3,641 7 155 499 | | including income and allocated foreign | Projects 103 – (104) (1) – 2 – (1) 1 2 | | exchange hedging (2022: £509 million). | Total portfolio | reported in the Table 1 summarises the valuations and Financial statements 2,873 824 (426) 31 320 19 3,641 6 156 501 movements in the portfolio, as well as the 1 This comprises the aggregate of value movement, foreign exchange translation, allocated foreign exchange hedging and underlying portfolio income return for each investment, for the year. inthe 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). Portfolio review continued 3i Infrastructure plc Annual report and accounts 2023 37 The total portfolio return in the year of £501 million was 15.1% (2022: £509 million, 19.8%) of the aggregate of the opening value of the portfolio and investments less amounts syndicated in the year (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, Tempnet, Ionisos, Attero and Valorem, each of which continues to benefit from positive underlying growth trends. The other portfolio companies performed in line with expectations, with the exception of DNS.NET, which continues to face challenges with its fibre network roll out. Chart 1 shows the portfolio return in the year for each asset as a percentage of the aggregate of the opening value of the asset and investments in, and syndication of, the asset in the year (excluding capitalised interest). Note that this measure does not time-weight for investments and syndications in the year and includes foreign exchange movements net of hedging. Chart 1: Portfolio return by asset (year to 31 March 2023) ![img-0.jpeg](img-0.jpeg) * GCX acquired in August 2022 and Future Biogas acquired in February 2023 and return not annualised. ** Divested in June 2022 and return not annualised. Our portfolio 38 ## Portfolio review continued Movements in portfolio value The portfolio generated a value gain of Infinis had a very strong year, generating In March 2023, we invested a further £320 million in the year, alongside income a value gain of £52 million driven by higher £30 million of equity to support the The movements in portfolio value were of£156 million. forecast future power prices and price development of this pipeline, with the driven principally by the delivery of planned volatility which benefitted the power remainder of the funding coming from cash flows and other asset outperformance Portfolio activity response assets in particular. Its power the company’s own cash generation as well as new and follow-on investments Our renewable energy generating companies, response assets experienced higher running anddebt facilities. and syndications made during the year. | | | Infinis, Valorem and Attero, performed | hours driven by the UK’s power generation | | | --- | --- | --- | --- | --- | | | A reconciliation of the movement in | | | Valorem materially outperformed the prior | | | | strongly in the year and have made | capacity constraints. | | | | portfolio value is shown in Chart 2 below. | | | year despite the French government’s 90% | | Our portfolio | | substantial progress in developing their | | | | | The portfolio summary shown in Table 1 | | Infinis made significant progress in | windfall tax. Its closed capacity now totals | pipelines of new projects towards and into on page 36 details the analysis of these further establishing a 1.5GW solar energy 778MW of wind and solar projects including operation. This is reflected in an overall movements byasset. Changes to portfolio generation and battery storage pipeline new projects in France and Finland and increase in installed capacity from 898MW valuations arise due to several factors, as across various stages of development. its first project in Greece. It has a healthy to 979MW over the year, as shown in the shown in Table 2 onpage 41. 5.7GW pipeline of wind and solar projects Sustainability report. inEurope 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 824 31 3,641 320 19 strong, particularly due to recent availability Chart 2: Reconciliation of the movement in portfolio value (year to 31 March 2023, £m) issues experienced by the French nuclear (426) 2,873 power sector and France’s renewables 4,000 development targets. French solar and wind auction tariffs increased by c.25% in 2022 versus 2021. 3,000 2,000 0 1,000 Opening 1 Divestment/ Value Exchange Accrued Closing Investment 2 portfolio value at capital repaid movement movement income portfolio value at 1 April 2022 movement 31 March 2023 1 Includes capitalised interest. 2 Excludes movement in the foreign exchange hedging programme (see Chart 8 in the Financial review). 3i Infrastructure plc Annual report and accounts 2023 39 ## Portfolio review continued Attero also benefitted from high power in 2022 and its off-lease rate has reverted ambitions, representing an incremental planned transition, a new CEO joined prices although its hedging strategy topre-Covid-19 levels. step up in earnings. thebusinessinMarch 2023. insulates it from short-term price volatility. In November 2022, TCR completed the The pipeline for further new SOVs in the Our communications infrastructure Despite waste supply volumes being bolt-on acquisition of Adaptalift, an North Sea and the rapidly accelerating investments, Tampnet, GCX and DNS:NET, slightly lower than expectations due to Australian-headquartered ground service US wind market is strong and we expect are taking advantage of the acceleration lower economic activity, the company equipment lessor, adding incremental anumber of tenders will take place over indigitalisation trends. outperformed the prior year due to contracted EBITDA at an attractive thenext 12 months. the higher electricity price outlook Tampnet performed well in the year, valuation with strong expected synergies. andgoodavailability at its EfW plants. ESVAGT’s ERRV segment continued to increasing in value by £52 million, Our portfolio TCR successfully raised additional debt seegood momentum due to the improved driven by higher forecast revenues due The £47 million value increase in Attero from existing and new lenders to support oil and gas markets, attractive supply/ to the signing of new private network is due to several waste supply contracts itsnext growth phase. demand dynamics and an increased contracts, identification of new potential recontracted at increased gate fees and focuson security of supply in Europe. growth opportunities and extended life forlonger periods, as well as the higher ESVAGT and Joulz, which indirectly assumptions resulting from higher energy longer-term electricity price outlook. contribute to the energy transition, have Joulz performed ahead of expectations prices and the increased focus on security performed well and are benefitting from due to strong growth in the order book, Preparations for a potential divestment of energy supply by governments in Europe thetailwinds in this sector. including for its large integrated Energy ofAttero are at an advanced stage. and the US. It exceeded budgeted revenue Transition Solutions. The business made Any saleproceeds are expected to ESVAGT had a good year, benefitting and EBITDA targets due to increased considerable progress diversifying its contribute towards partially repaying from contract rates in excess of our offshore activity on the back of improved supplier base to mitigate the risk of delays drawings on the Company’s RCF. expectations and high utilisation levels. sentiment in the energy markets and previously experienced in completing Inflation is generally positive for ESVAGT stronger demand for bandwidth upgrades. TCR materially outperformed expectations, newinstallations, primarily due to key due to its index-linked contracts, although increasing in value by £86 million, due to hardware suppliers struggling to keep cost inflation, in particular fuel costs, a number of significant contract wins and upwith rising demand. acceleratedinthe year. extensions, higher utilisation rates of the The company’s long-term contracts fleet, and stronger than expected repair In January 2023, ESVAGT’s joint venture in aredirectly linked to inflation, andthis andmaintenance activity. the United States, CREST, won its first SOV provided good protection forhigher contract inthe US offshore wind market. This outperformance reflects a sustained operating and capital costs. The 15-year SOV contract is with Siemens rebound of air traffic levels as well as Gamesa, servicing the Coastal Virginia In December 2022, Joulz successfully an increased post-pandemic demand Offshore Windfarm, the largest offshore raised debt financing, which was utilised for its full-service rental model globally. wind projectin the US (2.6GW), and was an to replenish its revolving credit facility, TCR added over 35 airports to its portfolio important milestone in ESVAGT’s growth supporting the funding of further growth opportunities. As part of a 40 ## Portfolio review continued | Tampnet is progressing a number of new | DNS:NET continues to experience delays | Ionisos delivered meaningful growth | A strategic transition to some green fuel | | --- | --- | --- | --- | | fibre projects in the North Sea and the | in the roll out of its fibre network in the | against prior year due to strong volume | storage is progressing well. In 2022, a first | | Gulf of Mexico and signed a number of | Berlin area and specifically in connecting | growth, notably in the medical and | agreement was signed with a customer | | important new contracts in both regions. | and activating customers. We have updated | pharmaceutical segments, resulting | to start storing and blending sustainable | | The company is also in discussions with | the forecasts to reflect more conservative | ina£43 million gain in value. | aviation fuel (‘SAF’) at ADS. The project to | | several carbon capture and storage projects | roll-out assumptions, which has led to | | convert existing storage to accommodate | In order to meet growing demand, in the North Sea which are located within a£54 million value decrease in the year. SAF is ontrack and is expected to be Ionisos progressed various expansion | | Tampnet’s existing network. The digitisation | | | operational in mid-2023. We believe this | | --- | --- | --- | --- | --- | | | | Operational performance was | opportunities, including extending | | | Our portfolio | proposition offered by Tampnet (combining | | | gives ADS a first mover advantage forSAF- | | | | belowexpectations as delays to connect | existing sterilisation facilities, acquiring | | | | low-latency connectivity with services such | | | related business in Singapore. | | | | and activate new homes persist, which | the Daniken E-Beam plant in Switzerland, | | as Private Networks) is continuing to prove we see as an industry-wide challenge. and a new greenfield EO plant in Kleve, SRL performed broadly in line with plan popular with customers, and we expect The delivery of a network built by a local Germany, which became operational in during the financial year. Whilst higher than to see an acceleration of the short-term authority to be transferred to DNS:NET January 2023. In a capacity constrained in the previous year, activity levels were penetration of digitisation projects. under concession contract isalso running market, these initiatives will increase slightly lower than expected due to delays GCX had a good year with strong growth behind schedule. Ionisos’s ability to address and meet strong in capital expenditure programmes in the in lease revenues, although indefeasible underlying demand growth for sterilisation, public sector and construction sectors During the year, we invested a further right of use sales are behind schedule. whilst diversifying its technology mix resulting in fewer days on hire than forecast. £15 million to support the business’s roll The business secured a significant managed and expanding the geographic footprint The Investment Manager is working closely out and have worked with the company to services contract during the year and from which it will service its medical and with management to professionalise optimise its business model and strengthen is experiencing increasing demand for pharmaceutical client base. account management processes and the management team in order to minimise bandwidth capacity across its network. optimise fleetutilisation and build. and recover the roll out delays. A new Oystercatcher performed well in the year. The business is evaluating a number of CFO was appointed in January 2023. He is ADS’s customer activity levels were high opportunities to expand its subsea network overseeing the implementation of a new and all available capacity was let. This was as well as the development of terrestrial ERP system and other initiatives. Hiring to despite a backdrop of a backwardation assets. GCX and Tampnet announced further strengthen the management team market structure for petroleum products. a strategically important partnership is also underway, aimed at providing the Our positive medium-term outlook which supports the increasing network bandwidth and experience to accelerate remains unchanged given the terminal is connectivity demands of the data centre the network roll out. the premier gasoline blending terminal in market in the Nordics. Singapore and the wider region. 3i Infrastructure plc Annual report and accounts 2023 41 ## Portfolio review continued Summary of portfolio In determining a DCF valuation, we Inflation in the UK and Europe has risen generating portfolio companies, although consider and reflect changes to the two sharply which has put pressure onsupply the majority of our power price exposure valuation methodology principal inputs, being forecast cash flows chain and employee costs. washedged in the short to medium term. Investment valuations are calculated at from theinvestment and discount rates. thehalf-year and at the financial year end by The portfolio is positively correlated Future power price projections are taken the Investment Manager and then reviewed We consider both the macroeconomic to inflation, but the ability to pass cost from independent forecasters and changes in by the Board. Investments are reported at environment and investment-specific inflation to customers varies by portfolio these assumptions will affect the future value the Directors’ estimate of fair value at the valuedrivers when deriving a balanced company sowe take a granular approach of these investments. Recently introduced relevant reporting date. base case of cash flows and selecting tomodellingthe effects of inflation. taxes on renewable electricity generators Our portfolio anappropriate discount rate. vary in their applicability and we have The valuation principles used are based Higher longer-term power prices have considered their impact on each company on International Private Equity and Venture positively affected the valuation of our energy individually, based on their circumstances. Capital (‘IPEV’) valuation guidelines, generally using a discounted cash flow (‘DCF’) methodology (except where a market quote Table 2: Components of value movement (year to 31 March 2023, £m) is available), which the Investment Manager considers to be the most appropriate Value movement component Value movement in the year Description valuation methodology for unquoted Planned growth 175 Net value movement resulting from the passage of time, consistent with the infrastructure equity investments. discount rate and cash flow assumptions at the beginning of the year less distributions received and capitalised interest in the year. Where the DCF methodology is used, Other asset performance 99 Net value movement arising from actual performance in the year and changes the resulting valuation is checked against to future cash flow projections, including financing assumptions and changes to other valuation benchmarks relevant regulatory assumptions. to the particular investment, including, for example: Discount rate movement (6) Value movement relating to changes in the discount rate applied to the portfoliocash flows. • earnings multiples; Macroeconomic assumptions 52 Value movement relating to changes to macroeconomic out-turn or • recent transactions; and assumptions, eg. power prices, inflation, interest rates and taxation rates. Thisincludes changes to regulatory returns that are directly • quoted market comparables. linkedtomacroeconomic 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 42 ## Portfolio review continued TCR operates in the aviation sector, which has transition risk (for example, assumptions on ourinvestment horizon, for example, Discount rate been severely affected by travel restrictions the timing and extent of decommissioning technological evolution, climate Chart 3 shows the movement in the over the past three years. ofNorth Sea oil fields, which affects change,orsocietal change. weighted average discount rate applied Tampnet and ESVAGT). | | The value of TCR assumes a full recovery | | For ESVAGT, which operates ERRVs in the | to the portfolio at the end of each year | | --- | --- | --- | --- | --- | | | in air traffic to pre-Covid-19 levels in 2024, | We take a granular approach to these | North Sea servicing sectors, including the | since the Company’s inception and the | | | consistent with the assumptions made | risks,for example each relevant offshore | oil and gas market, we do not assume any | position as at March 2023. The weighted | | | intheprior year. | oiland gas field has been assessed | new vessels or replacement vessels in our | average discount rate increased over the | | | | individually toforecast the market over | valuation for that segment of the business. | course of FY23 due to the evolution of | | Our portfolio | As a ‘through-the-cycle’ investor with a | | | | | | | thelong term and a low terminal value | | the portfolio mix following the realisation | | | strong balance sheet, we consider valuations | | A number of our portfolio companies | | | | | has been assumedat the end of the | | of the European Projects portfolio and | | | in the context of the longer-term value of the | | are set to benefit from these long-term | | | | | forecast period. | | the completion of theGCX and Future | | | investments. This includes consideration of | | megatrends and, in the base case for each | | Biogas acquisitions. | climate change risk and stranded asset risk. | In the case of stranded asset risk, | of our valuations, we take a balanced view | | | --- | --- | --- | --- | | Factors considered include physical risk, | we consider long-term threats that | of potential factors that we estimate are | The range of discount rates used in | | litigation risk linked to climate change and | may impactvalue materially over | as likely to result in underperformance | individual valuations at 31 March 2023 is | | | | as outperformance. | also shown, which is broadly consistent | withthe prior year. During the year, we witnessed an increase in risk-free rates across Europe as central banks took action in response to higher 13.8 inflation. Given the significant risk premium 13.2 Chart 3: Portfolio weighted average discount rate (31 March, %) included in our long-term discount rates and the continued appetite for high-quality 12.5 12.6 infrastructure businesses, rising risk-free 11.3 12.0 rates did not impact the discount rates 11.8 10.8 10.9 10.5 13.2 used to value our portfolio companies 10.0 10.8 at31 March 2023. 10.2 9.9 12.4 11.3 Mar Mar Mar Mar Mar Mar Mar Mar Mar Mar Mar Mar Mar Mar 10.0 Mar Mar 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 3i Infrastructure plc Annual report and accounts 2023 43 ## Portfolio review continued | Portfolio company debt | When considering the appropriate | Investment track record | These returns were underpinned by | | --- | --- | --- | --- | | | quantum of debt for a portfolio company, | | substantial cash generation in the form | | Our portfolio companies are funded by long- | | As shown in Chart 5, since its launch in 2007, | | | | we typically look for an investment grade | | ofincome or capital profits. | | term senior-secured debt alongside equity | | 3i Infrastructure has built a portfolio that | | level of risk. Some portfolio companies from the Company and other shareholders. has provided: The value created through this robust have an investment grade credit rating | Valorem also uses project financing in its | | | investment performance has been | | | --- | --- | --- | --- | --- | | | from a credit rating agency. Chart 4 below | • significant income, supporting the | | | | portfolio of renewable energy projects. | | | crystallised in a number of instances | | | | shows the average loan-to-value (‘LTV’) ratio | delivery of a progressive annual dividend; | | | | There were no mezzanine or junior debt | | | throughwell-managed realisations, | | | | across the portfolio as well as the portfolio | • consistent capital growth; and | | | | structures within our portfolio at 31 March | | | shownas‘Realised assets’ in Chart 5. | | | | value analysed across a range of loan-to- | | | Our portfolio | | 2023 (2022: none). | | • strong capital profits from realisations. | | | | | value levels. The average loan-to-value | | While the Company is structured to hold | | | In recent years, the Investment Manager | ratio is 33% (2022: 34%) with all portfolio | These have contributed to a 19% | investments over the long term, it has | | | proactively refinanced facilities across the | companies below a ratio of 40% at 31 March | annualisedasset Internal Rate of Return | sold assets where compelling offers will | | | portfolio, extending the term of the debt | 2023 (2022: below 45%). | (‘IRR’) since the Company’s inception. | generate additional shareholder value. | | | and securing low fixed rates or hedged | | The European portfolio has generated | | | Portfolio asset returns in Chart 5 include interest rates. strong returns, in line with, or in many an allocation of foreign exchange hedging casesahead of, expectations. where applicable. 1 Average LTV 33% Chart 4: Portfolio company leverage* (3iN value at 31 March 2023, £m) 800 1,200 600 1,000 400 200 Net debt/Enterprise 0 value (‘LTV’) 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. 26-30%<25% 31-35% 36-40% 329 ESVAGT 485 352 Infinis 407 88 99 304 TCR 537 244 187 Tampnet 292 13 195 Joulz 287 2 24 186 Ionisos 298 10 139 Oystercatcher 254 47 146 205 DNS:NET 179 6 191 44 SRL ## Portfolio review continued 219 12 81 Valorem 188 22 88 Attero 144 28 25 Chart 5: Portfolio asset returns throughout holding period (since inception, £m) 28 Future Biogas Existing portfolio (Total return) Realised assets (Total return) 28 Money multiple Money multiple IRR 318 GCX | | | 323 | 329 | | | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | ESVAGT | | | | | | (realised December 2019) | | | | | | | 1.5x | | | | 485 | 1.7x | 27% | | | | | | 21431 | | | | | 352 | | | | | | XLT | 63 | | | | | Infinis | | | | | | | (realised March 2019) | | | | | | 1.7x | | | | | 5.9x | 40% | | | | | 38332 | | 407 88 99 Our portfolio | | | | 304 | | | | | Elenia | 195 | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | TCR | | | | | (realised February 2018) | | | | | 1.9x | | | | | 4.5x | 31% | | | | 766 106 | | | 265 | | | 537 244 | | | | | | | WIG | | | | | 187 | | | | | | | | AWG | 173 | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | Tampnet | | | | | | | | (realised February 2018) | | | | | | | | | | 1.6x | | | | | | | | | | | | | | | 410 | | 154 | | | | | | | 292 | 13 | 3.3x | 16% | | | | | | | | | | | | | | | 195 | | | | | | | Eversholt | | 151 | | | | | | 1.6x | | Joulz | | | | | | | | (realised April 2015) | | | | | | | | | | | | | | 287 | 2 24 | 3.3x | 41% | | | | | | | | 114391 | | | | | | | 186 | | | | | | | Projects | | | 289 | | | | | 1.7x | | Ionisos | | | | | | | | | (realised assets) | | | | | | | | | | | | | 298 10 | | 1.9x | 22% | | | | | | | 446 | | 103 | | | | | 139 | | | | | | | | | | 138 | | | | | 1 Others | 3.2x | Oystercatcher | | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | | 254 47 146 | 1.2x | 8% | | | 24145 | | | | | 205 | | | | | 108 | | | 0.9x | | DNS:NET | | | | | India Fund | | | | | | | 179 6 | | 0.6x | (6%) | | 61 | | 191 ### 1.2x SRL 219 12 | | | | | | Asset IRR to 31 March 2023 | Total cost Value including accrued income | | --- | --- | --- | --- | --- | --- | --- | | | | 81 | | | | Proceeds on disposals/capital returns Cash income | | 2.6x | Valorem | | | | | | | | | | 188 | 22 | | Portfolio asset returns include allocation of foreign | exchange hedging where applicable. Dates of asset ## 88 19% ### 2.2x realisations refer to completion dates. Attero 144 28 25 1 Others includes junior debt portfolio, T2C and Novera. Since inception 28 ### 1.0x Future Biogas 28 318 ### 1.0x GCX 323 | | WIG | | 265 | | | --- | --- | --- | --- | --- | | (realised December 2019) | | | | 21431 | | | XLT | 63 | | | (realised March 2019) 38332 | | Elenia | | 195 | | | --- | --- | --- | --- | --- | | (realised February 2018) | | | | 766 106 | | | AWG | 173 | | | (realised February 2018) | | | | | 410 | | 154 | | --- | --- | --- | --- | --- | --- | --- | | | Eversholt | 151 | | | | | | (realised April 2015) | | | | | 114391 | | | | Projects | | 289 | | | | | | (realised assets) | | | 446 | | 103 | 138 1 Others 24145 108 India Fund 61 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. 3i Infrastructure plc Annual report and accounts 2023 45453i Infrastructure plc Annual report and accounts 2023 ## Sustainability ## report 46 ## Sustainability report ## The Company made a step change Responsible investing ## initsapproach to sustainability in FY23 The Investment Manager has been a signatory to the UN Principles for ## withadedicated team now in place. Responsible Investment since 2011. Responsibility starts when we first consider investing in a company. | | In FY23 the Investment Manager created | We see a strong link between companies | | | --- | --- | --- | --- | | Sustainability report | a dedicated ESG team with specialist | with good ESG performance and those that | We screen investment opportunities | | | sustainability resource. This has improved | can achieve long-term sustainable business | against 3i’s Responsible Investment | The Board is responsible for overseeing the rigour of our assessment of sustainability growth and we believe that a responsible policy. The policy sets out the type the Company’s Sustainability strategy factors in our investment process and approach to investment adds value to of businesses in which the Company with day-to-day accountability resting throughout the holding period, enhanced our portfolio. will not invest, as well as minimum with the Investment Manager. the quality of our engagement with our standards in relation to ESG matters We invest selectively in a small number of portfolio companies on sustainability issues, which we expect new portfolio The Board has reviewed the Responsible businesses every year, giving consideration and accelerated the implementation of companies to either meet or commit to Investment and other sustainability to the sustainability aspects of investee arange of sustainability initiatives across meeting over areasonable time period. policies of the Investment Manager companies’ activities, opportunities and ourinvestment team and portfolio. The Responsible Investment policy andis satisfied that the adoption of challenges before deploying capital. applies to all investments, irrespective these policies meets the Company’s This new team also provides the Company For example, the decision to invest in oftheir country or sector. objectives in this area. with updates on new regulations and FutureBiogas considered the UK net emerging themes around sustainability. zerostrategy, biomethane demand, The Company embeds an assessment To read the Responsible Investment andlinks to regenerative farming. ofESG risks and opportunities at all policy and for more information As owners of infrastructure businesses stages of the investment, portfolio onthe Investment Manager’s other withmajority or significant minority management and value creation sustainability policies, please refer holdingsand representation on their processes. We seek to identify material tothe3i Group website: boards, we recognise our ability to ESG risks and opportunities at the ww w.3i.com/sustai nability influenceour portfolio companies to point we invest, and we put in place ensurethey act responsibly. We operate appropriate and robust plans to with high standards ofstewardship. mitigate the risks or capitalise on the opportunities during ownership and exit. 3i Infrastructure plc Annual report and accounts 2023 47 ## Sustainability report continued We proactively engage with The ESG review focused on ESG-related We remain focused levers that can positively influence our | ourportfolio to create value | | on the climateagenda | | | --- | --- | --- | --- | | | ability to realise revenue opportunities and | | 69% | | The Company seeks to leverage value | | Climate change continues to be a topic | | | | growth, cost optimisation, and value at exit. | | of the portfolio have dedicated ESG resources | | creation opportunities presented by | | of increasing urgency for government, | | We also consider reputational and specific sustainability considerations, and does regulators and other stakeholders and ESG risks for each company including | not view sustainability in isolation from | | willbekey to protecting and creating | | | | --- | --- | --- | --- | --- | | | health and safety, climate change and | | 62% | | | investment performance. | | valueinour portfolio. | | | | | cybersecurity during our ownership. | | have a Sustainability strategy | | | The ESG performance of the portfolio | | Therefore, this year, our focus has | | Sustainability report | We see a number of common sustainability- isdiscussed periodically by the remainedon GHG emissions and climate- related themes and challenges faced by ## 38% InvestmentManager and the Board. related risks and opportunities. ourportfolio. We facilitate the sharing of We held a dedicated annual ESG review produce a Sustainability report best practices, innovation and solutions of the portfolio, which provided a across our portfolio through ad-hoc portfolio-levelview ofESG performance, connections and through workshops. ## 92% emergingtrends, prioritiesand actions. report on Scope 1 and 2 GHG emissions Sustainability pathway We use our influence to encourage our portfolio companies to mature their approach to ESG under our ownership, and we support them viaregular interactions that leverage knowledge and best practices across the portfolio. Identify Measure Develop Implement Fully embed appropriate GHG emissions a Sustainability full suite sustainability senior individuals and develop strategy of governance objectives in the to lead on decarbonisation sponsored by policies organisation ESG topics roadmap the CEO 48 ## Sustainability report continued The Company is embarking on Similar training sessions were also conducted with a subset of portfolio Key actions taken by the Investment Manager this year itsdecarbonisation journey companies this year. We supported our portfolio companies Category Outcome to implement a GHG emissions inventory Developing our approach Governance The new ESG team supported each portfolio company on its sustainability covering Scopes 1 and 2. Next year, we to climate-related risks andresources journey and consideration of the Company’s objectives at portfolio company plan to encourage our portfolio companies andopportunities level. The team also led the ESG reporting for the Company and delivered the to obtain third-party assurance for their annual ESG review of the portfolio. The assessment of both the risk and carbon footprint and to measure Scope 3 Sustainability report Portfolio data The Investment Manager improved the quality of the sustainability and financial impact of climate change GHG emissions. collection and GHGemissions data collected from the portfolio by refining the ESG over the short, medium and long term, management questionnaires completed by portfolio companies We asked our portfolio companies to promotes more informed investment identify GHG emissions reduction initiatives The Investment Managerselected a new software tool which will be used andstrategic decisions. to gather, organise and analyse ESGdata from the portfolio with better andtodevelop a five-year decarbonisation consistency. This tool will be rolled out duringthenext financial year. Following an initial, top-down climate plan for Scope 1 and 2 GHG emissions. scenario analysis, the Investment Manager GHG For the second year, the Investment Manager worked with our portfolio With support from a specialist consultancy, emissions companies tomeasure, refine and report Scope 1 and Scope 2 GHG emissions. has engaged a specialist consultancy to we undertook an initial assessment of We made progress in the collection of Scope 3 datafrom the portfolio. help it design and carry out a second each portfolio company’s GHG emissions We worked with a third-party specialist firm toreview data collection phase of this work. The objective in this and decarbonisation pathway in relation governance and controls at each portfolio company and suggest areas second phase will be to perform a more to the Science Based Target initiative forimprovement. detailed, bottom-up analysis on a number (‘SBTi’). This assessment highlighted of our portfolio companies to inform our Transition We worked with portfolio companies to consider and implement opportunities which companies are positioned to set plans and to reduce their Scope 1 and 2 GHG emissions over time, where possible engagement with them on climate-related science based targets (‘SBTs’) for either targets developing decarbonisation plans. factors. As best practice and modelling the near or long term, and the extent With support from a consultancy, we assessed the ability ofportfolio companies tools evolve, the work in this area will be of further work required to apply for to set near-term targets aligned with the objectives of the Paris Agreement. iterative in nature and develop over time. appropriate accreditation. On 5 April 2023, the Investment Manager wrote to the SBTi to indicate its Please refer to our voluntary climate-related commitment to set up science-based targets. That commitment will require the disclosures for more information. Interactive workshops were held to train Company’s portfolio companies to set SBTs over time. the Investment Manager’s team on the Climate This year, the Investment Manager carried out its initial, top-down scenario SBTi framework, giving them confidence scenario analysisto model the impact of climate change on our portfolio companies, toengage with portfolio companies analysis in line with TCFD recommendations. It is currently refining and improving on setting decarbonisation strategies its approach to scenario analysis to better understand climate physical and SBTs. andtransition risks in our portfolio. 3i Infrastructure plc Annual report and accounts 2023 49 ## Sustainability report continued ## Sustainability in action ## Contributing to ## a low-carbon future | The Company has invested in several | More recently this includes Joulz, which has | The chart below shows the growth in our | Valorem has grown its operational | | | --- | --- | --- | --- | --- | | businesses that support the transition | broadened its service offering to include | portfolio companies’renewable energy | renewable assets base from 157MW | | | towards a low-carbon economy in | rooftop solar development and operations. | generating capacity over the past seven | at acquisition in 2016 to 508MW, with | Sustainability report | | different ways. | | financial years. | a further 270MW under construction. | | The total renewable energy installed This includes onshore wind, solar and The Company has invested in businesses capacity across these businesses is now We invest in businesses that can beagents hydro-electric generation. The business which contribute directly to the energy 979MW, enough to power almost two-thirds of change within their own industries by is also making investments into green transition through the production of of the households in London. addressing the decarbonisation challenges hydrogen, battery storage, and renewable and low-carbon energy. of their customers through innovation and floatingoffshore wind. the provision of low and zero-emission infrastructure assets. | | | 22 | For example, in the maritime sector, | | --- | --- | --- | --- | | Renewable energy installed capacity (at 31 March, MW) | ,000 | | | | | | 177 | ESVAGT is pioneering the transition | 900 1 177 to green support operation vessels 177 800 177 in partnership with renewable 272 700 energycompany Ørsted. 177 238 287 600 289 We also support our businesses in transitioning towards more resilient | 500 | | | 304 | | | | | --- | --- | --- | --- | --- | --- | --- | | | | 294 | | | 508 | | | | | | | 483 | | andfuture-proof business models, for | | 400 | 287 | | | | | | example, diversifying from oil and gas 387 350 300 and building tomorrow’s low-carbon infrastructure. For example, Tampnet 200 233 216 is increasingly serving offshore wind 157 100 customers and ADS is moving intostorage 0 and blending ofsustainableaviation fuel. Mar 19Mar 18Mar 17 Mar 20 Mar 21 Mar 22 Mar 23 Valorem Infinis Attero Joulz 50 ## Sustainability report continued ## Sustainability in action continued ## Supporting safety ## and good health | | A number of the businesses we invest in | The business supports public health | Making the sea a safe place to work has | Its temporary traffic solutions enable | | --- | --- | --- | --- | --- | | | contribute to a healthy and safe society | by providing essential services to the | been ESVAGT’s mission from day one. | greater segregation and control of | | Sustainability report | through the provision of safe services | medical and pharmaceutical industries | The business has a strong track record | traffic flows, in turn improving safety | | | and, for one business, Ionisos, through | through cold sterilisation. This ensures | of health and safety supported by a | andreducing congestion around | | | direct support of the medical and | medical devices are safe for all touse. | comprehensive programme of initiatives | roadworks. On a congested junction, | | | pharmaceutical industries. | In 2022, 65% of its revenues were derived | for employees and customers. In 2022, | SRL’s system reduces average journey | | | | from customers in these industries. | thebusiness experienced zero lost time | times by up to 22%. This improves | For most of our businesses, safety is key incidents – asignificant achievement. satisfaction for road users and totheir social licence to operate. Many of local communities, enabling more our businesses facilitate safe operations sustainable cities. for their customers through the provision of appropriate equipment and services. Through our influence on the portfolio company boards, we support all of ourbusinesses in upholding high health andsafety standards in their operations to protect their employees, contractors and customers. 3i Infrastructure plc Annual report and accounts 2023 51 ## Sustainability report continued ## Sustainability in action continued ## Fostering ## inclusive growth | Our businesses often support economic | The business is a mission-driven company | The company has launched a | TCR operates across 180 airports in over | | | --- | --- | --- | --- | --- | | growth where they operate, for example | that aims to support local and inclusive | “WomeninTech” programme | 20 countries. Its workforce comprises | | | through job creation and increased | economic growth and job creation, | dedicatedto attracting female | over 56 nationalities and speaks over 48 | Sustainability report | | investment. In 2022, our portfolio | with a particular focus on the long-term | employees, and has public targets | languages. English has been adopted as | | | companies collectively employed over | unemployed with a certain number of | toimprove the representation of | TCR’s working language. | | | 5,400 people. | on-site working hours reserved for them | femaleemployees across its business | | | | | each year. In 2022, 12% of working hours | andin management by 2025. | | | We expect our businesses to have on Valorem’s solar PV sites were reserved high governance standards in place forthe long-term unemployed. 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. 52 ## Sustainability report continued ## 2023 voluntary climate-related disclosures the Company and its portfolio companies • overseeing and reviewing internal controls ## This section of the Annual report sets out operate, as well as the perspectives of the and risk management by the Investment different stakeholders involved. Manager, including the appropriate ## how we incorporate climate-related risks and assessment and management of ESG The Board’s oversight of climate- risksand opportunities in the portfolio; ## opportunities into our governance, strategy, relatedrisks and opportunities • ensuring compliance with applicable The Board is responsible for overseeing the ## risk management, metrics andtargets, and ESGlegislation and regulation; and Sustainability report Company’s overall approach to sustainability • reviewing and approving the ## isguided by, but is not intended to comply and related policies. The Board has adopted Company’s voluntary disclosures the Responsible Investment policy of the undertheTCFD framework. ## with, the recommendations of the TCFD. Investment Manager. It delegates day-to-day accountability for sustainability, including The Board receives frequent updates on ESG climate change-related issues, tothe matters and climate-related issues from the The Company continues to make good The following should be read in conjunction Investment Manager. Managing Partners and the ESG team as they progress in its voluntary climate-related with the restof the Annual report and become relevant and material. Further detail financial disclosures as recommended by accounts and3iGroup’s disclosures under The Board receives a formal update on on risk governance can befound in the Risk theTCFD. For a listed investment company, the TCFD framework, available in their the Company’s performance on relevant report on page 68. these are not required by the UK Listing annual reports. ESG riskmatters, including climate change, Rules, but will be a disclosure responsibility of once a year as part of the annual ESG The Investment Manager’s role Governance portfolio review. In addition, the Investment the Investment Manager. inassessing and managing climate- The management of climate-related risks Manager regularly updates theBoard on related risks and opportunities We have cross-referenced the relevant and opportunities is embedded throughout the Company’s ESG approachand progress sections under each of the headings below. The Investment Committee of the the Company’s processes and operations, towards agreed sustainability objectives For an investment company, the majority Investment Manager is responsible for including investment and portfolio forthe year. of the disclosures relate to the Company’s the implementation of the Responsible management activities, with clear oversight portfolio of investments rather than to The Board discharges its responsibilities Investment policy, as well as for making by the Board and delegated authority to theCompany itself. for overseeing and monitoring policies decisions concerning the acquisition, the Investment Manager. In determining the andprocedures and to address issues if they management, ongoing monitoring and We expect that the Company’s reporting Company’s strategy and approach to climate arise through the Company’s Audit andRisk saleof investments, and for making ofTCFD disclosures will continue to evolve change, both the Board and the Managing Committee. The Audit and Risk Committee is decisionsconcerning major investments over time, consistent with the requirement Partners, assisted by a number of committees responsible for: made by ourportfolio companies. forthe Investment Manager to publish and the ESG team, take into account the laws a TCFD product report in respect of the and regulations of the countries in which Company by June 2024. 3i Infrastructure plc Annual report and accounts 2023 53 ## Sustainability report continued ## 2023 voluntary climate-related disclosures continued In evaluating new and existing investments, under management thatseeks to improve However, it seeks to identify investments that We are now working with portfolio the Investment Manager takes account the understanding andmanagement of the benefit from long-term trends, many of which companies to refine these plans and of certain climate-related risks and risks associated withclimate change. link to environmental sustainability themes, develop science-based GHG emissions opportunities where relevant. including circularity and the transition reduction targets where feasible. Since joining the group, the Investment toalow-carbon economy. This may include the impact of climate Manager has contributed feedback towards Resilience of the organisation’s change on the markets each company serves the guide published by iCI and the British As set out earlier in this report, the Company, strategy, taking into consideration and demand for its services, the climate Private Equity & Venture Capital Association through its Investment Manager, screens different climate-related scenarios, Sustainability report change resilience of each company’s assets, (‘BVCA’) on the implementation of TCFD all investments against the requirements of including a2°Cor lower scenario and, in the case of GHG emissions-intensive and the working group in relation to 3i Group’s Responsible Investment policy, As a company that invests over the industries, the feasibility and potential cost of developing the guidance for the calculation and embeds an assessment of ESG factors, medium to long term in infrastructure GHG emissions abatement. The Investment of the Scope 3 GHG emissions of portfolio including climate-related factors, at all stages assets that, by definition, provide essential Manager is informed about climate-related companies and on the development of of the investment and value creation journey. and long-term services to society, we risks and opportunities via its regular decarbonisation strategies. We can screen out opportunities that have an recognise the importance of investing interactions with each portfolio company unsustainable impact on the environment and in the energy transition and that this will Please refer to the 3i Group’s TCFD and portfolio company board updates societies in which they operate, inconsistent ultimately impact all the sectors in which disclosures for more information on throughout the year. with generating long-term value. we invest. the Investment Manager’s governance The 3i Group Risk Committee oversees framework and further participation in Once invested, we use our influence Early in FY23, the Investment Manager theInvestment Manager’s risk management working groups. at portfolio companies to encourage carried out its first climate scenario framework. The 3i Group ESG Committee the monitoring of climate-related risks analysis on its Private Equity portfolio and Strategy advises the Group CEO, directly through the and opportunities. Economic infrastructure assets, including Group Risk Committee and the Investment Climate-related risks and opportunities those owned by the Company, with the We are continuously evolving our approach Committee, on ESG-related matters. identified over the short, medium, and help of an external consultant. as a responsible investor to improve our long term and the impact on businesses, Participation in Industry assessment of climate risks and opportunities strategy, and financial planning This high level top-down analysis within our investment and portfolio WorkingGroups suggested that the Company’s portfolio Our investment strategy is to make a management processes. has limited exposure to material climate- In July 2022, the Investment Manager joined limited number of new investments each related risks, and also highlighted that the the Initiative Climat International (‘iCI’), a year, selected within our target sectors and During the year, portfolio companies Company’s portfolio is exposed to the global, practitioner-led community of over geographies on the basis of their compatibility continued to measure their GHG emissions energy transition and thus may stand to 200 private markets firms and investors with our return targets and fit with the existing and, where possible, to develop a benefit in both an orderly and a disorderly representing over US$3.2 trillion in assets portfolio. The Company does not operate decarbonisation plan. net zero scenario. asustainability-driven investment strategy. 54 ## Sustainability report continued ## 2023 voluntary climate-related disclosures continued The Investment Manager has now engaged Processes for identifying and We continue to develop our governance To improve data consistency and a specialist consultancy to help design and assessingclimate-related risks and risk management framework to comparability, the Investment Manager carry out a second phase of climate scenario ensure that sustainability-related risks and selected a new software tool which will The Investment Manager monitors relevant analysis, which it expects to complete particularly climate-related risks are treated be used to gather, organise and analyse portfolio risks, including climate-related in FY24. Its objective will be to perform as a priority by our portfolio company ESG data from the portfolio withbetter risks and changing consumer preferences in a deeper dive, bottom-up analysis on a management teams. automation and consistency. This tool, which response to environmental issues, notably number of the portfolio companies to inform will improve significantly onexisting systems, carbon taxes and the risk of stranded Processes for managing climate-related Sustainability report engagement with the portfolio on climate- will be rolled out duringthe course of FY24. assets due to the energy transition, through risks and integration into overall risk related factors. Please refer to the 3i Group’s its investment assessment and portfolio management 3i Infrastructure itself is not exposed TCFD disclosures for more details. monitoring processes. This is critical to to material environmental risks. The Audit and Risk Committee ensures that protecting and enhancing the value of our We also assess the potential financial impact The Companyhas no employees. the processes for managing climate-related assets and is at the core of our investment of climate change on the Company through risks are appropriate. This includes the The business of the Company is conducted management process. our annual viability assessment (see pages development and integration of the data, through the Investment Manager and 79 and 80). Our analysis shows that the The Investment Manager undertakes ESG tools and capabilities needed to support Jersey administrator, which do not have any Company remains viable over the medium due diligence where appropriate, including disclosure, risk identification and monitoring office locations dedicated to the Company. term from a climate change stress scenario environmental due diligence, before making for ESG-related risks, including climate- As the regulatory environment is constantly on our portfolio. new investments and monitors ESG risks related risks, across the whole portfolio. evolving, the Investment Manager actively throughout the life of our investments. Risk management considers and monitors existing and This year the Investment Manager created If appropriate this includes the engagement emerging regulatory requirements related to The Company has a comprehensive risk a dedicated ESG team with specialist of specialist external firms to provide advice climate change (eg. limits on GHG emissions governance framework and compliance sustainability resource. This has improved the on specific sectors or topics. This process is and carbon taxes) as these requirements processes and procedures to ensure that all rigour of our assessment of sustainability supported by the new specialist ESG team. may affect both the Company and our risks, including ESG and climate-related risks, factors in our investment process and During the year, the Investment Manager portfolio companies. are monitored and managed with due care throughout the holding period, enhanced further developed the ESG assessment that and diligence and that the Company is fully the quality of our engagement with our is incorporated into the investment process, compliant with all applicable environmental portfolio companies on sustainability issues, to provide a more detailed view of each legislation. This is further described in the and accelerated the implementation of a company’s ESG performance. Risk report on pages 68 to 70. range of sustainability initiatives across our investment team and portfolio. 3i Infrastructure plc Annual report and accounts 2023 55 ## Sustainability report continued ## 2023 voluntary climate-related disclosures continued Metrics and targets to minimise their environmental footprint, There is a legal requirement for UK listed GHG emissions reporting invest in the mitigation of their environmental companies and UK large unquoted Metrics used to assess climate-related As noted above, the Company itself impact and implement energy efficiency companies to provide certain climate-related risks and opportunities has a very limited direct impact measures. This is an important part not disclosures, including in relation to GHG on the environment and is not a We monitor the environmental sustainability only of our portfolio risk management emissions. This applies to Infinis, which significant producer of GHG emissions. of each portfolio company as we would procedures, but also of the value creation provides this reporting as part of its own The Company consumed less than any other critical business activity, in plan for each of our investments. annual report and accounts, which can be 40 megawatt hours of energy in the an integrated and consistent manner. Sustainability report found on www.infinis.com. financial year and is therefore exempt from The Investment Manager monitors the During the year, the Investment Manager the UK Streamlined Energy and Carbon environmental performance of our portfolio worked with our portfolio company Our portfolio companies aim to include Reporting disclosure requirements. companies on an annual basis, and uses management teams to continue to measure objectives for reducing GHG emissions its influence as an investor to promote a and report their GHG footprint. orintensity (depending on the sector) in their We report Scope 1 and Scope 2 GHG commitment in our portfolio companies sustainability strategies. The objectives for emissions for our portfolio companies for each portfolio company will differ depending the second time in this report. These are on the sector in whichthey operate. being disclosed voluntarily in order to 2021 2022 provide a useful view on GHG emissions On 5 April 2023, the Investment Manager Company Scope 1 Scope 2 Scope 1 Scope 2 across our portfolio. wrote to the SBTi to indicate its commitment 1 2 Attero 792,245 37,729 792,669 14,192 to set SBTs that will affect the Company. We supported portfolio companies 2 1 ESVAGT 99,248 331 120,847 272 The Investment Manager is now working to with implementing GHG emissions 1 1 Infinis 66,591 2,822 102,167 2,502 formulate its targets, with the intention to reporting and worked with a third-party 1 2 Ionisos 3,502 1,952 2,221 3,418 submit these to SBTi for validation during specialist firm during the year to review 1 2 TCR 1,656 2,031 1,921 1,830 the course of FY24. Its SBTs will cover its controls and governance associated with | | | | 2 | direct Scope 1 and 2 GHG emissions and the | | | --- | --- | --- | --- | --- | --- | | SRL – – 1,793 151 | | | | | GHG data collection at each portfolio | | | 1 | | 2 | Scope 3 GHG emissions associated with its | | | DNS:NET 418 1,880 | | 530 1,916 | | | company. This will allow us to improve | | | 1 | | 2 | portfolio, including the Company’s portfolio, | | | Joulz 533 98 | | 436 86 | | | the consistency and quality of the | | | 1 | | 2 | and will be formulated in line with the | | | Tampnet 31 103 | | 47 341 | | | methodology and GHG emissions data | | | 1 | | 1 | guidance published by SBTi for the Private | | | Oystercatcher 14 1,717 | | 36 3,101 | | | in the next financial year. Two companies | | | 2 | | 1 | Equity sector. | | | Valorem 13 106 | | 14 77 | | | have GHG emissions certified by a | | | | | 1 | | third party and we will encourage the | GCX – – 0 701 companies across our portfolio to do this. 1 Location-based, using grid-average GHG emissions factors. 2 Market-based, using contract-specific GHG emissions factors. 56 ## Sustainability report continued ## 2023 voluntary climate-related disclosures continued | We will continue to work with portfolio | the volume of emissions avoided. It is | | gas supplies in 2022. Infinis has begun | The review also provided guidance | | --- | --- | --- | --- | --- | | company management teams to refine | committed to increasing its avoided | | developing battery projects that will | on improving GHG emissions data | | their data collection and calculation | emissions to one million tonnes of CO | 2 | allow renewable energy to be stored to | collection robustness going forward. | | methodologies over time, including the | by 2025 by increasing the production of | | meet peaks in demand. This will lessen | Improvements include third-party review | | calculation of Scope 3 GHG emissions. | renewable energy and recycled materials. | | reliance on natural gas to fill gaps in | of all collected data, provision of formal | | | Attero is working to develop Carbon | | supply. Infinis also generates renewable | GHG emissions training for portfolio | The work performed to collect Scope Capture and Storage capabilities, which energy through solar energy parks, company employees responsible for 1 and Scope 2 GHG emissions helped Sustainability report would enable a significant reduction in which does not contribute any GHG data collection, and separation of data identify several potential opportunities GHG emissions emissions. In addition, Infinis’s captured preparation and data review. for reduction across the portfolio. We are landfill methane and captured mineral • ESVAGT’s Scope 1 GHG emissions continuing to work with the portfolio Across the portfolio, seven companies methane operations contributed to the relate to the fuels used in its vessels, companies to consider and implement calculated Scope 3 GHG emissions capture of 230,000 tonnes of methane which it aims to transition to renewable GHG emissions reduction initiatives for 2022, with a range of in-house or in FY23, equivalent to preventing the sources of fuel and electrical power. over time. consultant-led methods. A range of emission of 5,700,000 tonnes of CO 2 , ESVAGT has set itself an environmental Scope 3 categories were considered GHG emissions data for calendar year more than 55 times the company’s Scope goal to become operationally carbon based on materiality for each portfolio 2022 have been collected for all portfolio 1 GHG emissions neutral by 2035 and to have zero carbon company. We will continue working with companies, excluding Future Biogas, which emissions by 2050. To help achieve This year the Investment Manager the portfolio companies throughout was acquired in February 2023. this, ESVAGT has several innovations in developed its GHG emissions and ESG FY24 to expand this reporting and align progress. ESVAGT increasingly supports The most significant sources of Scopes 1 data collection method further. The annual on key categories. the offshore wind industry through and 2 GHG emissions across the portfolio questionnaire was distributed to all the its operations | relate to specific operations that support | | portfolio companies, requesting data | | --- | --- | --- | | the essential nature of the businesses in | • Infinis’s Scope 1 GHG emissions | across a broad range of emissions, health | | our portfolio. | primarily relate to the natural gas used | and safety, governance, compliance and | | | in its Power Response business, which | other ESG topics for calendar year 2022. | • Attero continues to be the largest provides highly responsive power during direct emitter in the portfolio, with GHG The GHG emissions data was subsequently times of peak demand. This is a critical emissions primarily resulting from its reviewed by a specialist consultancy activity to help overcome the current waste processing activities and its owned which performed an assessment of the gaps in the UK’s electricity supply from and operated landfills. Since 2019, Attero governance and processes surrounding renewable power sources and has has fully offset its GHG emissions by GHG emissions data collection at each been particularly important to meet UK portfolio company. energy demand following the Ukraine conflict and resulting impact on UK 3i Infrastructure plc Annual report and accounts 2023 57 ## Financial ## review and ## Risk report Financial review 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. **We continued to deliver on our objectives, with strong NAV growth and an increased dividend.** CFO, Infrastructure ![img-1.jpeg](img-1.jpeg) ![img-2.jpeg](img-2.jpeg) 3i Infrastructure plc Annual report and accounts 2023 59 ## Financial review continued The Company delivered another year ofoutperformance, with the portfolio Composition of balance sheet and income statement (year to 31 March 2023) generating strong capital growth and income materially higher than the prior Composition of balance sheet and income statement (year to 31 March 2023) year. The dividend was well covered by netincome this year. The target dividend Balance sheet (as at 31 March 2023) Income statement (year to 31 March 2023) forFY24 of 11.90 pence per share is an Portfolio return increase of 6.7% over FY23. | | Derivatives | | Financial review and Risk report | | --- | --- | --- | --- | | Total net investment in the year was | £18m | | | | £452 million, including the closing of | Borrowings | | | | | £501m | Costs | | theinvestments in GCX, TCR and Future £109m Biogas, the syndication of a portion of Other net the investments in ESVAGT and TCR and liabilities £87m further investments in DNS:NET and Infinis. The Company maintained low levels of uninvested cash throughout the year and Dividends Capital actively managed its liquidity position return £101m £320m through its £900 million RCF facility and a £100 million capital raise in February 2023. | | Portfolio | Shareholders’ | | | | --- | --- | --- | --- | --- | | Returns | assets | | equity | | | | £3,641m | | £3,101m | | | Total return | | | | Total | return The Company generated a total return £394m for the year of £394 million, representing | a 14.7% return on time-weighted opening | Movements | | | | --- | --- | --- | --- | | | in derivatives | | Available for | | NAV and equity issued net of the prior year | and exchange | | reinvestment | | | | on EUR | when realised | final dividend (2022: £404 million, 17.2%). | | | borrowings | | | £293m | | --- | --- | --- | --- | --- | --- | | This performance is significantly ahead of | Cash | | | | | | | | | £6m | Portfolio | | £5m the target return of 8% to 10% per annum income £156m tobe achieved over the medium term. Other Foreign net assets exchange £4m £19m Other income £57m £2m Derivatives 60 ## Financial review continued This outperformance was driven by Table 3: Summary total return (year to 31 March, £m) strong performance across the portfolio, particularly from TCR, Tampnet, Valorem, 2023 2022 Attero and Ionisos, partially offset by Capital return (excluding exchange) 320 375 underperformance from DNS:NET. Foreign exchange movement in portfolio 19 9 Changes in the valuation of the Company’s Capital return (including exchange) 339 384 portfolio assets are described in the Movement in fair value of derivatives and exchange on EUR borrowings 6 (2) Movements inportfolio value section of Financial review and Risk report Net capital return 345 382 the Portfolio review. The investment cases of our portfolio companies reflected in the Total income 158 133 1 valuations at 31 March 2023 are fully funded, Costs (109) (111) with the exception of the DNS:NET fibre roll Total return 394 404 out. Our companies continue to generate 1 Includes non-portfolio related exchange gain of £2 million (2022: loss of £3 million). discretionary growth opportunities that are accretive to our investment cases. Total income and non-income cash of £202 million in the year was significantly 158 | higher than last year, due to income | | | | 3,151 | | | --- | --- | --- | --- | --- | --- | | | 320 | 25 | | | 3,101 | | fromnew investments in GCX, ESVAGT, | | | (109) | | | (50) Chart 6: Reconciliation of the movement in NAV (year to 31 March 2023, £m) TCR andSRL (2022: £143 million). 100 2,757 2,657 3,500 Non-income cash receipts reflect distributions from underlying portfolio 3,000 companies, which would usually be income to the Company, but which are distributed as a repayment of investment for a variety 2,500 of reasons. Whilst non-income cash does not form part of the total return shown in Opening Equity Adjusted Capital Net foreign Total Net costs NAV before Distribution to Closing Table 3, it is included when considering | | | NAV at | | raised in | opening | return | exchange | | income | including | | distributions | shareholders | NAV at | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | 2,000 | | | | | | | | 2 | | | | | | | | | dividend coverage. | 1 April | | February | NAV | | movement | | | management | | | | 31 March | | | | 2022 | 1 | | | | | | | | 3 | | | 2023 | | | | | | 2023 | | | | | | fees | | | | | An analysis of the elements of the total 1,500 return for the year is shown in Table 3. 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. 3i Infrastructure plc Annual report and accounts 2023 61 ## Financial review continued | Capital return | Total income and non-income cash is shown | Foreign exchange impact | As shown in Chart 8, the reported foreign | | --- | --- | --- | --- | | | in Table 4. | | exchange gain on investments of£19 million | | The capital return is the largest element | | The portfolio is diversified by currency | | (2022: £9 million) included a gain of ofthe total return. The portfolio generated Table 4: Total income and non-income cash asshown in Chart 7. We aim to deliver £13 million from the Company’s exposure a value gain of £320 million in the year to (year to 31 March, £m) steady NAV growth for shareholders, tothe US dollar, largely through Tampnet, | 31 March 2023 (2022: £375 million), as shown | | andthe foreign exchange hedging | | | --- | --- | --- | --- | | | 2023 2022 | | which was not hedged in the first half | | in Chart 6. There was a positive contribution | | programme helps us to do this by | | of the year. This was accompanied by a across the majority of the portfolio and the Total income 158 133 reducingour exposure to fluctuations £6 million gain on the hedging programme | largest contributors were TCR (£86 million), | Non-income cash 44 10 | intheforeign exchange markets. | | | | --- | --- | --- | --- | --- | | | | | (2022: loss of £2 million). The positive | Financial review and Risk report | | Infinis (£52 million) and Tampnet (£52 million). | Total 202 143 | | | | | | | Portfolio foreign exchange movements, | hedge benefit resulted from favourable | | The only negative contribution was | | | after accounting for the hedging | interest rate differentials onthe euro | | --- | --- | --- | --- | | from DNS:NET (£54 million). These value | A strong income contribution from the new | | | | | | programme, increased the net capital | hedging programme. | | movements are described in the Portfolio | investments in GCX and SRL and higher | | | return by £25 million (2022: increased review section. non-income cash receipts, particularly from by£7 million). Attero, offset the reduction in income from | | Income | the divestment of the European Projects | | | --- | --- | --- | --- | | | The portfolio generated income of | portfolio. A breakdown of portfolio income | | | | £156 million in the year (2022: £127 million). | is provided in Chart 9 on page 62, together | at 31 March 2023) | | Chart 7: Portfolio value by currency | Of this amount, £1 million was through | with an explanation of the change from | | Chart 8: Impact of foreign exchange (‘FX’) ( dividends (2022: £24 million) and prior year. movements onportfolio value £155 million through interest on shareholder (year to 31 March 2023, £m) 12 Interest income from the portfolio was loans (2022: £103 million). An additional significantly higher than prior year due to £2 million of interest was accrued on the 6 the new investments in GCX, SRL, TCR and 25 vendor loan notes issued in lieu of WIG ESVAGT. Dividend income was lower than 13 13 proceeds (2022: £6 million) together with 20 prior year due to a high level of dividend afurther £0.5 million of interest receivable income from Tampnet in the prior year as 5 15 on deposits (2022: £0.1 million). liquidity preserved during the pandemic 10 0 was released. FX gain before FX gain after hedging hedging EUR 52% | GBP | 18% | | | --- | --- | --- | | DKK | 13% | Hedged assets (EUR/SGD/DKK/USD/NOK) | | USD | 9% | | 8%NOK Unhedged assets for part of the year (USD) 62 ## Financial review continued Chart 9: Breakdown of portfolio income (year to 31 March, £m) Explanation of variances 46 ESVAGT Further investment in FY22 28 6 Tampnet FY22 release of liquidity retained 17 5 16 Financial review and Risk report Infinis 17 18 TCR Further investment in October 2022 13 9 Ionisos 9 19 SRL Full year of ownership 7 6 Joulz 6 4 Oystercatcher 5 1 Attero Additional non-income cash of £23m 4 1 8 DNS:NET Further investment in FY22 and FY23 4 1 3 Valorem 1 3 18 GCX New investment in FY23 1 Projects Portfolio Divestment in June 2022 2 5 Interest (FY23) Interest (FY22)Dividend (FY23) Dividend (FY22) 3i Infrastructure plc Annual report and accounts 2023 63 ## Financial review continued | Costs | For a more detailed explanation of how | Ongoing charges ratio | The AIC methodology does not include | | --- | --- | --- | --- | | | management and performance fees are | | transaction fees, performance fees or finance | | Management and performance fees | | The ongoing charges ratio measures | | | | calculated, please refer to Note 18 of | | costs. However, the AIC recommends | annualoperating costs, as disclosed During the year to 31 March 2023, the accounts. that the impact of performance fees on inTable 5 below, against the average the Company incurred management the ongoing charges ratio is noted, where NAVover the reporting period. fees of £47 million (2022: £43 million), Fees payable performance fees are payable. The ratio including transaction fees of £3 million Fees payable on investment activities The Company’s ongoing charges ratio including the performance fee was 3.19% (2022: £10 million). The fees, payable to include costs for transactions that did not is calculated in accordance with the (2022: 3.52%). The total return of 14.7% for | 3i plc, consist of a tiered management | reach, or have yet to reach, completion and | Association of Investment Companies | | | | --- | --- | --- | --- | --- | | | | | the year is after deducting this performance | Financial review and Risk report | | fee, and a one-off transaction fee of 1.2% | the reversal of costs for transactions that | (‘AIC’) recommended methodology and | | | fee andongoing charges. | payable in respect of new investments. | have successfully reached completion and | was 1.64% for the year to 31 March 2023 | | --- | --- | --- | | The management fee tiers range from 1.4%, | were subsequently borne by the portfolio | (2022: 1.41%). The ongoing charges ratio | | reducing to 1.2% for anyproportion of gross | company. For the year to 31 March 2023, | is higher in periods where new investment | | investment valueabove £2.25 billion. | fees payable totalled less than £1 million | levels are high and new equity is raised | | | (2022: £3 million). | or capital is returned toshareholders. | An annual performance fee is also payable Realisation of assets reduces the by the Company, amounting to 20% of Other operating and finance costs ongoingcharges ratio. The cost items returns above a hurdle of 8% of the total Operating expenses, comprising Directors’ thatcontributed to the ongoing charges return. This performance fee is payable fees, service provider costs and other ratio are shown below. inthree equal annual instalments, with the professional fees, totalled £3 million second and third instalments only payable intheyear (2022: £3 million). if certain future performance conditions Table 5: Ongoing charges (year to 31 March, £m) are met. This hurdle was exceeded for Finance costs of £16 million (2022: £5 million) the year ended 31 March 2023, resulting in the year comprised arrangement and 2023 2022 in a performance fee payable to 3i plc in commitment fees for the Company’s Investment Manager’s fee 44.6 32.6 respect of the year ended 31 March 2023 £900 million RCF and interest on drawings. Finance costs were higherthan in FY22 due Auditor’s fee 0.8 0.6 of£45 million (2022: £54 million). to an increase in interest rates and a greater Directors’ fees and expenses 0.5 0.5 The first instalment, of £15 million, will be average drawn balance. Other ongoing costs 1.9 2.4 paid in May 2023 along with the second Total ongoing charges 47.7 36.1 instalment of £18 million relating to the Ongoing charges ratio 1.64% 1.41% previous year’s performance fee and thethird instalment of £2 million relating totheFY21 performance fee. 64 ## Financial review continued | Balance sheet | Cash and other assets | The movement from March 2022 is due | way of a placing of ordinary shares in the | | --- | --- | --- | --- | | | | toan increase in the performance fee | capital ofthe Company at 330pence per | | The NAV at 31 March 2023 was | Cash balances at 31 March 2023 totalled | | | | | | payable of £45 million, following the | share. The placing price represented a | | £3,101 million (2022: £2,704 million). | £5 million (2022: £17 million). | | | | | | outperformance in the period. £26 million | discount of approximately 3.4% to the | The principal components of the NAV are Cash on deposit was managed actively of prior year performance fees were share price immediately prior to the the portfolio assets, cash holdings, the fair by the Investment Manager and there paid during the period. The vendor loan announcement of the placing. A total value of derivative financial instruments, are regular reviews of counterparties note of£98 million, included as an asset of 30,915,990 newordinary shares were borrowings under the RCF and other andtheirlimits. Cash is principally held within other net assets at March 2022, admitted to trading on the London Stock netassets and liabilities. A summary Financial review and Risk report inAAA-rated money market funds. wasredeemed in July 2022. Exchange main market for listed securities balance sheet is shown in Table 6. on 14 February 2023. The Company Other net assets and liabilities Borrowings At 31 March 2023, the Company’s now hasatotal of922,350,000 shares in predominantly comprise a performance netassetsafter the deduction of The Company increased the commitments issue,anincrease of 3.5%. Soft pre-emption fee accrual of £83 million (2022: £64 million), theproposed final dividend were under its RCF in July 2022 from £700 million was followed where possible in allocating including amounts relating to prior £3,050 million (2022: £2,657 million). to £900 million in order to maintain a good the shares. year fees. level and maturity of liquidity for further NAV per share investment whilst minimising returns dilution from holding excessive cash The total NAV per share at 31 March balances. This is a three-year facility, with a 2023 was 336.2 pence (2022: 303.3 Table 6: Summary balance sheet (at 31 March, £m) maturity date of November 2025. A further pence). This reduces to 330.6 pence one-year extension option is available under (2022: 298.1pence) after the payment 2023 2022 the facility agreement. At 31 March 2023, of thefinal dividend of 5.575 pence Portfolio assets 3,641 2,873 thetotal amount drawnwas £501 million. (2022: 5.225 pence). There are no Cash balances 5 17 dilutivesecurities in issue. An additional credit facility of £300 million Derivative financial instruments 39 8 available at the beginning of this financial Dividend and dividend cover Borrowings (501) (231) year, with a maturity of less than one year, Other net (liabilities) / assets (83) 37 The Board has proposed a dividend was cancelled in July 2022 at the same NAV 3,101 2,704 for the year of 11.15 pence per time as the commitments under the RCF share, or£101 million in aggregate were increased. (2022: 10.45pence; £93 million). This is inline with the Company’s Capital raise targetannounced in Maylast year. In February 2023, the Company successfully completed a capital raise, with net proceeds of £100 million, by 3i Infrastructure plc Annual report and accounts 2023 65 ## Financial review continued Table 7: Dividend cover (year to 31 March, £m) When considering the coverage of the A shortfall could arise, for example, due proposed dividend, the Board assesses to holding substantial uninvested cash 2023 2022 | | the income earned from the portfolio, | orthrough lower distributions being | | --- | --- | --- | | Total income, other income and non-income cash 202 143 | interest received on cash balances and any | received from portfolio companies | | Operating costs, including management fees (66) (50) | additional non-income cash distributions | inordertopreserve liquidity. | | Dividends paid and proposed (101) (93) | from portfolio assets which do not follow | | Chart 10 shows that the Company Dividend surplus for the year 35 – from a disposal of the underlying assets, has consistently covered the dividend Dividend reserves brought forward from prior year 794 868 as well as the level of ongoing operational overthelast five years. costs incurred in the year. The Board Financial review and Risk report Realised gain/(loss) over cost on disposed assets 30 (20) also takes into account any surpluses Performance fees (45) (54) Sensitivities retained from previous years, and net Dividend reserves carried forward 814 794 The sensitivity of the portfolio to key capital profitsgenerated through asset inputsto our valuations is shown in Chart realisations,which it considers available 11and described in more detail in Note 7 asdividend reserves for distribution. tothe accounts. The portfolio valuations Table 7 shows the calculation of arepositively correlated to inflation. 80 | | | dividendcoverage and dividend | The longer-term inflation assumptions | | --- | --- | --- | --- | | 60 | 165 | | | | | | reserves.The dividend was fully | beyond two years remain consistent with | 40 coveredfortheyear with a surplus central bank targets, eg. UK CPI at 2%. 136 Chart 10: Dividend cover (five years to 31 March 2023, £m) 20 of£35 million (2022:no surplus). The sensitivities shown in Chart 11 on page 1 00 105 101 The retained amount available for 66 are indicative and are considered in 93 93 1 80 87 87 distribution, following the payment of isolation, holding all other assumptions 82 60 70 thefinal dividend, the realised profit over constant. Timing and quantum of price 1 | | | cost relating to the sale of the European | increases will vary across the portfolio | | --- | --- | --- | --- | | 1 | 40 | | | | | | Projects portfolio and the performance | and the sensitivity may differ from that | | 1 | 20 | | | | | | fee will be £814 million (2022: £794 million). | modelled. Changing the inflation rate | | | 0 | This is a substantial surplus, which is | assumption maynecessitate consequential | Mar 19 Mar 20 Mar 21 Mar 22 Mar 23 | | | | available to support the Company’s | changes toother assumptions used in the | | --- | --- | --- | --- | --- | | | 1 | | progressive dividend policy, particularly | valuationof each asset. | | Net income | | Dividend | | | should dividends not be fully covered byincome in a future year. 1 Net income is Total income, other income and non-income cash less operating costs. 66 ## Financial review continued Alternative Performance The APMs are consistent with those • Total return on opening NAV reflects • Total income and non-income cash is disclosed in prior years but this year we the performance of the capital used to assess dividend coverage based Measures (‘APMs’) have added two new APMs, Total liquidity deployed by the Company during the on distributions received and accrued We assess our performance using a variety and Portfolio debt to enterprise value. year. This measure is not influenced from the investment portfolio of measures that are not specifically defined The Directors monitor total liquidity to by movements in share price or • Investment value including commitments under IFRS and are therefore termed APMs. assess the Company’s ability to make ordinary dividends to shareholders. measures the total value of shareholders’ The APMs that we use may not be directly further investments, the efficiency of the This is a common APM used by capital deployed by the Company comparable with those used by other balance sheet, and short-term viability. investment companies companies. These APMs provide additional • Total portfolio return percentage reflects Financial review and Risk report Portfolio debt to enterprise value is • The NAV per share is a measure of the information of how the Company has the performance of the portfolio assets monitored to assess the underlying gearing underlying asset base attributable to performed over the year and are all financial during the year of portfolio companies, the consequential each ordinary share of the Company measures of historical performance. • Total liquidity is a measure of the risk in the forecast cashflows of those and is a useful comparator to the share Company’s ability to make further companies and the ability of portfolio price. This is a common APM used investments and meet its short- companies to fund capital expenditure byinvestment companies term obligations fromtheir own resources. • Portfolio debt to enterprise value is a measure of underlying indebtedness ofthe portfolio companies | Discount rate | -1% | | | £343m 9.4% | | --- | --- | --- | --- | --- | | | +1% | £(296m) (8.1%) | | | | Inflation | -1% | | £(52m) (1.4%) | | (for two years) | | | +1% | | | £47m 1.3% | | | --- | --- | --- | --- | --- | --- | --- | | Chart 11: Portfolio sensitivities (year to 31 March 2023) | Interest rate | -1% | | | £175m 4.8% | | | | | +1% | £(182m) (5.0%) | | | | | | | | | 0 2% 4% 6%-2%-4%-6%-8%-10% 8% | | 10 | % 3i Infrastructure plc Annual report and accounts 2023 67 ## Financial review continued The definition and reconciliation to IFRS of the APMs is shown below. APM Purpose Calculation Reconciliation to IFRS Total return on A measure of the overall financial It is calculated as the total return of £394 million, as shown in the The calculation uses IFRS measures. openingNAV performance of the Company. 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 For further information see the £47 million, adjusted on a time-weighted basis for the receipt of the KPIsection. £100million capital raise on 14 February 2023. An adjustment to increase the opening NAV by £13 million is required for this time weighting. Financial review and Risk report NAV per share A measure of the NAV per share It is calculated as the NAV divided by the total number of shares in The calculation uses IFRS measures and is set out in Note 14 inthe Company. issueat the balance sheet date. tothe accounts. Total income and A measure of the income It is calculated as the total income from the underlying portfolio and Total income uses the IFRS measures Investment income and non-incomecash and other cash receipts by otherassets plus non-income cash being the repayment of shareholder Interest receivable. The non-income cash, being the proceeds the Company which support loans not resulting from the disposal of an underlying portfolio asset. from partial realisations of investments, are shown in the Cash the payment of expenses flow statement. The realisation proceeds which result from a anddividends. partial sale of an underlying portfolio asset are not included within non-income cash. | Investment value | A measure of the size of the | It is calculated as the portfolio asset value plus the amount of the | The portfolio asset value is the ‘Investments at fair value | | --- | --- | --- | --- | | includingcommitments | investment portfolio including | contracted commitment. At 31 March 2023, the Company had no | through profit or loss’ reported under IFRS. The value of | | | thevalue of further contracted | investment commitments. | futurecommitments is set out in Note 16 to the accounts. | future investments committed bythe Company. Total portfolio A measure of the financial It is calculated as the total portfolio return in the year of £501 million, The calculation uses capital return (including exchange), returnpercentage performance of the portfolio. asshown in Table 1, as a percentage of the sum of the opening value movement in fair value of derivatives, underlying portfolio ofthe portfolio and investments less amounts syndicated in the year income, opening portfolio value and investment in the year. (excluding capitalised interest) of £3,325 million. 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 It is calculated as the cash balance of £5 million plus the undrawn The calculation uses the cash balance, which is an IFRS measure ability to make further balanceavailable under the Company’s revolving credit facility and undrawn balances available under the Company’s revolving investments and meet its short- of£399million. credit facility, which are described in Note 11 to the accounts. term obligations. Portfolio debt to A measure of underlying It is calculated as total debt as a percentage of the enterprise value of The calculation is a portfolio company measure and therefore enterprise value indebtedness of the portfolio the portfolio companies, and does not include indebtedness of the cannot be reconciled to the Company’s accounts under IFRS. companies. Company. 68 ## Risk report ## This was the second year of a three-year cycle ## of risk reviews, whereby the Audit and Risk ## Thoughtful risk management ## Committee (the ‘Committee’), alongside the ## is a cornerstone of our risk ## Investment Manager, conducted a thorough ## review to identify and consider the impact and ## governance framework.” ## likelihood of the key, principal and emerging Wendy Dorman Chair, Audit and Risk Committee ## risks facing the Company today. Against the backdrop of the current facing the Company, then collating and geopolitical and macroeconomic comparing the results, which we refer to as environment, the Company has continued the ‘blank sheet of paper exercise’. This was to perform strongly, supported by our performed last year as it was the first year of risk management framework and process, the cycle. which enables appropriate and responsive This year, a number of risks were decision making. reassessed to reflect developments in The following sections explain how we the year, and the list of emerging risks identify and manage risks to the Company. was refreshed. The Committee updated We outline the key risks, our assessment the risk register and risk matrix as a of their potential impact on the Company result of the analysis conducted during and our portfolio in the context of the the year, and considered the alignment current environment and how we seek of the principal risks identified to the tomitigate them. Company’sstrategic objectives. 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 3i Infrastructure plc Annual report and accounts 2023 69 ## Risk report continued Approach to risk governance There were no significant changes to the It is expected that, as the portfolio expands, Risk framework overall approach to risk governance or its the range of expected returns in individual The Board is ultimately responsible for operation in FY23, but we continued to investment cases may also expand to the risk management of the Company. refine our framework for risk management include higher risk/return ‘value add’ cases It seeks to achieve an appropriate balance where appropriate. and lower risk/return ‘core’ investments. between mitigating risk and generating We recognise that this has the potential to long-term sustainable risk-adjusted returns Risk appetite result in greater volatility inreturns on an for shareholders. Integrity, objectivity The Committee discusses the Company’s individual asset basis. and accountability are embedded in the risk appetite annually and this year Financial review and Risk report Company’s approach to risk management. The benefits of diversification across concluded that it remained broadly stable. sectors, countries and types of underlying The Board exercises oversight of the risk As an investment company, the Company economic risk will mitigate this volatility, framework, methodology and process seeks to take investment risk. The appetite and the Company has sought to build through the Committee. The risk framework for investment risk is described previously a diverse portfolio while considering is designed to provide a structured and in the Our business model section, and carefully the underlying risks to which consistent process for identifying, assessing in the Investment policy towards the end our portfolio companies are exposed. and responding to risks. The Committee of this document. Investments are made The Committee concluded that the risk ensures that there is a consistent subject to the Investment Manager’s appetite of the Company for core-plus approach to risk across the Company’s Responsible Investment policy, which infrastructure investments has not changed, strategy, business objectives, policies addresses an important element of our Risk-related reporting and remains appropriate for our investment and procedures. appetite for investment risk. Given the mandate and target returns. The Covid-19 Internal External – Annual report strong competition for new investments, • Monthly management • Risk appetite The Company is also reliant on the risk pandemic provided a severe test of the investment discipline remains a accounts • Viability statement management frameworks of the Investment appropriateness of the Company’s risk key consideration. • Internal and external • Resilience statement Manager and other key service providers, appetite, and its attractiveness to investors. audit reports • Internal controls aswell as on the risk management The target risk-adjusted objective of The portfolio overall has been resilient, • Service provider • Going concern operationsofeach portfolio company. delivering 8% to 10% return per annum and benefitted from diversification across control reports • Statutory/accounting over the medium term remains consistent infrastructure subsectors and types of • Risk logs The Board manages risks through disclosures with our current portfolio investment cases, underlying risks. • Compliance reports reports from the Investment Manager including our recent new investments. • Risk-related reporting and other service providers and through representation on all portfolio companies’ boards by the Investment Manager’s team members. 70 ## Risk report continued The key tools used by the Committee to Risk review process • regular updates on the operational • consideration of scenarios that may define the Company’s risk appetite and and financial performance of impact the viability of the Company; The Company’s risk review process todetermine the appetite for key risks portfolio companies; includes the monitoring of key strategic • assessment of emerging risks; and arethe risk register and the risk matrix. and financial metrics considered to be • experience of investment • review of the Company’s risk log. indicators of potential changes in its risk anddivestment processes; The process of creating and reviewing the The Committee uses the risk framework risk register and risk matrix is described profile. The review takes place three times a • compliance with regulatory obligations, to identify emerging and key risks, and below, together with a discussion of the year, with the last review in April 2023, and including climate-related regulations; to evaluate changes in risks over time. Company’s appetite for each of the key includes, but is not limited to, the following: Financial review and Risk report • analysis of new and emerging The framework is designed to manage risks. Beyond the appetite for investment • infrastructure and broader regulatory initiatives; rather than eliminate the risk of failure to risk discussed above, the Company seeks market overviews; • liquidity management; achieve objectives and breaches of risk tolimit or manage exposure to other risks • key macroeconomic indicators and appetite. Developments during the year in • assessment of climate risks to to acceptable levels. theirimpact on the performance and the more significant key risks or ‘principal the portfolio, including physical, valuation of portfolio companies; risks’ are discussed later in this document. transitionand litigation risks; These are risks that the Committee considers to have the potential to materially impact thedeliveryof our strategic objectives. The Committee evaluates the probability Risk categorisation of each identified risk materialising and the impact it may have, with reference to the The Committee uses the following categorisation to describe risks that are identified during the risk review process. Company’s strategy and business model. The review process assesses the Emerging risks Key risks Principal risks likelihood and impact of each risk over two timeframes, within three years and beyond three years. The evaluation of An emerging risk is one that may in future A key risk is considered currently to The Committee maintains a risk matrix, these key risks is then presented on a risk be likely to have a material impact on the pose the risk of a material impact on onto which the key risks are mapped by matrix. Mitigating controls have been performance of the Company and the theCompany. Risks may be identified as impact and likelihood. The principal risks developed for each risk and the adequacy achievement of our long-term objectives, emerging risks and subsequently become are identified on the risk matrix as those of the mitigation is then assessedand, but that is not yet considered to be a key key risks. Identified key risks may cease with the highest combination of impact if necessary, additional controls are risk and is subject to uncertainty as to tobe considered key risks over time. andlikelihood scores. implemented and reviewed by the nature, impact and timing. Committee at a subsequent meeting. 3i Infrastructure plc Annual report and accounts 2023 71 ## Risk report continued | The Committee considers the identified | The resulting assessment of viability is | impact and likelihood (within a three-year | Risk categorisation, including the definition | | --- | --- | --- | --- | | principal risks in greater detail in the | included in this Risk report. | period and beyond a three-year period). | of emerging risk, is shown onpage 70. | | assessment of the Company’s viability. | | In January 2023, the results of the principal risk | | | | Review during the year | | The Board and the Investment Manager | scoring were considered and assessed by the | A number of scenarios have been developed | | | consider these factors when reviewing the | | | --- | --- | --- | --- | --- | | | In October 2022, the Committee reassessed | Committee and additional changes made. | | | | to reflect plausible outcomes should the | | | performance of the portfolio and when | | | | the identified key risks and considered any | In April 2023, the Committee reviewed the | | | | principal risks be experienced, as well as | | | evaluating new investments, seeking to | | | | update to the list of emerging risks currently | updated risk register and riskmatrix and the | | | | consideration of stressed scenarios that could | | | identify which factors present a potential | | | | facing the Company. This involved a ‘blank | Company’s appetite foreach of the key risks. | | | | result in the Company ceasing to be viable. | | | risk and can either be mitigated or | | | | sheet of paper’ exercise where each Director, | | | Financial review and Risk report | | | | We have a relatively diverse spread of | converted into opportunities. | | | As the Company is an investment company, | and several members of the Investment | | | | assets in the portfolio and it is important the stressed scenarios reflect reduced Manager’s team, identified the top emerging As part of the ongoing risk identification that risk diversity is maintained as we evolve cash flows from the Company’s investment risks facing the Company, and discussed and management of the Company, the the portfolio through new investments, portfolio, such that debt covenants are changes to the impact and likelihood of Committee considers whether these realisations and syndications. | breached and liabilities not met. | theprincipal risks. | | emerging risks should be added to the | | --- | --- | --- | --- | | | | Future realisations and syndications may | Company’s risk register. The risk register | | The Investment Manager models the | In December 2022, the Investment Manager | | | | | | continue the evolution of risk in the portfolio in | is a ‘live’ document that is reviewed and | | impact of these scenarios on the Company | analysed the data collected and identified | | | | | | line with our strategy and allow the Company | updated regularly by the Committee | | and reports the results to the Committee. | the emerging and principal risks facing the | | | | | | to manage its exposure to more sensitive | as new risks emerge and existing risks | Company, scoring the principal risks for assets, or to take account of where the risk change. Examples of emerging risks Risk register review process profile of an asset has changed over time. that were considered during the year include the impact of energy price caps, October 2022 December 2022 We are confident that the portfolio remains UK political change, escalation of the defensive and resilient, and in a position Directors identify potential Analysis and conflict in Ukraine, divergence between to benefit from accretive but discretionary emerging or new key risks interpretation the UK and the EU regulation increasing growth opportunities as highlighted in the facing the Company of responses friction over trade in goods and services, Investment Manager’s review. We believe and escalating regulatory reporting the current appetite for risk is appropriate. requirements, including climate-related reporting requirements. In some cases, Emerging risks emerging risks may already be considered The Company is a long-term investor and within abroader identified key risk, such April 2023 January 2023 therefore needs to consider the impact of asmarketand economic risk. Risk register and Impact and likelihood both identified key risks, as detailed below, risk matrix updated of the identified and risks that are considered emerging or risks considered longer-term. 72 ## Risk report continued Key risks The risk of an inappropriate rate of investment and loss of senior Investment Key risks are mapped by impact and Environmental sustainability ESG and sustainability is increasingly Manager staff is considered to have likelihood on a risk matrix. During the important in the context of our andclimate risk increased this year, given this liquidity risk. year, the Committee considered the strategic and investment objectives. Environmental sustainability and ESG are development of all the key risks in Further information on work done in These changes are reflected in the anincreasingly important focus amongst detail. Within the category of key risks, relation to ESG reporting, including climate- Principalrisks and mitigations table. our shareholders and in the wider market. the principal risks identified by the related disclosures, and our approach to Committee in the financial year are set Fraud and cyber risk Climate risk includes the short- to medium- climate-related risk and opportunities can Financial review and Risk report | out in the Principal risks and mitigation | We remain vigilant to cyber- and other | term impacts, including transitional | be found in our Sustainability report on | | --- | --- | --- | --- | | table on pages73 to 75 alongside how | IT-related issues which could result in | changes (for example, regulation and | pages 46 to 56. All of the companies in | | theCompanyseeks to mitigate these risks. | disruption to the Company, loss of data and/ | financial) aswell as the long-term emerging | our portfolio recognise the importance | | | or reputational damage. The Investment | risk ofclimate change (for example, | of considering climate change and of | The risk review showed a high level of Manager has a robust fraud risk assessment flooding events). Failure to identify and evolving a sustainable business model. consistency with the prior year, with a and anti-fraud programme in place. mitigate risks at this stage could result in a As discussed in the Sustainability report, small number of changes in the key risks The latter includes fraud prevention work by reduction in the attractiveness of our assets, the physical andtransition climate-related identified. The assessment of likelihood their Internal Audit team, mandatory training reputational damage and a reduction risks are alsoseen as opportunities for and impact of the key risks resulted to maintain vigilance and awareness, and invalue of our portfolio in the future. allcompaniesin our portfolio. in some changes to the principal risks provision of an independent reporting facingthe Company. Although there is still much uncertainty There are no acute physical nor transition service or ‘hotline’ accessible by all staff. around the extent and timing of the impact risks identified in the portfolio that would Market and economic risk was considered The Investment Manager’s cyber security of climate change, government and societal suggest that climate risk is a principal the top risk facing the Company and was programme also aims to identify and action, and future regulations, we recognise risk, although an example of the impact considered to have increased during the mitigate the risks of third-party frauds, for that climate-related risk is a key risk as well of a transition risk is the introduction of a year. This includes the consequences of example ransomware and phishing attacks, as an investment theme for the Company. tax on imported waste or a carbon tax in sanctions on Russia and Russian companies, through the use of IT security tools and We have separated climate-related risk the Netherlands, which impacts Attero, increased commodity and energy prices, regular staff training. There is also a detailed intotwo distinct but related risks. and therisk of early decommissioning of rising inflation and interest rates, supply business continuity and disaster recovery oil andgas assets, which impacts some chain constraints and a heightened risk plan, should a significant event occur. Climate regulation risk addresses the customers of Tampnet and ESVAGT. of recession. The Company asks its service providers regulatory risk to the Company and the toinform it of any significant cyber events portfolio associated with the transition We consider that the mitigating controls at Following the high level of new investment, that they experience. to a low-carbon economy. Climate risk the Company and the Investment Manager the management of liquidity risk is addresses the physical and transition over climate regulation risk prevent this considered to have increased. risksfrom climate change on the portfolio. from being a principal risk at the moment. 3i Infrastructure plc Annual report and accounts 2023 73 ## Risk report continued Our Strategic priorities ## Principal risks and mitigations Maintain balanced Disciplined Manage portfolio Efficient Sustainability portfolio approach intensively balance sheet key driver External Principal risk Risk description Risk mitigation • Macroeconomic or market volatility, such as may arise from the • Resources and experience of the Investment Manager on deal-making, Market/economic consequencesofthe conflict in Ukraine and from the effects on economies assetmanagement and hedging solutions to market volatility of post-pandemic demand and supply imbalances, flows through to • Periodic legal and regulatory updates on the Company’s markets and in-depth pricing, valuations and portfolio performance market and sector research from the Investment Manager and other advisers • Fiscal tightening impacts market environment Risk exposure Link to Strategic • Portfolio diversification to mitigate the impact of a downturn in any geography movement in priorities • Risk of sovereign default lowers market sentiment and increases volatility or sector or portfolio company-specific effects Financial review and Risk report the year Manage portfolio • Misjudgement of inflation and/or interest rate outlook • The permanent capital nature of an investment trust allows us to look Increased intensively throughmarket volatility and the economic cycle • Increased competition for the acquisition of assets in the Company’s • Continual review of market data and review of Company return target Competition | | | strategicfocus areas | | comparedto market returns | | --- | --- | --- | --- | --- | | | | • Deal processes become more competitive and prices increase | • Ongoing analysis of the competitor landscape | | | | | • New entrants compete with a lower cost of capital | • Origination experience and disciplined approach of Investment Manager | | | Risk exposure | Link to Strategic | | • Strong track record and strength of the 3i Infrastructure brand | | | movement in | priorities | | | | | the year | Disciplined approach | | | | No significant change Debt markets deteriorate • Debt becomes increasingly expensive, eroding returns • The Investment Manager maintains close relationships with a number ofbanksand monitors the market through transactions and advice • Debt availability is restricted • Regular reporting of Company liquidity and portfolio company • The Company’s RCF or portfolio company debt cannot refinancing requirements berefinancedduetolack of appetite from banks Risk exposure Link to Strategic • Investment Manager has extensive experience in raising debt finance movement in priorities forportfolio companies, alongside an in-house Treasury team to provide the year Manage portfolio adviceontreasury issues No significant intensively • Active management of portfolio company debt facilities, with fixed rates change andlong duration of debt 74 ## Risk report continued Our Strategic priorities ## Principal risks and mitigations continued Maintain balanced Disciplined Manage portfolio Efficient Sustainability portfolio approach intensively balance sheet key driver Operational Principal risk Risk description Risk mitigation Loss of senior Investment • Members of the deal team at the Investment Manager leave, • Performance-linked compensation packages, including an element of and ‘deal-doing’ and portfolio management capability in the deferred remuneration Manager staff short to medium term is restricted • 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 Link to Strategic Financial review and Risk report movement in priorities the year Maintain Increased balanced portfolio Sustainability key driver Strategic Principal risk Risk description Risk mitigation • Failure to manage the Company’s liquidity, including cash and available • Regular reporting of current and projected liquidity Management of liquidity credit facilities • Investment and planning processes consider sources of liquidity • Insufficient liquidity to pay dividends and operating expenses or to make • Flexible funding model, where liquidity can be sought from available cash new investments balances including reinvestment of proceeds from realisations, committed Risk exposure Link to Strategic • Hold excessive cash balances, introducing cash drag on the credit facilities which can be increased with approval from our lenders, movement in priorities Company’s returns andtheissue of new share capital the year Disciplined approach • Growth opportunities can be part or fully funded by portfolio company Increased cashbalances and/or available debt facilities • Failure to ensure the investment strategy can deliver the return • Market returns are reviewed regularly Deliverability targetanddividend policy of the Company • The Investment Manager and other advisers to the Company report ofreturn target • Failure to adapt the strategy of the Company to changing onmarket positioning market conditions • Investment process addresses expected return on new investments andtheimpact on the portfolio Risk exposure Link to Strategic • Consideration of megatrends in the investment process movement in priorities • Consideration of risks, including ESG and climate risks, in the the year Maintain investment process No significant balanced portfolio change Sustainability key driver 3i Infrastructure plc Annual report and accounts 2023 75 ## Risk report continued Our Strategic priorities ## Principal risks and mitigations continued Maintain balanced Disciplined Manage portfolio Efficient Sustainability portfolio approach intensively balance sheet key driver Investment Principal risk Risk description Risk mitigation Security of assets • An incident, such as a cyber or terrorist attack • Regular review of the Company and key service providers • Unauthorised access to information and operating systems • Regular review and update of cyber due diligence for potential investments • Regulatory and legal risks from failure to comply with cyber-related • Review of portfolio companies for cyber risk management and lawsandregulations, including data protection incident readiness Risk exposure Link to Strategic movement in priorities the year Maintain Financial review and Risk report No significant balanced portfolio change Sustainability key driver • Misjudgement of the risk and return attributes of a new investment • Robust investment process with thorough challenge of the investment Poor investment casesupported by detailed due diligence • Material issues at a portfolio company performance • Investment Manager’s active asset management approach, including • Poor judgement in the realisation of an asset proactivemanagement of issues arising at portfolio company level • Experience of the Investment Manager’s team in preparing for and executingrealisations of investments Risk exposure Link to Strategic movement in priorities the year Maintain No significant balanced portfolio change Sustainability key driver 76 ## Risk report continued Development of significant The urgency of tackling climate change Inflation in the UK and Europe has risen The Company is exposed to movements hasalso made investment in some sharply in the year, driven by rising energy insterling exchange rates against a number keyrisks in the year sectors, such as those with a focus on costs, supply chain bottlenecks, labour and ofcurrencies, most significantly the euro. The disclosures in the Risk report are not energy transition, relatively insulated raw material shortages and the reopening an exhaustive list of risks and uncertainties The Company operates a hedging from macro headwinds. As a result, of economies from pandemic-related faced by the Company, but rather a programme which substantially offsets the European infrastructure market lockdowns. The portfolio is positively summary of significant key risks which volatility in returns from exchange continues to experience strong demand correlated to inflation as most portfolio are under active review by the Board. rate movements. The Board monitors for new investments. Private funds companies have revenues at least partially These significant key risks have the potential the effectiveness of the Company’s Financial review and Risk report with a core-plus infrastructure focused linked to inflation, although higher inflation to affect materially the achievement of the hedgingpolicy on a regular basis. mandate have significant amounts of dry may also result in increased costs and Company’s strategic objectives and impact powder and these are the Company’s supply chain disruption and, should it The valuation of our portfolio companies its financial performance. This disclosure primary competition for new investment. persist, is generally bad for economies as that generate electricity is affected by shows developments in these significant key Fundraising has increased at a faster a whole. Sensitivities to macroeconomic the evolution of long-term power price risks for the year. The risks that have been pace than the number of funds raised, assumptions are discussed in the Financial forecasts and by fluctuations in the spot identified as principal risks are described resulting in larger fund sizes creating review and in Note 7 to the accounts. power price. Medium-term power price in more detail in the Principal risks and intense competition for suitable forecasts have also increased considerably mitigations table. Central bank base rates increased during infrastructure targets. There remains a risk during the year, driven by gas supply the year in response to higher inflation and, that pricing does change for core-plus concerns, record carbon prices, low wind External risks – market although there is evidence, particularly in | | infrastructure in the medium term, but at | | levels and higher commodity prices, | | --- | --- | --- | --- | | andcompetition | | Europe, that this is bringing inflation back | | | | this point we are not seeing any upward | | particularly for gas. This has benefitted | | In the face of rising interest rates and | | towards target levels, there is a risk that | | | | pressure on discount rates for core-plus | | those portfolio companies that generate | | macroeconomic uncertainty, infrastructure | | inflation will return to a level either above | | | | infrastructure investments as these tend | | electricity and typically sell it on a forward | | assets have proven relatively resilient | | orbelow our long-term assumptions. | | | | to have greater discount rate headroom | | basis in order to avoid spot market volatility: | | when compared to the dislocation in other | | There are no material refinancing | | | | to risk-free rates and strong inflation | | Infinis, Attero and Valorem. | | markets, but a difficult GDP environment | | requirements in the portfolio until 2026 | | protection features. In this environment, remains a key risk for the Company. andover 95% of long-term debt facilities Sanctions on Russia and Russian the Investment Manager continues to Infrastructure’s fundamental characteristics are either hedged or fixed rate at 31 March companies, together with the recovery from leverage its network and skills to look as an asset class anchored by predictable, 2023. This mitigates the risk from further the Covid-19 pandemic, led to an increase forinvestments that can deliver attractive long-term revenue streams that are often near-term interest rate rises. inoilprices, peaking in June 2022. and sustainable risk-adjusted returns to linked to inflation have positioned the theCompany’s shareholders. sector well to withstand recessionary riskand volatile markets. 3i Infrastructure plc Annual report and accounts 2023 77 ## Risk report continued Since then prices have come down, due We are pleased with the performance of The French and Dutch governments Investment risks to a softer economic environment and TCR over the duration of the pandemic and introduced taxes on merchant revenues As part of our investment due diligence reduced trans-shipment volumes, but the the strong performance this year and we above a price cap for 2023. The effect and active portfolio management, the market continues to be backwardated. have maintained our assumption of a return of current and proposed legislation Investment Manager uses specialist For Oystercatcher, this may maintain some to pre-pandemic levels of air travel by 2024. is reflected in the valuations of these cyber security advisers to ensure that our short-term downward pressure on pricing portfolio companies. DNS:NET is being affected by the industry- companies remain vigilant and continue ofcontract renewals. wide challenge of rolling out a FTTH to focus on effective operations of controls Strategic risks Ionisos is a provider of cold sterilisation network in Germany due to thecomplexity against possible cyber-attacks. Some of our The Company manages its balance sheet Financial review and Risk report and ionising radiation treatment services of the construction process and difficulty portfolio companies do experience fraud and liquidity position actively, seeking to tothe medical, pharmaceutical, plastics in obtaining permits for construction, attempts, some of which are successful, but maintain adequate liquidity to pursue new and cosmetics industries. Gamma radiation, alongside cost inflation. The German none have had a material impact on any of investment opportunities, while not diluting one of the three methods of cold government is planning to accelerate the our companies. shareholder returns by holding surplus | sterilisation used, relies on the radioactive | roll out through a simpler and digitalised | | | | --- | --- | --- | --- | | | | cash balances. At 31 March 2023 there was | Operational risks | | decay of Cobalt-60, a scarce resource. | approval process. | | | £5 million available in cash, with drawings of Although a worldwide shortage of The key areas of operational risk include £501 million under the RCF. During the year External risks – regulatory and tax attracting and retaining key personnel at Cobalt-60 is expected until 2028, resulting the Company raised a further £100 million from increased demand and the permanent The Company’s investments in Infinis, the Investment Manager, and whether the through an equity placing and extended closure of a large Russian reactor, Ionisos is Valorem and Attero are exposed to Investment Manager’s team can continue the maturity of its RCF facility to in a good position to maintain its capacity electricity market regulation risk in their to support the delivery of the Company’s November 2025. | as it has recently expanded its supplier base | respective countries. On 1 January 2023, | | objectives. The team has strength | | --- | --- | --- | --- | | and is in advanced discussions with one | the UK government introduced a levy or | The portfolio is diversified across sector | and depth, and the transition in senior | | supplier for a five-year supply agreement. | price cap on extraordinary returns from | and geography, with no investment above | management has been carefully managed. | | | electricity generation (the ‘EGL’). | 15% of portfolio value. | The Board monitors the performance | During the past three years, TCR was of the Investment Manager through the affected by air traffic movements and The EGL is an exceptional and time-limited Management Engagement Committee. passenger numbers being substantially measure that is due to expire in 2028. It also monitors the performance of key below the levels seen before the service providers, receiving reports of Covid-19 pandemic. anysignificant control breaches. 78 ## Risk report continued | Resilience statement | Short-term resilience | The Directors manage the Company’s | In addition, Note 9 to the accounts includes | | --- | --- | --- | --- | | | | liquidity actively, reviewing reports | the Company’s objectives, policies and | | Our resilience comes from the effective | The Directors assess the Company’s | | | | | | on current and forecast liquidity from | processes for managing its capital, its | | implementation of our business model, | short-term resilience through monitoring | | | | | | the Investment Manager, alongside | financial risk management objectives, | | described on pages 9 to 13. Key elements | portfolio, pipeline and finance reports. | | | | | | recommendations for seeking additional | details of its financial instruments and | | of our business model relating to resilience | These are prepared monthly, and discussed | | | | | | liquidity when appropriate. The Directors | hedging activities, and its exposures to | | include the Investment Manager’s | at quarterly scheduled board meetings and | | | | | | approved the issue of new equity during the | credit risk and liquidity risk. | | disciplined approach to new investment | board update calls held between scheduled | | | year, raising £100 million net of issue costs, | | and engaged asset management, the | meetings. Six-monthly detailed investment | | The Directors have made an assessment | | --- | --- | --- | --- | --- | | Financial review and Risk report | | | and the extension of the RCF to £900 million | | | | defensive characteristics of our portfolio | reviews are prepared by the Investment | | of going concern, taking into account the | of commitments. Further discussion on the of investments, high ESG standards, our Manager and discussed with the Board, as Company’s cash and liquidity position, RCF can be found in the Financial review flexible funding model and efficient balance part of the half-yearly and annual valuation current performance and outlook, which onpage 64. sheet, and the capability ofthe Investment and reporting processes. These reviews considered the impact of the higher Manager’s team. describe sources of risk at portfolio The identification of material uncertainties inflationary and interest rate environment, company level, and mitigating actions that could cast significant doubt over using theinformation available up to the This is underpinned by the strong being taken or considered. theability of the Company to continue date ofissue of these Financial statements. institutional culture and values of our as agoing concern forms the basis of the Investment Manager, high standards The resilience of key suppliers, including The Company has liquid financial Going concern statement below. of corporate governance, and effective the Investment Manager, is considered resourcesand a strong investment risk management. annually or more frequently if appropriate. portfolio providing a predictable income Going concern The Audit and Risk Committee is provided yield and an expectation of medium-term Over the life of the Company, the The Company’s business activities, together with relevant extracts of reports from capital growth. Investment Manager has built a resilient with the factors likely to affect its future the Investment Manager’s internal and diversified portfolio with good growth development, performance and position audit team, which includes an annual potential and downside protection that are set out in the Strategic report and in report on the Investment Manager’s delivers an attractive mix of income yield the Financial statements and related Notes European infrastructure investment team. and capital appreciation for shareholders. to our Annual report and accounts to Further detail is included in the Governance This has been achieved through consistent 31 March 2023. The financial position of the section on page 111. delivery of our strategic priorities, Company, its cash flows, liquidity position described on page 20. and borrowing facilities are also described in the Financial statements and related Notes to the accounts. 3i Infrastructure plc Annual report and accounts 2023 79 ## Risk report continued | The Company manages and monitors | Although not a commitment, the Company | Medium-term resilience | Viability statement | | --- | --- | --- | --- | | liquidity regularly, ensuring that it | has announced a dividend target for FY24 | | | | | | The assessment of medium-term | The Directors consider the medium-term | | is sufficient. | of 11.90 pence per share. Income and non- | | | | | | resilience,which includes modelling of | prospects of the Company to be favourable. | income cash is expected to be received At 31 March 2023, liquidity remained stressed scenarios and reverse stress tests, The Company has a diverse portfolio of from the portfolio investments during strong at £404 million (2022: £786 million). considers the viability and performance infrastructure investments, producing the coming year, some of which will be Liquidity comprised cash and deposits of of the Company in the event of specific good and reasonably predictable levels of required to support the payment of this £5 million (2022: £17 million) and undrawn stressed scenarios which are assumed income which cover the dividend and costs. dividend target and the Company’s other | facilities of £399 million (2022: £769 million). | | tooccur over a three-year horizon. | The defensive nature of the portfolio and of | | | --- | --- | --- | --- | --- | | | financial commitments. | | | Financial review and Risk report | | The £900 million revolving credit facility | | This stress testing forms the basis of | the essential services that the businesses in | | | matures beyond 12 months of the date | The Directors have acknowledged their | theViability statement. | which we invest provide to their customers | | | ofthis report. | responsibilities in relation to the Financial | | are being demonstrated in the current | | The Directors consider that a three-year | | statements for the year to 31 March | | climate. The Investment Manager has a | | --- | --- | --- | --- | | The Company had no contracted | | period to March 2026 is an appropriate | | | | 2023. After making the assessment on | | strong track record of investing in carefully | | investment commitment at 31 March | | period to review for assessing the Company’s | | | | going concern, the Directors considered | | selected businesses and projects and of | | 2023. However, the Company expects to | | viability. This reflects greater predictability | | | | it appropriate to prepare the Financial | | driving value through an engaged asset | | make follow-on investments in portfolio | | of the Company’s cash flows over that | | | | statements of the Company on a going | | management approach. The Directors | | companies to fund growth opportunities. | | time period and increased uncertainty | | | | concern basis. | | consider that this portfolio can continue | surrounding economic, political and The Company had ongoing charges of tomeet the Company’s objectives. The Company has sufficient financial regulatory changes over thelonger term. £48 million in the year to 31 March 2023, | | resources and liquidity and is well- | | The Directors have assessed the viability | | --- | --- | --- | --- | | detailed in Table 5 in the Financial review, | | The stress testing focuses on the principal | | | | positioned to manage business risks in the | | of the Company over a three-year period | | which are indicative of the ongoing run | | risks, but also reflects those new and | | | | current economic environment and can | | to March 2026. The Directors have taken | | rate in the short term. In addition, the | | emerging risks that are considered to | | | | continue operations for a period of at least | | account of the current position of the | | FY23 performance fee of £45 million | | be of sufficient importance to require | | | | 12 months from the date of this report. | | Company, including its liquidity position, | | (2022: £54 million) is due in three equal | | active monitoring by the Audit and Risk | | | | This is supported by the scenario analysis | | with £5 million of cash and £399 million of | | instalments with the first instalment payable | | Committee. The scenarios used are | | | | and stress testing described in the medium- | | undrawn credit facilities, and the principal | | in the next 12 months along with the second | | described in the Viability statement. | | | | term resilience section and the Viability | | risks it faces, which are documented in this | | instalment of FY22’s performance fee and | | The medium-term resilience of the | | | | statement. Accordingly, the Directors | | Risk report on pages 73 to 75. | | the third instalment of FY21’s performance | | Company is assessed through analysing | | continue to adopt the going concern fee, and a proposed final dividend for the impact of these scenarios on key basis in preparing the Annual report FY23of £51 million which is expected metrics such as total return, income yield, and accounts. tobepaid in July. net asset value, covenants on the RCF andavailable liquidity. 80 ## Risk report continued | The Directors have considered the potential | The assumptions used to model these | Based on this assessment, the Directors | The underlying megatrends supporting | | --- | --- | --- | --- | | impact on the Company of a number of | scenarios included a fall in value of some or | have a reasonable expectation that the | the longer-term resilience of each portfolio | | scenarios in addition to the Company’s | all of the portfolio companies, a reduction | Company will be able to continue in | company are identified in the Our approach | | business plan and recent forecasts, which | in cash flows from portfolio companies, a | operation and meet its liabilities as they | section on page 15. | | quantify the financial impact of the principal | reduction in the level of new investment | fall due over the three-year period to | | We have a long-term investment time risks occurring. These scenarios represent and/or realisations, the imposition of March 2026. horizon made possible by our permanent severe yet plausible circumstances that the additional taxes on distributions from, or Long-term resilience capital base that is unconstrained Company could experience, including a transactions in, the portfolio companies, an by the fixed investment period and Financial review and Risk report significant impairment in the value of the increase in the cost of debt and restriction As described above, the long-term fundraising cycle seen in private limited portfolio and a reduction in the cash flows in debt availability, and an inability for the resilience of the Company, beyond the partnership funds. available from portfolio companies from a Company to raise equity. The implications Viability statement period, comes from the variety of causes. of changes in the inflation, interest rate and effective implementation of our business Although the scenarios and stress testing foreign exchange environment were also model and consistent delivery of our to support the Viability statement are The assessment was conducted over considered, separately and in combination. strategic objectives. modelled over a three-year time horizon, several months, during which the proposed the resilience shown by the Company, and scenarios were evaluated by the Board, The results of this assessment showed that Our approach to origination and portfolio its ability to recover from these stressed the assumptions set, and the analysis the Company would be able to withstand construction, focus on price discipline and situations, supports the assessment of produced and reviewed. Analysis included the impact of these scenarios occurring engaged asset management approach our resilience over a longer term than the impact of an escalation of the conflict in over the three-year period. The Directors enable us to adapt in response to new and three years. Ukraine on our portfolio companies and the also considered scenarios that would emerging risks and challenges, including impact of a resulting economic downturn. represent a serious threat to its liquidity and climate change and developments Other considerations included the possible viability in that time period. These scenarios in megatrends. impact of climate-related events and were considered to be remote, such as a fall The characteristics that we look for in transition risks, widespread economic in equity value of the portfolio of materially infrastructure investments, described on turmoil, a reduction in cash distributions more than 50% whilst being fully drawn page 11, support the long-term resilience from portfolio companies to the Company, on the RCF including the accordion, or an of the Company. The performance of the a tightening of debt markets and the failure equivalent fall in income. portfolio through the Covid-19 pandemic of a large investment. provided good evidence of this. 3i Infrastructure plc Annual report and accounts 2023 81 ## Directors’ duties ## Section 172 statement The Company adheres to the AIC Code Under Jersey Law, the Directors are obliged to act honestly and in good faith with a view to the best interests of the Company; of Corporate Governance (the ‘AIC Code’) andtoexercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances. and it is the intention of the AIC Code that the matters set out in section 172 ofthe Pursuant to s172, a Director of a company must act in the way they consider, in good faith, would most likely promote the success Companies Act 2006 (‘s172’) are reported ofthecompany for the benefit of its members, and in doing so have regard (amongst other matters) to: on to the extent they do not conflict with Jersey law. The likely consequences of any The impact of the Company’s operations decisionsinthe long term onthe community and environment We recognise that our business can only Our purpose and strategy, combined We use our influence to promote a Financial review and Risk report grow and prosper by acting in the long- withtheresponsible investment approach commitment in our portfolio companies ofthe Investment Manager, focus tomitigate any adverse environmental term interests of our key stakeholders onsustainable returns and outcomes. andsocial impacts, and to enhance and that a good understanding of the key positiveeffects on their communities Read more andthe environment. issues affecting stakeholders should be Pages 5, 20 and 46 an integral part of the Board’s decision- Read more making process. The insights that the Pages 46 to 56 Board gains through the stakeholder engagement mechanisms it has in place The interests of the Company’s employees The desirability of the Company form an important part of the context for Whilst we do not have any employees, maintaininga reputation for high all the Board’s discussions and decision- ourpurpose includes the intention to havea standardsof business conduct positive influence on our portfolio companies Our success relies on maintaining a strong making processes. and their stakeholders, whichincludes the reputation, and our values and ethics are employees of those portfolio companies. aligned to our purpose, our strategy and As an externally managed investment ourways of working. trust, the Company has no employees or Read more customers and its key stakeholders are Page 51 Read more Page 13 its shareholders, third-party professional advisers and service providers (most The need to foster the Company’s The need to act fairly between membersof notably the Investment Manager), businessrelationships with suppliers, the Company portfolio companies, communities in customers and others The Board actively engages with its which the Company operates, lenders, We engage with all our stakeholders shareholders and considers their interests andgovernment and regulatory bodies. eitherdirectly or through the when implementing our strategy. Investment Manager. Read more Read more Pages 95 to 98 Pages 95 to 98 82 ## 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 Financial review and Risk report 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 83 ## GovernanceGovernance 84 ## Introduction to Governance ## On behalf of the Board, I am ## pleased to present the Company’s ## Robust corporate governance ## Governance report for the ## practices are integral to creating ## financial year ended 31March ## Governance 2023. Given the current global ## long-term value and success for ## macro environment, having ## thebenefit of our shareholders.” ## astrong governance framework Richard Laing ## has never been asimportant; our Chair, 3i Infrastructure plc ## effective governance processes ## have ensured the continued ## implementation of our strategy ## whilst mitigating risks. 3i Infrastructure plc Annual report and accounts 2023 85 ## Introduction to Governance continued Both the Covid-19 pandemic and the current volatile market environment have Compliance with the AIC Code Division of responsibilities reinforced the importance of established The Board has considered the principles and provisions We ensure that responsibilities of the Chair and non-executive governance principles, along with having oftheAIC Code of Corporate Governance (the ‘AIC Code’), Directors are clear and transparent in order to lead the a clear purpose and values aligned with which addresses the principles and provisions set out in the Company effectively, supported by both strong governance our strategy. UKCorporate Governance Code 2018 (the ‘UK Code’), as arrangements and the work of the Investment Manager. The following pages of this report provide theyapply to investment trust companies. It considers that Read more an insight into the activities of the Board reporting against the AIC Code, therefore, provides more Page 99 Governance and Committees over the year and how appropriate information to the Company’s shareholders. corporate governance underpins and Composition, succession and evaluation The Board confirms that the Company has complied with supports our business and the decisions theprinciples and provisions of the AIC Code (and the We aim to have a balanced Board with the appropriate skills and we make. Market conditions, including associated disclosures under the applicable provisions experience to govern the business. We have an effective board economic and political uncertainty, ofparagraph 9.8.6 of the Listing Rules), in so far as they evaluation process and a succession plan monitored by the are challenging, but the Board is well- applytothe Company’s business, throughout the year Nomination Committee. positioned to support the Investment underreview. Details of how the Company has complied Read more Manager in generating value for the withtherelevant principles andprovisions of the AIC Pages 100 to 105 Company from its portfolio. Codeareset out below. I am grateful to my fellow Board Board leadership and purpose Audit, Risk and Internal Control members for their continued support The Board is responsible for leading the business in a The Audit and Risk Committee, supported by the Investment and commitment and to the Investment waywhichsupports its purpose of investing responsibly Manager and other key stakeholders, identifies potential risks Manager for implementing our effective ininfrastructure, delivering long-term sustainable returns and how best to mitigate them. The Audit and Risk Committee corporate governance framework and toshareholders and having a positive influence on our isappointed to oversee this process on behalf of the Board. working on executing our purpose. portfoliocompanies and their stakeholders. Read more Pages 106 to 112 Richard Laing Read more Chair, 3i Infrastructure plc Pages 86 to 98 Remuneration The Remuneration Committee ensures a fair reward structure forthe non-executive Directors. Read more Page 115 86 ## Board leadership and purpose ## Board of Directors Richard Laing Paul Masterton Wendy Dorman Doug Bannister Governance Samantha Hoe-Richardson Ian Lobley Stephanie Hazell 3i Infrastructure plc Annual report and accounts 2023 87 ## Board leadership and purpose continued ## Board of Directors continued Chair Independent non-executive Directors Richard Laing Paul Masterton Wendy Dorman Appointed January 2016. Chair of the Nomination, Senior Independent Director Appointed March 2015. Chair of the Audit and Disclosure, and Management Engagement Risk Committee and member of the Management Appointed April 2013. Chair of the Remuneration Committees, and member of the Remuneration Engagement, Nomination, Remuneration, and Committee and member of the Audit and Risk, Committee. UK resident. Disclosure Committees. Jersey resident. Management Engagement, Nomination, and Skills and experience contributing to the Board Disclosure Committees. Jersey resident. Skills and experience contributing to the Board Governance • As an experienced non-executive Director and • Over 28 years’ experience as a chartered accountant Skills and experience contributing to the Board senior executive, has broad strategic insights and tax adviser • Extensive experience in leading and developing • Long-standing experience of investing in • Particular expertise in the taxation of UK and large companies, and of mergers and acquisitions international infrastructure offshore investment funds, including the tax aspects • Particularly experienced from an international • Deep knowledge of investment companies of fund structuring business perspective, having worked in the USA, • As a previous CFO, understands complex financial • Extensive knowledge of risk mitigation, compliance Europe and Asia and funding matters and corporate governance • Knowledge of digital technology through chairing • Fellow of the Institute of Chartered Accountants and leading the formation of Digital Jersey Current roles inEngland and Wales • Deep experience as a non-executive director, • Non-executive Director and Chair of Audit & Risk Current roles including board governance and remuneration Committee of Jersey Electricity plc • Non-executive Director of Tritax Big Box REIT plc • Leadership and team development, including • Non-executive Director and Chair of Audit & • Non-executive Director of JP Morgan Emerging coaching and mentoring Risk Committee of CQS New City High Yield Markets Investment Trust plc • Focus on corporate social responsibility Fund Limited • Trustee and Deputy Chair of Leeds Castle Foundation Current roles Past roles Past roles • Chair of Insurance Corporation CI • Head of PwC Channel Islands tax practice for • Non-executive Director and Chair of Perpetual • Chair of States of Jersey Development Company seven years Income and Growth Investment Trust plc • Senior Independent Director of Jersey Competition • Non-executive Director of Jersey Finance Limited • Non-executive Director of Murray Income Trust plc & Regulatory Authority • President of Jersey Society of Chartered and • Non-executive Director and Chair of Miro Forestry • Trustee of Digital Jersey Certified Accountants Company Limited • Chair of Governors for Jersey College of Higher • Chair of Jersey Institute of Directors • Non-executive Director of London Metal Exchange Education and University of Jersey • 11 years at CDC Group plc with the last seven years Past roles as Chief Executive • Over 25 years at RR Donnelley, including as president • 15 years at De La Rue latterly as Group of company’s businesses in Europe, Russia and India Finance Director • Chief Executive of Durrell Wildlife Conservation Trust • Commercial roles in agribusiness and Marks &Spencer • Chartered accountant at PricewaterhouseCoopers (‘PwC’) 88 ## Board leadership and purpose continued ## Board of Directors continued Independent non-executive Directors Non-executive Director Doug Bannister Samantha Hoe-Richardson Stephanie Hazell Ian Lobley | Appointed January 2015. Member of the Audit and | Appointed February 2020. Member of the Audit and | Appointed September 2022. Member of the Audit | Appointed May 2014 as the 3i Group nominated | | --- | --- | --- | --- | | Risk, Management Engagement, Remuneration, | Risk, Management Engagement, Remuneration, | and Risk, Management Engagement, Remuneration, | Director. UK resident. | | andDisclosure Committees. UK resident. | andDisclosure Committees. UK resident. | andDisclosure Committees. UK resident. | | Skills and experience contributing to the Board Skills and experience contributing to the Board Skills and experience contributing to the Board Skills and experience contributing to the Board • Valuable experience and insight into the • Over 30 years’ experience in the international • Senior executive with 18 years’ experience • Over 25 years of experience across energy, assessment of new investments and management Governance transportation and distribution sectors inglobalmining and infrastructure infrastructure and telecoms sectors ofthe portfolio • In-depth knowledge of leading asset-intense • In-depth understanding of environmental • Broad non-executive Director experience • Extensive knowledge of ESG matters operational businesses andsustainability issues • Experienced non-executive Director across Current roles • Experienced senior executive with broad • Broad based non-executive Director experience sectors,continents and ownership models • Non-executive Director of Atlasconnect Limited international experience • Chartered accountant • Significant experience, as an investor and engineer, • Non-executive Director of Neos Networks Limited • Knowledge in turnaround, mergers and acquisition of disruptive technologies across multiple Current roles • Non-executive Director of North Sea Midstream integration, restructuring and transformation of end markets • Non-executive Director of Assured Guaranty UK Ltd Partners Limited (Jersey) capital-intensive businesses | | • Independent Group Adviser on Climate Change & | • Non-executive Director of NNXYZ Limited | Current roles | | --- | --- | --- | --- | | Current roles | Sustainability to Laing O’Rourke | • Non-executive Director of Open Utility Limited | • 3i Group Managing Partner – Asset Management | | • Chief Executive of Dover Harbour Board | • Non-executive Director of Kew Soda Ltd | (Piclo) | • Non-executive Director of AES Engineering Ltd | | • Deputy Chair of British Ports Association | | • Non-executive Director of Renew Holdings plc | • Non-executive Director of Cirtec Medical | Past roles • Advisory Board Member for Shell New Energy Holdco LLC Past roles • Non-executive Director and Chair of the Audit • Senior Independent Director of BSI Group • Group CEO of Ports of Jersey (Airports & Harbours) Committees at Lancashire Holdings Limited and Past roles • Non-executive Director of Tato Holdings Ltd | • Commercial roles at P&O Nedlloyd and Maersk Line | Lancashire Insurance UK Limited | • Director, Strategy and Corporate Development, | | | --- | --- | --- | --- | | | • Non-executive Director and Chair of Audit | ExCo Member of National Grid | Past roles | | | Committee of Unum Limited | • Principal Consultant, Telecoms and Media at PwC | • Long-term member of 3i Group plc | | | • Head of Environment and Sustainable Development | • Various senior positions at Virgin Management | Investment Committee | | | of Network Rail | • Various senior positions at Orange Group | • Active investor and experienced board member | | | • Head of Environment at Anglo American plc | | in a variety of companies across Europe, Asia and | | | • Trustee of the Royal School of Needlework | | the USA | • Leadership of technology investing and portfolio management activities • Engineer at BOC Speciality Gases • Non-executive Director of Boketto Holdco Limited (Audley Travel) 3i Infrastructure plc Annual report and accounts 2023 89 ## Board leadership and purpose continued ## Investment Management team Scott Moseley Bernardo Sottomayor James Dawes Governance John Cavill Aaron Church Anna Dellis Thomas Fodor Stéphane Grandguillaume Tim Short 90 ## Board leadership and purpose continued ## Investment Management team continued Managing Partners CFO Scott Moseley Bernardo Sottomayor James Dawes | Joined 3i Group in 2007. Managing Partner and | Joined 3i Group in 2015. Managing Partner and | Joined 3i Group in 2016. CFO of 3i’s | | --- | --- | --- | | Co-Head of European Infrastructure since July 2022. | Co-Head of European Infrastructure since July 2022. | Infrastructure business. | | Current roles | Current roles | Current roles | | • Member of 3i Group’s Executive Committee, | • Member of 3i Group’s Executive Committee, | • Performs CFO duties for 3i Infrastructure | | Investment Committee and Group Risk Committee | Investment Committee and Group Risk Committee | • Manages the operational, financial and reporting | Governance • Extensive experience in European infrastructure, • Led or co-led investments by the Company in Joulz, requirements for 3i Group’s infrastructure business spanning utilities, transportation and TCR, Infinis, Attero, Alkane Energy, Ionisos and SRL • Non-executive Director of SRL Traffic Systems social infrastructure Traffic Systems Past roles • Investments include GCX, Tampnet, ESVAGT, Elenia, • Non-executive Director of TCR and 3i board • Finance Director of LGV Capital from 2007 to 2015 CrossLondon Trains andEversholt Rail Group observer at Attero and Joulz • Senior finance roles with Legal & General • Led the successful divestments of Elenia and XLT Past roles Investment Management as well as previously being responsible for junior • Over 20 years’ experience of investing and advising debt investments in Arqiva, Associated British Ports, in infrastructure Télédiffusion de France, Thames Water and Viridian • Partner at Antin Infrastructure, which managed • Non-executive Director of Tampnet, ESVAGT funds investing in infrastructure opportunities and GCX across Europe Past roles • Managing Director, Head of Acquisitions for • Various roles within the capital markets teams Deutsche Bank’s European infrastructure fund atWestLB and Crédit Agricole • Head of M&A at Energias de Portugal public utilities company • M&A advisory with UBS and Citigroup 3i Infrastructure plc Annual report and accounts 2023 91 ## Board leadership and purpose continued ## Investment Management team continued Partners John Cavill Aaron Church Thomas Fodor Tim Short | Joined 3i Group in 2013 and is a partner | Joined 3i Group in 2013 and is a partner | Joined 3i Group in 2016 and is a partner | | Joined 3i Group in 2007 and is a partner | | --- | --- | --- | --- | --- | | intheLondoninfrastructure business. | intheLondoninfrastructure business. | intheLondoninfrastructure business. | | intheLondon infrastructure business. | | Current roles | Current roles | Current roles | | Current roles | | • Non-executive Director of SRL Traffic Systems | • Focuses on origination, execution and asset | • Leads investor relation and fundraising efforts | | • Focuses on the origination, execution and debt | | • Leads the assets management activity for the | management of economic infrastructure investments | | acrossthe 3i European infrastructure business | financing of infrastructure investments | Governance | Projects portfolio | • Extensive infrastructure investing experience across | • First point of contact for shareholders in 3i | • Transaction experience includes the acquisitions | | --- | --- | --- | --- | | • Responsible for setting the strategy oversight of | the transport, utilities, energy and waste sectors | Infrastructure plc | and financing of Attero, Elenia, ESVAGT, GCX, Infinis, | | asset management activities | • Senior deal team member on the acquisitions of | • Oversees co-investment activities in the 3i | Ionisos, Joulz, Oystercatcher, Tampnet, TCR and WIG | | • Overseas the implementation of value | Joulz, Attero, Tampnet, Infinis and ESVAGT, and | infrastructure portfolio | • Non-executive Director of Infinis | | protection and enhancement activities, and | thesale of the Oystercatcher European terminals | | | | | | Past roles | Past roles | | performance reporting | • Non-executive Director of Joulz, Attero and | | | | | | • Private Capital Advisory at HSBC | • Financial restructuring at Houlihan Lokey | Advario Singapore Past roles • Started career at Lehman Brothers • Non-executive Director of WIG and XLT Past roles • Director at Barclays Infrastructure, St Modwen • Infrastructure investor at HRL Morrison & Co Stéphane Grandguillaume Properties plc, Land Securities Trillium and inEurope and Australasia Vinci Investments • Started career at Boston Consulting Group Joined 3i Group in 2013 and is a partner intheParisinfrastructure business. Anna Dellis Current roles • Leads 3i’s Infrastructure business in France Joined 3i Group in 2006 and is a partner • Responsible for origination, execution and intheLondon infrastructure business. fundraising in relation to project opportunities Current roles across Europe • Leads asset management for the portfolio • Non-executive Director of Valorem and Ionisos ofeconomic infrastructure investments Past roles • Led the successful exit of Oystercatcher’s • Headed Barclays Infrastructure in Paris investments in Advario terminals in • Headed Egis Investment Partners 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 andfinancingat PwC in London • Fellow of the Institute of Chartered AccountantsofEngland and Wales 92 ## Board leadership and purpose continued Company purpose, values Role of the Board Integrity andculture The Board’s role is to lead the Company The Board acts with honesty, dedication in achieving its purpose. The Board We invest responsibly in infrastructure, Integrity and consistency, with the courage to is also responsible for overseeing the delivering long-term sustainable returns do the right thing in every situation. implementation of the Company’s strategy to shareholders and having a positive The Board manages its relationships of maintaining a balanced portfolio of influence on our portfolio companies and Legacy based on trust and respect. infrastructure investments delivering an their stakeholders. This purpose is central 3iN | | to Board discussions when we review our | | | | attractive mix of income yield and capital | | --- | --- | --- | --- | --- | --- | | Governance | | Board | | Objectivity | | | | business model, financial performance and | | Objectivity | | appreciation to shareholders. See pages | | | | values | | The Board applies a fair, transparent and | | | | performance against strategic objectives. | | | | 95 to 98 for further information on the | balanced approach to decision making. Board’s key decisions and areas of focus The Board recognises that tone and culture The Board values diversity of opinion affecting stakeholders. are set from the top and individually and encourages different perspectives Accountability we always strive to do the right thing in to bring constructive challenge as it The Board is ultimately accountable to our all stakeholder interactions. The Board discharges its responsibilities. shareholders and the Directors ensure that individually and collectively acts in both their decisions and the actions of the Accountability accordance with the Board values of Investment Manager are aligned with the The Board acts in the interest of all Company’s and wider stakeholders’ interests. Integrity, Objectivity, Accountability and stakeholders of the Company, ensuring It determines the Investment policy, the Legacy and expects the same from the that obligations to shareholders are appointment of the Investment Manager, professional advisers and service providers understood and met. It is mindful of its financial strategy and planning, approval of it engages. The Chair encourages Directors responsibility to act as a good steward the results and dividends, and oversees the to express differences of perspective and of its portfolio and of the influence that maintenance of internal controls and the risk to challenge views and opinions but always the Company can have on society, the management framework, membership of the in a respectful, open, supportive and communities in which it operates and Board, Director remuneration and adherence collaborative fashion. Board behaviours the environment. to the corporate governance framework. are also evaluated as part of the annual Board evaluation. The Board’s culture and Legacy values are complemented by the strong The Board seeks to develop a company institutional culture and values of our and portfolio that delivers long-term, Investment Manager. sustainable value for our shareholders and society. 3i Infrastructure plc Annual report and accounts 2023 93 ## Board leadership and purpose continued The Company has no employees and The Chair is responsible for the leadership Board Committees have Terms of reference, which are available its investment and portfolio monitoring of the Board and ensuring its effectiveness. on www.3i-infrastructure.com. The Board, The Board is assisted in its activities by a activities have been delegated by the Board In addition to the Chair, there are currently on the advice of the Company Secretary, number of standing Committees of the to 3i Investments plc in its role as Investment five independent non-executive Directors annually reviews the Committees’ Terms Board and, in discharging its duties, it Manager. The Board ensures that the and one 3i Group nominated Director, of reference and the Schedule of Matters delegates certain authorities and decisions Investment Manager has the resources and who is not considered independent. Reserved to the Board to ensure they to these Committees. The Board reviews capabilities to support the delivery of the The Board’s core values of Integrity, remain appropriate and compliant with the membership of these Committees Company’s purpose and strategy. Under the Accountability, Objectivity and Legacy thelegal and regulatory environment. on a regular basis. The Board Committee Investment Management Agreement (‘IMA’) underpin its open and collaborative culture Governance structure, together with a summary of the the Investment Manager has sole discretion and are supplemented by the skills that each roles and composition of the Committees, is to make decisions on investments and individual Director brings to the Company. outlined in the table below. All Committees divestments, other than those decisions which relate to transactions which reach certain financial thresholds, in particular in relation to investments or divestments which 3i Infrastructure plc represent 15% or more of the gross assets of the Company, which require Board approval. The Board also maintains a Schedule of Board Committees Matters Reserved to the Board, which are considered significant to the Company due to their strategic, financial or reputational implications and consequences. Audit and Risk Remuneration Nomination Management Disclosure Committee Committee Committee Engagement Committee Committee The Investment Manager prepares reports and papers that are circulated to Financial Director Board appointments Monitoring of the Monitoring compliance the Directors electronically in advance of reporting, risk and remuneration and size and composition performance of the with disclosure Board and Board Committee meetings. internal controls ofthe Board Investment Manager requirements These papers are supplemented by Wendy Dorman Paul Masterton Richard Laing Richard Laing Richard Laing information specifically requested by (Chair) (Chair) (Chair) (Chair) (Chair) the Directors and additional papers and Doug Bannister Doug Bannister Wendy Dorman Doug Bannister Doug Bannister presentations from the Investment Manager, Stephanie Hazell Wendy Dorman Paul Masterton Wendy Dorman Wendy Dorman Samantha Hoe-Richardson Stephanie Hazell Stephanie Hazell Stephanie Hazell Company Secretary and other professional Paul Masterton Samantha Hoe-Richardson Samantha Hoe-Richardson Samantha Hoe-Richardson advisers and service providers. Richard Laing Paul Masterton Paul Masterton 94 ## Board leadership and purpose continued Meetings During the year, there were six scheduled Meetings of the Board meetings of the Board of Directors and Directors are expected to attend all The table below sets out the attendance of the Directors at the scheduled Board meetings seven additional ad-hoc Board meetings Board and Committee meetings, but in (excluding ad hoc Board meetings) and the attendance of Committee members at the arranged at short notice to consider time- certain exceptional circumstances, such relevant Committee meetings held during the financial year. critical matters such as the refinancing as pre-existing commitments or illness, Management of the Company’s RCF and the equity it is recognised that Directors may be Audit and Risk Remuneration Nomination Engagement issuancecompleted in February 2023. | | unable to attend. In these circumstances, | | | Board | Committee | Committee | Committee | Committee | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | the Directors receive relevant papers | The Board also held a Strategy Day(in | | | | | | | | Governance | | | Richard Laing 6 (6) * 1 (1) 3 (3) 2 (2) | | | | | | | | and, where possible, will communicate | addition to strategic matters which are | | | | | | | Doug Bannister 6 (6) 2 (3) 1 (1) – 2 (2) to the Chair or Company Secretary any considered at every Board meeting) where Wendy Dorman 6 (6) 3 (3) 1 (1) 3 (3) 2 (2) comments and observations in advance the Board worked with theInvestment Stephanie Hazell** 3 (3) 2 (2) 1(1) – 1(1) of the meeting for raising as appropriate Manager to consider in more detail matters Samantha Hoe-Richardson 6 (6) 3 (3) 1 (1) – 2 (2) during the meeting. They are updated of a strategic or wide-ranging nature. Ian Lobley 5 (6) * – – – on any developments after the meeting The Board also has regular update calls with Paul Masterton 6 (6) 3 (3) 1 (1) 3 (3) 2 (2) by the Chair of the Board or Committee, the Investment Manager in order to stay as appropriate. informed of the activities of the Investment * Richard Laing and Ian Lobley attend the Audit and Risk Committee meetings by invitation. ** Stephanie Hazell was appointed effective 29 September 2022. Manager between Board meetings. 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. 3i Infrastructure plc Annual report and accounts 2023 95 ## Board leadership and purpose continued Stakeholder interests and The Board has limited direct engagement with certain stakeholders as most Boarddecision-making engagement takes place through the As an externally managed investment trust, Investment Manager. Where there is no the Company does not have employees or direct engagement at Board level, the customers. Its main stakeholders therefore Investment Manager regularly reports to comprise its shareholders, third-party the Board on key areas and stakeholder professional advisers and service providers views to ensure that Board decisions are (most notably the Investment Manager), well informed. Governance portfolio companies, communities in | which the Company operates, lenders, | The Board carefully considers the interests | | --- | --- | | and government and regulatory bodies. | of all of its stakeholders as well as the other | | A strong understanding of our stakeholders | factors referred to in s172 of the Companies | | and their views is integral to the Company’s | Act 2006 in deciding what actions would | | strategic planning and achievement of its | be likely to promote the success of the | | strategic objectives. The Board recognises | Company for the benefit of its members as | | the importance of keeping the interests of | a whole. See pages 81 and 82 for our s172 | | the Company’s stakeholders central in its | statement. Set out below are examples | | key decision making. | 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. 96 ## Board leadership and purpose continued Who and why? How? Key decisions and areas of focus affecting stakeholders Outcomes Shareholders The Investment Manager and the Company’s brokers complete a Liquidity management, including refinancing theRCF. The Board balances the desire for consistent Understanding the views of investors programme of investor relations activities throughout the year, including shareholderreturns against the financial Approval of the non pre-emptive capital raise. enables the Company to take account an annual Capital Markets Event. This programme provides existing needs ofthe Company to promote long-term Approval of Financial statements. of such views when developing future andpotential investors with relevant information to enable them to sustainable growth. See the Chair’s statement on strategy. It is vital for the success of understand the Company’s activities, strategy and financial performance. Approval of interim and final dividend. page 5 for further discussion onourcommitment theCompany to have the support to our shareholders todeliverlong-term An analysis of the Company’s shareholder register is provided to the Strategy in the context of the external ofitsshareholders. sustainable returns. Directors at each Board meeting along with updates on any investor economicandpolitical environment. engagement activities or direct/indirect communication with investors. The Board considered the Company’s overall Governance Reports from the Company’s brokers are submitted to the Board on balancesheet strategy along with the terms of investorsentiment and industry issues. the RCF and the additional credit facility. Having appropriate levels of liquidity available supports The Chair and the Chairs of all Committees are available to meet with the Company in delivering on its purpose for the investors when requested. The Capital Markets Event provides an additional benefit of allstakeholders. Further discussion opportunity for the Chair and Chair of the Audit and Risk Committee to on the RCFcan befound in theFinancial review engage with shareholders. onpage 64. The Company uses its AGM as an opportunity to communicate with The Board considered that it was appropriate to itsshareholders and all Directors are available to answer questions raise capital in the market in order to pay down fromshareholders. RCF drawings and provide liquidity to fund The Company’s website provides details of forthcoming events for potential pipeline investments to support further shareholders and analysts. In addition, videos of results presentations, growth of the Company. For further details of the presentations from the Capital Markets Event and portfolio activities are results of the capital raise, please see page 64 of onthe Company’s website, which all shareholders can access and view. the Financial Review. Individual shareholders are encouraged to engage with the Company Ensuring that the presentation of the Financial andprovide feedback through the Investor Relations team, who can be statementsprovides shareholders with a contacted at Thomas.fodor@3i.com or by telephone on +44 (0)20 7975 3469. fair andbalanced view of the Company’s performance, strategyand 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. 3i Infrastructure plc Annual report and accounts 2023 97 ## Board leadership and purpose continued Who and why? How? Key decisions and areas of focus affecting stakeholders Outcomes Investment Manager At each Board and Audit and Risk Committee meeting, representatives Assessed the performance of, and considered the A mutually beneficial relationship promotes The Company’s principal supplieris the fromthe Investment Manager present verbal and written reports covering continued appointment of, the Investment Manager. the long-term success of the Company. Investment Manager, who is responsible for theiractivity, portfolio and investment performance over the preceding Engagement with the Company’s Investment managing the Company’s assets in order period. The Board also has regular scheduled update calls with the Investment Manager is necessary to evaluate their toachieve its stated investment objective. Manager between Board meetings. The Board and the Investment Manager performance against the Company’s stated operate in a supportive, co-operative and open environment. strategy and to understand any risks or The Directors believe that fostering opportunities this may present. constructive and collaborative relationships The relationship with, and the performance of, the Investment Manager with the Investment Managerwill assist ismonitored by the Management Engagement Committee. For further This ensures that the Company and its portfolio details see pages 113 and 114. assets are well managed, the Company Governance in their promotion ofthe success of the Company for thebenefit of all shareholders. adheres to its strategy, and the Board receives appropriate and timely management andsupport services fromthe Investment Manager. Other professional advisers The key third-party professional advisers and service providers work Performed an annual review of the performance, The work of the key professional advisers | andserviceproviders | closelyday-to-day with the Investment Manager. This interaction provides | anti-money laundering procedures, sustainability | and third-party service providers ensures | | --- | --- | --- | --- | | The Company contracts with | anenvironment where issues can be dealt with efficiently. On an annual | procedures and business continuity arrangements for all | compliance by the Company with its legal | | professionaladvisers and third parties | basis,the Board reviews both the arrangements that are in place with | service providers in order to assess their performance | and regulatory obligations in addition to the | | forservices, including the external | all keythird-party service providers and monitors their performance. | and consider the appropriateness of their continued | maintenance of the Company’s reputation | | auditor, the brokers, the depositary, | Inparticular, the Audit and Risk Committee reviews the performance | appointment. | andhigh standards of business conduct. | | legal advisers, the financial adviser, the | andservices provided by the external auditor and the Jersey administrator. | | | | | | The Board appointed a new Jersey administrator | The brokers promote the Company as an | | financial PR adviser, the Registrar, the | Key service providers attend Board and Committee meetings as | | | | | | following a review of service levels and requirements. | attractive investment trust and work to | | Jersey administrator and with3i plc for | appropriateto advise the Board on specific matters. | | | ensureliquidity in the Company’s shares. company secretarial, treasury, accounting The Company’s brokers present to the Board at least annually to advise on all The Company’s Jersey administrator and internal audit services. Provision aspects of their remit, particularly in relation to feedback from shareholders provides effective Jersey compliance ofthese services is necessary to ensure and potential investors. The Investment Manager meets regularly with the services through the provision of a dedicated theCompany’s compliance with its brokers who keep them up to date on both wider financial market-related Money LaunderingReporting Officer, legaland regulatoryobligations. matters. This year the brokers have provided specific advice to the Board Money Laundering Compliance Officer andthe Investment Manager on the Company’s access to liquidity. andCompliance Officer. The Jersey administrator attends one Audit and Risk Committee meetingperyear in person (the rest are attended via video conference) andpresents its compliance report at each such Committee meeting. See the Audit and Risk Committee report on page 106 for further discussionon the annual review of professional service providers, includingthe Jersey administrator. 98 ## Board leadership and purpose continued Who and why? How? Key decisions and areas of focus affecting stakeholders Outcomes Portfolio companies The principal engagement with portfolio companies is through the At each scheduled Board meeting the Board reviews The engagement enhances the value of the The companies in which we invest are Investment Manager’s team. One or more of its investment professionals portfolio company performance and discusses thematic portfolio companies for the benefit of their, the source of returns to shareholders. sitson the board of each portfolio company (or acts as a board observer) issues that affect portfolio companies such as the impact andour, stakeholders. Wedrive value though our engaged asset andengagement with a portfolio company takes place both formally of macroeconomic risks. See also the Risk reporton page management approach as detailed in at board level and informally by the Investment Manager’s team on 68 for further information on the Board’s oversight of the ourBusiness model(see pages 9 to 13). anongoingbasis. risks andopportunitiesaffecting portfolio companies. Government and regulatorybodies The Company works in a regulated environment and, through the Jersey The Board considers reports from the Company Secretary, The Company continues to operate in Governance Being a UK listed and Jersey administrator, the Company engages with the Jersey regulators to ensure advisers, the Jersey administrator and the Investment compliance with relevant law and regulation registeredCompany, the Board views compliance with Jersey law and regulation. In addition, the Company adheres Manager on legal and regulatory developments affecting and ensures the highest standards of corporate compliance with regulations as of the to the AIC Code and soengages with the AIC on matters related to corporate the Company. In this context theBoard undertakes an governance for the benefit of allstakeholders. utmostimportance. governance. annual review and approval process for its Schedule of Matters Reserved for the Board and the Terms of Reference As a UK listed company the Company Secretary ensures ongoing compliance of its Committees toensure that they remain fit for purpose with the FCA’s Listing Rules and Disclosure Guidance and Transparency Rules. and adhere tobest practice. Through the Investment Manager, the Company responds to government consultations on issues relevant to its business. Lenders and hedging The Investment Manager’s treasury team manages the engagement with The Board held two ad-hoc meetings to discuss in Access to bank borrowing and hedging counterparties thelenders in the Company’s RCF and the Company’s hedge counterparties. detailthe refinancing of the RCF prior to providing instruments provides important flexibility and The Company requires access This year, with the support of its lenders, the Company was able to refinance itsapproval. resilience to the Company’s financial structure tobankborrowing to maintain its and extend its existing RCF onfavourable terms to support the acquisition and helps the Company tomaintain an efficient Foreign exchange hedging is discussed at the annual financialstructure and liquidity. pipeline. Forfurtherdetailssee page 118. balance sheet. treasury update given to the Board. Access to hedge counterparties allows the Company to mitigate foreign exchange risk. | Communities | Engagement is primarily via the Investment Manager. One or more | Strong sustainable performance by portfolio | By investing in, developing and actively | | --- | --- | --- | --- | | The Company is committed to | ofitsinvestment professionals sits on the board of each portfolio | companiesbenefits their stakeholders and the | managing infrastructure assets, we foster | | contributing positively to the communities | company(or acts as a board observer) and engagement with a | communities in whichthey operate. During the year, | growth and aim to provide a positive benefit | | in which it operates and details of this | portfoliocompany takes place both formally at board level and | theBoard discussedESG reporting requirements | to the communities in which our portfolio | | arecontained in the Sustainability | informallybytheInvestment Manager’s team on an ongoing basis. | including those under the TCFD framework. | companies operate and the customers they | | reporton pages 46 to 56. | | Forfurtherdetails see theSustainability report | serve. | onpage46. We are able to use our position as a shareholderin the businesses we own toinfluence and support management tooperateresponsibly. 3i Infrastructure plc Annual report and accounts 2023 99 ## Division of responsibilities The Board is the principal decision- Role Responsibilities Each of the Directors has an appointment making body of the Company with Chair As Chair, Richard Laing: letter, copies of which are available from authority for specific matters being • leads the Board in the determination and implementation of its purpose and strategy; the Company Secretary upon request. delegated to Committees of the Board. • promotes a culture of responsibility, scrutiny, challenge and support in Board No Director has a contract of employment meetings, underpinned by the Board values of Integrity, Objectivity, Accountability In compliance with the AIC Code, the with the Company, nor are any such and Legacy; Board has established an Audit and Risk contracts proposed. The Directors’ • is responsible for organising the business of the Board, ensuring its effectiveness Committee, a Nomination Committee and and setting its agenda; appointments can be terminated, without • facilitates the effective contribution of all Directors; a Remuneration Committee in addition to compensation for loss of office, in • actively encourages constructive relations between the Company’s advisers, a Management Engagement Committee accordance with the Company’s Articles Governance theInvestment Manager, and the Directors; and a Disclosure Committee. This structure • ensures that the views of all stakeholders are understood and considered of Association (the ‘Articles’). The Articles allows the Board to focus on matters of appropriately in Board discussions and decision making; and further specify that each of the Directors • leads the Board and Committee evaluations. strategic importance. Each Committee shall retire and may offer themselves for Chair provides regular reports to the Board Senior Independent As Senior Independent Director, Paul Masterton: re-election at each AGM of the Company. on the matters covered at each Committee Director • acts as a sounding board for the Chair; Following the formal appraisal process of • supports the Chair in the delivery of his responsibilities; meeting. The Terms of Reference clearly Directors, and in accordance with Provision • acts as an intermediary with the Chair for the other Directors and shareholders; set out the remit and decision-making 7.2, paragraph 23 of the AIC Code, the • leads the appraisal of the Chair’s performance with the non-executive Directors; and powers for each of the Board’s Committees, • is available to address shareholders’ concerns that have not been resolved through re-election of all current Directors will be the usual channels of communication. are reviewed annually by the Board and proposed at the forthcoming 2023 AGM. are available to view on the Company’s Non-executive The remaining non-executive Directors: The Company’s policy on Director tenure website. Matters and decisions that require Directors • provide constructive challenge during discussions and offer strategic guidance is that a Director should normally serve Board approval and which cannot be tothe Board; • bring independent judgement to the consideration of issues of strategy, no longer than nine years on the Board delegated are set out in a formal Schedule performance, investment appraisal, communication matters and standards but, where it is in the best interests of Matters Reserved to the Board, which is of conduct; of the Company, its shareholders and reviewed annually. • ensure high standards of financial probity on the part of the Company; and • scrutinise the performance of the Company and progress against stakeholders, the Board may approve a | To ensure the Board performs effectively, | | strategic objectives. | Director serving for a longer tenure. In such | | --- | --- | --- | --- | | there is a clear division of responsibilities | | | instances the Board will provide a clear | | | Company | 3i plc serves as the Company Secretary under the terms of the IMA. 3i plc’s | | | between Board roles, set out in writing and | Secretary | Group Secretariat: | explanation in the Annual report as to their | | agreed by the Board. Key roles have been | | • ensures compliance with Board procedures and corporate governance best practice; | reasoning. For further information see the | | | | • provides corporate governance advice and guidance to the Board and keeps the | Nomination Committee report on pages | defined in greater detail opposite: Board updated on corporate governance developments; 102 to 105. • assists the Chair with meeting preparation; and • ensures the Board has access to timely high-quality information in order to function effectively and efficiently. 100 ## Composition, succession and evaluation Composition and succession Conflicts of interest These include temporary separation or Board evaluation recusal from a relevant process or decision, The Board currently consists of seven andindependence The Board recognises that it needs to restriction of access to certain information members, comprising the Chair, five The Board assesses and reviews the continually monitor and improve its and sharing authority through collective independent non-executive Directors and independence of each of the Directors at performance and the annual performance decision-making. In view of this practice, one non-executive Director who is the 3i least annually and considers whether or evaluation provides the opportunity for the 3i Group nominated Director recuses nominated Director and not considered not a Director has any interest, position, the Board and its Committees to consider himself when matters in which 3i Group has to be independent. Biographies of the association or relationship which is and reflect on the effectiveness of its an interest are discussed. Ian Lobley is not a | | Directors are set out on pages 87 and | likely to influence unduly or cause bias | | activities, the quality of its decision making, | | --- | --- | --- | --- | --- | | Governance | | | member of the Management Engagement | | | | 88. The Board considers that there is an | in decision-making in the best interests | | and the collective contribution made by | Committee and so did not participate in the appropriate balance of skills, experience of the Company and its stakeholders. each Board member. This year an internal Board’s evaluation of the performance of and independence on the Board to enable The Board considers all Directors, with review of the performance of the Board, the the Investment Manager. it to discharge its duties. the exception of Ian Lobley, who is the Audit and Risk Committee and the Chair 3i Group nominated Director, to be In accordance with the Articles and the was conducted with the support of the The Nomination Committee oversees the independent in character and judgement, Companies (Jersey) Law 1991, the Board Company Secretary following the externally process of appointments and succession and free from conflicting business or other can authorise any matter that would facilitated review of 2022. planning of non-executive Directors. | | interests that could interfere with the | otherwise result in a Director breaching his | | | --- | --- | --- | --- | | The role of the Nomination Committee is | | | As an action from the external review of | | | exercise of their independent judgement. | or her duty to avoid a conflict of interest. | | | critical in ensuring that the composition | | | FY22, the Board held a workshop led by | | | The Chair was considered independent | The Company’s Jersey administrator | | | and balance of the Company’s Board and | | | Satori, the external facilitator, to further | | | on appointment and has no relationships | maintains a conflict register covering | | | Committees support both the Company’s | | | articulate and consider the Board’s purpose | | | or circumstances which might create a | actual and potential conflicts and details | | | strategy and best practice in the area of | | | and values in the context of the Company’s | | | conflict of interest between his interests and | of the Board authorisation of any conflict. | | | corporate governance. Further information | | | strategic objectives. This year’s evaluation | | | those of the shareholders. See page 103 | When they are appointed, all Directors | | | is set out in the Nomination Committee | | | included a review of the effectiveness of the | | | of the Nominations Committee report for | are required to disclose any other | | | report on pages 102 to 105. | | | workshop and the outcome of the previous | | | further information. | appointments or significant commitments. | | year’s evaluation. Satori has no connection They must also notify the Chair and Ian Lobley, the 3i Group nominated with the Company. Company Secretary of any changes or Director, has a pre-approved conflict in new appointments in order for the Board relation to the IMA. The Board ensures to consider any potential conflicts of the independence of all Directors and interest prior to providing its approval it has at its disposal a range of conflict fornew appointments. management tools to manage potential oractual conflicts. 3i Infrastructure plc Annual report and accounts 2023 101 ## Composition, succession and evaluation continued All Directors and the Investment Manager Director induction, training During the year, Directors receive a full As part of their role, Directors are also completed a confidential questionnaire, programme of briefings across all areas of expected to personally identify any anddevelopment which was similar to questionnaires used the Company’s business with the objective additional training requirements they feel in the past to ensure a comprehensive Upon joining the Board, all Directors of ensuring that the Directors remain up to would benefit them in performing their review and provide assurance on progress receive a formal induction to the Company, date on all issues affecting the Company. duties to the Company. In accordance against actions. Anonymised reports were which is designed to enable them to Briefings are led by the Investment with Jersey regulations the Directors are subsequently prepared by the Company understand the Company’s purpose, Manager, Company Secretary or external required to undertake sufficient, relevant Secretary and presented to the Board for values and strategy, the industry in which it service providers, such as the Company’s and appropriate training and development consideration. The Board had an extensive operates and the portfolio companies, so auditors, and cover a wide variety of each year. Directors have access to the Governance discussion to identify progress made and that they can be effective Board members sector-specific and business issues, as advice and services of the Company further actions to be taken. Each of the from the outset. The induction programme well as legal and financial regulatory Secretary and, when deemed necessary, Chair and Audit Committee Chair excused includes presentations on corporate developments relevant to the Company the Directors can seek independent themselves from the meeting when their governance, Director duties relevant to a and the Directors. Sessions during the professional advice. Furthermore, performance was discussed. Jersey-incorporated UK Listed Company, year included briefings on UK corporate training and development needs are the Company’s policies, meetings with governance developments, changes reviewed annually as part of the Board The conclusions of this year’s evaluation the wider Investment Management to laws and regulations in Jersey and evaluation process. have been positive and confirmed that team, external advisers, briefings and the UK, tax matters, fund raising, ESG the Board remains effective. In particular, reading materials. developments, and developments in the the following progress and actions infrastructure market. Detailed briefing were identified: papers or presentations are provided at each scheduled Board meeting or Progress since • The Board participated in a workshop on Board purpose and Board values at ad-hoc meetings and Directors have 2022evaluation • The Board is devoting more time to strategic matters during meetings and prioritisingstrategic topics on meeting agendas the opportunity for formal and informal • The succession of the Investment Manager’s Managing Partners and the meetings with the Investment Manager relationshipwith the new Managing Partners were managed effectively by orthe Company’s other advisers. theChairand the Board as a whole Actions for the • Funding and liquidity planning would continue being an area of focus comingyear • 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 102 ## Composition, succession and evaluation continued ## Nomination Committee report Role of the Committee Members of the Committee do not vote Composition and succession planning in decisions affecting their own position. The Committee’s principal responsibility is As part of its review of composition and During the year the Committee reviewed to ensure that, collectively and at any given succession planning, the Committee carefully its compliance with the AIC Code and its time, the members of the Board possess considered which skills and experience it Terms of Reference and confirmed that it the necessary balance of knowledge, skills would require on the Board over the coming remained compliant with all of its corporate and experience to support and develop the years based on the perceived current and governance responsibilities. | strategy of the Company. In seeking to achieve | | future challenges facing the Company | | --- | --- | --- | | this, it recommends new Board appointments | Details of each of the Director’s skills | and the tenure of all Directors. The review | | as and when appropriate and ensures that | and experience which contribute to the | identified that it would be in the interest | | effective succession planning processes are | effective functioning of the Board and the | of the Company to appoint an additional | | in place. In accordance with the Committee’s | success of the Company can be found in | independent non-executive Director | | Terms of Reference, it is the Board as a | their biographies on pages 87 and 88 and | with broad industry experience to the | | whole which is responsible for making new | intheSkills Matrix below. | Board. The Committee appointed Odgers | | appointments upon recommendation by the | | Berndtson, an independent executive | | Nomination Committee. | | search and leadership consulting firm with | no connection to the Company or any Directors’ Skills Matrix (Number of Directors) of its Directors, to support the search for candidates. Following an extensive search, nfrastructure 7 Odgers Berndtson proposed candidates 5 I fromas diverse a pool of candidates as 3 Investment trust Asset management possible given the nature, responsibilities 4 Fund management and skills required for the role. The Board was 3 delighted that the exercise resulted in the Valuations 5 Financial/audit (recent and relevant) During the year we appointment of Stephanie Hazell, who joined 7 the Board in September 2022. continued our focus on 4 Risk and compliance succession planning for our 5 In order to facilitate the succession planning ESG Governance 5 non-executive Directors, process, the Nomination Committee Legal and regulatory 5 recommended the Directors’ appointment keeping in mind the skills 5 letters be updated to incorporate provisions Remuneration and experience required Technology/next generation/digital 5 for a formal review on the third and sixth | Megatrends | to support the Company’s | | | | | | --- | --- | --- | --- | --- | --- | | | | | | 7 | anniversaries of first appointment to discuss | | | | strategic objectives.” | 5 | | whether it is appropriate to serve for a | M&A/capital markets Consumer markets 2 furtherthree-year term. Richard Laing International Chair, Nomination Committee 3i Infrastructure plc Annual report and accounts 2023 103 ## Composition, succession and evaluation continued ## Nomination Committee report continued The Board has agreed a maximum term Board members by gender Diversity The Board, with the Committee’s support, forany Director of nine years, subject to continues to take practical and purposeful The Board has adopted 3i Group’s anyexceptional circumstances that might steps towards enhancing theBoard’s diversity. EqualOpportunities and Diversity policy arise atthe relevant time. | | in so far as it is relevant to the Company | The framework within which the Committee | | --- | --- | --- | | Given that the Company was | having only non-executive Directors and | assesses the composition of the Board, its | | considering moving its domicile to the | no employees. The policy can be found | Committees and future Board appointments | | UK, as reportedlast year, the Board | at www.3i.com. The Board, with the | is based on the Company’s strategic | | had asked PaulMasterton to remain | support ofthe Committee, is committed | objectives, regulatory requirements, the | Governance | on the Board for anadditional year | | | topromoting greater diversity on the | Company’s status as aUK listed, Jersey | | --- | --- | --- | --- | --- | | whilst it awaited the outcome of the | | | Boardtoenhance the effectiveness | incorporated company and the specific | | UK government’s consultation on UK | | | ofthe Board. | functions which non-executive Directors | | | Female (43%) | 3 | | | | Corporate Redomiciliation. | | | | would be required to fulfil on Committees. | As can be seen by the graph below, This presents aparticular challenging and Male (57%) 4 thiscommitment has led to improved In considering Paul’s status as an sometimes conflicting set of requirements independentnon-executive Director, the gender diversity on the Board and has to adhere to and which the Board has been Committee concluded that there were already achieved the target set by the working towards overcoming. nocircumstances which were likely to FTSEWomenLeaders Review of having Non-executive Directors’ tenure | impact, or could appear to impact, his | 40% of FTSE 350 board roles filled by | In November 2022, the Association | | --- | --- | --- | | independence and he was considered | women by 2025. | of Investment Companies published | | toremain an independent director. | | an articlesetting out the significant | The Board supports the targets set by challenges faced by Jersey registered, The Committee has started the process to theParker Review for FTSE 250 Boards to UKListed companies due to the Jersey law recruit a successor for Paul. In addition, 3i have at least one Board member from an requirement of having two Jersey-resident Group will, in accordance with the terms ethnic minority background by 2024 and Directors on its boards. | of the relationship agreementbetween | | | is working towards achieving this target | | | --- | --- | --- | --- | --- | | 3i Group and theCompany, nominate a | | | despite the complexities that it has faced | The limited diverse candidate pool for Jersey | | successor to IanLobley (who hasnow served | | | in this regard. The Board is disappointed | resident directors and the ongoing issues on | | on the Boardfor nine years)later in 2023. | | | that it does not yet meet the Parker Review | overboarding mean that there is a conflict | | | | | target, however, this does not fairly reflect | between the Jersey and UK regulatory | | | 0–3 years | 2 | | | | | | | the Board’s commitment to diversity. | expectations, especially in relation to the | | | 4–6 years | 0 | | | UK Listing Rule requirements for reporting on diversity. 7+ years 5 104 ## Composition, succession and evaluation continued ## Nomination Committee report continued | | The Company has been in discussion with | Unless the JFSC requirement for two | Should the Company decide to transfer | The Listing Rules make provision for | | --- | --- | --- | --- | --- | | | the Jersey Financial Services Commission | Jersey resident directors is changed or | its domicile it would no longer require | closed-ended investment funds, such as | | | (‘JFSC’) regarding its succession plans | a variance is granted, the Company has | two Jersey resident directors, which | the Company, who do not typically have | | | and the challenges it faces in satisfying | only four independent non-executive | would allow any future directors to be | a CEO or CFO, to not report against the | | | the requirement for two Jersey resident | Director rolesthat it could use to fulfil the | sought from a much wider candidate | target to have at least one of the senior | | | directors. During FY24 the Board will | UK diversity requirements. The maximum | pool. Unfortunately there has been no | board positions held by a woman if it is | | | formally request the JFSC to grant the | number of Directors allowed under | further update from the UK government on | “inapplicable”. As an externally managed | | | Company a variance to the requirement | the Articles is seven, which is generally | these proposals. | investment company, 3i Infrastructure plc | | Governance | of having two Jersey resident Directors on | considered to be a high number for an | | does not have a CEO or CFO and therefore, | Despite the challenges already mentioned, the Board. If granted, this would allow the investment trust with noemployees. as allowed by the Rules, does not need to diversity in all its forms remains a critical Nomination Committee to conduct future report against this target. The Board does, In addition, the Board has noinfluence consideration in the Board’s succession searches for directors in a geographically however, consider the role of the Chair of over the choice of candidates for planning processes. wider area, leading to a more diverse pool any of its permanent Committees to be the appointment of the 3i Group of candidates from which to select. In accordance with LR 9.8.6(9) of the FCA’s senior positions on the Board. nominated Director. Listing Rules, the tables on page 105 set out | The Parker Review update report published | | | Wendy Dorman is the Chair of the Audit | | --- | --- | --- | --- | | | Furthermore, the Board has previously | details of the diversity of the individuals on | | | in March 2023 also noted that many | | | and Risk Committee and, in the Board’s | | | stated that it would consider redomiciling | the Board and Executive Committee at the | | | investment trusts are based outside | | | view, it therefore complies with the target | | | the Company to the UK under a proposed | date of this Report. The Listing Rules state | | | mainland Great Britain (eg. in theChannel | | | of having at least one senior Board position | | | UK Corporate Redomiciliation regime, on | that, for purposes of the required disclosure | | | Islands) where there are fewer residents | | | held by a woman. | | | which the UK government consulted during | and assessment against targets, senior | | from ethnic minorities and their boards 2021. The government’s proposal includes board positions consist of the chair, chief often have fewer directors on them than a regime to allow overseas registered executive officer (CEO), senior independent other companies. companies to become UK registered director (SID) or chief financial officer companies in a simpler and more cost- (CFO)(LR 9.8.6R (9)(a)(ii)). effective process. 3i Infrastructure plc Annual report and accounts 2023 105 ## Composition, succession and evaluation continued ## Nomination Committee report continued Number of Percentage Number of senior positions on the Appointment process The Committee is also responsible for Gender identity or sex Board members of the Board Board (CEO, CFO, SID and Chair) obtaining and verifying references prior When considering candidates for Men 4 57% 2 to any formal decision on appointment. appointment as Directors of the Company, Women 3 43% 1 Appointments are therefore made on a detailed job specification and candidate Not specified/ – – – personal merit and against objective profile is prepared, and consideration prefer not to say criteria with the aim of bringing new skills is given to the existing experience, and different perspectives to the Board knowledge and background of Board Number of Percentage Number of senior positions on the whilst considering the existing balance of members as well as the strategic and Ethnic background* Board members of the Board Board (CEO, CFO, SID and Chair) knowledge, experience and diversity. Governance business objectives of the Company. It is White British or other 7 100% 3 the Company’s policy to use independent white(including minority- Richard Laing external search agencies for all Chair, Nomination Committee white groups) | | | Board recruitment. | 9 May 2023 | | --- | --- | --- | --- | | Mixed/Multiple | – – – | | | | ethnicgroups | | Shortlisted candidates are invited to | | | Asian/Asian British – – – | | interview with members of the Committee | | | Black/African/ | – – – | and, if recommended by the Committee, | | | Caribbean/Black British | | would be invited to meet the entire Board | | | Other ethnic group, | – – – | before any decision is taken relating to | | including Arab the appointment. Senior members of the Not specified/ – – – Investment Manager also meet potential prefer not to say candidates and provide their views on such * This information was collected through a self-identification exercise by all Directors and facilitated by the candidate to the Committee. Company Secretary. Permission was sought from the Directors to use the information for this purpose. 106 ## Audit, Risk and Internal Control ## Audit and Risk Committee report Membership and meetings The Committee held three scheduled In addition to the scheduled Committee meetings this year, aligned with meetings, the Committee Chair has All the members of the Audit and Risk the Company’s reporting cycle. regular discussions and meetings with the Committee are independent non-executive Meetings followan annual workplan Investment Manager, external auditor and Directors who collectively have the developed from the Committee’s Terms the Company’s Jersey administrator. necessary range of financial, risk, internal of Reference in addition to any specific control and commercial experience The Committee Chair provides a formal business requirements. required to fulfil the Committee’s remit. update on the Committee’s work to The Audit and Risk Committee Chair, Regular attendees at meetings are the the Board at each scheduled Board Governance | Wendy Dorman, is a Chartered Accountant, | Board Chair, Ian Lobley, members of the | meeting. The performance of the | | --- | --- | --- | | and the Board is satisfied that she has | Investment Manager’s team, the external | Committee and its Chair is evaluated | | recent and relevant financial experience. | auditor, Deloitte LLP (‘Deloitte’) and the | annually as part of the overall evaluation | | The Chair of the Board is not a member | Company’sJersey administrator, Aztec | of the Board and theBoard Committees | | of the Committee but attends meetings | Financial Services (Jersey) Limited (‘Aztec’) | as further disclosedon page 100. | | by invitation. | (Apex Financial Services (Alternative | Overall the Committee continued | | | Funds) Limited (‘Apex’) was previously | to perform wellandwas effective in | | | the Company’s Jersey administrator, | discharging its responsibilities. | untilDecember 2022). The Committee plays a key role, overseeing the integrity of the Company’s financial reporting, audit processes, and riskmanagement and internal controls.” Wendy Dorman Chair, Audit and Risk Committee 3i Infrastructure plc Annual report and accounts 2023 107 ## Audit, Risk and Internal Control continued ## Audit and Risk Committee report continued | Role of the Committee | Internal audit | Fair, balanced and understandable | Key accounting estimates | | --- | --- | --- | --- | | The role of the Audit and Risk Committee | The Committee annually reviews the need | (‘FBU’) reporting | andjudgements | | is to assist the Board by establishing, | for an internal audit function and is satisfied | The Committee considered the | An important responsibility of the | | reviewing and monitoring policies and | that the systems, processes and procedures | requirements of the AIC Code and | Committee is to review and agree the key | | procedures to ensure the integrity of | of the Company and the Investment | specifically reviewed this Annual report | estimates, judgements and assumptions | | financial and narrative reporting, the | Manager provide sufficient assurance that | andaccounts to conclude whether the | which impact the Financial statements. | | independence and effectiveness of the | an appropriate level of risk management | financial reporting is fair, balanced, | The key areas of judgement are set out | | external auditor, and the effectiveness of | and internal control is maintained. | understandable, comprehensive and | on page 108. After receiving reports on | Governance the system of internal controls and of the The Committee has therefore concluded consistent with how the Board assesses the significant estimates and matters of risk management framework. In addition, that an internal audit function specific to theperformance of the Company’s judgement from the Investment Manager, the Committee manages the relationship theCompany is currently not necessary. businessduring the financial year. and after considering the report on the with the external auditor, reviews the audit from Deloitte, the Committee agreed Financial and narrative reporting As part of this review, the Committee scopeand terms of its engagement, that the judgements made were appropriate considered whether the Annual report andmonitors its performance through The Company, through the Investment and correctly reflected and presented in the and accounts provided the information regular effectiveness reviews. Manager, has in place internal control and Annual report and accounts. More detailed necessary to shareholders to assess risk management arrangements to support information on the Company’s accounting In accordance with the Committee’s role the Company’s position, performance, the financial and narrative reporting policies can be found on pages 140 to 147. in scrutinising investment valuations, strategyand business model and process and to provide assurance that the Committee reviews and challenges reviewedthe description of the the Company’s Half-yearly report and the Investment Manager’s semi-annual Company’sKey Performance Indicators. Annual report and accounts are prepared valuation assumptions, judgements and in accordance with applicable standards. The Committee’s FBU process consists resulting valuations of the Company’s The Committee reviewed and made ofreviewing the Annual report and underlying portfolio of infrastructure recommendations to the Board regarding accounts at various stages of its production, assets. More details on the Committee’s significant accounting matters and the reviewing confirmation of the factual role inscrutinising investment valuations accounting disclosures in the Half-yearly verification process by the Investment canbefound on page 108. report and Annual report and accounts Manager and Company Secretary and ofthe Company. reviewing the work of the external auditor. 108 ## Audit, Risk and Internal Control continued ## Audit and Risk Committee report continued In addition to the above matters, the External auditor Valuation of the The Committee noted that this year there were no changes to the principles of valuation investment portfolio whichhave been consistently applied. All unquoted assets have been valued on a discounted Committee reviewed the following areas: The Committee has primary responsibility cash flow (’DCF’) basis with the exception of the 3i India Infrastructure Fund where the valuationis taken as the Company’s share of the Fund’snet assets. Within the India Fund, • the use of Alternative Performance for overseeing the relationship with theremaining investment in Supreme Infrastructure is valued at nil. Measures (‘APMs’) and the balance Deloitte, the external auditor, including The WADR of the portfolio was slightly higher at 11.3% (10.9% at March 2022), primarily ofAPMs andGAAP measures in the assessing annually its performance, duetothe evolution of the portfolio mix following the completion ofthenew investments Annual report and accounts; effectiveness and independence. inGCX and Future Biogas and the realisation of the EuropeanProjects portfolio. Shareholders approved the re-appointment The Committee considered the effect of a higher inflation and interest rate environment • the appropriateness of the sensitivity of Deloitte as external auditor for the year Governance on cost and revenue assumptions. Factors considered included theimpact on operating rates applied in Note 9 of the costs, the cost of debt and capital expenditure, the abilitytopass cost inflation to customers ended 31 March 2023 at the Company’s Financial statements; and company specific factors. These factorsare reflected in the cash flow projections of the July 2022 AGM following a competitive portfolio companies. The appropriateness of the discount rates in relation to these cash • post balance sheet events; and external auditor selection process in 2017. flowprojections was also considered. • other changes in presentation within Stephen Craig has been the audit partner The Investment Manager, as the Company’s Alternative Investment Fund Manager, is thereport to improve clarity for users. for Deloitte since the conclusion of the 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 2022 audit. The Committee reviewed and The Committee presented its conclusions infrastructure valuations committee is considered independent of the Investment Manager’s monitored Deloitte’s execution of the audit fund management activity and that it had approved the investment portfolio valuation as on the above areas to the Board and advised plan and also considered Deloitte’s report at31 March 2023. The Committee discussed in detail the portfolio company valuations with the Board that it considered the Annual the Investment Manager and the external auditor, including the external auditor’s valuation on its review of the half-yearly results and report and accounts, taken as a whole, expert, and considered that the principles of valuation applied by the Investment Manager its report on the FY22 audit. It discussed all to be fair, balanced and understandable. tothe investmentportfolio had been applied correctly and consistently and recommended significant matters identified in Deloitte’s thevaluations to the Board for approval. The Committee further advised that, so final report on the FY22 audit, including far as it was aware, there was no relevant Interest streaming For an approved investment trust that has taxable profits arising from net interest income, key accounting judgements taken by the the UK tax rules provide an option to treat a part of the dividends it pays asinterest. audit information of which the external Investment Manager and the Investment TheCommittee decided to designate 5.4 pence of the 5.575 pence interim dividend payable auditor was unaware; that the Committee as aninterest distribution. The Annual report and accounts have been prepared on the Manager’s responses to any audit findings. had taken all reasonable steps to ascertain assumption thatthe Company will not designate any of its final dividend as interest. any relevant audit information and ensure Investment entity The Committee annually reviews the assessment that the Company continues tomeet that the external auditor was aware of such consideration thecriteria of an investment entity. information; and that the Annual report Calculation of the The Committee undertook a detailed review of the management and performance fee and accounts provided the information management and calculation. The Committee also had access to a review of the calculation of the management performance fees necessary for the shareholders to assess and performance fee carried out by the internal audit function of the Investment Manager payable to the andengaged the external auditor to perform additional agreed-upon-procedures work theCompany’s position, performance, Investment Manager inrelation to the inputs to the management and performance feecalculation. business model and strategy. Valuation of derivative The Committee considered and agreed with the Investment Manager’s valuations in relation financial instruments toderivative financial instruments and other receivables. and other receivables 3i Infrastructure plc Annual report and accounts 2023 109 ## Audit, Risk and Internal Control continued ## Audit and Risk Committee report continued External auditor effectiveness The Committee noted the following Evaluation of audit quality • the review of disclosures required inrespect of the external auditor: for the new resilience statement and The Audit and Risk Committee reviewed Following the FRC’s Practice Aid for additional disclosure in the key estimation the effectiveness of the FY22 external audit committees on audit quality (2019) Assessment against the audit plan uncertainties section such as cash flow audit process, considering performance, the Committee considered the four key • there were no areas where the and terminal value assumptions; objectivity, independence and relevant elements that are necessary to support the InvestmentManager or Company’s views experience demonstrated by reports and auditor in making sound judgement – (i) • the use of data analytic tools to support of the accounting treatment differed from presentations from the external audit Judgement, (ii) Mindset and Culture, (iii) the conduct of the audit; that of the external auditor; Governance team and discussion with the Investment Skills, Character and Knowledge, and (iv) • the level and quality of challenge • the level of engagement from the Manager. The Committee monitors the Quality Control. In making its evaluation received from the external auditor; audit partner was high throughout external auditor’s independence and theCommittee noted the following in • a good knowledge of accounting theaudit process; objectivity, taking into consideration respect of the external auditor: standards, governance requirements relevant professional and regulatory • the auditors met the agreed audit plan • the work undertaken by the external andthe infrastructure market; requirements, the quality of the audit and undertook work to address the auditor to address the risks identified • the robust and perceptive handling of the process, and the use of Deloitte’s risks identified in their plan and any intheir plan and any subsequent risks key accounting and audit judgements; valuation practice to support the subsequent risks identified; thathad later been identified; audit of the portfolio valuations, the • the support received by the external • continuity of the audit team was • the external auditor’s focus on valuation technical knowledge of the team and auditor from the external auditor’s retained into the audit of the assumptions, particularly inflation rates staff turnover within the Deloitte audit technical team; Company’ssubsidiaries; and used in the individual asset models. team. The Committee considered a • the focus of the external auditor on • the audit matched the process A significant amount of time was spent memorandum from the Investment compliance with the UK Investment setoutinthe audit plan. on testing inflation linkage within each Manager regarding the external auditor’s Trust Regulations and AIC Statement asset model; effectiveness, independence and ofRecommended Practice; and objectivity. The Committee considered • the detailed audit work completed • the final report was presented based on the Financial Reporting Council’s (‘FRC’) onthecalculation of the management a good understanding of the Company’s 2016 guidance to Audit Committees when and performance fees; business and included granularity around assessing the effectiveness of the whole the valuation assumptions. audit process. 110 ## Audit, Risk and Internal Control continued ## Audit and Risk Committee report continued Non-audit services and external This related to agreed-upon procedures Risk management and As part of this the Committee: on the management and performance auditor independence internalcontrol • carried out a full review of the risk register fees (£8,316), agreed-upon procedures The Company’s Non-audit services policy The Board has overall responsibility for as part of the three-year risk review cycle work in respect of sustainability KPIs is reviewed annually to ensure that the the Company’s risk management and with the objectives of (i) identifying the for the RCF reporting (£27,000) and a provision of such services by the external internal control framework, including principal, key and emerging risks facing review of the interim financial statements auditor does not impair the external auditor’s the determination of the nature and the Company; (ii) considering the impact (£60,575). In this financial year, in line with independence or objectivity. In order to extent of the principal risks it is willing to and likelihood of these risks; (iii) ensuring the Company’s policy, Deloitte provided safeguard external auditor objectivity and take to achieve its strategic objectives. that risks identified were linked to the Governance non-audit services in relation to certain non- independence, the chair of the Audit and The Company’s overall risk management Company’s strategic objectives; and consolidated investee companies. The fees Risk Committee is required to approve in and internal control process is regularly (iv)updating the risk register and risk for these services areordinarily borne by advance all non-audit work undertaken reviewed by the Audit and Risk Committee matrix as appropriate; the underlying investee companies or by the external auditor for the Company and complies with the Guidance on Risk • conducted risk reviews as detailed unconsolidated subsidiaries, and therefore and its subsidiaries, and as a general rule Management, Internal Control and Related intheRisk report on pages 70 to 72; are not includedin the expenses of the external auditor will not be engaged Financial and Business Reporting issued the Company. • carried out horizon scanning to identify on investment-related work. However, bythe Financial Reporting Council. new and emerging risks; exceptions to this may be permitted if the In assessing the external auditor’s During the year, the Committee reviewed • reviewed the risk log at each work is (i) for an affiliate of the Company independence, the Committee reviews the Company’s risk management processes Committeemeeting, and discussed and an indirect service to the Company or thetotal amount of fees paid to the primarily based on the Company’s themanagement of risks noted on (ii) reporting accountant work, for example externalauditor in accordance with the assessment of its principal risks and thelogwith the Investment Manager; in the case of a capital raise. In addition to Non-audit services policy, regardless uncertainties as set out in the Risk report the Company’s policy, in accordance with ofwhether they are borne bytheCompany • considered the presentation of risk- onpages 73 to 75. Deloitte internal controls, the audit partner or by the investee companies. related matters in the Annual report must also approve any non-audit services The Committee concluded thatthe external andaccounts; and provided by Deloitte to their audit client. auditor remained independent and the • considered the resilience, viability audit was effective, and that a resolution be statement andthe reverse stress test Deloitte and their associates provided proposed to shareholders recommending analysis (formore detail see pages 78 non-audit services to the Company for the re-appointment of Deloitte at the to 80). feestotalling £95,891 for the year to 2023 AGM. 31 March2023 (2022: £104,635). 3i Infrastructure plc Annual report and accounts 2023 111 ## Audit, Risk and Internal Control continued ## Audit and Risk Committee report continued | A process of monitoring and oversight is | • The nature of 3i’s business means there | • during the year a review of 3i’s treasury | For the year under review, Aztec had | | --- | --- | --- | --- | | built into the existing delegated authority | are no ICT critical dependencies in terms | processes was also considered and | received an unqualified ISAE 3402 report | | structure through the role of the Board | of day-to-day operations. Since the last | no material findings were reported. | and had recently been re-certified under | | and its Committees, including the Audit | review, 3i’s IT governance, infrastructure | Other service areas, such as tax, are | ISO 27001. ISAE 3402 and ISO 27001 | | and Risk Committee. The Company is | and operations have all remained stable | reviewed on a two- to three-year | are the global assurance standards for | | dependent on investment management, | and systems performance and stability | rotation basis; | internal control and information security, | | financial and treasury, administrative and | have been good with no outages or cyber | | which provides assurance to clients | • the Company’s Registrar provides other support services being provided by security incidents reported. The Company over the robustness of the design and an annual independent report on its third parties (the ‘Service providers’) and is reliant on its Service providers for application of Aztec’s internal controls. Governance internal controls, which covers the those Service Providers are subject to their disclosing significant cyber attacks and During the year the Company’s previous registrar services to the Company. This is own operational risk management and whether the Company’s information Jersey administrator, Apex, also provided completed in accordance with Technical controls. Independent monitoring is carried hadbeen compromised or not; an internal control annual confirmation for Release AAF 01/20. The report is reviewed | out by the Service providers’ internal audit | | | the period up to December 2022 detailing | | --- | --- | --- | --- | | | • the Committee also considered a | by the Board, the Company Secretary | | | teams and the Company receives copies | | | the internal control framework that Apex | | | reporton the findings of a review of the | and Investment Manager and for the | | | of Service provider reports on their own | | | adheres to as a Fund Services Business | | | European infrastructure team. The scope | year under review showed no weakness | | | internal controls as follows: | | | under the Financial Services (Jersey) Law | | | of the review included the ongoing | in controls; | | 1998; and application of the investment procedures • annual independent review of the • the Company’s Jersey administrator and portfolio management processes, • Deloitte provides an audit update report Company’s business line operations by provides an annual report detailing progress on sustainability objectives which includes an assessment of the the Investment Manager’s Internal Audit theirinternal control framework to and implementation of sustainability design and implementation of controls and Group Compliance functions. demonstrate their approach to internal strategies and GHG emissions reporting Deloitte identified as key controls. controls and their risk management In particular, for the year under review and management of the Company’s processes. The Jersey administrator the Committee discussed reports operating structure, including monitoring is regulated by the JFSC and must inrelation to the internal audit of the of its investment trust status and provide acopy of their annual directors’ Investment Manager’s Information and AIFMD relatedobligations. The overall declaration to the JFSC of any material Communication Technology (‘ICT’) opinion onthe control environment was breaches of the Codes of Practice for framework which focused on 3i’s cyber unqualified with no material issues or Fund Services Business (inclusive of maturity and general ICT security. urgent actions noted; internal systems and controls), audited accounts, auditoropinion and ISA 260 letter. 112 ## Audit, Risk and Internal Control continued ## Audit and Risk Committee report continued Other internal control measures On the recommendation of the Compliance As a result of the above reviews, the Officer and the Money Laundering Audit and Risk Committee was able to Aztec succeeded Apex as the Company’s Compliance Officer, the Board approved confirm to the Board that the Company’s Jersey administrator in December 2022. further updates to its Conduct of Business internal controls were working effectively The Company’s Compliance Officer, Manual, Anti-Money Laundering Manual, and no weaknesses or inefficiencies had Money Laundering Reporting Officer and Business Risk Assessment and customer been identified. Money Laundering Compliance Officer due diligence processes during the year. is an employee of Aztec. She presents a Other matters compliance report at every Audit and Risk In addition, as part of the internal control Governance Other specific matters reviewed by Committee meeting and the Committee framework, the Company Secretary reports theCommittee during the year were: is responsible for the assessment and to the Board on updates to those policies evaluation of these reports in the context which do not form part of the Conduct • the Committee’s Terms of reference of the delegated investment management of Business Manual and Anti-Money inview of its responsibility for oversight and support services and for monitoring the Laundering Manual, namely the Non-audit ofESG reporting; and effectiveness of those internal controls. services policy, the Whistleblowing policy, • the Company’s compliance with its Treasury policy and 3i Group’s Equal regulatory obligations in the UK as Aztec maintains an annual Compliance Opportunities and Diversity policy (in so a listed entity and in Jersey where Monitoring Plan and reports to the far as this particular policy applies to the itis registered. Committee on the results of its tests on the Directors of the Company). Company, the Directors, the Investment Wendy Dorman Manager and the Company’s suppliers, The Chair of the Audit and Risk Committee Chair, Audit and Risk Committee | amongst others. Aztec and Apex did not | meets with the Compliance Officer, and | 9 May 2023 | | --- | --- | --- | | identify any areas of concern during the | the Investment Manager’s Head of Internal | | | course of the year. | Audit and Head of Compliance periodically | | to receive updates on the internal audit and compliance processes and procedures of the Investment Manager. 3i Infrastructure plc Annual report and accounts 2023 113 ## Relationship with Investment Manager ## Management Engagement Committee report The principal function of the Management Investment Manager The Investment Manager undertakes Engagement Committee is to consider, origination activities, manages the The Investment Manager, 3i Investments and recommend to the Board, whether the Company’s funding and hedging plc, is responsible for the implementation continued appointment of the Investment requirements, and manages funding of the agreed Investment policy and Manager is in the best interests of the requirements of the investment portfolio, for investment or divestment decisions, Company and its shareholders and to all of which is governed by the terms of subject to the investments or divestments give reasons for its recommendation. the IMA. remaining below an agreed threshold. Its remit includes managing all aspects of The IMA includes an exclusivity the performance of and relationship with Where the value of investments or Governance arrangement in respect of investment the Investment Manager. The Committee divestments is above the agreed opportunities within the Company’s also reviews the terms of the Investment threshold,the Board is responsible Investment policy. Management Agreement (‘IMA’). forapproving these transactions. Fees under the IMA consist of a tiered The Investment Manager keeps the management fee and time weighting of Board regularly updated on the progress the management fee calculation, a one-off of the deal pipeline, and proposed and transaction fee of 1.2% payable in respect completed transactions. of new investments, and the payment of The Investment Manager discusses with the a performance fee on a phased basis and Board potential investment opportunities subject to future performance tests. and proposed divestments, whether or not they are within the Investment Manager’s delegated authority. 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 forshareholders.” Richard Laing Chair, Management Engagement Committee 114 ## Relationship with Investment Manager continued ## Management Engagement Committee report continued The applicable tiered rates are shown in the During the year, the Committee assessed • reviewed the fees charged to the table below: the overall relationship with the Investment Company by the Investment Manager Manager and: forthe provision of its management Gross investment value Applicable tier rate services; and Up to £1.25bn 1.4% • monitored and reviewed the Investment • reviewed non-investment services Manager’s performance against the £1.25bn to £2.25bn 1.3% provided by the Investment Manager. Company’s strategy and the general Above £2.25bn 1.2% market conditions; Following its assessment, and based on The IMA is terminable on service of • reviewed the quality, timeliness, accuracy the continued good performance of the Governance | 12 months’ notice by either party. | and relevance of the information | Investment Manager, the Committee | | --- | --- | --- | | Further details on the management and | provided to the Board, including | recommended to the Board, and the Board | | performance fees and the relationship | recommendations on new investments | agreed, that the continued appointment | | between the Company, 3i Investments plc | and divestments and reviews of portfolio | of the Investment Manager on the terms | | and 3i Group are described in more detail | company performance; | set out in Note 18 in the Financial statements | | in Note 18 in the Financial statements on | | on pages 168 and 169 is in the interest of the | • reviewed reports from industry analysts, pages 168 and 169. Company and its shareholders as a whole. comparing the performance of listed infrastructure investment companies, Richard Laing including an analysis of the terms Chair, Management Engagement Committee of their management agreements 9 May 2023 and fees charged relative to their investment objectives; 3i Infrastructure plc Annual report and accounts 2023 115 ## Remuneration ## Remuneration Committee report | It is the responsibility of the | The Remuneration Committee reviewed the | After careful consideration the Committee | | | --- | --- | --- | --- | | RemunerationCommittee to recommend | current level of the Directors’ fees, taking | recommended to the Board that the fees | | | to the Board a policy for non-executive | account of the challenges in the global | for Directors, the Chair, the Chair of the | | | Director remuneration, to monitor its | macro environment, the impact of an | Audit and Risk Committee and the Senior | | | implementation and to ensure that all | increasingly complex regulatory environment | Independent Director be increased as | | | payments to non-executive Directors | on Directors, and time spent, including | set out below, and this was subsequently | | | aremade in accordance with the | but not limited to, attendance at meetings, | approved by the Board to take effect | | | agreed policy. | Board calls with the Investment Manager, | from1 April 2023. | | | | the strategy sessions and attending ad hoc | | Governance | Remuneration policy meetings. The Committee also reviewed | The Company’s policy is that smaller, | external benchmarking reports on Director | | --- | --- | | incremental increases to non-executive | remuneration for both FTSE 250 companies | | Director fees is a preferable approach | and, inparticular, investment trusts. | toadjusting fees, rather than larger increases atlonger frequencies. The Directors’ fees for the financial year to 31 March 2023 and fee increases from 1 April2023 are as follows: The remuneration of each of the Directors is subject to fixed fee arrangements Amount per annum Amount paid in Amount paid in to be paid from the year ended the year ended and none of the Directors received any 1 April 2023 31 March 2023 31 March 2022 additional remuneration or incentives Directors’ fees £ £ £ inrespect of his or her services as a Richard Laing 130,000 124,000 120,000 Directorofthe Company. Doug Bannister 50,000 47,500 46,000 The fee structure for non- Wendy Dorman 62,000 58,500 56,000 executive Directors should 1 Stephanie Hazell 50,000 23,750 0 be transparent and reflect Samantha Hoe-Richardson 50,000 47,500 46,000 the increasing complexity 2 Ian Lobley 50,000 47,500 46,000 of the Company, along Paul Masterton 58,000 55,000 53,000 with the skill set and time 1 Appointed with effect from 29 September 2022. commitment required of 2 Fee payable to 3i plc. non-executive Directors.” Paul Masterton Paul Masterton Chair, Remuneration Committee Chair, Remuneration Committee 9 May 2023 116 ## Additional statutory and corporate ## governance information Principal activity Corporate governance Appointment and re-election The Board is responsible to shareholders for the overall management of the The Company is a closed-ended The Company is committed to upholding ofDirectors Company and may exercise all the powers UK investment trust that invests in the highest standards of corporate The appointment and re-election of of the Company subject to the provisions infrastructure businesses and assets. governance. The Company observes the Directors is governed by the Articles, the of relevant statutes, the Articles and any The Directors do not anticipate any change requirements of the AIC Code, a copy of Companies (Jersey) Law 1991 and related directions given by special resolution of in the principal activity of the Company in which is available from The Association of legislation. The Articles provide that at the shareholders. | | the foreseeable future. Its unconsolidated | Investment Companies (the ‘AIC’) website | each AGM of the Company all the Directors | | | --- | --- | --- | --- | --- | | | subsidiaries are shown in Note 19 in the | at www.theaic.co.uk. The provisions of | at the date of notice convening the AGM | | | Governance | | | | Matters reserved for the Board | | | Financial statements on pages 170 to 177. | the AIC Code are more appropriate for a | shall retire from office and each Director | | The Board has approved a formal closed-ended investment trust than the UK may offer himself or herself for election Investment trust status Scheduleof Matters Reserved to it and Code because, amongst other things, it has or re-election. In addition, under the AIC itsduly authorised Committees for The Company is a UK approved investment no executive directors and no employees. Code, all Directors should be subject to decision, as detailed on page 93. trust. The affairs of the Company are The AIC website includes an explanation annual election by shareholders. As a directed to enable it to maintain its UK of how the AIC Code adapts the principles result, all Directors will retire and stand Portfolio management tax domicile and its approved investment and provisions set out in the UK Code for election or re-election at the next andvotingpolicy trust company status, which it did during to make them relevant for investment AGM to be held on 6 July 2023. The Board In relation to unquoted investments, the the course of the year. This is managed companies. The Company complied with regularly considers the independence of Company’s approach is to seek to add value on an ongoing basis by the Investment all the provisions of the AIC Code for non-executive Directors as detailed on to the businesses in which it invests through Manager and monitored by the Audit the financial year ended 31 March 2023. page 100. the extensive experience, resources and andRisk Committee. See page 85 for the Company’s Statement The Directors’ letters of appointment contacts of the Investment Manager’s team. ofCompliance with the AIC Code. | | were updated this year as further detailed | In relation to quoted equity investments, | | --- | --- | --- | | Directors’ duties | in the Nomination Committee report on | the Company’s policy is to exercise voting | | | page 102. | rights on matters affecting the interests | Details of compliance by Directors with ofthe Company. theirDirectors’ duties are set out on Board’s responsibilities pages81 and 82. andprocesses 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. 3i Infrastructure plc Annual report and accounts 2023 117 ## Additional statutory and corporate ## governance information continued | Regulation | The Investment Manager is a subsidiary of | In accordance with Part 5 of the Regulations | Results and dividends | | --- | --- | --- | --- | | | 3i Group and the Remuneration policy of | and the relevant requirements of the EU | | | The Company is incorporated in Jersey | | | The Directors recommend that a final | | | 3i Group (which applies to the Investment | Alternative Investment Fund Managers | | | andis regulated by the Jersey Financial | | | dividend of 5.575 pence per share | | | Manager) was last approved by 3i Group’s | Directive, the Investment Manager, as | | | Services Commission as a collective | | | (2022: 5.225 pence per share) be paid in | | | shareholders in 2020. Details of the | an AIFM, requires all relevant controlled | | | investment fund under the Collective | | | respect of the year to 31 March 2023 to | | | Remuneration policy are set out in the 3i | portfolio companies to make available to | | | Investment Funds (Jersey) Law 1988. | | | shareholders on the register at the close of | | | Group Annual report and accounts for 2022. | employees an annual report which meets | | | It hasaPremium Listing on the London | | | business on 16 June 2023. The Company | the applicable disclosure requirements. Stock Exchange’s Main Market. The disclosures required by the Investment has chosen not to designate any of its final Governance Manager as an AIFM are contained in the These are available either on the portfolio dividend as an interest distribution. Alternative Investment Fund Annual report and accounts of 3i Group company’s website or through filing with The distribution of the dividend payments Managers Directive (www.3i.com). These disclosures include the relevant local authorities. between interim and final dividends For the purposes of the Alternative the remuneration (fixed and variable) of is evaluated by the Board each year, NMPI Investment Fund Managers Regulations all staff and all AIFM Identified Staff of the according to the Company’s performance, 2013 (the ‘Regulations’) and the EU Investment Manager. Due to 3i Group’s As a UK investment trust, the Company’s portfolio income generation and other Alternative Investment Fund Managers operational structure, the information shares are excluded from the FCA rules factors, such as profits generated on the Directive, the Company is an alternative needed to provide a further breakdown of regarding the restrictions on the retail realisation of portfolio assets. The Company investment fund (‘AIF’). The Investment remuneration attributable to the staff and distribution of unregulated collective will be targeting a dividend for FY24 of 11.90 Manager is approved as an alternative the AIFM Identified Staff of the Investment investment schemes and close substitutes pence per share. investment fund manager (‘AIFM’) by the Manager as the Company’s AIFM is not (‘non-mainstream pooled investments’, Financial Conduct Authority (the ‘FCA’) readily available and would not be relevant or ‘NMPIs’) and therefore the restrictions for the purposes of the Regulations and is or reliable. relating to NMPIs do not apply to its shares. the Company’s AIFM. The Depositary is It is the Board’s intention that the Company Although certain investor disclosures currently Citibank UK Limited. will continue to conduct its affairs in such required by the FCA’s Investment a manner that it maintains its approved Funds sourcebook are made in this investment trust company status and that, Annual report, further disclosures are accordingly, the Company’s shares will summarised on the Company’s website at continue to be excluded from the FCA’s www.3i-infrastructure.com. There have been rules relating to NMPIs. no material changes to these disclosures during the financial year. 118 ## Additional statutory and corporate ## governance information continued | Operations and management | Revolving credit facility | Major interests in ordinary shares | | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | arrangements | During the year, the Company extended | As at 31 March 2023 and 30 April 2023, the Company has received notification in | | | | | | | | | | Details of the role and responsibilities of the | its existing Revolving CreditFacility | accordance with Chapter 5 of the FCA’s Disclosure Guidance and Transparency Rules | | | | | | | | | | Investment Manager under the Investment | (‘RCF’) from £700 million to £900 million | of thefollowing notifiable interests in the voting rights in the Company’s ordinary | | | | | | | | | | Management Agreement are set out in the | and cancelled an additional £300 million | share capital: | | | | | | | | | | Management Engagement Committee | facility available at the beginning of the | | | | | | | | | | | | | | | Number of | | | | Number of | | | | report on pages 113 and 114. | financial year, with a maturity of less than | | | | | | | | | | | | | | | | 1 | | | | 1 | | | | | | ordinary shares | | as | % of issued | ordinary shares | | as | % of issued | one year. The RCF has a maturity date of Governance Interest in ordinaryshares at 31March 2023 sharecapital at 30April2023 sharecapital Other significant service November 2025 and has one remaining 3i Group plc (and subsidiaries) 269,242,685 29.19% 269,242,685 29.19% arrangements one-year extension option. The RCF has Schroders plc 49,118,773 5.33% 51,367,262 5.57% a margin of1.50% and a non-utilisation In addition to the investment management fee. The facility is a sustainability-linked 1 Each ordinary share carries the right to one vote. arrangements, 3i plc and 3i Investments RCF. It includes stretching targets across plc (both subsidiaries of 3i Group plc), ESG themes aligned with the Company’s in relation to certain regulatory services, Directors’ shareholding and share interests purpose. Performance againstthese have been appointed by the Company to Details of Directors’ interests (including interests of their closely associated persons) targets will adjust the margin for the provide support services, including treasury intheCompany’s shares as at 31 March 2023* are shown in the table below. subsequent year. and accounting services, investor relations and other support services. The amounts Ordinary shares at Ordinary shares at Share capital payable under these arrangements are Directors’ interests and beneficial interests 31 March 2023 31 March 2022 On 14 February 2023, following a non described in more detail in Note 18 in Richard Laing 35,000 35,000 pre-emptive capital raise, 30,915,990 new theFinancial statements on pages 168 Doug Bannister 20,000 20,000 ordinary shares of the Company were and 169. Wendy Dorman 28,294 21,947 admitted to the premium listing segment Stephanie Hazell 6,420 0 3i plc acts as Company Secretary to the of the Official List of the FCA and to trading Samantha Hoe-Richardson 2,839 1,339 Company and Aztec Financial Services on the London Stock Exchange’s Main (Jersey) Limited acts as the Company’s Ian Lobley 0 0 Market. See page 64 of the Financial Review Jersey fund administrator, which Paul Masterton 29,194 29,194 for further details of the capital raise. includes provision of the Company’s * There have been no changes in Directors’ shareholding and share interests since 31 March 2023. The issued share capital of the Company Compliance Officer, MoneyLaundering asat 31 March 2023 was 922,350,000 Compliance Officer andMoney ordinary shares (2022: 891,434,010). LaunderingReporting Officer. The Company does not hold any ordinaryshares in treasury. 3i Infrastructure plc Annual report and accounts 2023 119 ## Additional statutory and corporate ## governance information continued Directors’ authority to buy Directors’ indemnities Information included in the Jersey company law requires the Directors to prepare financial statements for each backshares The Articles provide that, subject to the Strategic report financial period in accordance with The Company did not purchase any of its provisions of the Statutes, every Director The Strategic report on pages 1 to 82 generally accepted accounting principles. own shares during the year. The current of the Company shall be indemnified out provides a review of the performance and The Financial statements of the Company authority of the Company to make market of the assets of the Company against all position of the Company, together with are required by law to give a true and fair purchases of up to 14.99% of the issued liabilities and expenses incurred by him or a description of the principal risks and view of the state of affairs of the Company ordinary share capital expires at the 2023 her in the actual or purported execution uncertainties that it faces. Furthermore, the at the period end and of the profit or loss | AGM. The Company will seek to renew such | or discharge of his or her duties. ‘Statutes’ | Strategic report includes the Company’s | | | | --- | --- | --- | --- | --- | | | | | ofthe Company for the period then ended. | Governance | | authority until the end of the AGM in 2024, | here refers to the Companies (Jersey) Law | risk management objectives and policies; | | | | specifying the maximum and minimum | 1991 and every other statute, regulation or | likely future developments of the business; | In preparing these Financial statements, | | | price at which shares can be bought back. | order for the time being in force concerning | GHG emissions; and the s172 statement. | theDirectors should: | | | Any buy back of ordinary shares will be | companies registered under the Companies | The Directors’ Resilience statement is also | | | • select suitable accounting policies made in accordance with Jersey law and (Jersey) Law 1991. shown in the Strategic report on page 78. andthen apply them consistently; the making and timing of any buy backs In addition, the Company has entered into Statement of Directors’ • make judgements and estimates will be at the discretion of the Directors. indemnity agreements for the benefit of its responsibilities thatare reasonable; Such purchases will also only be made in Directors and these remain in force at the accordance with the Listing Rules of the The Directors are responsible for • specify which generally accepted date of this report. The Company also had FCA, which provide that the price paid must preparing the Annual report and accounts accounting principles have been directors’ and officers’ liability insurance not be more than the higher of: (i) 5% above in accordance with applicable law and adoptedin their preparation; and inplace in the year. the average middle market quotations for regulations and those International Financial • prepare the Financial statements on the ordinary shares for the five business Political donations Reporting Standards (‘IFRSs’) which have the going concern basis, unless it is days before the shares are purchased; and been adopted by the United Kingdom. inappropriate to presume that the During the year to 31 March 2023 no (ii) the higher of the last independent trade Company will continue in business. donations were made to political parties As a company listed on the London Stock and the highest current independent bid on or organisations, or independent election Exchange’s Main Market, 3i Infrastructure the London Stock Exchange at such time. candidates and no political expenditure plc is subject to the FCA’s Listing Rules and was incurred. Disclosure Guidance and Transparency Rules, as well as to all applicable laws and regulations of Jersey, where it is incorporated. 120 ## Additional statutory and corporate ## governance information continued | The Directors are responsible for keeping | The Directors are also responsible | In accordance with the FCA’s Disclosure | The Directors of the Company and their | | --- | --- | --- | --- | | accounting records which are sufficient | forpreparing the Annual report and | Guidance and Transparency Rules, the | functions are listed on pages 87 and 88 | | to show and explain the Company’s | accounts and the Directors confirm that | Directors confirm to the best of their | andpages 92 and 93 and page 99. | | transactions and are such as to disclose | they consider that, taken as a whole, | knowledge that: | | The Directors have acknowledged their | with reasonable accuracy at any time | the Annual report and accounts are | | | | --- | --- | --- | --- | | | | • the Financial statements, prepared in | responsibilities in relation to the Financial | | the financial position of the Company | fair, balanced and understandable and | | | | | | accordance with applicable accounting | statements for the year to 31 March 2023. | | and enable them to ensure that the | providethe information necessary for | | | standards, give a true and fair view of Company’sFinancial statements comply shareholders to assess the Company’s By order of the Board the assets, liabilities, financial position Governance with the requirements of the Companies performance, business model and strategy. Authorised signatory and profit or loss of the Company (Jersey) Law 1991. The Directors confirm that, so far as they takenasawhole; and 3i plc Company Secretary | They are also responsible for | are each aware, there is no relevant audit | | | | --- | --- | --- | --- | | | | • the Annual report and accounts include | 9 May 2023 | | safeguardingthe assets of the Company | information of which the Company’s auditor | | | a fair review of the development and Registered Office: and hence for taking reasonable steps is unaware; and each Director has taken performance of the business and the 11-15 Seaton Place | for the prevention and detection of | all the steps that he or she ought to have | | | | --- | --- | --- | --- | | | | position of the Company taken as a | St. Helier | | fraudandother irregularities. | taken as a director to make him or herself | | Jersey JE4 0QH | whole, together with a description of Channel Islands aware of any relevant audit information and theprincipal risks and uncertainties to establish that the Company’s auditor is facedby the Company. aware of that information. 121 ## Accounts ## and other ## information 122 ## 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. Accounts and other information 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. 3i Infrastructure plc Annual report and accounts 2023 123 ## 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 inthe 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 prohibitedby the FRC’s Ethical Standard to the Company. Accounts and other information 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 ofcomprehensive 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 There have been no significant changes in our audit approach compared with the prior year. inourapproach 124 ## 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; Accounts and other information • 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 bytheInvestment 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 ontheCompany’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. 3i Infrastructure plc Annual report and accounts 2023 125 ## 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 onthese matters. Accounts and other information 5.1 Fair value of Investments Key audit At 31 March 2023, the Company held investments totalling £3,641 million (2022: £2,873 million) in unquoted companies which are measured at matter fair valuethrough profit and loss. These investments are classified at Level 3 within the IFRS fair value hierarchy and, for Economic Infrastructure description 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 asakeysource of estimation uncertainty on pages 142 and 143 and in the portfolio valuation methodology on pages 41 and 42. 126 ## Independent auditor’s report to the ## members of 3i Infrastructure plc continued 5.1 Fair value of Investments continued How the scope In response to the key audit matter identified, we performed the following procedures: of our audit • tested the controls in respect of the valuation process adopted by the Investment Manager and the Board, including the review and approval processes responded undertaken by the Investment Manager’s valuation committee; to the key • tested that the valuation methodology is compliant with IFRS 13 requirements; audit matter • met with the Investment Manager’s Managing Partners, CFO and other partners and personnel responsible for preparing and reviewing the valuations Accounts and other information 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 theinherent 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 cashflow 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, andtherefore have concluded that the fair value of the Company’s investments as at 31 March 2023 is appropriate. 3i Infrastructure plc Annual report and accounts 2023 127 ## Independent auditor’s report to the ## members of 3i Infrastructure plc continued 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 bechanged 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). Accounts and other information 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. Materiality NAV £31m Audit Committee £1.5m NAV Materiality 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 £3,101m factors of stakeholder interest. reporting threshold 128 ## 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; Accounts and other information • 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 thatthreshold 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 theoverall 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 torespond 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 thevaluation of investments, performance and management fees, investment income and financial reporting. This has included the control environment andrelevant controls operatingat the Investment Manager as a key service provider to the Company. We have also tested the controls in respect of the investment valuation process. 3i Infrastructure plc Annual report and accounts 2023 129 ## Independent auditor’s report to the ## members of 3i Infrastructure plc continued 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 theFinancialstatements 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 inrespect 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. Accounts and other information 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 fortheother 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. 130 ## 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 giveatrue 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 Accounts and other information 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 ofthe 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 assessmentof 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 Financialstatements and any potential indicators of fraud. 3i Infrastructure plc Annual report and accounts 2023 131 ## Independent auditor’s report to the ## members of 3i Infrastructure plc continued 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. Accounts and other information 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 asapproved 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 adirect 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 anycorrespondence 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. 132 ## 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: Accounts and other information • 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. 3i Infrastructure plc Annual report and accounts 2023 133 ## Independent auditor’s report to the ## members of 3i Infrastructure plc continued 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 sixyears, 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). Accounts and other information 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 wemight state to the Company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members as a body, for our audit work, for this report, or for the opinions we have formed. Stephen Craig, FCA For and on behalf of Deloitte LLP Recognised Auditor London, United Kingdom 9 May 2023 134 ## Statement of comprehensive income ## For the year to 31 March | | Year to | | Year to | | | --- | --- | --- | --- | --- | | | 31 March | | 31 March | | | | | 2023 | | 2022 | | Notes | | £m | | £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 Accounts and other information 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 3i Infrastructure plc Annual report and accounts 2023 135 ## Statement of changes in equity ## For the year to 31 March | | Stated | | | | | | | | | | | Total | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | capital | | Retained | | | Capital | | | Revenue | | shareholders’ | | | | | | | | 1 | | | 1 | | | 1 | | | | account | | reserves | | | reserve | | | reserve | | | equity | | For the year to 31 March 2023 Notes | | £m | | £m | | | £m | | | £m | | £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) Accounts and other information Closing balance at 31 March 2023 879 1,282 940 – 3,101 | | Stated | | | | | | | | | | Total | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | capital | | Retained | | Capital | | | Revenue | | shareholders’ | | | | | | | 1 | | | 1 | | | 1 | | | | account | | reserves | | reserve | | | reserve | | | equity | | For the year to 31 March 2022 Notes | | £m | | £m | | £m | | | £m | | £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. 136 # Balance sheet As at 31 March Accounts and other information | | 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** | Balance sheet continued 3i Infrastructure plc Annual report and accounts 2023 137 | | 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 Accounts and other information 138 ## Cash flow statement ## For the year to 31 March | Year to | | Year to | | | --- | --- | --- | --- | | 31 March | | 31 March | | | | 2023 | | 2022 | | | £m | | £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 Accounts and other information 1 Investment income 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). 3i Infrastructure plc Annual report and accounts 2023 139 ## Reconciliation of net cash flow to movement in net debt ## For the year to 31 March | | Year to | | Year to | | | --- | --- | --- | --- | --- | | | 31 March | | 31 March | | | | | 2023 | | 2022 | | Notes | | £m | | £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) Accounts and other information 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. 140 ## Significant accounting policies Corporate information Basis of preparation Going concern Income and non-income cash is 3i Infrastructure plc (the ‘Company’) In accordance with IFRS 10 (as amended), The Financial statements are prepared on expected to be received from the is acompany incorporated in Jersey, entities that meet the definition of an agoing concern basis as disclosed in the portfolio investments during the Channel Islands. The Financial statements investment entity are required to fair Risk report, as the Directors are satisfied coming year, a portion of which will be for the year to 31 March 2023 comprise value certain subsidiaries through profit thatthe Company has the resources to required to support the payment of the the Financial statements of the Company or loss in accordance with IFRS 9 Financial continue in business for the foreseeable dividend target and the Company’s as defined in IFRS 10 Consolidated Instruments, rather than consolidate their future. The Directors have made an otherfinancial commitments; Financial Statements. results. The Company does not have any assessment of going concern, taking Accounts and other information consolidated subsidiaries, which would into account a wide range of information • uncertainty around the valuation of The Financial statements were authorised include subsidiaries that are not themselves relating to present and future conditions, the Company’s assets as set out in the for issue by the Board of Directors on investment entities and provide investment- including the Company’s cash and Key sources of estimation uncertainties 9 May 2023. related services to the Company. liquidity position, current performance section. The valuation policy and process and outlook, which considered the impact was consistent with prior years. This year Statement of compliance The Financial statements of the Company | | | of the higher inflationary and interest | a key focus of the portfolio valuations | | --- | --- | --- | --- | | These Financial statements have been | are presented in sterling, the functional | | | | | | rate environment, ongoing geopolitical | at 31 March 2023 was an assessment | | prepared in accordance with United | currency of the Company, rounded | | | | | | uncertainties and current and expected | of the impact of the macroeconomic | | Kingdom adopted International Financial | to the nearest million except where | | | | | | financial commitments, using the | environmenton the operational and | | Reporting Standards (‘IFRS’) and | otherwise indicated. | | | | | | information available up to the date of issue | financial performance of each portfolio | InternationalAccounting Standards. The preparation of financial statements ofthese Financial statements. As part of company. In particular this focused on These Financial statements have also inconformity with IFRS requires the thisassessment the Directors considered: increasing inflationary pressures, rising been prepared in accordance with and Boardto make judgements, estimates and interest rates and the impact on the • the analysis of the adequacy of the incompliance with the Companies assumptions that affect the application of cost ofdebt, volatility in power prices Company’s liquidity, solvency and capital (Jersey)Law 1991. policies and reported amounts of assets and ongoing geopolitical uncertainties. position. The Company manages and and liabilities, income and expenses. We have incorporated into our cash monitors liquidity regularly, ensuring it The estimates and associated assumptions flowforecasts a balanced view of future is adequate and sufficient. At 31 March are based on experience and other factors income receipts and expenses; and 2023, liquidity remained strong at that are believed to be reasonable under £404 million (2022: £786 million). the circumstances, the results of which form Liquidity comprised cash and deposits the basis of determining the carrying values of£5 million (2022: £17 million) and of assets and liabilities that are not readily undrawn revolving credit facilities of apparent from other sources. Actual results £399 million (2022: £769 million) with may differ from these estimates. amaturity date ofNovember 2025. 3i Infrastructure plc Annual report and accounts 2023 141 ## Significant accounting policies continued • the Company’s financial commitments. In addition to the considerations listed (i) Assessment as investment entity – The Company meets the criteria as follows: The Company had no investment above there are a number of actions within Entities that meet the definition of an • the stated strategy of the Company is commitments at 31 March 2023. management control to enhance available investment entity within IFRS 10 are to deliver stable returns to shareholders The Company had ongoing charges of liquidity. These include the timing of certain required to measure their subsidiaries through a mix of income yield and £48 million in the year to 31 March 2023, income receipts from the portfolio and at fair value through profit or loss rather capital appreciation; detailed in Table 5 in the Financial review, the level and timing of new investments than consolidate them unless they • the Company provides investment which are indicative of the ongoing run or realisations. provided investment-related services management services and has several rate in the short term. The Company to the Company. To determine that Having performed the assessment of investors who pool their funds to Accounts and other information has a FY23 performance fee accrual of the Company continues to meet the going concern, the Directors considered gain access to infrastructure-related £45 million, a third of which is payable definition of an investment entity, the it appropriate to prepare the Financial investment opportunities that they might within the next 12 months. The Company Company is required to satisfy the statements of the Company on a going not have had access to individually; and has a FY22 performance fee accrual of following three criteria: concern basis. The Company has sufficient | £36 million relating to the second and | | | | • the Company has elected to measure | | --- | --- | --- | --- | --- | | | financial resources and liquidity and is well | (a) the Company obtains funds from one | | | | third instalments of the FY22 fee, the | | | | and evaluate the performance of all of its | | | placed to manage business risks in the | | or more investors for the purpose | | | second instalment being due within the | | | | investments on a fair value basis. The fair | | | current economic environment and can | | of providing those investor(s) with | | | next 12 months, an accrual of £2 million | | | | value method is used to represent | | | continue operations for a period of at least | | investment management services; | | | relating to the third instalment of the | | | | the Company’s performance in its | 12 months from the date of approval of FY21 fee due within the next 12 months (b) the Company commits to its investor(s) communication to the market, including theseFinancial statements. and a proposed final dividend for FY23 that its business purpose is to invest investor presentations. In addition, the of £51 million. In addition, while not funds solely for returns from capital Company reports fair value information Key judgements a commitment at 31 March 2023, the appreciation, investment income, or internally to Directors, who use fair value The preparation of financial statements in Company has a dividend target for FY24 both; and as the primary measurement attribute to accordance with IFRS requires the Directors | of 11.90 pence per share. | | | | evaluate performance. | | --- | --- | --- | --- | --- | | | to exercise judgement in the process of | (c) the Company measures and evaluates | | | | | applying the accounting policies defined | | the performance of substantially all of its | | | | below. The following policies are areas | | investments on a fair value basis. | | where a higher degree of judgement has been applied in the preparation of the Financial statements. 142 ## Significant accounting policies continued The Directors are of the opinion that the (iii) Assessment of consolidation Key sources of estimation The discount rate applied to the cash flows Company has all the typical characteristics requirements – The Company holds in each investment portfolio company is uncertainties of an investment entity and continues significant stakes in the majority of its a key source of estimation uncertainty. Valuation of the investment portfolio to meet the definition in the standard. investee companies and must exercise The acquisition discount rate is adjusted to This conclusion will be reassessed on an judgement in the level of control of The key area where estimates are reflect changes in company-specific risks annual basis. the underlying investee company that significantto the Financial statements and to the deliverability of future cash flows is obtained in order to assess whether have a significant risk of causing a material and is calibrated against secondary market (ii) Assessment of investments as the Company should be classified as adjustment to the carrying amounts of information and other available data points, structured entities – A structured Accounts and other information a subsidiary. assets and liabilities within thenext financial including comparable transactions. entity is an entity that has been year is in the valuation of the investment designed so that voting or similar The Company must also exercise The discount rates applied to the portfolio. The portfolio is well-diversified rights are not the dominant factor judgement in whether a subsidiary provides investment portfolio at 31 March 2023 by sector, geography and underlying risk in deciding who controls the entity. investment-related services or activities range from 10.0% to 13.2% (2022: 10.0% to exposures. The key risks to the portfolio are Additional disclosures are required and therefore should be consolidated or 13.2%) and the weighted average discount discussed in further detail in the Risk report. | by IFRS 12 for interests in structured | held at fair value through profit or loss. | | rate applied to the investment portfolio is | | --- | --- | --- | --- | | entities, whether they are consolidated | Further details are shown in significant | The majority of assets in the investment | 11.3% (2022: 10.9%). The increase in the year | | or not. The Directors have assessed | accounting policy ‘A Classification’ below. | portfolio are valued on a discounted cash | is due to the evolution of the portfolio mix | | whether the entities in which the | | flow basis which requires assumptions to be | following the realisation of the European | During the year, the Company set up three Company invests should be classified as made regarding future cash flows, terminal Projects portfolio and the completion of the wholly owned subsidiary entities for the new structured entities and have concluded value and the discount rate to be applied GCX and Future Biogas acquisitions. In the investment in Future Biogas. The Directors that none of the entities should be to these cash flows. The methodology for prior year, the Projects portfolio was valued have assessed whether any of these entities classified as structured entities as deriving the fair value of the investment on a sales basis and was removed from the provide investment-related services and voting rights are the dominant factor in portfolio, including the key estimates, is set discount rate range. have concluded that they should not be deciding who controls these entities. out in the Portfolio valuation methodology consolidated and that they should all be section. Refer to Note 7 for further details held at fair value through profit or loss. of the valuation techniques, significant The adoption of certain accounting inputs to those techniques and sensitivity policiesby the Company also requires the of the fair value of these investments to the use of certain critical accounting estimates assumptions that have been made. in determining the information to be disclosed in the Financial statements. 3i Infrastructure plc Annual report and accounts 2023 143 ## Significant accounting policies continued The cash flows on which the discounted The terminal value attributes a residual New and amended standards Amendments to IAS 16 Property, Plant and cash flow valuation is based are value to the portfolio company at the end Equipment – Proceeds before Intended Use adopted for the current year derived from detailed financial models. of the projected discrete cash flow period (1 January 2022) Standards and amendments to standards | These incorporate a number of | based on market comparables. The terminal | | | | | --- | --- | --- | --- | --- | | | | applicable to the Company that became | Amendments to IAS 37 Provisions, | | | assumptions with respect to individual | value assumptions consider climate change | | | | | | | effective during the year and were adopted | Contingent Liabilities and Contingent | | | portfolio companies, including: forecast | risk and stranded asset risk. The valuation | | | | | | | by the Company on 1 April 2022 are | Assets – Onerous Contracts | | | new business wins or new orders; cost- | of each asset has significant estimation in | | | | | | | listed below: | (1 January 2022) | | | cutting initiatives; liquidity and timing | relation to asset specific items but there is | | | | | of debtor payments; timing of non- | also consideration given to the impact of | Amendments to IFRS 17 Insurance | Amendments to IFRS 3 Business | Accounts and other information | | committed capital expenditure and | wider megatrends such as the transition to a | contracts(1 January 2023) | Combinations (1 January 2022) | | | construction activity; the terms of future | lower-carbon economy and climate change. | | | | | | | Disclosure of Accounting Policies | Standards and amendments | | debt refinancing; and macroeconomic | | The effects of climate change, including | (Amendments to IAS 1 and IFRS Practice | | | --- | --- | --- | --- | | assumptions such as inflation and energy | | | issued but not yet effective | | | extreme weather patterns or rising sea | Statement 2) (1 January 2023) | | | prices. Future power price projections are | | | As at 31 March 2023, the following new | levels in the longer term could impact the taken from independent forecasters, and Deferred Tax related to Assets and oramended standards, which have not valuation of the assets in the portfolio in changes in these assumptions will affect Liabilities arising from a Single Transaction beenapplied in these Financial statements, different ways. The Summary of portfolio the future value of our energy-generating (Amendments to IAS 12) (1 January 2023) had been issued by the International valuation methodology section earlier in portfolio companies. Accounting Standards Board (‘IASB’) this document provides further details on Annual Improvement to IFRS Standards butareyet to become effective: | The Summary of portfolio valuation | some of the assumptions that have been | 2018-2020 Cycle – Amendments to IFRS | | | --- | --- | --- | --- | | methodology section onpages 41 and | made in deriving terminal values and some | 1 First-time Adoption of International | Classification of Liabilities as Current | | 42 provides further details on some of | of the risk factors considered in the cash | Financial Reporting Standards, IFRS 9 | orNon-current (Amendments to IAS 1) | | the assumptions that have been made in | flow forecasts. | Financial Instruments, IFRS 16 Leases and | (1 January 2024) | | deriving a balanced base case of cash flows. | | IAS 41 Agriculture | | Lease Liability in a Sale and Leaseback Amendments to IAS 1 Classification of (Amendments to IFRS 16) (1 January 2024) Liabilities as Current or Non-current Non-current Liabilities with Covenants (1 January 2023) (Amendments to IAS 1) (1 January 2024) Amendments to IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors (1 January 2023) 144 ## Significant accounting policies continued The Company intends to adopt these within the structure and concluded B Exchange differences C Investment portfolio standards when they become effective, but that there are no subsidiaries of the Transactions entered into by the Recognition and measurement – does not currently anticipate thestandards Company that provide investment- Company in a currency other than its Investments are recognised and will have a significant impactonthe related services or activities. functional currency are recorded at the de-recognised on a date where the Company’s Financial statements. (ii) Associates – Associates are those rates ruling when the transactions occur. purchaseorsale of an investment Current assumptions regardingthe impact entities in which the Company has Foreign currency monetary assets and is underacontract whose terms of future standards will remain under significant influence, but not control, liabilities are translated to the functional require thedelivery or settlement consideration in light of interpretation over the financial and operating policies. currency at the exchange rate ruling ofthe investment. Accounts and other information notesas and when theyare issued. Investments that are held as part of the atthebalance sheet date. The Company manages its investments A Classification Company’s investment portfolio are Foreign exchange differences arising with a view to profiting from the receipt carried in the Balance sheet at fair value (i) Subsidiaries – Subsidiaries are on translation to the functional currency of investment income and obtaining even though the Company may have entities controlled by the Company. are recognised in the Statement of capital appreciation from changes in the significant influence over those entities. | Control exists when the Company | | | comprehensive income. Foreign exchange | fair value of investments. Therefore, all | | --- | --- | --- | --- | --- | | is exposed, or has rights, to variable | (iii) Joint ventures – Interests in joint | | differences relating to investments held at | unquoted investments are measured at | | returns from its involvement with the | | ventures that are held as part of the | fair value through profit or loss are shown | fair value through profit or loss upon initial | | subsidiary entity and has the ability to | | Company’s investment portfolio are | within the line Net gains on investments. | recognition and subsequently carried in | | affect those returns through its power | | carried in the Balance sheet at fair value. | Foreign exchange differences relating | the Balance sheet at fair value, applying the | | over the subsidiary entity. In accordance | | This treatment is permitted by IFRS 11 | toother assets and liabilities are shown | Company’s valuation policy. Acquisition- | | with the exception under IFRS 10 | | and IAS 28, which allows interests held | within the line Exchange movements. | related costs are accounted foras expenses | | Consolidated Financial Statements, the | | by venture capital organisations where | | when incurred. | Non-monetary assets and liabilities that | Company only consolidates subsidiaries | those investments are designated, | | | | --- | --- | --- | --- | | | | are measured in terms of historical cost | Net gains or losses on investments are the | | in the Financial statements if they | upon initial recognition, as at fair value | | | | | | in a foreign currency are translated using | movement in the fair value of investments | | are deemed to perform investment- | through profit or loss and accounted for | | | | | | the exchange rate at the date of the | between the start and end of the | | related services and do not meet the | in accordance with IFRS 9 with changes | | | | | | transactions. Non-monetary assets and | accounting period, or investment disposal | | definition of an investment entity. | in fair value recognised in the Statement | | | | | | liabilities denominated in foreign currencies | date, or the investment acquisition date and | | Investments in subsidiaries that do | of comprehensive income in the year. | | | | | | that are stated at fair value are translated | the end of the accounting period, including | notmeet this definition are accounted to the functional currency using exchange divestment-related costs where applicable, for as Investments at fair value through rates ruling at the date the fair value was converted into sterling using the exchange profit or loss with changes in fair determined with the associated foreign rates in force at the end of the period; value recognised in the Statement exchange difference being recognised and are recognised in the Statement ofcomprehensive income in the year. within the unrealised gain or loss on ofcomprehensive income. The Directors have assessed all entities revaluation of the asset or liability. 3i Infrastructure plc Annual report and accounts 2023 145 ## Significant accounting policies continued Income • distributions from investments in Limited (iii) Performance fee – The Investment However, due to their short-term and Partnerships are recognised in the Manager is entitled to a performance liquid nature, this is the same as fair Investment income is that portion of Statement of comprehensive income fee based on the total return generated value. Interest receivable or payable incomethat is directly related to the return when the Company’s rights as a Limited in the period in excess of a performance oncash and cash equivalents is from individual investments. It is recognised Partner to receive payment have been hurdle of 8%. The fee is payable in three recognised on an accruals basis. to the extent that it is probable that there established; and equal annual instalments and is accrued will be an economic benefit and the (ii) Bank loans, loan notes and borrowings in full in the period it is incurred. incomecan be reliably measured. • fees receivable represent amounts – Loans and borrowings are initially Further details are provided in Note 18. earned from investee companies on recognised at the fair value of the The following specific recognition Accounts and other information completion of underlying investment (iv) Finance costs – Finance costs consideration received, net of issue criteria must be met before the income transactions and are recognised on associated with loans and borrowings costs associated with the borrowings. is recognised: anaccruals basis once entitlement arerecognised on an accruals basis Where issue costs are incurred in relation • dividends from equity investments totherevenue has been established. usingthe effective interest method. to arranging debt finance facilities are recognised in the Statement of these are capitalised and disclosed D Fees comprehensive income when the E Treasury assets and liabilities within Trade and other receivables and Company’s rights to receive payment (i) Fees – Fees payable represent fees Short-term treasury assets and short- amortised over the life of the loan. have been established. Special dividends incurred in the process of acquiring andlong-term treasury liabilities are used aninvestment and are measured After initial recognition, loans and are credited to capital or revenue to manage cash flows and the overall costs ontheaccruals basis. borrowings are subsequently measured according to their circumstances; of borrowing. Financial assets and liabilities at amortised cost using the effective • interest income from loans that are are recognised in the Balance sheet when (ii) Management fees – A management interest method, which is the rate measured at fair value through profit the relevant company entity becomes fee is payable to 3i plc, calculated that exactly discounts the estimated or loss is recognised as it accrues by a party to the contractual provisions as a tiered fee based on the Gross future cash flows through the expected reference to the principal outstanding ofthe instrument. Investment Value of the Company and life of the liabilities. Amortised cost | and the effective interest rate applicable, | is accrued in the period it is incurred. | | | | | --- | --- | --- | --- | --- | | | | (i) Cash and cash equivalents – Cash and | | is calculated by taking into account | | which is the rate that exactly discounts | Further details on how this fee is | | | | | | | | cash equivalents in the Balance sheet | anyissue costs and any discount or | | the estimated future cash flows through | calculated are provided in Note 18. | | | | | | | | and Cash flow statement comprise cash | premium on settlement. | the expected life of the financial asset at bank, short-term deposits with an to the asset’s carrying value or principal original maturity of three months or less amount. The remaining changes in the and AAA-rated money market funds. fair value movement of the loans are Money market funds are accounted for recognised separately in the line Net at amortised cost under IFRS 9. gains on investments in the Statement ofcomprehensive income; 146 ## Significant accounting policies continued (iii) Derivative financial instruments – F Other assets G Other liabilities Share capital is treated as an equity Derivative financial instruments are instrument, on the basis that no Assets, other than those specifically Liabilities, other than those specifically used to manage the risk associated contractual obligation exists for the accounted for under a separate policy, are accounted for under a separate policy, with foreign currency fluctuations Company to deliver cash or other stated at their consideration receivable are stated based on the amounts which in the valuation of the investment financial assets to the holder of less impairment losses. Such assets are are considered to be payable in respect portfolio. This is achieved by the use the instrument. short-term in nature and the carrying of goods or services received up to the of forward foreign currency contracts. value of these assets is considered to be financial reporting date. Such liabilities On 15 October 2018, the Company became Such instruments are used for the approximate to their fair value. Assets are areshort-term in nature, the carrying UK tax domiciled and, with effect from that Accounts and other information sole purpose of efficient portfolio reviewed for recoverability and impairment valueof these liabilities is considered date, was granted UK approved investment management. All derivative financial using the expected credit loss model tobeapproximate to their fair value. trust status. Financial statements prepared instruments are held at fair value simplified approach. The Company will under IFRS are not strictly required to through profit or loss. H Equity and reserves recognise the asset’s lifetime expected apply the provisions of the Statements Derivative financial instruments are credit losses at each reporting period (i) Share capital – Share capital issued of Recommended Practice issued recognised initially at fair value on where applicable in the Statement of by the Company is recognised at by the UK Association of Investment the contract date and subsequently comprehensive income. An impairment the fair value of proceeds received Companies for the financial statements remeasuredto the fair value at each loss is reversed at subsequent financial and is credited to the Stated capital of Investment Trust Companies (the ‘AIC reporting date. All changes in the fair reporting dates to the extent that the account. Direct issue costs net of tax SORP’). However, where relevant and valueof derivative financial instruments asset’s carrying amount does not exceed are deducted from the fair value of appropriate, the Directors have looked to are taken to the Statement of its carrying value, had no impairment theproceeds received. follow the recommendations of the SORP. comprehensive income. been recognised. From this date, the retained profits of the (ii) Equity and reserves – The Stated Company have been applied to two new The maturity profile of derivative contracts Assets with maturities less than 12 months capital account of the Company reserves, being the Capital reserve and is measured relative to the financial contract are included in current assets, assets with represents the cumulative proceeds the Revenue reserve. These are in addition settlement date of each contract and the maturities greater than 12 months after recognised from share issues or new to the existing Retained reserves which derivative contracts are disclosed in the theBalance sheet date are classified as equity issued on the conversion of incorporate the cumulative retained profits Financial statements as either current non-current assets. warrants made by the Company net of of the Company (after the payment of ornon-current accordingly. issue costs and reduced by any amount dividends) plus any amounts that have been that has been transferred to Retained transferred from the Stated capital account reserves, in accordance with Jersey of the Company to 15 October 2018. Company Law, in previous years. 3i Infrastructure plc Annual report and accounts 2023 147 ## Significant accounting policies continued The Directors have exercised their • Performance fees are applied wholly I Income taxes Given capital items are exempt from tax judgement in applying the AIC SORP to the Capital reserve as they arise under the Investment Trust Company Income taxes represent the sum of the and a summary of these judgements mainly from capital returns on the rules, deferred tax is not expected to be tax currently payable, withholding taxes areas follows: investment portfolio; recognised on these balances. All deferred suffered and deferred tax. Tax is charged or tax liabilities are offset against deferred tax • Operating costs are applied wholly to credited in the Statement of comprehensive • Net gains on investments are applied assets, where appropriate, in accordance the Revenue reserve as there is no clear income, except where it relates to items wholly to the Capital reserve as they with the provisions of IAS 12. connection between the operating charged orcredited directly to equity, relate to the revaluation or disposal expenses of the Company and the in which case the tax is also dealt with of investments; The carrying amount of deferred tax assets Accounts and other information purchase and sale of an investment; in equity. is reviewed at each balance sheet date and • Dividends are applied to the Revenue • Finance costs are applied wholly to reduced to the extent that it is no longer reserve except under specific The tax currently payable is based on the the Revenue reserve as the existing probable that sufficient taxable profits will circumstances where a dividend arises taxable profit for the year. This may differ borrowing is not directly linked to an be available to allow all or part of the asset from a return of capital or proceeds from the profit included in the Statement of investment; and to be recovered. froma refinancing, when they are comprehensive income because it excludes appliedto the Capital reserve; • Exchange movements are applied to items of income or expense that are taxable theRevenue reserve where they relate or deductible in other years and it further • Fees payable are applied to the Capital toexchange on non-portfolio assets. excludes items that are never taxable reserve where the service provided is, in substance, an intrinsic part of an intention or deductible. (iii) Dividends payable – Dividends on to acquire or dispose of an investment; | | ordinary shares are recognised in | To enable the tax charge to be based | | --- | --- | --- | | • Movement in the fair value of derivative | the period in which the Company’s | on the profit for the year, deferred tax | | financial instruments is applied to | obligation to make the dividend | is provided in full on temporary timing | | the Capital reserve as the derivative | payment arises. For the period to | differences, at the rates of tax expected to | | hedging programme is specifically | 15 October 2018, dividends were | apply when these differences crystallise. | | designed to reduce the volatility of | deducted from Retained reserves. | Deferred tax assets are recognised only to | | sterling valuations of the non-sterling | For subsequent periods, dividends are | the extent that it is probable that sufficient | | denominated investments; | deducted first from the Revenue reserve | taxable profits will be available against | | | and then from the Capital reserve | which temporary differences can be set | • Management fees are applied to the Revenue reserve as they reflect ongoing if required. off. In practice, some assets that are likely asset management. Where a transaction to give rise to timing differences will be fee element is due on the acquisition treated as capital for tax purposes. of an investment it is applied to the Capital reserve; 148 # 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, ESWAD and Tangmet 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: | | Economic infrastructure businesses £m | Projects portfolio £m | India Fund £m | Unallocated £m | Total £m | | --- | --- | --- | --- | --- | --- | | **For the year to 31 March 2023** | | | | | | | 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. Accounts and other information 3i Infrastructure plc Annual report and accounts 2023 149 ## Notes to the accounts continued 2 Management and performance fees payable | Year to | | Year to | | | --- | --- | --- | --- | | 31 March | | 31 March | | | | 2023 | | 2022 | | | £m | | £m | Management fee 47 43 Performance fee 45 54 92 97 Accounts and other information 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 | | Year to | | | --- | --- | --- | --- | | 31 March | | 31 March | | | | 2023 | | 2022 | | | £m | | £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. 150 ## Notes to the accounts continued 3 Operating expenses (continued) Services provided by the Company’s auditor During the year, the Company obtained the following services from the Company’s auditor, Deloitte LLP. | | Year to | | Year to | | | --- | --- | --- | --- | --- | | | 31 March | | 31 March | | | | | 2023 | | 2022 | | Audit services | | £m | | £m | 1 Statutory audit Company 0.52 0.40 Accounts and other information 2 UK and Jersey unconsolidated subsidiaries 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. 3i Infrastructure plc Annual report and accounts 2023 151 ## Notes to the accounts continued 4 Finance costs | Year to | | Year to | | | --- | --- | --- | --- | | 31 March | | 31 March | | | | 2023 | | 2022 | | | £m | | £m | Finance costs associated with the debt facilities 14 3 Professional fees payable associated with the arrangement of debt financing 2 2 16 5 Accounts and other information 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 | | Year to | | | --- | --- | --- | --- | | 31 March | | 31 March | | | | 2023 | | 2022 | | | £m | | £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. 152 ## Notes to the accounts continued 6 Income taxes | Year to | | Year to | | | --- | --- | --- | --- | | 31 March | | 31 March | | | | 2023 | | 2022 | | | £m | | £m | Current taxes Current year – – Total income tax charge in the Statement of comprehensive income – – Accounts and other information 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 | | Year to | | | --- | --- | --- | --- | | 31 March | | 31 March | | | | 2023 | | 2022 | | | £m | | £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, ieonce 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. 3i Infrastructure plc Annual report and accounts 2023 153 ## Notes to the accounts continued 7 Investments at fair value through profit or loss and financial instruments 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 Derivative financial instruments held at fair value directly (ie as prices) or indirectly (ie derived from prices) Level 3 Inputs that are not based on observable market data Unquoted investments and unlisted funds Accounts and other information 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. 154 Notes to the accounts continued # 7 Investments at fair value through profit or loss and financial instruments (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) | Accounts and other information 3i Infrastructure plc Annual report and accounts 2023 155 ## Notes to the accounts continued 7 Investments at fair value through profit or loss and financial instruments (continued) Reconciliation of financial instruments categorised within Level 3 of fair value hierarchy | | | As at | | As at | | --- | --- | --- | --- | --- | | | 31 March | | 31 March | | | | | 2023 | | 2022 | | Level 3 fair value reconciliation | | £m | | £m | Opening fair value 2,873 1,804 Additions 824 816 Disposal proceeds and repayment (426) (148) Accounts and other information 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. 156 Notes to the accounts continued ## 7 Investments at fair value through profit or loss and financial instruments (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. Accounts and other information 3i Infrastructure plc Annual report and accounts 2023 157 ## Notes to the accounts continued 7 Investments at fair value through profit or loss and financial instruments (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 Accounts and other information 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 | | Year to | | | --- | --- | --- | --- | | 31 March | | 31 March | | | | 2023 | | 2022 | | | £m | | £m | Current assets Vendor loan notes – 100 Other receivables including prepayments – 2 Capitalised finance costs 4 2 4 104 158 ## 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. Accounts and other information 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. 3i Infrastructure plc Annual report and accounts 2023 159 ## Notes to the accounts continued 9 Financial risk management (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. Accounts and other information 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. 160 ## Notes to the accounts continued 9 Financial risk management (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. | | | Payable | | Due within | | | Due between | | Due between | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | on demand | | | | 1 year | | 1 and 2 years | | 2 and 5 years | | Total | | 2023 | | | £m | | | £m | | £m | | £m | £m | Liabilities 1 Accounts and other information Loans and borrowings – (26) (26) (517) (569) Trade and other payables (4) (35) (33) (15) (87) Derivative contracts – (4) (6) (8) (18) 2 Financial commitments – – – – – 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. | | | Payable | | Due within | | Due between | | Due between | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | on demand | | | | 1 year | 1 and 2 years | | 2 and 5 years | | Total | | 2022 | | | £m | | £m | | £m | | £m | £m | Liabilities 1 Loans and borrowings – (7) (5) (234) (246) Trade and other payables (4) (26) (20) (18) (68) Derivative contracts – (12) (3) (3) (18) 2 Financial commitments (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. Notes to the accounts continued 3i Infrastructure plc Annual report and accounts 2023 161 # 9 Financial risk management (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/ £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. Accounts and other information 162 ## Notes to the accounts continued 9 Financial risk management (continued) As at 31 March 2022 1 Sterling Euro NOK DKK US dollar Total £m £m £m £m £m £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: Accounts and other information 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 | | | As at | | --- | --- | --- | --- | --- | --- | | | 31 March | | | 31 March | | | | | 2023 | | | 2022 | | Investments | | | Investments | | | | at fair value | | | at fair value | | | | | | £m | | | £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. 3i Infrastructure plc Annual report and accounts 2023 163 ## Notes to the accounts continued 9 Financial risk management (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). Accounts and other information 10 Derivative financial instruments | | As at | | As at | | --- | --- | --- | --- | | 31 March | | 31 March | | | | 2023 | | 2022 | | | £m | | £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 ofcertain 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 profitor 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). 164 ## Notes to the accounts continued 11 Loans and borrowings 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. Accounts and other information 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 | | Year to | | | --- | --- | --- | --- | | 31 March | | 31 March | | | | 2023 | 2022 | | | | £m | | £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). 3i Infrastructure plc Annual report and accounts 2023 165 ## Notes to the accounts continued 13 Issued capital 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 Accounts and other information 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). 166 ## Notes to the accounts continued 14 Per share information The earnings and net asset value per share attributable to the equity holders of the Company are based on the following data: | Year to | | Year to | | | --- | --- | --- | --- | | 31 March | | 31 March | | | | 2023 | | 2022 | | | £m | | £m | Earnings per share (pence) Basic and diluted 44.0 45.3 Accounts and other information 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 | | As at | | --- | --- | --- | --- | | 31 March | | 31 March | | | | 2023 | | 2022 | Net asset value per share (pence) Basic and diluted 336.2 303.3 Net assets (£m) Net assets 3,101 2,704 3i Infrastructure plc Annual report and accounts 2023 167 ## Notes to the accounts continued 15 Dividends Year to 31 March 2023 Year to 31 March 2022 Declared and paid during the year 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 Accounts and other information 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 | | As at | | --- | --- | --- | --- | | 31 March | | 31 March | | | | 2023 | | 2022 | | | £m | | £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. 148 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). ![img-3.jpeg](img-3.jpeg) 3i Infrastructure plc Annual report and accounts 2023 169 ## Notes to the accounts continued 18 Related parties (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. Accounts and other information Performance fee Outstanding balance at Year (£m) 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. 170 ## Notes to the accounts continued 19 Unconsolidated subsidiaries and related undertakings 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% Accounts and other information 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% 3i Infrastructure plc Annual report and accounts 2023 171 ## Notes to the accounts continued 19 Unconsolidated subsidiaries and related undertakings (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% Accounts and other information 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% 172 ## Notes to the accounts continued 19 Unconsolidated subsidiaries and related undertakings (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% Accounts and other information 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% 3i Infrastructure plc Annual report and accounts 2023 173 ## Notes to the accounts continued 19 Unconsolidated subsidiaries and related undertakings (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% Accounts and other information 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% 174 ## Notes to the accounts continued 19 Unconsolidated subsidiaries and related undertakings (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% Accounts and other information 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% 3i Infrastructure plc Annual report and accounts 2023 175 ## Notes to the accounts continued 19 Unconsolidated subsidiaries and related undertakings (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% Accounts and other information 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% 176 ## Notes to the accounts continued 19 Unconsolidated subsidiaries and related undertakings (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: Accounts and other information 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% 3i Infrastructure plc Annual report and accounts 2023 177 ## Notes to the accounts continued 19 Unconsolidated subsidiaries and related undertakings (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% Accounts and other information 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). 178 ## Investment policy (unaudited) | The Company aims to build a diversified | The Company will, in any case, invest no | For most investments, the Company | Depending on the size of the relevant | | --- | --- | --- | --- | | portfolio of equity investments in entities | more than 15% of its total gross assets in | seeksto obtain representation on the | investment and the identity of the | | owning infrastructure businesses and | other investment companies or investment | boardof directors of the investee company | relevant co-investor, such a co-investment | | assets. The Company seeks investment | trusts which are listed on the Official List. | (or equivalent governing body) and in cases | arrangement may be subject to the | | opportunities globally, but with a focus | | where it acquires a majority equity interest | relatedparty transaction provisions | The Company may also consider investing onEurope, North America and Asia. in a business, that interest may also be contained in the Listing Rules and may in other fund structures (in the event that acontrolling interest. therefore require shareholder consent. The Company’s equity investments will it considers, on receipt of advice from often comprise share capital and related the Investment Manager, that that is the No investment made by the Company will The Company’s Articles require its Accounts and other information | shareholder loans (or other financial | most appropriate and effective means | represent more than 25% of the Company’s | outstanding borrowings, including | | --- | --- | --- | --- | | instruments that are not shares but that, | of investing), which may be advised or | gross assets, including cash holdings, at | any financial guarantees to support | | in combination with shares, are similar | managed either by the Investment Manager | the time of making the investment. It is | subsequentobligations, to be limited to | | insubstance). The Company may also | or a third party. If the Company invests | expected that most individual investments | 50%of the gross assets of the Company | | investin junior or mezzanine debt in | in another fund advised or managed by | will exceed £50 million. In some cases, the | (valuing investments on the basis | | infrastructure businesses or assets. | 3i Group, the relevant proportion of any | total amount required for an individual | includedin the Company’s accounts). | | | advisory or management fees payable | transaction may exceed the maximum | | | Most of the Company’s investments are | | | In accordance with Listing Rules | | | by the investee fund to 3i plc will be | amount that the Company is permitted | | | in unquoted companies. However, the | | | requirements, the Company will | | | deducted from the annual management | to commit to a single investment. In such | | | Company may also invest in entities owning | | | onlymakeamaterial change to its | | | fee payable under the Investment | circumstances, the Company may consider | | | infrastructure businesses and assets whose | | | investment policy with the approval | | | Management Agreement and the relevant | entering into co-investment arrangements | | | shares or other instruments are listed on | | | of shareholders. | | | proportion of any performance fee will be | with 3i Group (or other investors who may | | any stock exchange, irrespective of whether deducted from the annual performance also be significant shareholders), pursuant they cease to be listed after completion fee, if payable, under the Investment to which 3i Group and its subsidiaries (or ofthe investment, if the Directors judge Management Agreement. such other investors) may co-invest on the that such an investment is consistent with same financial and economic terms as the the Company’s investment objectives. For the avoidance of doubt, there will be no Company. The suitability of any such co- similar set-off arrangement where any such investment arrangements will be assessed fund is advised or managed by a third party. on a transaction-by-transaction basis. 3i Infrastructure plc Annual report and accounts 2023 179 ## Portfolio valuation methodology (unaudited) A description of the methodology used General Quoted investments DCF to value the investment portfolio of the In estimating fair value, the Directors Quoted equity investments are valued at DCF is the primary basis for valuation. Company is set out below in order to seek to use a methodology that is the closing bid price at the reporting date. In using the DCF basis, fair value is provide more detailed information than is appropriate in light of the nature, facts In accordance with International Financial estimated by deriving the present value included within the accounting policies and and circumstances of the investment Reporting Standards, no discount is applied of the investment using reasonable the Investment Manager’s review for the and its materiality in the context of the for liquidity of the stock or any dealing assumptions and estimation of expected valuation of the portfolio. The methodology overall portfolio. The methodology that is restrictions. Quoted debt investments will future cash flows, including contracted complies in all material aspects with the the most appropriate may consequently be valued using quoted prices provided and uncontracted revenues, expenses, International Private Equity and Venture Accounts and other information include adjustments based on informed by third-party broker information where capital expenditure, financing and taxation, Capital valuation guidelines which are and experience-based judgements, and reliable or will be held at cost less fair and the terminal value and date, and endorsed by the British Private Equity will also consider the nature of the industry value adjustments. the appropriate risk-adjusted discount and Venture Capital Association and and market practice. Methodologies are rate that quantifies the risk inherent Invest Europe. Unquoted investments applied consistently from period to period to the investment. The terminal value except where a change would result in a Unquoted investments are valued using attributes aresidual value to the investee Basis of valuation better estimation of fair value. Given the oneof the following methodologies: company atthe end of the projected Investments are reported at the Directors’ uncertainties inherent in estimating fair discrete cash flow period. The discount • Discounted Cash Flow (‘DCF’); estimate of fair value at the reporting | | value, a degree of caution is applied | | rate will be estimated for each investment | | --- | --- | --- | --- | | date in compliance with IFRS 13 Fair Value | | • Proportionate share of net assets; | | | | in exercising judgements and making | | derived fromthe market risk-free rate, | | Measurement. Fair value is defined as ‘the | | • Sales basis; and | | | | necessary estimates. | | arisk-adjusted premium and information | price that would be received to sell an asset • Cost less any fair value specificto the investment or market sector. or paid to transfer a liability in an orderly Investments may include portfolio assets adjustments required. transaction between market participants and other net assets/liabilities balances. atthe measurement date’. 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 atfairvalue or approximate to fair value. 180 ## Portfolio valuation methodology (unaudited) continued Proportionate share of net assets Sales basis Where the Company has made investments The expected sale proceeds will be used into other infrastructure funds, the value to assign a fair value to an asset in cases of the investment will be derived from where offers have been received as part of the Company’s share of net assets of the an investment sales process. This may either fund based on the most recent reliable support the value derived from another financial information available from the methodology or may be used as the primary fund. Where the underlying investments valuation basis. A marketability discount is Accounts and other information within a fund are valued on a DCF basis, applied to the expected sale proceeds to the discount rate applied may be adjusted derive the valuation where appropriate. by the Company to reflect its assessment Cost less fair value adjustment of the most appropriate discount rate | for the nature of assets held in the fund. | Any investment in a company that has failed | | --- | --- | | In measuring the fair value, the net asset | or, in the view of the Board, is expected | | value of the fund is adjusted, as necessary, | to fail within the next 12 months, has the | | to reflect restrictions on redemptions, | equity shares valued at nil and the fixed | | future commitments, illiquid nature of | income shares and loan instruments | | theinvestments and other specific factors | valued at the lower of cost and net | | ofthe fund. | recoverable amount. | 3i Infrastructure plc Annual report and accounts 2023 181 ## Information for shareholders Certain shareholders have been and will • always ensure the firm is on the FCA Financial calendar infuture be sent a certification form for the Register and is allowed to give financial Ex-dividend date for final dividend 15 June 2023 purposes of collecting required information. advice before handing over your money. Record date for final dividend 16 June 2023 You can check at www.fca.org.uk/register; Annual General Meeting 6 July 2023 Boiler room and other scams • double-check the caller is from the firm Final dividend expected to be paid 10 July 2023 Shareholders should be wary of any they say they are – ask for their name and Half-yearly results November 2023 unsolicited investment advice, offers to telephone number and say you will call buy shares at a discounted price or offers them back. Check their identity by calling to buy 3i Infrastructure plc shareholdings. Accounts and other information the firm using the contact number listed Designation of dividends The Common Reporting Standard These fraudsters use persuasive and on the FCA Register. This is important asinterest distributions Tax legislation under the Organisation for high-pressure tactics to lure shareholders as there have been instances where | | Economic Co-operation and Development | into scams. We have become aware of | | | --- | --- | --- | --- | | As an approved Investment Trust, the | | | an authorised firm’s website has been | | | (‘OECD’) Common Reporting Standard for | what appears to be an increase in calls | | | Company is permitted to designate | | | cloned but with a few subtle changes, | | | Automatic Exchange of Financial Account | to current and former 3i Infrastructure | | | dividends wholly or partly as interest | | | such as a different phone number | | | Information requires investment trust | plc shareholders. | | | distributions for UK tax purposes. | | | orfalseemail address; | | Dividends designated as interest in this | companies to provide personal information | | | | | | The Financial Conduct Authority (‘FCA’) | • check the FCA’s list of known unauthorised | | way are taxed as interest income in the | about certain investors who hold shares | | | | | | hasfound that victims of share fraud are | overseas firms. However, these firms | | hands of shareholders and are treated as | in investment trusts to HMRC. As an | | | | | | often seasoned investors with victims | change their name regularly, so even if | | tax deductible interest payments made | investment trust company, 3i Infrastructure | | | | | | losingan average of £20,000. | a firm is not listed it does not mean they | | by the Company. The Company expects | plc is therefore required to provide | | | are legitimate. Always check that they information annually to HMRC on certain Please keep in mind that firms authorised to make such dividend designations arelisted on the FCA Register; and; certificated shareholders and corporate by the FCA are unlikely to contact you in periods in which it is able to use the • if you have any doubts, call the FCA entities. This information includes country unexpectedly with an offer to buy or resultant tax deduction to reduce the UK Consumer Helpline on 0800 111 6768. of tax residency as well as details of shares sell shares. You should consider getting corporation tax it would otherwise pay If you deal with an unauthorised firm, held and dividends received. HMRC may independent financial or professional on the interest income it earns from its you will not be eligible to receive in turn exchange the information with advice before you hand over any money investments. The Board is not designating payment under the Financial Services the tax authorities of another country or oreven share any information with them. any of the 5.575 pence final dividend Compensation Scheme. payable in respect of the year as an countries in which the shareholder may be If you receive any unsolicited approaches interest distribution. tax resident, where those countries (or tax orinvestment advice, you should proceed authorities in those countries) have entered with caution. Steps that you might wish into agreements to exchange financial totake could include the following: account information. 182 ## Information for shareholders continued Registrars By post For full up-to-date investor relations information, including the latest share The Company’s registrar is Link Market Link price, recent reports, results presentations Services (Jersey) Limited (the ‘Registrar’). Central Square and financial news, please visit the The Registrar’s main responsibilities 29 Wellington Street investor relations page on our website. include maintaining the shareholder Leeds LS1 4DL www.3i-infrastructure.com register and making dividend payments. * Calls from outside the United Kingdom Their registered address is as follows: If you would prefer to receive shareholder will be charged at the applicable communications electronically, Accounts and other information Link Market Services (Jersey) Limited international rate. Lines are open including your Annual reports and PO Box 532 between9.00am and 5.30pm, Monday notices of meetings, please go to St. Helier to Friday excluding public holidays www.3i-infrastructure.com/investors/ Jersey JE4 5UW in England and Wales. shareholder-centre for details of how Channel Islands Investor relations to register. If you have any queries relating to your andgeneralenquiries Frequently used Registrars’ forms 3iInfrastructure plc shareholding you For all investor relations and general can be found on our website at should contact the Registrar as follows: | | enquiries about 3i Infrastructure plc, | www.3i-infrastructure.com/investors/ | | --- | --- | --- | | Online | please contact: | shareholder-centre. | | www.signalshares.com. From here | | 3i Infrastructure plc | Thomas Fodor youwill be able to securely email Link Registered Office Investor Relations withyour query. 11-15 Seaton Place 3i Infrastructure plc St. Helier 16 Palace Street Telephone Jersey JE4 0QH London SW1E 5JD Channel Islands 0371 664 0300 www.3i-infrastructure.com email: thomas.fodor@3i.com Overseas enquiries Telephone: +44 (0)20 7975 3469 +44 371 664 0300* 3i Infrastructure plc Annual report and accounts 2023 183 ## Glossary Alternative Investment Fund (’AIF’) Asset IRR refers to the internal rate of Company 3i Infrastructure plc. FTTH refers to fibre-to-the-home. 3i Infrastructure plc is an AIF managed return of the existing and realised portfolio This describes the fibre-optic connection Discounting The reduction in present value by3iInvestments plc. since the inception of the Company. toindividual homes or buildings. at a given date of a future cash transaction The asset IRR to 31 March 2023 is 19% Alternative Investment Fund Manager at an assumed rate, using a discount factor FY15, FY18, FY19, FY21, FY22, FY23, (2022: 19%). This calculation incorporates (‘AIFM’) is the regulated manager reflecting the time value of money. FY24 refers to the financial years to the cost of each investment, cash income, | ofanAIF. For 3i Infrastructure plc, | | | 31 March 2015, 31 March 2018, 31 March | | --- | --- | --- | --- | | | proceeds on disposal, capital returns, | E-Beam refers to electron beams, | | | thisis3iInvestments plc. | | | 2019, 31 March 2021, 31 March 2022, | | | valuation as at 31 March 2023, including | amethodof sterilisation used by Ionisos. | | 31 March 2023 and 31 March2024, Approved Investment Trust Company accrued income and an allocation of Accounts and other information EO refers to ethylene oxide, a method respectively. This is a particular UK tax status maintained foreignexchange hedging. ofsterilisation used by Ionisos. by 3i Infrastructure plc. An approved Initial Public Offering (‘IPO’) is the Association of Investment Companies Investment Trust company is a UK tax ERRV is an Emergency Rescue mechanism by which a company (‘AIC’) The Association of Investment resident company which meets certain andResponse Vessel. admits itsstock to trading on a public Companies is a UK trade body for | conditions set out in the UK tax rules, which | | | stock exchange. 3i Infrastructure plc | | --- | --- | --- | --- | | | closed-ended investment companies. | ESG refers to environmental, | | | include a requirement for the company | | | completedits IPO in March 2007. | socialand governance. toundertake portfolio investment activity Board The Board of Directors of International Financial Reporting that aims to spread investment risk and for the Company. External auditor The independent Standards (‘IFRS’) are accounting the company’s sharesto be listed on an auditor,Deloitte LLP. Capex refers to capital expenditure standards issued by the International approved exchange. The ‘approved’ status whichismoney a company uses to acquire, Fair value through profit or loss (‘FVTPL’) Accounting Standards Board (‘IASB’). for an investment trust must be agreed by upgrade, and maintain physical assets such is an IFRS measurement basis permitted The Company’s Financial statements are the UK tax authorities and its benefit is that as property, plants, buildings, technology, for assets and liabilities which meet required to be prepared in accordance certain profits of the company, principally or equipment. Capex is often used to certain criteria. Gains and losses on withIFRS, as adopted by the UK. itscapital profits, are not taxable in the UK. undertake new projects or investments assets and liabilities measured as FVTPL Investment income is that portion by acompany which add some future are recognised directly in the Statement ofincome that is directly related to the economic benefit to the operation. ofcomprehensive income. return from individual investments and is Capital reserve recognises all profits that FTTC refers to fibre-to-the-cabinet. recognised as it accrues. It is comprised are capital in nature or have been allocated This describes the fibre-optic cable in ofdividend income, income from loans to capital. These profits are distributable place from the local telephone exchange andreceivables, and fee income. It is byway of a dividend. to a distribution point, commonly called recognised to the extent that it is probable aroadside cabinet. that there will be an economic benefit and the incomecan be reliably measured. 184 ## Glossary continued | IRR refers to the internal rate of return | Net gains on investments is the | Revolving credit facility (‘RCF’) | Total return measured as a percentage, | | --- | --- | --- | --- | | andis a metric used to estimate the | movement in the fair value of investments | A£900 million facility provided | iscalculated against the opening NAV, net | | profitability of investments. | between thestart and end of the accounting | bytheCompany’s lenders with a | of the final dividend for the previous year, | | | period, or investment disposal date, or | maturitydateinNovember 2025. | and adjusted (on a time weighted average | Key Performance Indicator (‘KPI’) the investment acquisition date and the basis) to take into account any equity is a measure by reference to which SORP means the Statement of end of the accounting period, including issuedand capital returned in the year. the development, performance or Recommended Practice: Financial divestment related costs where applicable, position ofthe Company can be Statements of Investment Trust Total shareholder return (‘TSR’) is converted into sterling using the exchange measured effectively. Companiesand Venture Capital Trusts. the measure of the overall return to Accounts and other information rates in force at the end of the period. shareholders and includes the movement Money multiple is calculated as the SOV is a service operation vessel. Ongoing charges A measure of the annual in the share price and any dividends cumulative distributions or realisation recurring operating costs of the Company, Stated capital account The Stated paid,assuming that all dividends are proceeds plus any residual value expressed as a percentage of average capitalaccount of the Company reinvested on their ex-dividend date. dividedbyinvested or paid-in capital. NAVover the reporting period. representsthe cumulative proceeds Net annualised return is the annualised recognised from share issues or new Paris Agreement is an international growth rate in NAV per share to 31 March equityissued on the conversion of treatyon climte change, adopted in 2015. | 2023, including ordinary and special | | warrantsmade by the Company net | | --- | --- | --- | | dividends paid. The net annualised return | Public Private Partnership (’PPP’) is a | ofissuecosts and reduced by any | | since the inception of the Company to | government service or private business | amountthat has been transferred to | | 31 March 2023 was 14% (2022: 14%) and | venture which is funded and operated | Retained reserves, in accordance with | | since the change in strategy in FY16 to | through a partnership of government and | Jersey Company Law, inprevious years. | | 31 March 2023 was 19% (2022: 19%). | one or moreprivate sector companies. | | Sustainability KPIs Sustainability metrics | Net asset value (‘NAV’) is a measure | Retained reserves recognise the | inrelation to the sustainability-linked | | --- | --- | --- | | ofthe fair value of all the Company’s | cumulative profits to 15 October 2018, | revolving credit facility. The facility | | assetsless liabilities. | together with amounts transferred | includestargets across ESG themes | | | fromtheStated capital account. | alignedwith our purpose. | Net assets per share (‘NAV per share’) isthe NAV divided by the total number Revenue reserve recognises all profits TCFD is the Task Force on Climate- ofshares in issue. that are revenue in nature or have been relatedFinancial Disclosures. allocated to revenue. For further information see our website www.3i-infrastructure.com This report is printed on Revive 100 made from 100% FSC® Recycled certified fibre sourced from de-inked post-consumer waste. Revive 100 is a Carbon balanced paper which means that the carbon emissions associated with its manufacture have been measured and offset using the World Land Trust’s Carbon Balanced scheme. This report has been printed sustainably in the ® UK by Pureprint, a CarbonNeutral company and certified to ISO 14001 environmental management system. It has been digitally printed without the use of film separations, plates and associated processing chemicals, and 99% of all the dry waste associated with this production has been recycled. Designed and produced by Radley Yeldar www.ry.com 3i Infrastructure plc Registered office: 11-15 Seaton Place St. Helier Jersey JE4 0QH Channel Islands T +44 (0)371 664 0445 Annual report and accounts online To receive shareholder communications electronically in future, including Annual reports and notices of meetings, please go to: www.3i-infrastructure.com