Pantheon Infrastructure Plc Annualreport 2022
Access to high-quality
global infrastructure assets
Annual report
31 December 2022
About us
Pantheon Infrastructure Plc (the ‘Company’ or ‘PINT’) is a closed-ended
investment company and an approved UK investment trust, listed on
the Premium Segment of the London Stock Exchange’s Main Market.
PINT provides exposure to a global, diversified portfolio (the ‘Portfolio’) through direct
co-investments in high-quality infrastructure assets with strong defensive characteristics,
typically benefiting from contracted cash flows, inflation protection and conservative
leverage profiles. Our assets have strong ESG credentials and include projects that support
the transition to a low‑carbon economy. The Portfolio focuses on assets benefiting from
long-term secular tailwinds.
The Company is overseen by an independent Board of non-executive Directors and managed
by Pantheon Ventures (UK) LLP (‘Pantheon’), a leading multi-strategy Investment Manager
in infrastructure and real assets, private equity, private debt and real estate.
Purpose
Our purpose is to provide access to a globally diversified portfolio of
high-quality infrastructure assets which generate sustainable attractive
returns over the long term. We achieve this by targeting assets which
have strong environmental, social and governance (ESG) credentials,
and underpin the transition to a low-carbon economy. We seek to invest
in private assets which we believe will benefit from strong downside
protection from inflation and other defensive characteristics.
Highlights Contents
Second interim H2 dividend per share:
1p per share
Full‑year dividend per share: 2p per share
NAV per share:
98.9p
Capital committed:
£389m
1
Net asset value (NAV):
£475m
Market cap:
£449m
1. This refers to the capital committed to assets which are: invested, committed and in legal closing. Invested assets represent those
that have reached financial close and have been, or are in the process of, being funded, and may include small amounts reserved
for follow‑on investments; committed assets represent those which are announced and are subject to final financial close; and in
legal closing assets represent those which are not yet announced but are in the final stages of legal closing. There is no guarantee
that commitments subject to legal closing will be closed. As at 31December2022, £346million of capital was committed to
assets, with a further c.£43million in legal closing.
At a glance as at 31 December 2022
Strategic report
Highlights 1
Why invest in PINT 2
PINT at a glance 6
Chair’s statement 8
PINT timeline 11
Investment Manager’s report 12
Alternative Performance Measures 23
Investment policy 25
PINT investments 26
Our market 37
Sector spotlight 40
Business model 42
Investment strategy 51
Strategy in action 52
Responsible investing and ESG 53
S172(1) statement 66
Principal risks and uncertainties 72
Viability statement 77
Governance
Chair’s introduction to Corporate
Governance 79
Board of Directors 80
Investment Manager 82
Statement on Corporate Governance 85
Audit and Risk Committee report 92
Nomination Committee report 95
Directors’ remuneration report 96
Directors’ report 100
Directors’ responsibility statement 104
Financial statements
Independent Auditor’s report 105
Income statement 112
Statement of changes in equity 113
Balance sheet 114
Cash flow statement 115
Notes to the financial statements 116
Other information
AIFMD disclosures 132
Glossary 134
Directors and advisers 136
Strategic report Governance Financial statements Other information
1
Pantheon Infrastructure Plc
Annual report 2022
1
Unique access to private infrastructure co‑investment assets
Pantheon, PINT’s Investment Manager, has a large and global infrastructure network
Why invest in PINT
The Company aims to build a global portfolio of investments with blended risk/return
profiles,andsettargetsacrossdealtypes,sectorsandgeographiesfordiversification.
PINT is managed by Pantheon’s global infrastructure
investment team, which has a deep and broad sourcing
network with leading private asset investment managers.
PINT invests in infrastructure assets via co‑investments
alongside highly experienced general partners (‘Sponsors’),
typically on a management fee and carried interest free basis.
Thisis attractive for several reasons, including:
Unique opportunities
PINT provides investors with the opportunity to access
Pantheon’s extensive deal flow network of blue‑chip
infrastructure investors. There are fewer public market
infrastructure opportunities to access private infrastructure
assets, as infrastructure companies often remain private for
long periods of time. Therefore, investing in PINT provides
access to high‑quality co‑investment infrastructure assets not
normally accessible to public market investors.
Portfolio construction
Pantheon uses co‑investments to select individual assets to
gain exposure to, and tilt the Portfolio towards, sectors based
on the Investment Manager’s view on relative value.
Enhanced economics
The use of co‑investments can reduce the overall expense
ratio and gross‑to‑net performance spread of a portfolio,
asmost deals are offered with no ongoing management
feenor carried interest.
Sponsor specialisation
Pantheon, on behalf of PINT, is able to choose deals alongside
a Sponsor with a distinct edge who may be best placed to
create value inthat particular sub‑strategy.
ESG
Pantheon is able to apply its integrated ESG approach
to investments to the direct co‑investment as well as to
theSponsor.
AUM Investments
$19.0bn 188
Investment professionals
30
Average years’ experience
of Investment Committee
21 years
Pantheon’s infrastructure experience
Strategic report Governance Financial statements Other information
2
Pantheon Infrastructure Plc
Annual report 2022
Why invest in PINTcontinued
2
Favourable defensive long‑term characteristics
Infrastructure assets can offer reliable income streams with inflation protection
Infrastructure assets combine a range of attractive
characteristics for long‑term investors. Distinctively,
infrastructure may mitigate the adverse effects of rising
inflation and may provide an income‑generating investment
outside of traditional fixed income. Infrastructure assets may
also provide embedded value and downside protection across
market cycles given the regulated and contracted nature of
many of the underlying cash flows. Infrastructure assets may
provide a range of attractive investment attributes, including
thefollowing:
Stable cash flow profile
Infrastructure may provide a compelling, stable distribution
profile similar to traditional fixed income. Infrastructure
assetsoften offer reliable income streams governed by
regulation, hedges or long‑term contracts with reputable
counterparties.
Inflation hedge
Infrastructure investments can provide a natural hedge
to rising inflation in portfolios, as many sub‑sectors have
contracts with explicit inflation‑linkage or implicit protection
through regulation or market position. The majority of PINT’s
assets have explicit inflation‑linkage or implicit protection
through regulation or market position.
Embedded downside protection
The vital role that many infrastructure sub‑sectors play
in ourdaily lives can make them an innately defensive
investment. The tangible nature of infrastructure investments
can provide a basis for liquidation and recovery value in
downside cases. Cash flows that have a high portion of
protection through contractual structures with high‑quality
counterparties offer further downside protection.
Diversification
Infrastructure can be a valuable portfolio diversifier alongside
traditional and alternative investments. Historically, listed
infrastructure returns have been only moderately correlated
to traditional asset classes. The sub‑sectors within the
infrastructure universe and the drivers of such sub‑sector
returns tend not to be correlated with one another.
Strategic report Governance Financial statements Other information
3
Pantheon Infrastructure Plc
Annual report 2022
3
Access to secular trends
PINT continues to develop its diversified Portfolio across sectors that benefit from secular trends
1. Proportion of gross assets of £484.3 million at 31 December 2022. Includes assets which have been invested, committed and/or were in legal closing as at
31December 2022. Figures do not total to 100% because of uncommitted cash totalling 17% of gross assets.
Pantheon has taken and continues to take a disciplined
approach to PINT’s strategy to construct a globally diversified
portfolio with exposure across sub‑sectors and geographies,
while maintaining the flexibility to tilt exposures based on
opportunities which may present compelling relative value.
The Company aims to build a global portfolio of investments
with blended risk/return profiles, and set targets across deal
types, sectors and geographies for diversification. Please
refer to page 25 for more detail.
Digital
Infrastructure
41%
1
Data centres, fibre networks and towers
Renewables &
Energy Efficiency
9%
1
Wind, solar, sustainable waste and smart infrastructure
Power
& Utilities
25%
1
Energy utilities, water and conventional power
Transport
& Logistics
8%
1
Ports, rail and road, airports and e‑mobility
Why invest in PINTcontinued
Strategic report Governance Financial statements Other information
4
Pantheon Infrastructure Plc
Annual report 2022
4
PINT seeks to generate attractive risk‑adjusted returns
Targeting capital growth and dividend returns
1. NAV Total Return per share is defined as the growth in the NAV per share, together with all distributions (ofanincome or
capital nature) paid in respect of such share.
2. Following the first year dividend of 2p per share, the Company is targeting an increased dividend of 4p per share for the
year ending 31December2023 and, thereafter, a progressive dividend.
The Company seeks to generate attractive risk‑adjusted total
returns for shareholders over the longer term. This comprises
capital growth with a progressive dividend, through the
acquisition of equity or equity‑related investments in a
diversified portfolio of infrastructure assets with a primary
focus on developed OECD markets.
The Company is targeting a NAV Total Return per
share of8‑10% p.a. following full investment of IPO and
subscription share proceeds.
Why invest in PINTcontinued
8‑10% p.a.
1
Target NAV Total Return
per share
2p per share
2
Full‑year 2022 dividend
4p per share
2
Target 2023 dividend, progressive
thereafter
Strategic report Governance Financial statements Other information
5
Pantheon Infrastructure Plc
Annual report 2022
Digital
Infrastructure
Power
& Utilities
Transport
& Logistics
Renewables &
Energy Effi ciency
Europe | 41%
North America | 34%
UK | 8%
Uncommitted | 17%
Digital Infrastructure | 41%
Power & Utilities | 25%
Renewables & Energy Effi ciency | 9%
Transport & Logistics | 8%
Uncommitted | 17%
PINT at a glance
Eleveninfrastructure
co‑investmentassets
1
Geographic diversifi cation
1
Sector diversifi cation
1
1. Based on assets invested, committed and in legal closing at 31 December 2022.
Strategic report Governance Financial statements Other information
6
Pantheon Infrastructure Plc
Annual report 2022
PINT at a glancecontinued
1. Based on assets invested, committed and in legal closing at 31 December 2022.
United Kingdom
National Gas
1
Netherlands
Delta Fiber
Fudura
Spain
Primafrio
Ireland
National Broadband
Ireland
Germany/Austria
GD Towers
1
North America
CyrusOne
Cartier Energy Holdings
Calpine
Vantage Data Centers
Vertical Bridge
Strategic report Governance Financial statements Other information
7
Pantheon Infrastructure Plc
Annual report 2022
Vagn Sørensen
Chair
£389 million of net IPO and
subscription share proceeds committed
1
1p
per share
Second interim dividend
declared for the period
Chair’s statement
We are pleased with the Portfolio assembled to
date and have confidence in the future of the
Company and its Portfolio, and the high‑quality
pipeline of opportunities.
Vagn Sørensen
Chair, Pantheon Infrastructure Plc
Investingininfrastructure
hasneverbeensoimportant.
1. This refers to the capital committed to assets which are: invested, committed and in legal closing at 31 December 2022.
Introduction
I would like to thank all of PINT’s investors who have
supportedtheCompany since its launch and have been
instrumental in its success.
PINT’s IPO was oversubscribed and hit its hard cap, reaching
£400million of gross proceeds (the largest new infrastructure
investment company launch of 2021), which were augmented
by £80.8million of gross proceeds from the exercise of its
subscription share offering in the summer of 2022.
PINT’s purpose is to enable investors to gain exposure to a
mix ofhigh‑quality growth and income‑generating private
infrastructureassets in developed markets. We target those
assets withstrong downside and inflation protection and invest
alongsideleading Sponsors and institutional investors.
The Company is targeting a NAV Total Return per share of between
8% and 10% p.a. Following the payment of the interim dividend
of 1p per share in October, the Board is recommending a further
dividend of 1p per share for the period to 31December2022, in line
with our targets, which we expect to rise to 4p perOrdinary Share
for the financial year ending 31December 2023, and aprogressive
dividend thereafter. TheCompany intends to pay dividends
onasemi‑annualbasis.
Strategic report Governance Financial statements Other information
8
Pantheon Infrastructure Plc
Annual report 2022
Chair’s statementcontinued
Market environment and C shares
The period under review, which covers a little over a year since the
Company’s IPO in November 2021, was challenging in terms of
geopolitics, macroeconomic factors and broad market volatility.
In February 2022, Russia’s invasion of Ukraine caused a spike in
energy prices and higher inflation at a time when concerns were
already rising about slowing global growth. The UK’s so called
‘mini‑budget’ in September included significant unfunded tax
cuts to which markets reacted negatively and strongly. Thecost
of UK government debt rose with unprecedented speed, and
the associated fall in value of gilts triggered a sell‑off in UK
equities as pension funds were forced to liquidate assets to meet
collateralcalls.
With this backdrop, it was pleasing that PINT’s portfolio of
infrastructure assets proved very resilient, benefiting from
geographic and sector diversification and downside protections.
However, the shares of investment trusts across all sectors,
including infrastructure, were not immune to the fall in the broader
UK equity indices. PINT’s shares fell to trading at a discount for the
first time since launch and, as a result, the Board concluded that
the issue of new equity C shares proposed for September 2022
should not proceed.
Since that time, under a new UK Prime Minister and Chancellor
of the Exchequer, the destabilising changes proposed under the
mini‑budget have been reversed. Whilst the listed infrastructure
sector continues to trade at a discount, we remain confident of
the high quality characteristics of infrastructure assets which are
largely uncorrelated with more volatile asset classes.
Deployment and performance
As at 31 December 2022, the Company had committed to ten
assets totalling £346million, with a further £43million committed
post the year end into GD Towers. In total this amounts to
£389million, which compares favourably with our initial target
of committing to up to twelve assets in the first twelve months
and means that the Company is substantially fully invested, after
allowing for required working capital and cash retentions.
NAV per share as at 31December2022 was 98.9p, up 0.9p per
share for the period since IPO, principally attributable to underlying
gains on the Portfolio, which was valued at £301million, reflecting
the nine assets invested at 31December2022. Given the recency
of the Company’s new investments, these were modest gains and
no significant valuation movements were recognised in the period.
Strategy and portfolio
The Company seeks to generate attractive risk‑adjusted returns
by constructing a diversified portfolio of high‑quality assets
across the global infrastructure investment universe, with a focus
on assets that offer downside and inflation protection, which is
particularly relevant in the current market environment. Leveraging
Pantheon’s extensive 13‑year experience in infrastructure investing
and its c.$19billion infrastructure platform, PINT targets specific
transactions that Pantheon deems to be most attractive, notably
opportunities in businesses with strong operations and growth
potential, insub‑sectors benefiting from long‑term positive trends
and managed by high‑quality Sponsors.
We do, however, remain alert to the challenges in the current
environment and there are several key themes that we believe are
important to consider:
Inflation
Despite policy intervention, inflation is at levels which have
not been seen for over 40 years. PINT’s Portfolio is positively
correlated against inflation as many of its underlying cash flows
arecontractually index‑linked, or capture inflationary benefits
through regulation or market position.
Interest rates
Rates have risen faster than at any other time in history, with bond
yields driving up risk‑free rates; however, transactional evidence is
showing limited to modest increases in discount rates. Portfolio
financings have been executed on favourable terms, which mitigate
this risk; however, new platforms are factoring inhigherdebt costs.
Global economic slowdown
Real GDP growth expectations have been cut sharply, with global
demand expected to weaken throughout 2023 as central bank
intervention continues. GDP correlation and leverage continue to
beareas of diligence focus when considering investments forPINT.
Strategic report Governance Financial statements Other information
9
Pantheon Infrastructure Plc
Annual report 2022
Chair’s statementcontinued
Strong governance
The Board takes its responsibilities to its shareholders, in
accordance with good governance standards, very seriously.
Tothat end, we have assembled a highly experienced and
independent Board of Directors. All the Board members have
worked extensively in the infrastructure sector and have a
combined experience across the industry in excess of 100
years. Allthe Directors are non‑executive and are independent of
Pantheon. We have recently completed our first internal Board
Evaluation, a process which we will carry out annually hereafter.
At present, the Board has concluded it is of an appropriate size
relative to the assets of the Company, with good diversity of skills,
gender and experience. As a relatively new Board, no Directors are
expected to retire in the short term. However, we are aware of the
need to consider Board tenure and ensure continuity and a smooth
transition of Directors in the future, as well as adding further
diversity, and will consider this in our succession planning in the
coming years.
The Board of Directors is responsible for managing the business
affairs of the Company in accordance with the Articles and has
overall responsibility for the Company’s activities, including
setting strategy, approving future capital raising activity, the
review of investment activity and performance, and the overall
supervision of Pantheon as Investment Manager. The PINT team
at Pantheon is led by Richard Sem, a Partner with over 25 years of
experience investing in infrastructure. The Board is confident that
the Pantheon team has the depth and expertise to enable PINT to
achieve its long‑term objectives.
The Directors may delegate certain functions to other parties such
as the Investment Manager, the Administrator, the Depositary
and the Registrar. In particular, the Directors have delegated
responsibility for managing the Company’s investment portfolio to
Pantheon as the Investment Manager.
Pantheon has selected a number of top‑tier advisers for PINT,
including Investec as broker, Hogan Lovells as Legal Counsel and
EY as auditors.
Pantheon has a proven track record of delivering strong returns
by applying a disciplined investment process across a globally
diversified portfolio and we are confident that its approach, to focus
on co‑investing, thus minimising fees while maximising the number
of investment opportunities it can access, offers a compelling and
differentiated opportunity for investors.
PINT’s Directors collectively own a total of 240,000 shares in the
Company. In addition, thirteen Partners of Pantheon collectively
hold a further 1,232,570 shares.
ESG
The Board recognises the importance of ESG to the operations of
the Company as well as to the operations of those whose services
it uses and the companies it invests in. TheBoard as a whole fulfils
the responsibilities of the ESG Committee, which include:
•
monitoring the Company’s compliance with applicable ESG
policies and regulations; and
•
oversight of new and developing ESG legislation.
As part of fulfilling its responsibilities, the committee receives ESG
updates from Pantheon.
We are impressed with the ESG activities and plans proposed by
the portfolio companies. More details can be found in the ‘ESG’
andthe ‘PINT Investments’ sections of this report.
Annual General Meeting
The first Annual General Meeting (AGM) of the Company will be
held at 11:00am on 30 March 2023 at 10FinsburySquare, 4thFloor,
London, EC2A 1AF. All shareholders are encouraged to attend.
Outlook
The need for new infrastructure has notdiminished because of
the global economic outlook. Thedeveloped world continues to
embark on an aggressive path towards decarbonisation, and the
road to net zero globally will require sustained and extraordinary
investment in new infrastructure. Private infrastructure has
demonstrated a necessary role in filling that gap, and we believe
it will continue to play an important part in funding global
infrastructure investments.
The market for infrastructure investments remains competitive,
with significant fundraising activity in private markets further
driving strong demand for high‑quality infrastructure assets.
PINT’s strategy continues to be to identify and target companies
that benefit from key sectoral tailwinds whilst exhibiting
defensive characteristics, delivering growth in real terms across
the economic cycle. Pantheon’s wide capability to source new
investments through its vast network and established partnerships,
as demonstrated since PINT’s IPO, is all the more crucial in current
market conditions. The Board remains optimistic about PINT’s
future investment opportunities and value creation potential.
Vagn Sørensen
Chair
1 March 2023
Strategic report Governance Financial statements Other information
10
Pantheon Infrastructure Plc
Annual report 2022
PINT timeline
PINT commitments translated to GBP at 31 December 2022 foreign exchange rates.
March 2022 May 2022 July 2022 October 2022 December 2022 March 2023
November 2021
April 2022
June 2022 September 2022 November 2022 January 2023
Signing of maiden
investment £40m
commitment to Primafrio
– European Transport
and Logistics
Commitment
of £33m
to Cartier
Energy –
US District
Energy
Platform
Commitment of £29m
to Vantage Data Centers
– North American data
centre business
Paid first interim
dividend of
1ppershare
Agreed £63m
multi‑currency
revolving
creditfacility
Declared second
interim dividend
of 1p per share
to be paid on
31March2023
Raised £400m gross
IPOproceeds
Commitment of £24m
to Vertical Bridge –
USDigital Infrastructure
company
Commitment of £23m to
Delta Fiber – European
Digital Infrastructure
Company
Commitment
of £46m to
Calpine –
US Power
generation
business
Raised £81m of
gross proceeds
through exercise
of Subscription
Shares
Publication of first
interim report to
30June 2022
Commitment of
£40m to National
Gas Transmission
– UK‑Regulated Gas
Transmission Network
and Metering Business
Commitment of £25m to
CyrusOne – Data Centre
Business
Commitment
of £47m to
National
Broadband
Ireland –
Irish Digital
Infrastructure
Company
Commitment
of £43m to
GD Towers
– German
and Austrian
Digital
Infrastructure
Company
Commitment of £41m
to Fudura – Dutch
Electricity Infrastructure
Provider
Key:
Digital Infrastructure Renewables & Energy Efficiency Power & Utilities Transport & Logistics
Strategic report Governance Financial statements Other information
11
Pantheon Infrastructure Plc
Annual report 2022
Investment Manager’s report
AUM
$19.0bn
1
Total commitments
$4.4bn
Investments
188
Total investments
52
Investment professionals
30
Asset sourcing partners
50+
Average years’ experience
ofInvestment Committee
21 years
Notional net IRR
2
12.3%
Pantheon private infrastructure
Pantheon private infrastructure co‑investments
Pantheon platformPantheon’s infrastructure experience
Foundedin1982,Pantheonhasestablisheditselfasaleadingglobalmulti‑strategy
investorinprivateequity,infrastructureandrealassets,privatedebtandrealestate.
Since 2009, Pantheon has completed 188 infrastructure
investments across primaries, secondaries and co‑investments
alongside more than 56 asset sourcing partners, solidifying its
position as one of the largest managers investing in infrastructure.
Total infrastructure co‑investment and Sponsor relationships
exceeded 50 as of December2022, including investments closed
or in legal closing. The global infrastructure investment team
managed $19.0 billion in AUM as at 30September2022.
143
Investment
professionals
$88.9bn
1
Funds under
management
>960
Institutional
investors globally
11
Global
offices
1. As at 30 September 2022. This figure includes assets subject to discretionary
or non‑discretionary management or advice. Infrastructure AUM includes
all infrastructure and real asset programmes which have an allocation to
naturalresources.
2. Performance data as of 30 September 2022. Past performance is not indicative of
future results. Future performance is not guaranteed and a loss of principal may
occur. Performance data includes all infrastructure co‑investments approved by
Pantheon’s Global Infrastructure and Real Assets Committee (GIRAC) since 2015,
when Pantheon established its infrastructure co‑investment strategy. Notional net
performance is based on an average forecast annualised fee of 1.5% of NAV.
Strategic report Governance Financial statements Other information
12
Pantheon Infrastructure Plc
Annual report 2022
Investment Manager’s reportcontinued
Pantheon has extensive experience of and expertise in primary,
secondary and co‑investments, which are defined as follows:
•
Primary investments: involve a commitment to a newly
launched limited life fund managed by a Sponsor, seeking to
exit improved businesses in the later years of the fund term
ataprofit
•
Secondary investments: traditionally involve the purchase
of an interest in an established private fund or a portfolio of
companies from an existing investor
•
Co‑investments: afford the opportunity for investors to invest
alongside Sponsors in specific Portfolio Companies, typically
ona fee and carried interest‑free basis
PINT focuses on gaining exposure to infrastructure assets via
co‑investments.
1. As at 30 September 2022. This figure includes assets subject to discretionary
or non‑discretionary management or advice. Infrastructure AUM includes
all infrastructure and real asset programmes which have an allocation to
naturalresources.
2. Pantheon internal data from 2015 to December 2022. Screened deal flow is based
on total value of transactions ($).
3. Total infrastructure co‑investment count and committed amount as of December
2022, includes all Pantheon infrastructure co‑investments closed or in legal closing.
4. Performance data as of 30 September 2022. Performance data includes all
consummated infrastructure co‑investments approved by GIRAC since 2015,
whenPantheon established its infrastructure co‑investment strategy.
AUM in primary
companies since 2009
1
Co‑investment opportunities
screened since 2015
2
Committed across
52 co‑investment assets
Pantheon primary
funds strategy
Sponsors require
co‑investment partner
Pantheon co‑investment
strategy
•
Pantheon develops long‑term
relationships with top tier
sponsors by investing in their
underlying flagshipfunds.
•
Sponsors consider Pantheon
to be a strategic partner, rather
than a directcompetitor.
Sponsors may offer co‑investments
for the following reasons:
•
size of transaction;
•
manage concentration limits;
•
raise follow‑on capital; and
•
strengthen investor
relationships.
•
Access to co‑investment
assets, typically on a no‑fee,
no‑carrybasis.
•
Proven track record as a
valuable partner by providing
experience in complexdeals;
speed and certainty of
deal execution within short
timeframes.
•
Co‑investment track record
has produced notional net IRR
of12.3%
4
.
$9.0bn $70bn
$4.4bn
Committed across 52
co‑investment assets
3
Strategic report Governance Financial statements Other information
13
Pantheon Infrastructure Plc
Annual report 2022
Investment Manager’s reportcontinued
Portfolio
PINT is constructing a diversified global portfolio with a focus on
developed market OECD countries, with the majority of exposure
in Western Europe and North America. Over the medium term,
theInvestment Manager expects, in line with the initial prospectus, the
composition of the Portfolio to include investments in the following
sub‑sectors: DigitalInfrastructure, Power & Utilities, Transport & Logistics,
Renewables & Energy Efficiency and Social &Other Infrastructure.
In the period to 31 December 2022, the Company committed
£346million across ten investments, of which £288million was
invested across nine investments.
After the period end a further £43million was committed to a
digital investment, GD Towers, and the total amount invested
increased by £84million to £372million, principally due to funding
calls on GD Towers and NGT.
The Portfolio assembled to date is diversified across sectors
and geographies, and the Investment Manager believes that it
will endure through the current and near‑term volatile market
environment. The Portfolio investments typically benefit from
defensive characteristics, including long‑term contracted cash
flows, inflation protection and robust capital structures.
Five investments are in Digital Infrastructure, representing 41% of
gross assets, across the data centre, towers and fibre sub‑sectors.
Three investments, representing 25%, are in the Power & Utilities
sector including: gas transmission, district heating and electricity
generation, with the remaining investments in Renewables &
Energy Efficiency (9%) and Transport & Logistics (8%). The largest
percentage of the exposure is in North America (41%), with the
remaining exposure in Europe (34%), and the UK (8%).
The weighted average Sponsor case IRR of the Portfolio, based on
total commitments at 31 December 2022, was 13.9%. The weighted
average gearing was 38%.
1. Represents return of capital from co‑investment manager
NAV pence per share movement (period to 31 December 2022)
NAV per share over the period increased by 0.9p per share, after adjusting for the interim dividend paid of 1.0p per share paid
in October 2022. The movement in the period was principally driven by fair value gains of 2.0p per share and foreign exchange
movements of 2.1p per share attributable to the strengthening of the USD in the period, which was partially offset by a (1.8)p per
share movement from the foreign exchange hedging programme. Investment Income from the Portfolio and interest on cash
deposits contributed 0.4p per share, offset by (1.0)p per share related to fund operating expenses, and (1.0)p per share dividend,
resulting in a closing NAV of 98.9p per share. This will be reduced after the second interim dividend of 1ppershare, which will be
paid on 31March2023. There are no dilutive securities in issue.
As at
16 November
2021
(IPO date)
1
Fair
value
gains
Foreign
exchange
movement
Foreign
exchange
hedge
Expenses
2
Investment
income/yield
Dividends
paid
As at
31 December
2022
98.0
2.0
98.9
Subscription
share
issue
0.2
pence per share
2.1
(1.8)
0.4
(1.0)
(1.0)
1. NAV per share as at 16 November 2021 (IPO date) which comprised the net proceeds from the IPO.
2. Expenses include operating and capital expenses.
Strategic report Governance Financial statements Other information
14
Pantheon Infrastructure Plc
Annual report 2022
Europe | 41%
Invested | 30% Committed | 11%
North America | 34%
Invested | 32% Committed | 2%
UK | 8%
Invested | — Committed | 8%
Remaining cash
4
| 17%
Geographic diversification (as at 31 December 2022)
Outer ring: total (invested + committed)
Inner ring: invested
2
and committed
3
breakdown
Digital Infrastructure | 41%
Invested | 29% Committed | 12%
Power & Utilities | 25%
Invested | 17% Committed | 8%
Renewables & Energy Efficiency | 9%
Invested | 9% Committed | <1%
Transport & Logistics | 8%
Invested | 8% Committed | <1%
Remaining cash
4
| 17%
Sector diversification (as at 31 December 2022)
Outer ring: total (invested
2
+ committed
3
)
Inner ring: invested and committed breakdown
Investment Manager’s reportcontinued
The breakdown of the Company’s gross assets
1
as at 31 December 2022 is shown below by reference to sector and geography. The breakdowns are shown relative to amounts invested
2
and committed
3
.
1. Gross assets of £484.3million consisting of the £301.4million Portfolio fair value and £182.9million of cash and cash equivalents at 31 December 2022.
2. Invested amounts at 31 December 2022 totalled £301.4million, representing the fair value of the Company’s funded investments in those sectors or geographies.
3. Committed amounts at 31 December 2022 totalled £101.2million, representing cash held in respect of as yet undrawn commitments and/or deals in legal closing in those sectors or geographies. Undrawn commitments are a feature of the Company’s investments
andoccur when completions are deferred due to commercial or regulatory approval processes, or where capital calls are intentionally staggered over time for follow‑on purposes, for example for capex or M&A requirements.
4. Remaining cash at 31 December 2022 totalled £81.7million, representing £9.7million of cash retained against buffers not covered by the Company’s revolving credit facility, and £72.0million of remaining funds available to invest.
Strategic report Governance Financial statements Other information
15
Pantheon Infrastructure Plc
Annual report 2022
1. Commitments based on undrawn amounts of deals committed or in legal closing, converted into GBP as necessary, at 31 December 2022.
2. The financial close of National Gas was subject to regulatory clearances, with the investment completing post 31 December 2022.
3. The financial close of GD Towers occurred post 31 December 2022.
Asset Status Investment date Sector Region Sponsor
Portfolio NAV
31 December 2022
(£m)
Unfunded
Commitments
1
(£m)
Portfolio assets 31 December 2022
CyrusOne Invested March 2022 Digital: Data Centre North America KKR 23 4
Cartier Energy Holdings Invested April 2022 Power & Utilities: District Heating North America Vauban 35 —
Delta Fiber Invested May 2022 Digital: Fibre Europe Stonepeak 23 2
Vertical Bridge Invested May 2022 Digital: Towers North America Digital Bridge 27 —
Calpine Invested July 2022 Power & Utilities: Electricity Generation North America ECP 47 —
Fudura Invested July 2022 Renewables & Energy Efficiency Europe DIF 41 2
Primafrio Invested July 2022 Transport &Logistics Europe Apollo 40 1
Vantage Data Centres Invested August 2022 Digital: Data Centre North America Digital Bridge 22 5
National Broadband Ireland Invested November 2022 Digital: Fibre Europe Asterion Industr ial Partners 43 4
National Gas
2
Invested January 2023 Power & Utilities: Gas Transmission UK Macquarie — 41
301 58
Assets committed and in legal closing at 31 December 2022
GD Towers
3
Invested January 2023 Digital: Towers Europe Digital Bridge 43
301 101
Investment Manager’s reportcontinued
Key: Digital Infrastructure Renewables & Energy Efficiency Power & Utilities Transport & Logistics
Strategic report Governance Financial statements Other information
16
Pantheon Infrastructure Plc
Annual report 2022
Performance
During the period the Portfolio generated underlying growth of £9.6million, reflecting a 3.3%
movement on the capital invested, before adjusting for capital distributions totalling £4.0million.
Movements in foreign currencies resulted in a foreign exchange gain of £7.7million, beforeadjusting
for the impact of the foreign exchange hedging programme, resulting in a closing value of
£301.4million at 31 December 2022.
There were no material performance updates across the Portfolio during the period, and the
Investment Manager remains confident of the investment theses and underwriting that underpins the
Company’s investments. No changes were proposed by Sponsors to any of their underlying business
plans, and in some cases additional high conviction growth opportunities wereidentified.
Under the Company’s valuation policy investments are carried at fair value in accordance with FRS 102
and the International Private Equity and Venture Capital Valuation (IPEV) guidelines. In private market
transactions, the purchase cost of the investment is an indication of its initial fair value and is thereafter
calibrated for subsequent events and changes in valuation inputs. At the period end a number of the
Company’s investments were valued at a price consistent with the purchase price, andPantheon does
not consider this to be unexpected or unreasonable given the recency and stage of some of the Portfolio
investments by the Sponsors, all of which have been held for less than twelve months.
Investment Manager’s reportcontinued
The Portfolio had a weighted average discount rate (WADR) of 14.2%
1
at the period end.
Thisisslightlyhigher than the weighted average Sponsor case IRR of the Portfolio of 13.9%
2
,
duetosome modest increases in discount rates across the Digital Infrastructure sector,
andtheeffectof undrawncommitments.
Outlook
The Investment Manager remains confident in the volume of attractive opportunities for the Company
going forward. The tailwinds that support the demand for new infrastructure and the growth
opportunities that accompany it remain strong across all the sub‑sectors the Company is active in,
which provides protection against any potential market softening.
Overall, the Investment Manager does not expect to see significant movements in the Company’s
valuations arising due to current market considerations. There has been limited transactional evidence
to support downward valuation trends, and reference valuations for private market infrastructure funds
have traditionally been marked lower than the prices ultimately realised at exit, which adds in further
long‑term headroom and supports the notion that private markets assets demonstrate less volatility
than public proxies in times of market disruption.
Higher debt costs arising from increasing interest rates do have the potential to impact valuations
where capital structures do not allow for interest rate risk to be fully mitigated, as more cash flow
are diverted to servicing debt. However, in general gearing levels remain low compared to previous
financial crises, and the Investment Manager continues to exercise a diligent approach to underwriting
which typically involves allowing for additional pricing premiums for any uncommitted debt financing
packages, relative to Sponsor base cases.
The consensus amongst Sponsors that the Investment Manager works with is that discount rates
will either remain flat or see some modest increases. Most Sponsors believe that valuations will more
generally likely remain flat in the short term as underlying performance is offset by higher operating
costs and/or capital expenditure.
From a wider market perspective, there continue to be significant allocations to infrastructure as an
asset class, and to the private infrastructure market specifically, which creates sustained competition
for assets and further supports valuations. Specifically, there remains high interest in assets with some
form of inflation linkage and those that play a role in the energy transition.
Portfolio movement (period to 31 December 2022)
Capital calls
and investments
Asset valuation
movement
Distributions
Foreign exchange
movement
Closing
portfolio
£ million
(4.0)
9.6
7.7 301.4
288.1
1. WADR of 14.0% is based on the discount rate of each completed investment at 31December 2022, weighted by total contribution to Portfolio NAV at that date.
2. Based on the Sponsor base case IRR of each completed investment at 31 December 2022, weighted by total commitment size, converted to GBP as necessary.
Strategic report Governance Financial statements Other information
17
Pantheon Infrastructure Plc
Annual report 2022
Investment Manager’s reportcontinued
Dividend
In the IPO Prospectus, the Company said it would target a NAV Total Return of 8‑10% p.a. following
full investment of the IPO proceeds and an initial dividend of at least 2p per share for the first financial
period ended 31 December 2022, rising to 4p per share for the year ending 31December2023 and a
progressive dividend thereafter.
As part of this annual results announcement, the Board is declaring the Company’s second interim
dividend of 1p per share in respect of the period 1 July 2022 to 31December2022, which will be paid
on 31 March 2023. This is in line with the Company’s target.
Over the medium term, the Company expects the Portfolio to generate both yield and capital growth to
support the progressive dividend policy and expects to maintain a healthy dividend cover from income
distributions and surplus capital profits throughrealisations.
Foreign exchange impact
In order to limit the potential impact from material movements in major foreign exchange rates
on non‑local currency investments, the Company has put in place a foreign exchange hedging
programme. The aim of this programme is to reduce (rather than eliminate) the impact of movements
in foreign exchange rates on the Company’s NAV, and to this end the Company has adopted an internal
policy to seek to limit its unhedged exposure to 25% of NAV at any time. This is achieved through the
execution of foreign exchange hedging contracts relative to the ongoing non‑local currency investment
exposure. Any such hedging strategy for PINT is subject to, inter alia, market liquidity and pricing for
hedges, foreign exchange volatilities, the composition of the Company’s portfolio and the Company’s
balance sheet.
To date the Company has arrangements with five hedging counterparties, all on an unsecured basis
and subject only to margin calls if pre‑specified credit limits are breached on an individual counterparty
(not aggregate) basis. Furthermore, in line with the Investment Manager’s risk policies, the Company
has adopted a policy to maintain strict liquidity buffers in relation to these hedging positions to protect
against extreme volatility‑driven margin requirements. The details of the Company’s hedging positions
and associated cash buffers are set out in the tableopposite.
The depreciation of GBP resulted in a positive Portfolio and non‑Portfolio foreign exchange movement
in the period to 31December 2022 of £9.9million, which was offset by a loss on thehedging
programme of £8.5million.
Counterparty
EUR Notional
(€m)
USD Notional
($m)
Mark-to-market
(£m)
Buffer
(£m)
A — 82.3 (3.2) 6.2
B — 84.2 (3.4) 6.3
C 91.0 12.4 (1.4) 9.1
D 23.7 —(0.2) 1.8
E 23.7 8.8 (0.3) 2.5
Total 138.4 187.7 (8.5) 25.8
NAV foreign exchange and hedging
% of NAV
0.0
(0.1)
1.1
(1.0)
(3.7)
3.5
(2.5)
2.9
IPO to Mar 2022 Apr – Jun 2022 Jul – Sep 2022 Oct – Dec 2022
Hedge movement Asset FX movement Net movement
Strategic report Governance Financial statements Other information
18
Pantheon Infrastructure Plc
Annual report 2022
Borrowings
In December 2022, the Company entered into a new three year multi‑currency revolving credit facility
(RCF) for an aggregate commitment of £62.5million with Lloyds Bank Corporate Markets plc. TheRCF
allows the Company to maintain liquidity for unfunded commitments and working capital requirements
whilst minimising the inefficiencies of holding excessive cash. TheRCF, which is secured on the assets
of the Company, includes an uncommitted accordion feature, whichwill be accessible, subject to
approval, by additional lenders, andis intended to increase over time in line with the Company’s NAV
and its borrowing policy.
Cash and liquidity management
At the period end, the Company had total available liquidity of £245.4million, comprising £182.9million
of cash and £62.5million of undrawn RCF.
The Company maintains a policy to hold liquidity sufficient to cover all investment commitments
and amounts in legal closing due in the next twelve months. At the period end, this amount totalled
£101.2million, inclusive of £84.2million in respect of the National Gas and GD Towers transactions
which were subsequently drawn post period end.
In addition to this, the Company has adopted a risk‑based policy to hold specific cash buffers in
respect of potential further liquidity requirements. These buffers include forecast operating costs,
dividend payments, FX hedge settlements due (based on mark‑to‑market valuations), an allowance
for emergency co‑investment capital across the portfolio, allowances for FX movements on
undrawn non‑GBP commitments, and amounts held against the Company’s FX hedging positions
(calculatedrelative to notional amounts and contractual maturity). At the period end, these amounts
totalled £72.2million.
The net balance of all these considerations represents the funds available to the Company for further
investment. As at the period end this amount stood at £72.0million, which was significantly boosted
after completion of the Company’s RCF in December 2022.
Investment Manager’s reportcontinued
£m
1
Sources
Cash & equivalents 182.9
RCF 62.5
Total (A) 245.4
Commitments
Undrawn investment commitments 57.9
Investments in legal closing 43.4
Total (B) 101.2
Buffers
Operating costs 7.4
FX MtM 4.5
Dividends 14.4
Co‑investment buffers 16.0
FX buffers on undrawn investment commitments 4.1
FX hedging buffers 25.8
Total (C) 72.2
Available funds (= A - B - C) 72.0
Ongoing Charges
The Company’s ongoing charges figure is calculated in accordance with the Association of
InvestmentCompanies (AIC) recommended methodology and was 1.02% for the period to
31December 2022, reported on an annualised basis. The ongoing charges are lower in the first
year asno management fee was paid on undeployed cash until 75% of the Net Issue Proceeds
weredeployed. This was achieved in the quarter to 30 September 2022.
1. Totals do not match due to rounding.
Strategic report Governance Financial statements Other information
19
Pantheon Infrastructure Plc
Annual report 2022
Investment Manager’s reportcontinued
Inflation
Impact of inflation
Since IPO, inflation across the Company’s target geographies
has been at historic highs and materially above central bank
targets. Accordingly it has become an area of even greater
focus to investors and therefore during the transaction
underwritingprocess.
Historically, infrastructure as an asset class has benefited from
strong inflation linkage owing to the nature of its underlying revenue
mechanisms and pricing power. Typically this would serve to at
least protect against the impact inflation has on an infrastructure
asset’s cost base, and in some cases would provide for an
inflationary element to net returns.
The extent to which an investment’s valuation will be impacted by
material changes in actual and forecast inflation, and therefore
the Company’s correlation to it, is determined by the proportion
of income and costs that are linked to inflation. This varies across
sectors and specific investments, and no two businesses will
behave identically to changes in inflation.
The revenues and costs of infrastructure assets can be considered
to fall within a number of broad categories which all capture
inflation in different ways, as set out in the exhibit opposite.
Demand
Valuation impact
Contractual Regulated
The impact of changes in inflation assumptions on the valuation of assets is determined by the types of underlying revenues and input costs,
and the size of the cost base relative to its revenues. Where expected increases in revenues exceed any expected increases in costs in a higher
inflation scenario, forecast net cash flows will increase resulting in positive inflation correlation. Where expected increases in costs exceed any
expected increases in revenues, forecast net cash flows will decrease resulting in negative inflation correlation.
Operating costs
Operating costs such as labour and utilities
costs which more broadly align with wider
inflationary outturn.
Non‑contractual revenues (or short‑term
contracts) without explicit inflation linkage
but where market dynamics (such as high
barriers to entry or monopoly positioning)
provide potential for repricing that can
capture inflation.
Contractual revenues subject to specific
uprating provisions, usually annually and
by reference to either a fixed escalator
or a specified inflation measure. In some
cases such uprating will be subject to caps
or floors which limit the extent to which
inflation is captured.
Regulated revenues determined by real
price control mechanisms which allow for
annual uprating by reference to a specified
inflation measure.
Capital costs
Capital expenditure costs such as
construction, equipment and labour
costs that are often subject to unique and
sector‑specific supply side inflationary
pressures. On larger capital initiatives this
risk may be passed down to suppliers.
Financing costs
Borrowing costs are impacted by inflation
either directly, where index‑linked debt is
in place, or indirectly due to the fact that
central bank rates are used as a tool to
curb high inflation. This impact may be
avoided or reduced where interest rate
hedging has been used.
Inflationary characteristics of infrastructure revenues and costs:
Strategic report Governance Financial statements Other information
20
Pantheon Infrastructure Plc
Annual report 2022
Investment Manager’s reportcontinued
Inflation
PINT’s Portfolio
All of the Company’s investments are unique and the extent to which inflation impacts them varies
according to sector:
•
Data centre and towers assets tend to be characterised by fixed or capped escalators, which limits
revenue upsides in high inflationary scenarios. However, these investments also often include
separate pass‑through mechanisms for utility costs, which limits cost inflationary pressures.
•
Fibre assets may have greater direct linkage to inflation measures through wholesale pricing
contracts, but also carry a greater degree of exposure to capex inflation that is not usually passed
onto suppliers.
•
Utility assets typically have regulated indexing arrangements where ongoing revenues are a direct
function of inflation.
•
Power and Renewables assets will normally benefit from a mixture of short and medium term
“fixed price” contracted revenues with a variety of different escalators, and long‑term un‑contracted
wholesale revenues that are assumed to increase in line with inflation and over time. For new
developments, spikes in capex cost inflation can be mitigated with pass‑through or price
adjustment mechanisms in offtake agreements.
•
Transport assets exposed to demand risk or short‑term contracts may only have implicit inflation
protection depending on the ability to re‑price tariffs/tolls.
Methodology
The inflation or escalation assumptions that impact on the valuation and forecast returns of the
Portfolio are determined by Sponsors, reflective of underlying contractual or market specific factors,
as noted above, as well as the inflationary environment more generally. Where revenues or costs are
not expressly linked to an inflation measure, Sponsors will take a view on the extent to which those
revenues or costs will change relative to inflation more generally.
All inflation assumptions are subject to detailed review and analysis by the Investment Manager during
the underwriting process, and may be adjusted in the Company’s underwriting base case. Where
revenues or costs have express linkage to a local inflationary measure, such as CPI, the underwriting
base case will adopt long term central bank forecasts, and where future business growth is included
inthe underwriting case, associated revenues and costs are assumed to respond in the same manner
as current revenues and costs.
Sensitivity
In line with their information reporting obligations, Sponsors are required to perform a number of
valuation sensitivities on the Company’s behalf against key inputs including inflation, interest rates
anddiscount rates. The aggregated results of these sensitivities across the Portfolio are shown in
the chart below. Owingto the nature of the underlying revenues across the Portfolio, the Company
benefits from a net positive correlation with inflation. Conversely, the Portfolio is negatively correlated
to interest rate movements, where riseswould result in reduced free cash flows. The impact of this
across the Portfolio is mitigated by hedged orfixed rate debt at investment level.
Valuation sensitivity at 31 December 2022
1
Discount rate
(+/- 0.5%)
Interest rate
(+/- 0.5%)
Inflation
(+/- 0.5%)
Negative correlation Positive correlation
(3.0) (1.0)(2.0) 1.00.0 3.02.0
pence per share
1.3
(1.3) 1.5
(1.3)
2.9(2.7)
1. Based on assets invested, committed and in legal closing at 31December2022. Sensitivity results are provided by Sponsors based
on adjustments to the relevant underlying assumptions in base case financial models across the expected life ofeach investment.
Strategic report Governance Financial statements Other information
21
Pantheon Infrastructure Plc
Annual report 2022
Europe | 41%
Invested | 38% Committed | 3%
North America | 39%
Invested | 33% Committed | 6%
UK | 8%
Invested | 8% Committed | —
Remaining cash
4
| 12%
Geographic diversification (as at 24 February 2023)
Outer ring: total (invested + committed)
Inner ring: invested and committed breakdown
Digital Infrastructure | 41%
Invested | 38% Committed | 3%
Power & Utilities | 25%
Invested | 25% Committed | —
Renewables & Energy Efficiency | 14%
Invested | 9% Committed | 5%
Transport & Logistics | 8%
Invested | 8% Committed | <1%
Remaining cash
4
| 12%
Sector diversification (as at 24 February 2023)
Outer ring: total (invested + committed)
Inner ring: invested and committed breakdown
Investment Manager’s reportcontinued
Postbalancesheetevents
The Company has seen significant activity since the accounts date of 31December2022, most notably the commitment of £43.4million to GD Towers, of which £37.9million was invested, and the movement
to legal closing of a £25.0million transaction in a US renewables asset. Additionally, a further £45.0million was invested in respect of prior investment commitments across a number of deals, most notably
£40.8million in respect of NGT. The updated breakdown of the Company’s gross assets
1
as at 24February2023 is shown below by reference to sector and geography. The breakdowns are shown relative to
amounts invested
2
and committed.
3
1. Gross assets of £482.8 million consisting of £383.0 million of adjusted (for invested amounts and distributions) Portfolio fair value and £99.8 million of cash and cash equivalents at 24 February 2023.
2. Invested amounts at 24 February 2023 totalled £383.0 million, representing the adjusted (for invested amounts and distributions) fair value of the Company’s funded investments in those sectors or geographies.
3. Committed amounts at 24 February 2023 totalled £42.4 million, representing cash held in respect of as yet undrawn commitments and/or deals in legal closing in those sectors or geographies. Undrawn commitments are a feature of the Company’s investments
andoccur when completions are deferred due to commercial or regulatory approval processes, or where capital calls are intentionally staggered over time for follow‑on purposes, for example for capex or M&A requirements.
4. Remaining cash at 24 February 2023 totalled £57.4 million, representing £9.7 million of cash retained against buffers not covered by the Company’s RCF, and £47.7 million of remaining funds available to invest.
Strategic report Governance Financial statements Other information
22
Pantheon Infrastructure Plc
Annual report 2022
Alternative Performance Measures (APMs)
PINT assesses its performance using a variety of measures that are not specifically defined under
FRS 102 and are therefore termedAPMs. TheAPMs used may not be directly comparable with
those used by other companies. TheseAPMs provide additional information as to how the Company
has performed over the period and allow the Board, managementand stakeholders to compare
itsperformance.
APM Details Calculation Reconciliation to FRS 102
NAV Total Return Total return comprises the investment return from the Portfolio and
income from any cash balances, net of management and operating
and finance costs. It also includes foreign exchange movement and
movement in the fair value of derivatives and taxes.
It is calculated as the total return of £8.0million, as shown in
the Income Statement, as a percentage of the opening NAV of
£392.1million which is based on the net IPO Proceeds.
The calculation uses FRS
102measures.
Net asset value per share A measure of the NAV per share in the Company. It is calculated as the NAV divided by the total number of shares
inissue at the balance sheet date.
The calculation uses FRS
102measures and is set out
in Note 18 to the accounts.
Annual distribution This measure reflects the dividends distributed to shareholders in
respect of each year.
The dividend is measured on a pence per share basis. The calculation uses FRS
102measures.
Investment value and
outstanding commitments
A measure of the size of the investment portfolio including the
value of further contracted future investments committed by
theCompany.
It is calculated as the Portfolio asset value plus the amount of
contracted commitments.
The Portfolio asset value
uses the FRS 102 measure
Investments at fair value,
set out in Note1. The value
of future commitments is
set out in Note21 to the
accounts.
Strategic report Governance Financial statements Other information
23
Pantheon Infrastructure Plc
Annual report 2022
Alternative Performance Measures (APMs) continued
NAV Total Return
The Company is targeting a NAV
Total Return per share of 8‑10%
p.a. following full investment of the
IPO proceeds.
Definition
•
Total return is how we measure the overall financial
performance of the Company.
•
Total return comprises the investment return from the
Portfolio and income from any cash balances, net of
management and operating and finance costs. It also
includes foreign exchange movement and movement in the
fair value of derivatives andtaxes.
•
Total return is measured against the opening NAV, netof
the final dividend for the previous year, and adjusted
(onatime‑weighted average basis) to take into account any
equity issued in the year.
How has PINT performed?
Total return for the period to 31 December 2022 was 2.0%.
Giventhe recent acquisition of the investments, no significant
portfolio gains have been recognised in the period, but the
Portfolio is well positioned to deliver on PINT’s returntargets.
Annual distribution
The Company is targeting a 2p per share
dividend in the first year, 4p per share in
the second year, followed by a progressive
dividend policy thereafter.
Definition
•
This measure reflects the dividends distributed to
shareholders eachyear.
•
The Company’s investment objective is to generate returns
from Portfolio income and capital returns (through value
growth and realised capital profits).
•
The dividend is measured on a pence per share basis,
andistargeted to be progressive.
How has PINT performed?
Second interim dividend of 1p per share declared for the
period from 1July2022 to 31December2022, to be paid on
31March2023, which together with the dividend of 1ppershare
paid in October2022 totals 2p per share for the period ended
31December2022. TheCompany intends to pay dividends on
asemi‑annual basis in line with its progressive dividend policy.
Strategic report Governance Financial statements Other information
24
Pantheon Infrastructure Plc
Annual report 2022
Investment policy
The Company invests in a diversified portfolio of high‑quality operational infrastructure assets which provide
essential physical structures, systems and/or services to allow economies and communities to function
effectively. The Company invests in both yielding and growth infrastructure assets which the Investment
Manager believes offer strong downside protection and typically offer strong inflation protection.
The Company invests globally, with a primary focus on developed OECD markets, with the majority
of its investments in Europe and North America. The Company’s portfolio is diversified across
infrastructure sectors, which includes (but is not limited to):
Digital Infrastructure
(including wireless towers, data centres, and fibre‑optic networks)
Renewables & Energy Efficiency
(including smart infrastructure, wind, solar, and sustainable waste)
Power & Utilities
(including transmission and distribution networks, regulated utility companies and
efficient conventional power assets)
Transport & Logistics
(including ports, rail, roads, airports and logistics assets)
Social & Other Infrastructure
(including education, healthcare, government and community buildings)
In each case where the Investment Manager believes it can generate the most attractive
risk‑adjustedreturns.
The Company focuses on gaining exposure to infrastructure assets via co‑investments alongside
leading third‑party private direct infrastructure asset investment managers who are acting as general
partner or manager of a fund in which Pantheon, or any investment scheme, pooled investment vehicle
or portfolio fund managed by Pantheon, has invested or may invest (‘Sponsors’). In doing so, the
Company may invest on its own or alongside other institutional clients of the Investment Manager.
TheCompany may also invest in other direct or single asset investment opportunities originated by the
Investment Manager or by other third‑party asset sourcing partners. The Company does not invest in
private funds targeting a diversified portfolio of infrastructure investments.
Investment restrictions
The Company invests and manages its assets with the objective of spreading risk and, in doing so,
issubject to the following investment restrictions, which are measured at the time of investment:
•
no single Portfolio Investment will represent more than 15% of Gross Asset Value;
•
no more than 20% of Gross Asset Value will be invested in investments where the underlying
infrastructure asset is located in a non‑OECD country; and
•
no more than 30% of Gross Asset Value will be invested alongside funds or accounts of anysingle
Sponsor (other than Pantheon).
In addition, the Company does not invest in infrastructure assets whose principal operations are in
anyof the following sectors (each a ‘Restricted Sector’):
•
coal (including coal‑fired generation, transportation and mining);
•
oil (including upstream, midstream and storage);
•
upstream gas;
•
nuclear energy; and
•
mining.
The Company may invest in infrastructure assets whose principal operations are not in a Restricted
Sector but that nonetheless have some exposure to a Restricted Sector (for example, a diversified
freight rail transportation asset that has some exposure to the coal sector), provided that: (i)nomore
than 15% of any such infrastructure asset’s total revenues are derived from Restricted Sectors;
(ii)nomore than 5% of total revenues across the Portfolio (measured on a look‑through basis) will
bederived.
Strategic report Governance Financial statements Other information
25
Pantheon Infrastructure Plc
Annual report 2022
PINT investments
Sector: Transport & Logistics
Geography: Europe
Sponsor: Apollo Infrastructure
Website: www.primafrio.com
Date of commitment: 21.03.2022
PINT NAV 31 December 2022: £40m
Transport & Logistics
Primafrio
Transaction/company overview
•
Pomodoro Holdings Ltd (Primafrio) was founded in 2007 and
is a specialised, temperature‑controlled transportation and
logistics company in Europe primarily focused on the export of
fresh fruit and vegetables from Iberia to broader Europe and the
import of various high‑value and temperature‑sensitive goods
including pharmaceutical products.
•
Primafrio is an Iberian market leader, benefiting from substantial
scale, operational excellence and long‑standing client
relationships.
Investment thesis and value creation strategy
1
•
Niche market leader providing an essential service to resilient
end markets. The company has demonstrated strong organic
growth over a 15+ year operating history, including during major
economic dislocations (2008‑2009 global financial crisis and
2020‑2021 Covid‑19). The defensive qualities of Primafrio’s
market and its operations provide strong downside protection.
•
Value creation opportunities include inorganic growth,
strategic M&A, and continued investment in Primafrio’s cold
storage logistics infrastructure footprint.
ESG
2
•
Ranked in 2nd percentile (low risk) of all transportation
companies globally assessed by Sustainalytics
(aMorningstarcompany).
•
Dedicated R&D and ESG team highly focused on sustainability
initiatives with a net zero carbon strategy by 2030.
•
Rollout of ‘Smart Truck’ to improve fuel efficiency and reduce
emissions with investment into the latest technology for its
transport fleet.
1. There is no guarantee that the investment thesis will be achieved.
Pantheonopinion.
2. Source: www.primafrio.com.
Past performance is not indicative of future results. Future results are not
guaranteed, and loss of principal may occur. Please refer to ‘Disclosure 1 –
Investments’ towards the back of this report.
Strategic report Governance Financial statements Other information
26
Pantheon Infrastructure Plc
Annual report 2022
PINT investmentscontinued
Digital Infrastructure
CyrusOne
Sector: Digital: Data Centre
Geography: North America
Sponsor: KKR
Website: www.cyrusone.com
Date of commitment: 28.03.2022
PINT NAV 31 December 2022: £23m
Transaction/company overview
•
CyrusOne comprises a portfolio of more than
50high‑performance data centres representing more than
fourmillion sq ft of capacity across North America and Europe.
•
The company specialises in the design, construction and
operation of mission‑critical facilities that ensure the
continued operation of IT infrastructure for approximately
1,000 customers, including approximately 200 Fortune 1000
companies.
Investment thesis and value creation strategy
1
•
Growth in data usage continues to drive data centre
demand. In particular, the hyperscalesegment represents a
strong growth opportunity due to increasingcloud adoption
and increasingly data‑heavy technologies (5G, AI, gaming,
videostreaming).
•
Benefit from defensive characteristics such as long‑term
contracts with a largely investment grade credit quality
customer base, price escalators, and limited historical
customerchurn.
ESG
2
•
The company’s Sustainability Working Group was established in
2019 to integrate sustainability and ESG strategy and planning
into each function at CyrusOne.
•
Environmental targets directly aligned with the UN’s Sustainable
Development Goals; environmental topics identified using
guidance from the Sustainability Accounting Standards Board
(SASB).
•
Energy efficiency strategy:
•
minimise data hall heat using uninterruptible power supplies,
ultrasonic humidification and LED lighting;
•
deliver efficient cooling using a number of technologies
including building management systems, economisers and
high‑efficiency coolers; and
•
supplier partnerships to identify new, high‑efficiency green
technologies.
1. There is no guarantee that the investment thesis will be achieved.
Pantheonopinion.
2. Source: www.cyrusone.com, Sustainability Report 2022.
Past performance is not indicative of future results. Future results are not
guaranteed, and loss of principal may occur. Please refer to ‘Disclosure1–
Investments’ towards the back of this report.
Strategic report Governance Financial statements Other information
27
Pantheon Infrastructure Plc
Annual report 2022
PINT investmentscontinued
Sector: Power & Utilities: Gas utility and metering
Geography: UK
Sponsor: Macquarie Asset Management
Website: www.nationalgas.com
Date of commitment: 28.03.2022
PINT commitment December 2022: £41m
Transaction/company overview
•
National Gas is the owner and operator of the UK’s sole gas
transmission network, regulated by Ofgem, and an independent,
highly contracted metering business.
•
Its 7,630km network transports and connects gas to
approximately 85% of the UK’s households, as well as to
industries and power sectors to meet the country’s electricity
needs, playing a critical role in ensuring the UK’s energy security.
•
The company intends to support the UK government’s
commitment towards net zero carbon by 2050, facilitating the
shift towards low‑carbon heating.
Investment thesis and value creation strategy
1
•
Highly stable inflation-linked cash flows and high yielding
returns are positively correlated with higher inflation, supported
by tailwinds of the current macroeconomic environment.
•
Strong downside protection; regulatory framework allows
for the recovery of costs and guarantees a minimum
return on capital. The company also holds a monopolistic
position through sole ownership of the UK’s backbone gas
transmissionnetwork.
•
Significant growth opportunity. The transmission system
should play a leading role in making the network ready for the
transition from natural gas to hydrogen. It will support the
expansion of hydrogen’s role in the energy mix while working
closely with the government and Ofgem to maintain security
ofsupply.
ESG
2
•
National Gas is preparing the path for fossil‑free energy by
integrating renewable natural gas (RNG) and hydrogen into
supply, anticipating the future development of supportive
regulatory and policy frameworks.
•
Aims to achieve a 100% fossil‑free gas network by 2050 at
the latest, with a proportion of the network transporting 100%
green hydrogen and a proportion transporting a blend of green
hydrogen (hydrogen produced from green sources of energy,
e.g.solar and electrolysis) and RNG.
•
Transition to clean energy: extensive engagement with other
businesses, governments; participation in climate change
organisations; a Principal Partner of COP 26.
•
Detailed review of exposure to climate change risk and
assessment is set out in response to TCFD framework.
Power & Utilities
National Gas
1. There is no guarantee that the investment thesis will be achieved.
Pantheonopinion.
2. Source: www.nationalgrid.com, Responsible Business Report 2022.
Past performance is not indicative of future results. Future results are not
guaranteed, and loss of principal may occur. Please refer to ‘Disclosure 1 –
Investments’ towards the back of this report.
Strategic report Governance Financial statements Other information
28
Pantheon Infrastructure Plc
Annual report 2022
PINT investmentscontinued
Digital Infrastructure
VerticalBridge
Sector: Digital: Towers
Geography: North America
Sponsor: DigitalBridge
Website: www.verticalbridge.com
Date of commitment: 04.04.2022
PINT NAV 31 December 2022: £27m
Transaction/company overview
•
Vertical Bridge is the largest private owner and operator of
towers and other wireless infrastructure in the US, with ~7,000
owned towers across the country.
•
The company benefits from an average remaining lease term
of over 22 years (including extensions) primarily with the ‘big 4’
mobile network operators.
Investment thesis and value creation strategy
1
•
Track record of organic and inorganic growth: since its
founding in 2014, Vertical Bridge has been one of the most
active acquirers and ‘build‑to‑suit’ developers amongst tower
companies, and expects to further accelerate theseactivities.
•
5G build-out supporting continued growth: US carrier annual
capex is forecast to increase over 30% by 2025, prioritising
macro towers in the 5G rollout.
•
Top-tier management team and Sponsor: key members of
Vertical Bridge and DigitalBridge (including both CEOs) have
worked together since the founding of Global Tower Partners in
2003, and exceeded the original Vertical Bridge business plan.
ESG
2
•
In June 2020, Vertical Bridge became the world’s first tower
company to be certified as carbon neutral.
•
Vertical Bridge supports several projects in North America in
line with its carbon‑lowering strategy, including landfill gas,
waste‑to‑energy, and forest and grassland conservation/
re‑forestation.
•
Protecting wildlife is also a priority, including through wildlife
safety measures and tower lighting with avian‑friendly systems
to provide a safer environment for migratory and nesting birds.
1. There is no guarantee that the investment thesis will be achieved.
Pantheonopinion.
2. Source: www.verticalbridge.com. While DigitalBridge may consider ESG
factors when making an investment decision, DigitalBridge does not pursue
an ESG‑based investment strategy or limit its investments to those that meet
specific ESG criteria or standards. Any reference herein to environmental or
social considerations is not intended to qualify DigitalBridge’s duty to maximise
risk‑adjustedreturns.
Past performance is not indicative of future results. Future performance is not
guaranteed, and loss of principal may occur. Please refer to ‘Disclosure 1 –
Investments’ towards the back of this report.
Strategic report Governance Financial statements Other information
29
Pantheon Infrastructure Plc
Annual report 2022
PINT investmentscontinued
Digital Infrastructure
Delta Fiber
Sector: Digital: Fibre
Geography: Europe
Sponsor: Stonepeak
Website: www.deltafibernederland.nl
Date of commitment: 26.04.2022
PINT NAV 31 December 2022: £23m
Transaction/company overview
•
Delta Fiber is an owner and operator of fixed telecom
infrastructure in the Netherlands, providing broadband, TV,
telephone and mobile services to B2C, B2B and wholesale
customers over a predominantly fibre network.
•
The company was formed through the acquisitions of DELTA
and Caiway and is the third‑largest fixed network infrastructure
provider in the Netherlands with ~1.0million homes
passed(HP).
•
The company aims to deliver substantial further growth through
roll out of a fibre to the home (FTTH)programme (1million HP),
with a national target coverage of 25% by 2025.
Investment thesis and value creation strategy
1
•
Opportunity to invest in high quality fibre network with high
barriers to entry as a regional leader in its core footprint of
suburban and rural areas with historically high penetration and
low churn rates.
•
Well positioned to capitalise on extensive rollout programme
via first mover advantage in its core markets, exhibited
through its track record of fast build rates and ramp up of
constructioncapacity.
ESG
2
•
Delta Fiber limits the impact on the environment by using 100%
green energy, offsetting its own CO
2
emissions.
•
Contributes to seven of the UN Sustainable Development
Goals (SDGs) through four focus areas to ensure
sustainability‑improvement initiatives are targeted: enabling
a better digital life, contributing to society, taking care of
stakeholders, respecting our planet.
•
Target becoming net zero carbon by 2045.
•
In 2021, achieved a net zero emission carbon level for business
operations (Scope 1 and 2).
•
Delta Fiber Fund helps foundations and organisations in
start‑up phase or that are launching a new product with
socialvalue.
•
Supports school projects for IT students.
•
In Q4 2020, earned the highest score in the Consumer
Association’s test with a provider rating of 8.3. In 2021,
providercheck.nl awarded Delta Fiber the title of ‘best
customerservice’.
1. There is no guarantee that the investment thesis will be achieved.
Pantheonopinion.
2. Source: www.deltafiber.nl, CSR Report 2021.
Past performance is not indicative of future results. Future performance is not
guaranteed, and loss of principal may occur. Please refer to ‘Disclosure 1 –
Investments’ towards the back of this report.
Strategic report Governance Financial statements Other information
30
Pantheon Infrastructure Plc
Annual report 2022
PINT investmentscontinued
Sector: Power & Utilities: District Heating
Geography: North America
Sponsor: Vauban Infrastructure Partners
Website: To be created
Date of commitment: 23.05.2022
PINT NAV 31 December 2022: £35m
Transaction/company overview
•
Platform of eight district energy systems located across the
Northeast, Mid‑Atlantic and Midwest of the US.
•
Provides diversified energy services such as steam, electricity,
chilled water and hot water to around 190 buildings across
the higher education, healthcare, commercial, manufacturing,
hospitality, government and retail sectors.
•
District energy systems are sustainable, resilient and energy
efficient, and can be more environmentally friendly compared to
conventional on‑site energy systems due to the aggregation of
diverse load profiles and economies of scale.
Investment thesis and value creation strategy
1
•
Gross margin structure underpinned by availability-based
fixed capacity payments and consumption charges, and
pass‑through pricing mechanism limits commodity price
exposure providing robust downside protection.
•
‘Sticky’ customer base with an average relationship
tenure of ~15‑20 years and ~10‑12 year average remaining
contractuallife.
•
Provides customers with a path to decarbonisation and
increased thermal efficiency.
ESG
2
•
District energy is inherently more sustainable compared to
alternatives (UN Sustainable Development Goal #9), allowing
more efficient use of resources.
•
Cartier delivers reliable, cost effective and sustainable energy
(SDG #7) to US customers to support path to a low‑carbon
economy (SDG #13).
•
Cartier assets serve key sectors of the community: healthcare,
higher education and government entities (SDG #11).
•
Active asset management supported by ESG targets
leveraging the Sponsor’s track record in European district
energytechnologies.
Power & Utilities
Cartier Energy
1. There is no guarantee that the investment thesis will be achieved.
Pantheonopinion.
2. Source: Cartier Energy.
Past performance is not indicative of future results. Future performance is not
guaranteed, and loss of principal may occur. Please refer to ‘Disclosure 1 –
Investments’ towards the back of this report.
Strategic report Governance Financial statements Other information
31
Pantheon Infrastructure Plc
Annual report 2022
PINT investmentscontinued
Sector: Power & Utilities: Electricity Generation
Geography: North America
Sponsor: ECP
Website: www.calpine.com
Date of commitment: 27.06.2022
PINT NAV 31 December 2022: £47m
Transaction/company overview
•
ECP raised a $1.6 billion continuation vehicle to acquire an
indirect interest in Calpine (~20% equity).
•
Calpine provides exposure to one of the largest electricity
generators in the US with ~26GW of capacity (including
~770MW of operational renewables) benefiting from strategic
market positions, growing importance of reliable baseload
generation, contracted EBITDA profile, and a high‑quality
Sponsor and management team.
Investment thesis and value creation strategy
1
•
Vital supplier to the US electricity grid, providing reliable
power generation capacity and playing an important role in the
energy transition as the US targets net zero carbon by 2050.
Calpine benefits from highly predictable diversified cash flows
underpinned by contracts supported by a robust hedging
programme.
•
Strong renewables development pipeline of solar and battery
projects, financeable through the cash flows generated
by existing assets, which are projected to nearly triple its
renewables power generation capacity over the next five to
sixyears.
ESG
2
•
Employs an efficient fleet of combined‑cycle gas turbine
technologies and provides baseload power generation
andcapacity.
•
Operator of Geysers, the largest geothermal power generation
facility in the US, which produces ~7% of California’s 2020
renewables portfolio standard requirements.
•
Current renewable footprint also includes solar and
batterystorage.
•
Calpine’s free cash flow will also fund other technologies like
carbon capture andhydrogen.
•
Vocal supporter of state and federal policies to achieve
reductions in emissions that contribute to climate change and
health problems.
Power & Utilities
Calpine
1. There is no guarantee that the investment thesis will be achieved.
Pantheonopinion.
2. Source: www.calpineactsonclimate.com, 2020 Sustainability Report.
Past performance is not indicative of future results. Future performance is not
guaranteed, and loss of principal may occur. Please refer to ‘Disclosure 1 –
Investments’ towards the back of this report.
Strategic report Governance Financial statements Other information
32
Pantheon Infrastructure Plc
Annual report 2022
PINT investmentscontinued
Digital Infrastructure
Vantage
Sector: Digital: Data Centre
Geography: North America
Sponsor: DigitalBridge
Website: www.vantage-dc.com
Date of commitment: 01.07.2022
PINT NAV 31 December 2022: £22m
Transaction/company overview
•
Vantage Data Centers is a leading provider of wholesale data
centre infrastructure to large enterprises and hyperscale
cloudproviders.
•
Vantage’s North American business has data centre campuses
in Santa Clara, Quincy, Ashburn, Phoenix, Montreal and
QuebecCity.
•
The investment will support Vantage’s North American
business’ capital needs as the business continues to grow
with a strong near‑term sales pipeline to both existing and
newcustomers.
Investment thesis and value creation strategy
1
•
Secular data usage growth through increasing cloud adoption
and increasing data‑heavy technologies continues to drive data
centre demand.
•
Strong growth pipeline from favourable existing relationships
with hyperscale customers.
•
Downside protection from strong position in
supply‑constrained core geographies, long‑term contract
durations with investment‑grade counterparties, and low churn
due to high switching costs and barriers to entry.
ESG
2
•
Vantage has stated that it is committed to reach net zero
carbon emissions by 2030; Vantage’s goal targets reductions
for emissions that it controls, including Scope 1 and 2
emissions, as well as reductions that it guides or influences
inits supply chain.
•
Vantage is creating interim reduction targets that are in
alignment with the Science Based Target initiative (SBTi)
methodology, which defines and promotes emissions reduction
in line with climate science.
1. There is no guarantee that the investment thesis will be achieved.
Pantheonopinion.
2. Source: www.vantage‑dc.com. While DigitalBridge may consider ESG factors
when making an investment decision, DigitalBridge does not pursue an
ESG‑based investment strategy or limit its investments to those that meet
specific ESG criteria or standards.
Past performance is not indicative of future results. Future results are not
guaranteed, and loss of principal may occur. Please refer to ‘Disclosure 1 –
Investments’ towards the back of this report.
Strategic report Governance Financial statements Other information
33
Pantheon Infrastructure Plc
Annual report 2022
PINT investmentscontinued
Renewables & Energy Efficiency
Fudura
Sector: Renewables & Energy Efficiency
Geography: Europe
Sponsor: DIF Capital Partners
Website: www.fudura.nl
Date of commitment: 25.07.2022
PINT NAV 31 December 2022: £41m
Transaction/company overview
•
Fudura is a Dutch market‑leading business‑to‑business owner
and provider of medium‑voltage electricity infrastructure,
with a focus on transformers, metering devices and related
dataservices.
•
Fudura is active in offering services to companies seeking
solutions for energy efficiency, security of energy supply and
CO
2
neutrality. Fudura currently has approximately 22,000
business customers, being a combination of larger companies,
public institutions such as hospitals, and small to medium‑sized
enterprises.
Investment thesis and value creation strategy
1
•
Highly stable inflation-linked cash flows from large and
diversified locked‑in customer base with long‑term contracts,
low churn and inflation protection.
•
Strong downside protection with a quasi‑monopoly positioning
in its core regional markets characterised by high barriers
toentry.
•
Energy efficiency and decarbonisation tailwinds driving
growth opportunities to broaden service offering to customers
including electric vehicle charging, solar panels, heat pumps and
battery storage.
ESG
2
•
Fudura provides customers with the design, installation and
management of sustainable energy infrastructure solutions to
assist customers in managing their energy performance.
•
Growth strategy targets to become a one‑stop shop for
customers seeking to implement renewable and decentralised
energy solutions, further aiding the Netherlands’ long‑term
decarbonisation targets.
•
Fudura targets carbon emission savings through KPIs that its
management seek to implement on an annual basis.
1. There is no guarantee that the investment thesis will be achieved.
Pantheonopinion.
2. Source: Fudura.
Past performance is not indicative of future results. Future performance is not
guaranteed, and loss of principal may occur. Please refer to ‘Disclosure 1 –
Investments’ towards the back of this report.
Strategic report Governance Financial statements Other information
34
Pantheon Infrastructure Plc
Annual report 2022
PINT investmentscontinued
Digital Infrastructure
NBI
Company name: National Broadband Ireland (NBI)
Sector: Communications
Geography: Ireland
Sponsor: Asterion Industrial Partners
Website: www.nbi.ie
Date of commitment: 09.11.2022
PINT NAV 31 December 2022: £43m
Transaction/company overview
•
NBI is a fibre‑to‑the‑premises network developer and operator
working with the Irish government to support the rollout
of the National Broadband Plan. This programme seeks to
connect every premise in the country to high‑speed broadband
by 2027 and is the biggest investment in rural Ireland
sinceelectrification.
•
NBI is responsible for passing and connecting approximately
560,000 premises in rural areas, covering 96% of the land mass
of the country and serving around 23% of the population and
69% of the country’s farms.
Investment thesis and value creation strategy
1
•
Stable cash flows with inflation protection expected through
the terms of the project agreement and the prices NBI can
charge to internet service providers for access.
•
Downside protection through a unique positioning in the
intervention area (the franchise area granted by the Irish
government) and a flexible government subsidy regime.
•
Attractive macro trends including increased working from
home, demographics and growth in fibre broadband take‑up to
date underpin the long‑term commercial viability of the network.
ESG
2
•
Under the project agreement NBI provides access to affordable
high‑speed broadband in rural communities that could
previously have been underserved by commercial providers
without intervention.
•
Connecting remote premises to affordable fibre broadband
is expected to deliver economic benefits to the region,
support job creation and ensure that rural areas are not
disadvantaged compared to urban areas which are well‑served
by incumbentproviders.
•
NBI’s network area includes public facilities such as schools
and libraries, improving the benefit such infrastructure provides
to local communities.
•
The project is expected to directly support 1,800 jobs in the
region at its peak.
1. There is no guarantee that the investment thesis will be achieved.
Pantheonopinion.
2. Source: NBI.
Past performance is not indicative of future results. Future performance is not
guaranteed, and loss of principal may occur. Please refer to ‘Disclosure1–
Investments’ towards the back of this report.
Strategic report Governance Financial statements Other information
35
Pantheon Infrastructure Plc
Annual report 2022
PINT investments continued
Digital Infrastructure
GD Towers
Sector: Digital: Towers
Geography: Europe
Sponsor: DigitalBridge
Website: To be created
Date of announcement: 31.01.2023
PINT commitment: £43m
Transaction/company overview
•
In July 2022, DigitalBridge, alongside Brookfield Asset
Management, agreed to buy 51% of GD Towers from Deutsche
Telekom for a total enterprise value of €17.5 billion.
•
GD Towers is one of the largest tower and telecom
infrastructure networks in Western Europe with c.40,000 tower
sites across Germany and Austria, making it the market leader
in Germany and second largest in Austria.
•
GD Towers’ high‑quality portfolio is supported by an anchor
tenancy agreement with Deutsche Telekom, which has retained
a 49% ownership stake in GD Towers.
Investment thesis and value creation strategy
1
•
Majority of cash flows are contracted and index-linked,
offering strong downside protection in challenging
macroeconomic conditions.
•
Favourable market tailwinds from regulatory‑driven 5G
coverage requirements with significant growth opportunities.
•
Organic and inorganic growth opportunities arising from other
market participants, and numerous consolidation opportunities
in Europe.
ESG
2
•
Deutsche Telekom AG has a net zero carbon strategy that is
aligned with the Science Based Targets initiative and has been
highly rated by Carbon Disclosure Project.
•
The majority of power for the tower sites now comes from
renewable sources, with carbon offsetting arrangements in
place for any fossil fuel power consumption.
1. There is no guarantee that the investment thesis will be achieved.
Pantheonopinion.
2. Source: ERM. While DigitalBridge may consider ESG factors when making an
investment decision, DigitalBridge does not pursue an ESG‑based investment
strategy or limit its investments to those that meet specific ESG criteria or
standards. Any reference herein to environmental or social considerations is not
intended to qualify DigitalBridge’s duty to maximise risk‑adjusted returns.
Past performance is not indicative of future results. Future results are not
guaranteed, and loss of principal may occur. Please refer to ‘Disclosure 1 –
Investments’ towards the back of this report.
Strategic report Governance Financial statements Other information
36
Pantheon Infrastructure Plc
Annual report 2022
Infrastructurecontinuesto
demonstrateresilienceagainst
achallengingmacroeconomic
backdrop.
Market growth
In 2022, AUM in the private infrastructure market grew to in
excess of $1 trillion, with a projected CAGR of ~11% between
2022 and 2027
1
. Against this backdrop, competition for assets
has intensifi ed, with allocations to infrastructure increasing and
new participants entering the market in specialised sub‑sectors.
Increased competition in the market has necessitated a focus
onmaintaining a disciplined and selective investmentapproach.
Macro
Deterioration in the global macro economy has continued to
demonstrate the resilience of the infrastructure asset class.
Risinginfl ation, although directly benefi ting those assets
with infl ation linkage, has led to central bank policy tightening
throughout 2022. However, Pantheon’s experience is that any
upward pressure on discount rates for infrastructure asset
valuations has largely been offset by valuation benefi ts associated
with infl ation and other sector‑specifi c tailwinds.
In this environment, demand for infrastructure assets can increase
as investors seek to benefi t from infrastructure’s defensive
characteristics including low correlation to other asset classes.
Our market
•
Rising bond yields are driving up risk‑free rates
(although transactional evidence is not showing
anysignifi cant increase in discount rates).
•
Historic refi nancing on favourable terms, hedging and
availability of longer‑term fi xed debt have provided
agood degree of downsideprotection. Higher future
refi nancing rates could lead to lower enterprise
valuations if debt structures are not portable.
•
Although PINT’s foreign exchange risk is partly hedged at
the company level, USDstrength will continue to benefi t
assets with USD‑denominatedrevenue.
04. Foreign exchange03. Interest rates
•
Energy markets have dramatically changed over the past
year, which has knock‑on effects for certain types of
infrastructureassets.
•
Power generation assets with merchant price exposure
should continue to see yield and valuation benefi ts.
•
Assets with pricing power will continue to pass on higher
energy costs to customers.
•
Energy‑intensive infrastructure assets may experience
headwinds as a result of higher costs.
•
Infl ation remains at levels not seen since the 1980s
although peak infl ation may have passed.
•
Contracted and infl ation‑linked revenues can provide
protection during periods of rising infl ation.
01. Rising infl ation 02. Rising energy prices
Keymacrothemes
1. Source: Preqin Special Report – The Future of Alternatives in 2027. Closed‑ended
funds only; October 2022
Strategic report Governance Financial statements Other information
37
Pantheon Infrastructure Plc
Annual report 2022
Our market continued
Infrastructuremarketindicators
Deal activity by geography ($bn)
1
Infrastructure fundraising
2
Deal activity by sector ($bn)
1
Investor sentiment for future
infrastructure allocations
3
Increase/
maintain | 89%
Decrease | 11%
Pantheon opinion. There is no guarantee
that these trends will persist.
1. Source: Inframation, April 2022,
based on greenfield and brownfield
transactions from 2015 to 2022.
2. Source: Preqin as of January 2023.
Infrastructure fundraising is based
on the year capital was closed,
including funds which have not held
afinalclosing.
3. Source: Preqin Global Infrastructure
Report 2023.
2015 2016 2017 2018 2019 2020 2021 2022
Capital raised ($bn)
$76
$87
$95
$119
$133
$126
$159
$212
2015 2022
351
2016
371
2017
429
2018
576
2019
553
2020
574
2021
755
893
North America Europe Asia & RoW
CAGR +12%
20222015
351
2016
371
2017
429
2018
576
2019
553
2020
574
2021
755
893
Energy infrastructure
Telecommunications
Social & other
Power
Renewables
Transport
CAGR +12%
CAGR +14%
Strong upward trends in deal activity, fundraising and investor sentiment provide a positive backdrop for future growth.
Strategic report Governance Financial statements Other information
38
Pantheon Infrastructure Plc
Annual report 2022
Our market continued
Thewayinwhichsocietiesandeconomiesfunctionovertimeischanging,whichcreatesnewlong‑term
tailwindsforthesectorsthatservethem.PINTislookingtoconstructaportfoliointhesegrowingmarkets
withfavourabletailwindswhichwillprovidesustainablereturnstoshareholders.
Global changes
Urbanisation
Digitalisation
Smart cities
Telecommunications
Work from home
Decarbonisation
Population growth
Supply chain
realignment
Keysectorthemes
Pantheon opinion. There is no guarantee that thesetrends
willpersist.
1. Source: IATA, November 2022.
2. Source: Freightos, February 2023.
Utilities
•
The role of hydrogen is expected by some
to be significant in energy transition,
which impacts utilities such as gas
transmission and distribution companies.
•
Revenues tend to be inflation‑linked,
which is highly beneficial in the current
market environment.
•
High demand and lack of supply in the
market has driven asset prices up.
Energy transition
•
Governments and supranational
organisations globally are prioritising
climate change issues and clean energy,
leading to tangible and publicly stated
targets for many organisations.
•
Infrastructure supporting the development
of energy transition is still under‑developed
in areas such as the electric grid/EVs; further
investment in this sector is in high demand.
•
However, the process to build/transition
relevant assets is comparatively slow.
Digital
•
Significant increase in demand due to
global trends requiring major increase
in data/connectivity (WFH, gaming, AI,
streaming, videos etc.).
•
Labour and supply chain shortages/
issues are impacting certain build‑out
and development projects.
Transportation
•
Increased demand for cleaner modes
of transport in line with aforementioned
globaltrends.
•
There has been a post Covid‑19 recovery
in travel volumes, although air travel
remains at c.75% of 2019 levels.
1
•
After significant increases in 2021, freight
prices fell during 2022 due to softening
global demand.
2
Social & healthcare
•
Increased demand for childcare facilities
driven by the return to the office
post‑Covid‑19 and population growth.
•
Growth in life sciences, medical services
& research, and an ageing population
are driving demand for infrastructure in
thissector.
Strategic report Governance Financial statements Other information
39
Pantheon Infrastructure Plc
Annual report 2022
[]
Overview
Data centres are the physical facilities that enable organisations to run their business‑critical
applications and to store data. This is achieved by hosting and supporting the physical servers
andsystems that are necessary to facilitate the processing, redirecting and storage of large
volumesofdata such that it is readily accessible and transferable.
These facilities require capital‑intensive infrastructure to support the equipment they house,
includingpower sub‑systems, uninterruptible power supplies, ventilation and cooling systems,
fi resuppression and high bandwidth physical connections to external networks.
Data centre owners provide their customers with a variety of services. The exact specifi cations will
varybytype and locations, but broadly these include a mixture of:
• Physical space
• Power consumption
• Data connectivity
• Cross‑connection
• Labour and technical support
Types
Not all data centres are the same, and there are a number of different categorisations depending
onthefunction and type of customers they support. These include:
Co‑location – large facilities which rent out space or servers to multiple users, for whom constructing
their own facilities would be uneconomical
Edge – smaller facilities located on the edge of networks and in closer proximity to end users,
providingcustomers with the benefi t of lower latency, higher security and reduced intermittency
Enterprise – facilities that are built, owned, and operated by individual companies for their own
useandwhich are optimized for their end users
Hyperscale – vast single‑user facilities operated exclusively for their specifi c requirements
bythetwodozen or so global Internet‑based companies referred to as “hyperscalers”
Demand
Whether globally, regionally or nationally, digital communications networks are continuing to carry
extremely high volumes of data and moreover are witnessing sustained and strong levels of traffi c
growth. Whilst increases in the amounts of data carried to date have been impressive, numerous
studies suggest that this rate of growth will continue for many years to come. The key drivers for data
centres, and digital infrastructure more broadly, include:
• Online streaming
• Working from home
• Internet of things
Classifi cation
The specifi cations of data centres vary according to type and the needs of the customers they serve.
The integrity and resilience of data centres can be classifi ed by the following tiers:
Tier 1 – Basic site infrastructure with limited protection against physical events, allowing for up to
29hours of downtime a year (an uptime of 99.67%). Tier 1 facilities are suited to small businesses and
start‑ups that do not have complex IT requirements and that require an affordable hosting option.
Tier 2 – Redundant‑capacity site infrastructure, offering improved protection against physical events,
allowing for up to 22 hours of downtime a year (an uptime of 99.74%). Tier 2 facilities are the preferred
option for SMEs that need a cost‑effective but more reliable option than a tier 1 facility.
Strategic report Governance Financial statements Other information
Digital Infrastructure
Data Centres
Sector spotlight
Strategic report Governance Financial statements Other information
40
Pantheon Infrastructure Plc
Annual report 2022
Digital Infrastructure continued
Classifi cation continued
Tier 3 – Concurrently maintainable site infrastructure protecting against virtually all physical
events,allowing for up to 1.5 hours of downtime a year (an uptime of 99.98%). Tier 3 facilities
aretargeted at large companies with advanced IT operations that need further fail‑safes and that
hostextensive data (particularly customer data).
Tier 4 – Fault‑tolerant site infrastructure providing the highest levels of tolerance and redundancy,
allowing for only 0.5 hours of downtime a year (an uptime of 99.99%). These data centres host
enterprises which require uninterrupted availability, such as governments and large enterprises,
withmission‑critical servers and sustained customer or business demands.
Business case
Data centres exhibit a number of attractive investment features which drive value growth including;
recurring long‑term contracts (often with built in escalator clauses) with predictable cash fl ows,
limitedobsolescence risk and high location‑based barriers to entry.
The owner of the data centre typically benefi ts from:
• Long contracts or frequent annual renewals – customers contract for 5‑10+ years for
scaledeployment (which can be customised for larger tenants). Co‑location customers
typicallycontract for 1‑3 years, but usually with automatic renewal. In many instances,
contractsare based on power consumed (as opposed to square footage used) plus fees
forpower availability and additional services (such as cross connects).
• High renewal rates resulting in a sticky customer base – the typical tenant retention
ratesare70‑90% owing to the high costs associated with switching.
• Contractual escalators – leases typically have annual escalators at 2‑5% per annum.
The infrastructure owner earns a profi t after covering the costs of the data centre, including
site maintenance, insurance, temperature control systems, electrical systems, customer care
(includinglabour on site and management of the data centre’s operations) and the capital
costsinvolved.
PINT approach
PINT’s investment approach to data centres and digital assets more generally is to seek opportunities
in delivery platforms that benefi t from an established operating base as well as being well positioned to
capture growth opportunities going forward. These individual platforms will have dedicated underlying
management teams focused on development activity, technical operations and maintenance,
andfi nancial management.
To date PINT has invested in two data centre assets, CyrusOne and Vantage. Both of these business
have a focus on the hyperscale segment of the market and have ambitions to source all their energy
needs from renewable sources. Pantheon believes that the hyperscale segment is a particularly
attractive sub‑segment of the cash fl ows market. It benefi ts from both the proliferation of mobile
devices and demand for mobile gaming and streaming and the increase adoption of public clouds by
enterprises and government with continued expansion to meet redundancy requirements essential to
servicing public clouds.
Data Centres continued
Strategic report Governance Financial statements Other information
Sector spotlight continued
Strategic report Governance Financial statements Other information
41
Pantheon Infrastructure Plc
Annual report 2022
Digital Infrastructure
•
Growth in mobile data traffic
•
Growth in 5G connected devices
Renewables & Energy Efficiency
•
Average cost reduction for solar/wind
•
Increasing global installed wind/solar capacity
Power & Utilities
•
US/Europe transitioning grid to renewables
•
US coal power plant retirements
Transport & Logistics
•
Increased global trade
•
Higher e-commerce penetration
Purpose
The Company aims to
buildaglobalPortfolioof
investments with blended risk/
returnprofiles,andsettargets
acrossdealtypes,sectorsand
geographiesfordiversification.
Our co‑investment strategy differentiates us in the listed
infrastructure market.
What sets us apart Capturing secular growth
1
Deal selectivity:
Sponsor relationships drive strong
deal flow, allowing for highly selective
investmentprocess.
2
Diversification:
Access to investments across sourcing
Sponsors, sectors and geographies.
3
Sponsor specialisation:
Ability for investors to choose deals alongside
a Sponsor with a distinct edge who may be
best placed to create value.
4
Fee efficient:
Co-investments typically offered with no
ongoing management fee/carried interest.
Business model
Strategic report Governance Financial statements Other information
42
Pantheon Infrastructure Plc
Annual report 2022
How we create value Value creation
PINT’s business model creates
value by allowing Pantheon, the
Investment Manager, to allocate
capital and invest on its behalf
alongside the Sponsors that it
believes have a distinct edge in
a particular infrastructure sector.
Infrastructure assets
High‑quality infrastructure assets typically benefit from long‑term contractual cash flows,
positive correlation to inflation and exposure to secular changes in society.
Portfolio
Other Pantheon Funds
(private)
Pantheon provides a broad sourcing network with leading
private asset investment managers and has strong
relationships with Sponsors it can leverage on behalf of PINT.
Refer to the Investment Manager’s report for more details.
PINT
(public)
PINT has access to Pantheon’s deal sourcing platform.
Since PINT is publicly listed, any retail or institutional
investor is able to benefit from any value it creates.
Vehicle
Investors
Shareholders
Investors in PINT can participate in a globally
diversified portfolio of core infrastructure assets
alongside other leading private asset managers and
institutional investors.
8–10% p.a.
NAV Total Return per share
4p per share
1
second year dividend,
progressive thereafter
1. The Company is targeting a dividend of 4p per share in the year ending 31 December 2023, and, thereafter, progressive.
Business model continued
Strategic report Governance Financial statements Other information
43
Pantheon Infrastructure Plc
Annual report 2022
Business model continued
Backgroundtoco‑investments
There are broadly three routes to investing in private infrastructure assets:
Co‑investments
Co‑investments give investors the opportunity to invest
alongside Sponsors in specific portfolio companies.
Allocating to co‑investments can provide incremental
advantages to investors, including targeted deal selection
and fee‑efficient exposure to transactions which are often
offered on a no‑fee and no‑carry basis.
Primaries
Primaries involve a commitment to a newly launched limited
life fund managed by a Sponsor who will build a portfolio of
private investments and seek to exit improved businesses in
the later years of the fund term at a profit.
Secondaries
Secondaries traditionally involve the purchase of an interest
in an established private fund or a portfolio of funds from an
existing investor.
PINT’s investment policy is to gain exposure to infrastructure
assets via co‑investments. This can take the form of the following
types of transaction:
•
Co‑bid: Partnering with a lead Sponsor to underwrite a
deal prior to final bid submission, requiring the need for a
sophisticated investor who can lead independent due diligence
on an asset.
•
Targeted syndication: Following the signing of a deal, a
Sponsor will offer a select group of investors a portion of
the deal. This will typically comprise fewer than five parties,
who may have undertaken some early due diligence on
thetransaction.
•
General syndication: Following the signing of a deal, a Sponsor
will offer all of its existing fund investors the opportunity to gain
exposure to a transaction.
Sale process initiated Final bid submitted Deal signing
Co‑bid Targeted syndication
General syndication
Strategic report Governance Financial statements Other information
44
Pantheon Infrastructure Plc
Annual report 2022
Business model continued
Backgroundtoco‑investmentscontinued
Access:
There are fewer public market opportunities to access
infrastructure assets, as infrastructure companies tend to
remain private for longer periods of time. Therefore, investing
through co‑investments provides access to assets not
normally accessible by public market investors.
Portfolio construction:
Pantheon is able to utilise co‑investments
to select individual assets to gain exposure
to, and tilt the Portfolio towards, sectors
based on the Investment Manager’s view
on relative value.
Diversification:
Co‑investments are a critical part of
portfolio construction in having the
ability to build a programme that is truly
diversified across infrastructure sectors,
geographies, stages and Sponsor.
Exposure to nascent sectors:
Co‑investments can provide access to
nascent and emerging sectors that may
otherwise be underweight or not be
available within primary or secondary
investment opportunities.
Sponsor specialisation:
Co‑investors have the ability to choose
deals alongside a Sponsor with a
distinct edge who may be best placed
tocreatevalue.
Enhanced economics:
The use of co‑investments can reduce the overall expense
ratio and gross‑to‑net performance spread of a portfolio, as
most deals are offered with no ongoing management fee or
carried interest.
Alignment:
The structure of co‑investments provides significant
alignment through the incentivisation of both deal Sponsors,
who typically provide the majority of capital through their
primary fund vehicles, and management who are typically
tied in under long‑term incentive programmes.
Advantages of investing in infrastructure via co‑investments
Investing in co‑investments can be an attractive way to gain access to private infrastructure for several reasons, including:
Strategic report Governance Financial statements Other information
45
Pantheon Infrastructure Plc
Annual report 2022
Business model continued
Sourcing and origination
In its role as investment manager to the Company, Pantheon is
responsible for the sourcing and execution of transactions on
behalf of PINT.
The Investment Manager’s sourcing leads to a wide array of
investment opportunities as Sponsors embrace new transaction
models and co‑investment appetite from investors increases.
Pantheon’s primary relationships and network of Sponsors
allows it to be a preferred co‑investor, screening a high volume of
proprietary transactions. Pantheon’s ability to work with partners
to provide capital solutions in complex scenarios is expected to
continue to generate differentiated deal flow and allow it to acquire
high‑quality and difficult‑to‑access assets for the Company’s
Portfolio and other Pantheon clients.
Co‑investment capital makes up a sizeable portion of the
infrastructure investment universe, and Pantheon continues to see
strong deal flow, with continued signs of growth. This is driven by
Sponsors continuing to see the wider franchise benefit in offering
their trusted partners co‑investment deal flow, and in particular due
to such Sponsors being constrained by fund concentration limits.
Such limits may restrict the volume of capital many Sponsors can
invest from their funds in larger transactions, potentially restricting
their access to many deals unless they have access to additional
co‑investment capital.
Pantheon’sinvestment
process
Global sourcing and rigorous screening with highly selective conversion rate
Pantheon’s infrastructure co‑investment
deal funnel (2015‑2022):
Pantheon: annual infrastructure
co‑investments screened:
2015 2016 2017
2018
2019 2022
Deals screened ($bn)
3.9
5.2
5.1
8.1
9.7
13.7
+17.4%
2020
2021
12.4
11.9
Deals Screened
($bn) CAGR
Sourcing ExecutionScreening Due diligence Approval
Deals screened
Advanced diligence
Closed
$70.1bn
$6.5bn
$4.4bn
728 deals
75 deals
52 deals
6%
conversion
rate
Strategic report Governance Financial statements Other information
46
Pantheon Infrastructure Plc
Annual report 2022
Pantheon’sinvestment
process
continued
Screening Due diligence and underwriting
Business model continued
Sourcing Execution
Screening is the first of three stages of the Pantheon investment
due diligence and approval process. This stage involves preliminary
due diligence of the opportunity, which will include:
•
Assessing the deal fittofundstrategy
•
Review potential returns profile
•
Explore risk factors
•
Determine manager track record
•
Understand transaction dynamics andsponsoralignment
•
Conduct fund/companyoverview
After Screening, due diligence will be undertaken as part of the
Advanced Notice stage, including:
•
Review financial model and underlying assumptions
•
Review internal and company databases
•
Evaluate macro trends and sector themes/outlook and review
compatibility with assumptions
•
Identify risks and mitigants
If a deal is approved at Advanced Notice stage, it will proceed
to the final investment committee stage, Investment Thesis.
Transactional and due diligence work undertaken ahead of
thisincludes:
•
Benchmark performance
•
Extensive asset due diligence
•
Assess downside protection
•
Finalise financial model
•
Onsite manager visits
•
ESG and climate change risk assessment
•
Tax due diligence
•
Conduct background checks/reference calls
•
Complete “Investment Thesis” for submission to GIRAC
•
Poor‑quality assets
•
Business/firm franchise issue
•
Lack of coverage
•
Overly competitive process
•
Limited Pantheon edge
•
Poor fit with portfolio strategy
•
ESG considerations
Reasons to decline
•
Asset‑related risk factors:
•
High debt levels
•
High purchase price
•
Commodity price risk
•
Concentration risk
•
Quality of assets/Sponsors
•
Lack of embedded value
•
Pricing disconnect
Reasons to decline
•
Legal considerations
•
Limited downside protection
•
Inconclusive references
•
Weak governance
Reasons to decline
Screening Due diligence Approval
Strategic report Governance Financial statements Other information
47
Pantheon Infrastructure Plc
Annual report 2022
Business model continued
Due diligence and underwriting continued
For co‑investments, the Company is typically entering the
acquisition at the same time as the Sponsor which sets the
valuation and enters at the same amount, creating alignment with
the Company. The Sponsor provides its valuation assumptions
for the target asset and the Investment Manager will seek to
verify them, and either underwrite the deal at the same return
target as the Sponsor, or take a more conservative view on
some of the valuation assumptions which may result in a lower
underwritten return target. This process involves the Investment
Manager conducting its own independent review of the valuation
assumptions which includes, but is not limited to, the following
analysis as part of the Investment Thesis:
•
review of all due diligence material available, including technical,
market, legal, financial and tax. Assumptions for the valuation
are driven from these third‑party independent consultant
reports;
•
consult with external market contacts to verify key assumptions;
•
review financial model driving the valuation; and
•
conduct downside and upside sensitivities to prepare a
Pantheon base case that can be underwritten and that meets
relevant return requirements.
Sourcing ExecutionDue diligence ApprovalScreening
The base case prepared during the underwriting process forms the
basis of the final Investment Thesis. The investment return targets
can be attributed to several key components of a target business,
which may include:
•
Existing business: returns from the profitability of the target’s
existing assets/contracts.
•
Organic growth: returns derived from initiatives to greater
utilise existing infrastructure, such as leasing further antennae
capacity on an existing tower installation or supplying other
energy products to existing clients of a district heating business.
•
Growth capital: returns generated from additional profitability
arising from capital expenditure initiatives, taking the form
of expanding and/or upgrading existing or developing new
infrastructure. Such initiatives will depend on the target
company’s ability to source and execute on a pipeline of growth
opportunities.
•
Capital structure: returns generated from optimising the
target’s debt structure in tandem with its growth trajectory.
•
M&A activity: returns generated from the increased scale and
efficiencies achieved through bolt‑on acquisition activity.
•
Operational efficiencies: increased returns generated
from reduced operating costs achievable through greater
businessscale.
•
Multiple expansion: returns generated from delivering an exit
at an increased earnings multiple relative to the initial entry
valuation. An increased exit multiple would be in keeping with
the expectations to both increase the scale of the target as well
as reducing the risk‑profile over time.
The expected holding period for each co‑investment is between
5to 7 years, however this does not form the basis of any
guaranteed exit timing or method from the Sponsor. Thefinal
timing of a co‑investment exit will be a function of business
performance and economic conditions, and accordingly this is
sensitised during the underwriting process to ensure any delays will
not materially compromise expected returns.
Several key financial metrics are used for analytical purposes,
including internal rate of return (IRR) and multiple on invested
capital (MOIC). IRR is the annual rate of growth that an investment
is expected to generate over its life, and MOIC measures
investment returns by comparing the total realised value of
an investment at the exit date relative to the initial investment
amount. The illustrative bridge chart opposite demonstrates the
contributions to expected returns of certain assumptions in a
typical private market infrastructure co‑investment transaction.
Pantheon’sinvestment
process
continued
Strategic report Governance Financial statements Other information
48
Pantheon Infrastructure Plc
Annual report 2022
Due diligence
Business model continued
The final path approval of a deal includes:
•
Presentation of final investment thesis
•
Approval by GIRAC
•
Allocation between Pantheon clients in line with
Allocationpolicy
•
Funding ringfenced pending completion
Once a deal has been approved, it will move in to legal closing
andexecution, which involves:
•
Optimising deal structure
•
Review and negotiateagreements
•
Finalise reporting requirements
•
Negotiate preferential termsand rights
•
Execute transfer and payments
•
Implement hedging initiatives
Pantheon’sinvestment
process
continued
Approval and execution
Sourcing ExecutionApprovalScreening
Due diligence and underwriting continued
Illustrative MOIC composition
1
Existing
business
Contracted and
in construction
Development
with exclusivity
High conviction
development pipeline
Operational
efficiencies of scale
Capital
structure
High
conviction M&A
Underwriting
base case
Additional
development pipeline
Additional
M&A
Sponsor base
case
Exit multiple
expansion
Further upside
potential
Sponsor upside
case
0.90
0.10
0.15
0.20
0.10
0.15
0.15 1.75
0.20
0.15
2.10
0.35
0.30 2.75
3.0x
2.0x
1.0x
2.5x
1.5x
0.5x
0.0x
1. Figures are based on illustrative returns for a hypothetical transaction.
Strategic report Governance Financial statements Other information
49
Pantheon Infrastructure Plc
Annual report 2022
Business model continued
Valuations
The Company invests in infrastructure assets typically through
a co‑investment programme. In a typical co‑investment the
Company partakes in the investment alongside a lead investor
or aSponsor. The Sponsor will typically set up a co‑investment
vehicle, subject to annual statutory audits, that invests into an
underlying infrastructure investment and will issue a NAV and
capital accounts on a quarterlybasis.
The Sponsor will usually own the majority of equity and have
significant or controlling influence in the asset. Accordingly Pantheon
considers the Sponsor to be the responsible party for preparing the
valuation on behalf of the co‑investment vehicle, and may rely upon
the valuations prepared by the Sponsor that have been prepared
in‑line with the relevant accounting standards and IPEV guidelines.
In private market investing, the Sponsor is usually considered to
be the best party to determine the appropriate valuation due to
thefollowing:
•
intimate knowledge of the underlying infrastructure asset held
in the SPV and its business and the fundamental business
environment in which it operates;
•
a comprehensive understanding of the underlying infrastructure
asset held in the SPV and its financials;
•
knowledge of the market environment in which transactions
ofcomparable companies take place; and
•
the Company’s economic interest in an investment as
aco‑investor isaligned with that of the Sponsor.
In private market transactions, the purchase cost of the investment
is an indication of its initial fair value and is thereafter calibrated for
subsequent events and changes in valuation inputs. Infrastructure
assets often display particular characteristics allowing long‑term
financial forecasts to be prepared, which tends to result in a higher
prevalence of Discounted Cash Flows (DCF) in the valuation.
Insuch cases fair value is estimated by deriving the present
value of the expected cash flows generated by the investment
through the use of reasonable assumptions such as appropriate
discount rates to reflect the inherent risk of the assets forming
theinvestment.
Valuation governance
Pantheon operates a valuation committee, which is independent
of the investment and investor relations teams, and chaired
by Pantheon’s Chief Risk Officer, which ensures that there
are robust governance, oversight and process frameworks in
place, guaranteeing compliance with standards and consistent
application of policy.
The valuation committee review and challenges the valuations
provided by the Sponsors and reviews the accounting policies and
valuations methodologies applied. The valuation committee has
responsibility for approving investment valuations which determine
the fair value of the Portfolio, with input from the investment team
who are responsible for managing the Portfolio.
TheCompanyinvestsininfrastructureassets
typicallythroughaco‑investmentprogramme.
Strategic report Governance Financial statements Other information
50
Pantheon Infrastructure Plc
Annual report 2022
Diversification
Global portfolio with exposure to regions, sectors
and sourcing partners and the ability to tilt
the Portfolio over time to the best risk/return
opportunities.
Resilient cash
flow assets
Emphasis on direct infrastructure assets with
substantial contracted cash flows and conservative
leverage creates a portfolio with downside
protection.
Inflation
protection
Natural hedge against rising inflation with certain
assets benefiting from inflation protection.
Capturing
long‑term
growth
Exposure to growth dynamics within infrastructure
sub‑sectors including the transition to a net zero
carbon economy and the digitalisation of social and
economic activity.
Value‑creation
opportunities
Assets where added value can be created through
operational optimisation, incremental expansion of
a platform or industry consolidation, utilising the
skill‑set and track record of Sponsors.
Strong ESG
characteristics
Robust asset and Sponsor ESG risk assessment
through due diligence, ongoing asset monitoring
and exclusion of high‑risk ESG sectors from the
strategy, including coal, oil, gas (upstream), mining
and nuclear.
Investment strategy
TheCompanyseekstogenerateattractiverisk‑adjustedtotalreturnsforshareholdersover
thelongterm,comprisingbothcapitalgrowthandaprogressivedividend.Throughthe
acquisitionofequityorequity‑relatedinvestments,PINToffersadiversifiedportfolio
ofinfrastructureassetswithaprimaryfocusondevelopedOECDmarkets.
Strategic report Governance Financial statements Other information
51
Pantheon Infrastructure Plc
Annual report 2022
Strategy in action
Diversifi cation
In November 2022 PINT committed approximately €52.7million in Asterion Industrial Partners’
interest in National Broadband Ireland (NBI), an Irish fi bre to the premises (FTTP) network developer
andoperator.
NBI was selected by the Irish Department for Environment, Climate and Communications to support
the country’s National Broadband Plan, a programme that seeks to connect every business, public
and residential premises in the country to high‑speed broadband by 2027. NBI is responsible for
passing and connecting approximately 560,000 premises in rural areas stretching across 96% of
the land mass of Ireland, serving around 23% of the population and 69% of the country’s farms,
making this the largest infrastructural project in rural Ireland since rural electrifi cation.
Deployment is split into 227 Development Areas with the rollout occurring in all counties
simultaneously. The Irish government is providing subsidies alongside the capital committed
by shareholders and revenue generated to support the design, procurement, construction and
maintenance of the network under a 25‑year project agreement. The project is expected to help
bridge the digital divide between rural and urban areas in Ireland.
The investment is in line with PINT’s strategy of building a diversifi ed portfolio of infrastructure
assets benefi ting from structural growth drivers. Investment in digital infrastructure is essential to
ensure everyone benefi ts from the deployment of high‑speed networks. PINT has invested through
Asterion Industrial Partners, a leading European infrastructure investment manager specialising
in the telecoms, energy & utilities, and mobility sectors, with fellow investor GranahanMcCourt
retaining its current interest in NBI.
“This transaction represents a
high‑quality fi bre asset alongside
our long‑standing partner Asterion.
NBI’s commitment to providing
high‑speed broadband to underserved
areas in Ireland makes it a compelling
investment proposition which has a
positive impact on local communities.”
Richard Sem
Partner at Pantheon, PINT’s Investment Manager
National Broadband Ireland
Strategic report Governance Financial statements Other information
52
Pantheon Infrastructure Plc
Annual report 2022
Pantheon has strong credentials as a
responsible Investment Manager
The Board has appointed Pantheon as its Investment Manager
todeliver its Environmental, Social and Governance (ESG) policies,
which are reviewed and overseen by an ESG Committee of
Pantheon. Pantheon is committed to considering ESG issues in
both the operation of its business and in its investments for the
benefit of its stakeholders, includingclients, the local communities
in which the firm operates, and society as a whole. Pantheon,
in turn, operates its own group‑wide ESG policy, the objective of
which is to ensure that, wherever possible, ESG considerations are
appropriately reflected in Pantheon’s investment process. Pantheon
believes this is crucial to harnessing the potential for value creation,
as well as in protecting the interests and reputations of its firm
and clients. ESG due diligence findings are formally documented
in investment recommendations, with potential concerns flagged
for consideration by Pantheon investment committees. Following
the closing of an investment, Pantheon actively monitors ESG and
climate change risk across its infrastructure portfolios, engaging
with Sponsors to advocate for improvement inthe event of any
negative incidents.
ESG reporting in relation to PINT
The Investment Manager is in the process of collating data
regarding the performance of PINT’s investments against certain
sustainability indicators. This is for the purpose of reporting the
extent to which the Company’s investments have met its ESG
characteristics over the course of the reporting period. Theresults
of PINT’s investments’ ESG performance will be published in
accordance with the requirements of Article 11 of the SFDR
(including in accordance with the regulatory technical standards
set out in Commission Delegated Regulation (EU) 2022/1288)
andas part of PINT’s Sustainability Report, which is to be published
onthe Company’s website in the course of Q32023.
Responsible investing and ESG
PINT’s ESG characteristics
Following an internal assessment of the application of
the Sustainable Finance Disclosure Regulations (SFDR),
TheInvestment Manager has chosen to disclose the
Company’s ESG characteristics in accordance with Article 8
of the SFDR. As a fund that promotes certain environmental
and/or social characteristics, PINT targets investments
with strong environmental, social and governance (ESG)
credentials, with a focus on companies and projects that
can support thetransition to a low‑carbon economy, and
negatively screens for certain sectors.
1
PINT will not invest in coal, nuclear energy, oil (upstream,
midstream, storage), gas (upstream) or mining. If an asset
has some element of exposure to the above sectors,
then there will be a look‑through limitation of <5% of total
revenues of the portfolio and <15% of total revenues of
the asset, provided there is a planned trajectory to reduce
exposure over time to these sectors.
1. Prospective investors in the Company will need to undergo their own
internal assessment process to determine if they are satisfied that investing
in the Company is compliant with their own investment policies and/or
regulatory requirements, including but not limited to the investor’s internal
ESG policy and any other underlying obligations to its investor.
Strategic report Governance Financial statements Other information
53
Pantheon Infrastructure Plc
Annual report 2022
Sponsor ESG KPIs
Adoption of ESG industry standards
Established ESG approach in investment process
and ongoing portfolio management
Integration of climate change risk diligence
and monitoring
Signifi cant prior ESG events at the fi rm
Reputation checks and referencing
Diversity and inclusion policies and diversity
ratios of investment team
Corporate governance controls
Adoption of anti‑corruption and
anti‑bribery policies
Cyber security and business continuity plans
Portfolio Company ESG KPIs
Sector risk
Company risk
Country risk
Prior ESG company incidents
ESG benefi ts to company
Background checks on company/key professionals
Historical greenhouse gas emissions
Physical climate change risk
Transition climate change risk
Responsible investing and ESG continued
EimearPalmer,
TheInvestmentManager’s
Head of ESG
In 2022, Pantheon hired Eimear Palmer as Head of ESG.
Sheis responsible for overseeing and developing the
fi rm’s established ESG strategy and range of initiatives.
Eimear is highly experienced in ESG with a focus on
private markets, having worked at ICG and Carlyle Group in
similar roles. Pantheon also has an ESG Committee which
is responsible for coordinating its internal and external
efforts in this area. The Committee sets Pantheon’s ESG
strategy and policy and provides feedback to the wider
fi rm and externally to its Sponsors and stakeholders on
any ESG issues that arise. TheESG Committee comprises
senior staff from across Pantheon’s investment strategies
and operational businessfunctions.
Pantheon’s approach to assessing ESG opportunities and risk is multi‑faceted and includes a robust assessment of both Sponsor‑level
and asset‑level factors. Given that all of Pantheon’s infrastructure co‑investments have been completed alongside a core roster
of Sponsors, the team conducts extensive diligence at the Sponsor level using several ESG key performance indicators (KPIs).
Pantheon’sESG analysis of potential infrastructure co‑investments also involves assessment of ESG risk at the Portfolio Company level.
Specifi c areas of ESG assessment conductedinclude:
Strategic report Governance Financial statements Other information
54
Pantheon Infrastructure Plc
Annual report 2022
Industry partnerships
Pantheon was one of the fi rst private equity investors to sign up to
the PRI back in 2007 and has used these principles as a framework
to develop its ESG policy across all its investment activities.
Since then, it has been at the forefront of ESG adoption, both
through its involvement with associates and industry bodies, and
through its integration of ESG analysis into its investmentprocess.
Pantheon has been highly engaged with the PRI Steering
Committee since becoming a signatory and has worked directly
with the UN PRI in rolling out their framework of principles specifi c
toprivatemarkets.
Responsible investing and ESG continued
InvestmentManager’sapproach
1. Pantheon is a signatory to the UN PRI and has used these principles as a framework to develop its ESG policy across all its investment activities. Asasignatory of the PRI,
Pantheon is required to complete an annual assessment which seeks to facilitate learning and development, identify areas for further improvement and facilitate dialogue
between asset owners and investment managers on responsible investment activities and capabilities. Please note that this is not intended to meet Article 8 or 9 standards of the
SFDR. An investment’s ESG profi le and risk is only one of a number of factors Pantheon considers when evaluating managers and investments, and such ESG considerations are
not solely determinative of any selection of a manager or investment.
2009
Joined the PRI
Steering Committee
2011
Ranked in the top
quartile for all six
Principles of thePRI
Adopted ESG
Disclosure
Framework
1
2013
A+
2015
UN PRI awarded
A+ for Overarching
Approach and
PrivateEquity
A+
2017
Joined PRI Private
Equity Advisory
Committee
UN PRI awarded
A+ for Strategy and
Governance and A
for Private Equity
and Infrastructure
2021
Became a
signatory to the
Task Force on
Climate‑related
Financial
Disclosures (TCFD)
Strong scores
in PRI’s 2021
assessment,
including 100/100
for Private Equity
and Infrastructure
2008
Established an
internal ESG
workinggroup
2010
Successfully
integrated the PRI
into investment
processes
2012
Implemented
pioneering reporting
to clients on ESG
1
2014
Enhanced ESG
reporting forclients
1
A+
2018
UN PRI awarded
A+ for Strategy
and Governance,
Private Equity and
Infrastructure
Integration of
RepRisk into due
diligence processes
A+
2020
UN PRI awarded
A+ for Strategy
and Governance,
Private Equity
andInfrastructure
A+
2016
UN PRI awarded A+
for Private Equity
and Infrastructure
and A for Strategy
and Governance
Appointed RepRisk
as data provider for
ESG monitoring
1
2007
Signed up to
the Principles
for Responsible
Investment (PRI)
2019
A+
UN PRI awarded
A+ for Strategy
and Governance,
Private Equity
andInfrastructure
and A for
PrivateEquity
Appointed ERM
as data provider
for climate risk
monitoring
1
Strategic report Governance Financial statements Other information
55
Pantheon Infrastructure Plc
Annual report 2022
Responsible investing and ESG continued
InvestmentManager’sapproach
Consultant partnerships
Pantheon subscribes to RepRisk in order to improve its ESG due
diligence and ongoing risk monitoring. RepRiskis a global leader
in the provision of business intelligence on ESG risk and provides
ESG news flow and company ratings based on media reports and
other public sources external to Pantheon. Aswellas enabling an
enhanced level of proactive portfolio monitoring and increased
engagement opportunities, integration of the RepRisk data set with
its in‑house systems provides the capability to provide bespoke
ESG reporting for itsclients.
Sustainability consultancy ERM is supporting Pantheon in
identifying the physical and transition risks in its infrastructure
investments. Mapping of these risks (and opportunities) across
the infrastructure sector over different temperature scenarios
and time‑horizons will enable Pantheon to understand its existing
portfolio risk better and support the portfolio planning and
monitoring of climate change‑related risk in new programmes.
Pantheon then plans to report to clients on its approach and on
climate change risks and opportunities in client programmes,
including greenhouse gas emissions reporting. Pantheon is now
collecting greenhouse gas emissions data across its infrastructure
assets on an annual basis and has developed detailed transition/
physical risks and opportunities, mapping across its top
20investment sectors in partnership withERM.
Pantheon also subscribes to the Refinitiv World Check One
database, a third‑party provider which Pantheon typically uses
to look for adverse publicity and assorted anti‑money laundering
issues for the Sponsor and for certain individuals. Refinitiv allows
Pantheon to screen reputational risks across individuals and
Pantheon screens management and deal teams.
Pantheon has incorporated the SASB sustainability mapping tool
into its co‑investment due diligence process. Thistool provides a
breakdown of the most material ESG risks that a specific industry
sector may face across five dimensions including environment,
social capital, human capital, business model and innovation,
and leadership and government. SASB identifies a further 26
sustainability‑related business issues, whichencompass a range
of disclosure topics and their associated accounting metrics.
Identificationand awareness of material issues at the sector level in
turn enable Pantheon to focus on ESG risks to Portfolio Companies
within the specifiedindustry.
Modern Slavery Act
PINT is an investment company with no employees and
has appointed Pantheon to act as its investment manager.
TheUK’s Modern Slavery Act 2015 requires Pantheon to
report annually on the steps taken to ensure that slavery and
human trafficking are not taking place anywhere within the
business or supply chains. Both PINT and Pantheon’s ESG
policies are already aligned with a zero tolerance approach
to modern slavery and trafficking, and both the policy and
the Modern Slavery Statement can be found on Pantheon’s
website (www.pantheon.com).
Sustainable Development Goals
As part of its integrated ESG analysis in investment
due diligence, Pantheon considers the alignment of
each SDG applicable to the assets and presents these
to the Investment Committee. Within infrastructure,
Pantheonmaps to the following SDGs:
Strategic report Governance Financial statements Other information
56
Pantheon Infrastructure Plc
Annual report 2022
01
02
03
Better understand the investment implications of the transition to a low‑carbon environment and how different sectors are
likely to be impacted in the future.
Gain an understanding of the investment risks associated with climate change, including the potential impact of the changing
intensity and/or frequency of physical climate events.
Assess how investments across current portfolios are likely to be affected by climate‑affected risks and the potential
implication for future strategy.
Responsible investing and ESG continued
InvestmentManager’sapproach
Pantheon’s approach to climate change
analysis in investing
Pantheon has been providing ESG reporting to clients since
2012, undertaking fund manager ESG analysis since 2015, and
incorporating climate change risk questions into investment due
diligence for primary fund investments since 2018. Aspart of its
commitment to the ‘E’ of ESG, Pantheon believes that investors
need clear and comprehensive information on the potential effects
of climate change on investments. Thisincludes understanding the
implications of rising temperatures and climate‑relatedpolicy.
In order to improve and increase reporting on climate‑related
financial information, the Financial Stability Board (FSB) –
aninternational body formed by the G20 that monitors and makes
recommendations about the global financial system – established
the Task Force on Climate‑related Financial Disclosures (TCFD).
This was driven by concerns that the risks associated with
the transition to a low‑carbon economy were being mispriced
by market participants
1
. Pantheon supported this endeavour
and for the past three years has been working with a global
sustainability‑focused consultancy on climate change risk analysis.
This analysis has initially been conducted across Infrastructure
and Real Assets portfolios, given the assets’ physical nature and
particularly long investment horizons.
Given the challenges of collating non‑standard data, Pantheon
believes the TCFD will drive a meaningful improvement in the flow
of climate‑related financial information. Pantheon therefore made
the decision to engage global sustainability‑focused consultancy
ERM in 2019 to better understand climate change‑related risks and
opportunities. Additionally, Pantheon became a signatory to the
TCFD in 2021.
Climate change analysis
Pantheon believes that infrastructure is a natural place to start in this process given the physical nature of the assets, the essential role
of many of the types of assets typically invested in, such as utilities, and the long‑term investment horizons. In addition, infrastructure
is expected to play a central role in the transition to a low‑carbon economy. The IEA estimates that the majority (~70%) of clean energy
investment will need to come from financiers, rather than government funding
2
, highlighting the key role that private capital has to play.
In the first instance, Pantheon has conducted the analysis for PINT’s Infrastructure portfolio. The objectives were to:
1. Task Force on Climate‑related Financial Disclosures website, https://www.fsb‑tcfd.org/about/
2. Source: International Energy Agency, ‘World Energy Outlook 2021 – Mobilising investment and finance’, https://www.iea.org/reports/world‑energy‑outlook‑2021/mobilising‑investment‑and‑finance
Strategic report Governance Financial statements Other information
57
Pantheon Infrastructure Plc
Annual report 2022
Responsible investing and ESG continued
InvestmentManager’sapproach
Incorporating the topic into the Investment
Manager’s ESG due diligence procedures
In order to incorporate its work on climate risk and other ESG
considerations into its due diligence process, Pantheon has
revised its procedures for deal teams to utilise the results of the
work with ERM in the diligence process and investment memos.
Dealteams assess the ‘climate risk outlook’ of each investment,
where they note the physical and transition risk and opportunity
profile of the target sector and geography. To the extent that the
assets face material physical and/or transition risks (particularly
in the near term), Pantheon incorporates this into its other ESG
due diligence considerations. Pantheon also uses the Sustainable
Accounting Standards Board (SASB) guidelines for each sector
to identify which potential ESG risks to prioritise in due diligence
and to then discuss with the Sponsor. If an item presents material
ESG risk, Pantheon devotes further analysis to it in collaboration
with the Sponsor and summarises its findings through additional
materials in the final investment memo. Pantheon is in the process
of incorporating these procedures into an ESG screening and due
diligence ‘scorecard’, which will alsoprovide climate risk ratings
for investment opportunities utilising various data sources such as
ThinkHazard, Climate Change Performance Index and the World
Bank Carbon Pricingdashboard.
Looking forward
A focus on greenhouse gas (GHG) emissions
Pantheon has engaged an external consultant to support it
to estimate and analyse GHG emissions within Pantheon’s
infrastructure portfolio. AsPantheon generally does not
invest directly into assets, itrelied on information provided by
themanagers in its portfolio. Pantheonrequested each manager
provides Scope1, 2 and 3 GHG emissions (as per the GHG
Protocol) for each individual asset. Therehas been substantial
progress in this area across the industry, somethingit expects
to continue to improve. Pantheon has used estimated data
to complement this to provide a more complete coverage.
Thisshouldhelp Pantheon to (i) identify the relatively higher
emitting assets, fundsand Sponsors, (ii) prioritise Pantheon’s
engagement with these managers to better understand the likely
drivers of such emissions, and (iii) identify trends by comparing
2022 results with 2021 results. Pantheon is focused on working
with Pantheon’s Sponsors to increase the coverage of assets with
reported emissions, therefore reducing the number of estimates
required, inorder to create as accurate a picture for the portfolio
as possible. Looking forward, Pantheon expects to enhance
its climate‑related due diligence and monitoring processes.
Pantheonexpects these activities will further enhance the efficacy
of its engagement with Sponsors and ultimately drive real world
action by decreasing the carbon footprint of Pantheon’s portfolio.
Future plans for climate risk assessment and due
diligence integration
Pantheon plans to continue refining its climate risk/opportunity
assessment capabilities. A potential next step will be to extend
its current sector/geography‑level climate risk assessment
capabilities down to the asset level. Pantheonalso continues to
refine its integration of climate risk and other ESG considerations
into its due diligence process. EimearPalmer, Partnerand Global
Head of ESG, hasbegun a review of Pantheon’s current ESG and
climate due diligence procedures following her joining Pantheon
in August2022. Thisincludes developing more comprehensive
and standardised questions for Sponsors and management teams
around their own ESG analysis and procedures to enable earlier
identification of potential ESG and climate risks and opportunities,
along with a deeper consideration of how those climate‑related
risks will be mitigated during the investmentperiod.
ESG screening
Over the past year, Pantheon has declined a number of
transactions solely for ESG reasons:
•
Energy company: Business revenues derived from
fossilfuels.
•
Care home: Lack of staff vetting process and
safeguardingprocedures.
•
Healthcare: Declined addiction clinic and, separately,
eating disorder clinic due to concerns over profiting from
theseissues.
Strategic report Governance Financial statements Other information
58
Pantheon Infrastructure Plc
Annual report 2022
Pantheon as an investment manager:
diversity and inclusion
Pantheon is fully committed to progressing opportunities for
all its staff and to optimising diversity within the fi rm. 43% of its
investment teams’ heads are women – USA Primaries, European
Primaries, USA Infrastructure and Real Assets and European
Infrastructure and Real Assets
1
.
Pantheon was the fi rst private equity fi rm to publish gender
diversity data, and in 2018, became one of the fi rst private markets
fi rms to sign the UK’s government’s Women in Finance Charter.
Inregard to the latter, Pantheon has set an annual target of
achieving at least 33% women who are represented on its Executive
Committee or are a Global Head of a Department. Pantheon’s2021
representation was 37%
2
.
These disclosures demonstrate Pantheon’s open and transparent
approach to conducting our business, while recognising the
increasing focus on diversity within the private markets industry
and fi nancial services more broadly. When compared to a recent
(2021) industry survey by Level20 and the BVCA, Pantheon’s
diversity profi le outstripped that of the private equity cohort.
For example, the industry survey found that private equity
fi rms’ senior female investment professionals represented 10%,
whileat Pantheon, 43%of its investment team heads are female.
Theindustry survey also reported that 20% of individuals working
in private equity and venture capital are from non‑white ethnic
backgrounds, whileclose to 37% of Pantheon’s global workforce
identifi es as having a non‑white ethnic background.
Pantheon is committed to continuous progress and while it
recognises that there is still some way to go, its approach is to be
transparent, to be visible, toadvocate, toengage with and support
carefully selected external partners in Pantheon’s key geographic
markets. Pantheon is proud to work in collaboration with the
following external global partnerships:
Global partnerships
Responsible investing and ESG continued
InvestmentManager’sapproach
1. Data as of January 2022; data is subject to rounding. Response rate among all global staff was 73%. Investment team includes members of Pantheon’s Investment Structuring and Strategy Team.
2. Leadership data response rate is 100%. Data as of January 2022; data may be subject to rounding.
Strategic report Governance Financial statements Other information
59
Pantheon Infrastructure Plc
Annual report 2022
Spotlight on
Fudura
Provider of energy efficiency solutions,
renewable energy and decentralised power
to businesses across the Netherlands
Future growth driven by electrification
Fudura is the country’s largest provider of medium voltage
electricity infrastructure and its future growth is driven by:
1. The Netherlands‘ rapid electrification and Fudura’s strong
market position. Fudura serves its customers’ increasing
electricity demand by providing critical infrastructure to
secure access toelectricity;
2. Aims for Fudura to lever its strong position in its customers’
electrical infrastructure system, by further supporting
customers’ electrification process via added services
including EV charging, battery storage, solar PV, heat
solutions and energy analytics; and
3. The Dutch government‘s aims to reduce the Netherlands’
greenhouse gas emissions by 49% by 2030 and 95% by
2050 (vs 1990s levels). Fudura’s ambition to accelerate
electrification and provide renewable and decentralised
electricity generation solutions to customers will contribute
tothe nation’s carbon reduction targets.
CO
2
emissions reductions
•
Fudura reduced its CO
2
footprint by 32% between 2014
and2020.
•
The core product provision of electricity transformers,
metering and renewable energy solutions does not emit CO
2
.
Fudura’s Scope 1 emissions are derived from the operational
running of the company:
•
vehicle fleet to respond to customers/provide maintenance
services (c.80% of Scope 1 emissions); and
•
office buildings usage (c.20% of Scope 1 emissions).
•
Management objective to annually save 5% CO
2
emissions
per FTE of direct and indirect emissions compared to the
previousyear.
Responsible investing and ESG continued
Source: Climate policy | Climate change | Government.nl_actieplan_def.pdf
Strategic report Governance Financial statements Other information
60
Pantheon Infrastructure Plc
Annual report 2022
Spotlight on
National
Gas
The UK’s sole gas transmission network
Shaping the future of UK gas markets
•
In June 2019, the UK became the first major economy in the
world to commit to reaching net zero by 2050.
•
Gas represents up to c.40% of the power consumed in the
UK; heating over 80% of UK homes and providing the energy
needs for more than half of UK industrial activity. The use of
gas is particularly central to the production of steel, glass and
chemicals.
•
National Gas is strategically positioned to host the nation’s
introduction of and shift to cleaner gas through the country
with hydrogen which produces water vapour rather than
carbon emissions when it isburnt.
•
Hydrogen, when produced from a variety of sources such as
natural gas with carbon capture and renewable or low‑carbon
sources of electricity powering electrolysis, is a cleaner
alternative to methane (also known as natural gas), as well as
being one of the most abundant chemical elements available.
•
In order for hydrogen to be rolled out at scale, it requires the
existing current infrastructure to be adapted to transport
the gas from source to customer, which National Gas is
committing to in order to achieve net zero by 2050.
Key ESG benefits
•
Strong leadership with a corporate strategy aligning with
defined ESG ambitions.
•
Development of hydrogen transmission pipeline to support
the nation’s goal to reach net zero.
Responsible investing and ESG continued
Source: National Gas
Strategic report Governance Financial statements Other information
61
Pantheon Infrastructure Plc
Annual report 2022
Spotlight on
Calpine
US independent power producer
Critical and highly efficient natural gas
electricity generation assets
•
The young age and high efficiency of Calpine’s combined
cycle gas turbine (CCGT) power generation assets enables
the provision of efficient and reliable baseload power to
communities.
•
Critical to support grid reliability due to their proximity to
loadcentres.
•
With ongoing coal power retirements, Calpine’s natural gas
generation will remain one of the most effective sources of
baseload capacity with some reliance on gas generation
needed to achieve net-zero goals.
Strong focus on workforce safety and water
management
•
Calpine’s safety performance ranks among the best in the
industry based on lost‑time and total recordable incident
rates, the primary indicators of industrial safety performance.
•
Calpine’s water-sourcing methods conserve millions of
gallons of cooling water daily. It uses technologies to limit
usage of fresh water, including air cooled (vs. water cooled)
equipment and use of recycled water for its gas‑fired fleet and
geothermal assets.
Strong focus on continuing to drive
decarbonisation efforts
•
Calpine’s three decarbonisation focus areas include:
1. sensible sustainability process offered through its
retail business to help customers achieve renewable
energyobjectives;
2. deploying large-scale energy storage and solar
projects through a 1.3GW development pipeline,
largely being developed on Calpine‑owned sites with
existing interconnections, permitting strong community
relationships, and little to no system upgrade costs; and
3. advancing carbon capture utilisation and storage (CCUS)
technology. Calpine has received three grants from the
Department of Energy to pilot and conduct studies on
CCUS projects. Since then, Calpine has launched four
projects around the US to commercialise carbon capture
technology across all their plants.
•
Calpine’s Geysers are the largest renewable
geothermal power plants in the US producing ~6TWh/
yr (7% of California’s 2020 renewable energy procurement
requirements) across 13operating plants.
Responsible investing and ESG continued
Strategic report Governance Financial statements Other information
62
Pantheon Infrastructure Plc
Annual report 2022
Source: Company data
Responsible investing and ESG continued
Spotlight on
Cartier
Platform of eight district energy systems
that provide diversified energy services such
as steam, electricity, chilled water and hot
water to buildings across the higher education,
healthcare, commercial, manufacturing,
hospitality, government and retail sectors
Delivery of reliable, cost‑effective and
sustainable energy to US customers to
support the path to a low‑carbon economy
Supporting the path to a low‑carbon economy
through efficiencies
•
According to the United Nations Energy Program (UNEP)
atransition to modern district energy systems could contribute
to 60% of required energy sector emissions reductions by
2050, and reduce primary energy consumption by up to 50%.
•
District energy systems support the transition to a low‑carbon
economy through reducing the energy demand in cities.
With the right management, district energy systems are
sustainable, resilient and energy-efficient.
•
On‑site heating and cooling of space and water currently
presents systemic inefficiencies that account for a
significant proportion of energy consumption in many
cities. District energy systems, such as Cartier’s, contribute
to reduce such inefficiencies through the aggregation of
diverse load profiles and economies of scale.
•
Opportunity to develop a variety of digital tools to optimise
the system from end to end to increase energy efficiency:
smart metering, predictive load forecasting, demand
response programmes.
•
Cartier assets serve key sectors of the community:
healthcare, higher education and government entities.
•
Cartier operates in markets with a supportive regulatory
environment and has a demonstrated history of delivering
clean and cost-effective energy alternatives for critical
serviceproviders.
Leading efforts to accelerate ESG
performance through decarbonisation
and community impact
Active ESG asset management
•
Active asset management supported by ESG targets
leveraging the Sponsor’s track record in European district
energy technologies.
•
Leveraging leading third parties to adopt the best
marketpractices.
Strategic initiatives to reduce the carbon footprint
of the platform
•
The current system is fuelled with natural gas, but Cartier
is looking to implement a long-term strategy to include
renewables in the energy mix and reduce its carbon footprint,
whilemaintaining affordability.
•
Upgrading plants to take advantage of increasingly
decarbonised grids and move towards electrically powered
heating and cooling systems.
Source: Company data, United Nations Energy Program
Source: “Modernizing district energy systems could reduce heating and cooling energy primary consumption by up to 50% finds new report” – UNEP, 2015
Strategic report Governance Financial statements Other information
63
Pantheon Infrastructure Plc
Annual report 2022
Spotlight on
National
Broadband
Ireland (NBI)
Fibre‑to‑the‑premises network developer
and operator working with the Irish government
to support the rollout of the National
Broadband Plan
Developing a fi bre network across rural
Ireland to provide access to affordable,
high‑speed broadband
•
National Broadband Ireland (NBI) is working with the Irish
government to deliver the National Broadband Plan, an
ambitious plan to connect every premises in the country to
affordable, high‑speed broadband by 2027.
•
NBI was selected to design, build, operate and maintain a
network covering 96% of the country’s landmass and 23%
of its population, supported by subsidies provided by the
Irishgovernment.
•
This project will involve passing and connecting
approximately 560,000 premises across the country, including
its remote islands, and represents the largest investment in
rural Ireland sinceelectrifi cation.
•
The network area will include public facilities such as schools
and libraries, improving the services they provide to their
localcommunities.
•
NBI will provide wholesale network access to Internet Service
Providers, giving consumers and businesses in the region an
expanded choice of services and providers and ensuring they
can benefi t from a competitive supply market.
Benefi t to rural Ireland
•
The ‘digital divide’ has widened the inequality between those
that could work remotely during the pandemic and those that
could not due to the quality of theirconnection.
•
High‑speed broadband is a key pillar of the European
Commission’s strategy for economic and social development,
setting the target that all households should have access to
gigabit capable broadband by2030.
•
The unique characteristics of Ireland signifi cantly increase
the cost per premises to deploy fi bre and would not be
commercially viable for the private sector withoutsubsidies.
•
Estimated benefi ts of c.€5.9 billion from delivery of
the National Broadband Plan, a signifi cant increase
post‑pandemic due to the increase in homeworking.
Responsible investing and ESG continued
Source: Welcome to National Broadband Ireland – NBI gov.ie – The National Broadband Plan (www.gov.ie) Connecting Irish rural communities with the National Broadband Plan | EY Ireland
Source: Primafrio
Strategic report Governance Financial statements Other information
64
Pantheon Infrastructure Plc
Annual report 2022
Responsible investing and ESG continued
Spotlight on
Primafrio
European transport and
logistics company
Primafrio targets to reach net zero
emissions by 2030
1. Smart truck:
Developing the most advanced and energy efficient road
transport fleet to reduce emissions and automate logistics
activities.
2. Smart building:
Highly automated and energy efficient logistics centres with
zero emissions standards, connected in real time with fleet and
planning department.
3. Smart IT:
Latest technologies to automate processes contributing to the
reduction of emissions whilst utilising data mining for daily
operations.
4. Smart training:
Improved driver training and vehicle monitoring reduces fuel
consumption, improves energy efficiency and promotes safer
operations and more higher quality services for customers.
Achievements
Environmental
•
Invest in sustainability‑oriented infrastructure such as building
new logistics facilities and operating a fleet of vehicles with
the most fuel‑efficient engines available on themarket.
Social
•
40% of Primafrio’s executives are female.
•
The Sponsor’s Board influence can support initiatives to
continue to improve diversity and inclusionprofile.
Governance
•
Focus on institutionalising the company, which has been
family‑owned and private since inception until the investment
made by funds managed by Apollo.
Source: Primafrio
Strategic report Governance Financial statements Other information
65
Pantheon Infrastructure Plc
Annual report 2022
S172(1) statement
TheDirectors’overarchingduty
istoactingoodfaithandina
way that is most likely to promote
thesuccessoftheCompany,
assetoutinsection172ofthe
CompaniesAct2006.
Directors’ duties
Overview
The Directors’ overarching duty is to act in good faith and in a way
that is most likely to promote the success of the Company, as set
out in section 172 of the Companies Act 2006. In doing so, the
Directors must take into consideration the interests of the various
stakeholders of the Company, the impact the Company has on
the community and the environment, take a long‑term view on
the consequences of the decisions they make, aswell as aim to
maintain a reputation for high standards of business conduct and
fair treatment between the members of theCompany.
Fulfilling this duty supports the Company in achieving its
investment strategy and helps to ensure that all decisions are
made in a responsible and sustainable way. In accordance with
the requirements of the Companies (Miscellaneous Reporting)
Regulations 2018, the Company explains how the Directors have
discharged their duties under section 172 below.
To ensure that the Directors are aware of and understand their
duties, they are provided with pertinent information when they first
join the Board and receive regular and ongoing updates and training
on relevant matters. They also have continued access to the
advice and services of the Company Secretary and, when deemed
necessary, the Directors can seek independent professional
advice. The Schedule of Matters Reserved for the Board, as well
as the terms of reference of its Committees, are reviewed on
an annual basis and further describe Directors’ responsibilities
and obligations, and include any statutory and regulatory duties.
TheAudit and Risk Committee has responsibility for the ongoing
review of the Company’s risk management systems and internal
controls and, to the extent that they are applicable, risks related to
the matters set out in section 172 are included in the Company’s
risk register and are subject to regular review and monitoring.
Decision‑making
The importance of stakeholder considerations, in particular in
the context of decision‑making, is taken into account at every
Board meeting. All discussions involve careful consideration
of the longer‑term consequences of any decisions and their
implications for stakeholders. Further information on the role of
the Board in safeguarding stakeholder interests and monitoring
ongoing investment activity can be found on pages 66 to 71 of the
strategicreport.
Stakeholders
The Board seeks to understand the needs and priorities of the
Company’s stakeholders and these are taken into account during
all of its discussions and as part of its decision‑making. During
the period under review, the Board discussed which parties should
be considered as stakeholders of the Company and concluded
that, asthe Company is an externally managed investment
company and does not have any employees or customers, its key
stakeholders comprise its shareholders, the Investment Manager,
Sponsors, Portfolio Companies, service providers, lenders and
regulators. The section below discusses why these stakeholders
are considered of importance to the Company, and the actions
taken to ensure that their interests are taken into account.
Strategic report Governance Financial statements Other information
66
Pantheon Infrastructure Plc
Annual report 2022
S172(1) statement continued
Shareholders
Importance
Continued shareholder support and
engagement are critical to the business
and the delivery of its long‑term strategy.
Furtherdetails on what PINT offers to its
investors can be found on pages1 to 5 of
the strategicreport.
Board engagement
The Board is committed to maintaining open channels of communication and to engaging with shareholders in a manner which they find most meaningful,
inorder to gain an understanding of their views. These include:
•
AGM
The Company will hold its first AGM on 30 March 2023 and welcomes and encourages attendance and participation from shareholders at the AGM.
Shareholders will have the opportunity to meet the Directors and the Investment Manager, and to address questions to them directly. Pantheonwill
attend the AGM and give a presentation on the Company’s performance and the future outlook. The Company values any feedback andquestions it may
receive from shareholders ahead of and during the AGM and will take action or make changes, as and when appropriate.
•
Publications
The annual report and half‑year results are made available on PINT’s website (www.pantheoninfrastructure.com) and the annual report is circulated
toshareholders. These reports provide shareholders with a clear understanding of the Company’s business model, strategy, portfolio and financial
position. Feedback and/or questions that the Company receives from shareholders help the Company to evolve its reporting, aiming to render the
reportsand updates transparent and understandable.
•
Shareholder meetings
Unlike trading companies, shareholder meetings often take the form of meetings with the Investment Manager rather than members of the Board.
Shareholders are able to meet with Pantheon throughout the year and the Investment Manager provides information on the Company. Feedback from
all meetings between the Investment Manager and shareholders is shared with the Board. The Chair, the Senior Independent Director, the Chair of
the Audit and Risk Committee and other members of the Board are available to meet with shareholders to understand their views on governance and
the Company’s performance should they wish to do so. With assistance from the Investment Manager, the Chair seeks meetings with shareholders
who might wish to meet withhim. As a result, in late 2022 and early 2023, the Chair and the Chair of the Audit and Risk Committee met with a number
ofshareholders.
•
Shareholder concerns
In the event that shareholders wish to raise issues or concerns with the Directors, they are welcome to do so at any time by writing to the Chair at the
registered office. Other members of the Board, in particular the Senior Independent Director, are also available to shareholders if they have concerns that
have not been addressed through thenormalchannels.
•
Investor Relations updates
At every Board meeting, the Directors receive updates from the Company’s broker on the Company’s share trading activity and share price performance,
as wellas an update from the Investment Manager on specific shareholder feedback. Any pertinent feedback is taken into account when Directors
discuss investment strategy.
Strategic report Governance Financial statements Other information
67
Pantheon Infrastructure Plc
Annual report 2022
S172(1) statement continued
The Investment Manager
Importance
Holding the Company’s shares offers
investors a liquid investment vehicle
through which they can obtain exposure
to PINT’s portfolio of infrastructure
investment opportunities and
Pantheon’s relationships with Sponsors.
TheInvestment Manager’s performance
is critical for the Company to deliver its
investment strategy successfully and meet
its objective to provide shareholders with
attractive and consistent returns over the
long term. Further details of the Investment
Manager’s investment approach can be
found on pages12 to 22 and 46 to 49 of
the strategicreport.
Board engagement
Maintaining a close and constructive working relationship with the Investment Manager is crucial as the Board and the Investment Manager both aim to
achieve consistent, long‑term returns in line with the Company’s investment strategy. The Board is in regular contact with the Investment Manager to receive
updates on investment activity. Important components in the collaboration with the Investment Manager, representative of the Company’s culture, are:
•
encouraging an open discussion with the Investment Manager, allowing time and space for original and innovative thinking;
•
recognising that the interests of shareholders and the Investment Manager are, for the most part, well aligned, adopting a tone of constructive challenge,
balanced with robust negotiation of the Investment Manager’s terms of engagement if those interests should not be fully united;
•
the regular review of underlying strategic and investment objectives;
•
drawing on Directors’ individual experience and knowledge to support and challenge the Investment Manager in its monitoring of Portfolio Companies
and engagement with Sponsors; and
•
willingness to make the Directors’ experience available to support and challenge the Investment Manager in the sound long‑term development of its
business and resources, recognising that the long‑term health of the Investment Manager’s business is in the interests of shareholders in the Company.
Sponsors/Portfolio Companies
Importance
Part of PINT’s investment strategy is
focused on co‑investing with Sponsors
who create sustainable value in the
underlying Portfolio Companies.
TheInvestment Manager has extensive
networks and relationships with Sponsors
globally, which gives the Company access
to the best investment opportunities.
Board engagement
Day‑to‑day engagement with Sponsors is undertaken by Pantheon. The Board receives updates at each scheduled Board meeting from the Investment
Manager on specific investments, including regular valuation reports and detailed portfolio and returns analyses. Pantheon’s engagement with
Sponsors and due diligence of Portfolio Companies through the investment process and its investment strategies can be found in the strategic report on
pages12to22 and pages46 to 49 and in the Investment Manager’s report.
Other stakeholders
Strategic report Governance Financial statements Other information
68
Pantheon Infrastructure Plc
Annual report 2022
S172(1) statement continued
The Administrator, the Company Secretary, the Registrar, the Depositary and the Broker
Importance
In order to function as an investment trust
with a premium listing on the London
Stock Exchange, the Company relies on
a diverse range of reputable advisers for
support in meeting all relevant obligations.
Board engagement
The Board maintains regular contact with its key external providers and receives regular reporting from them, both through Board and committee meetings,
as well as outside the regular meeting cycle. Their advice, as well as their needs and views, are routinely taken into account.
The Board (through the Management Engagement Committee) formally assesses their performance, fees and continuing appointment annually to ensure
that the key service providers continue to function at an acceptable level and are appropriately remunerated to deliver the expected level of service.
TheAudit and Risk Committee reviews and evaluates the financial reporting control environment in place at each service provider.
The environment and society
Importance
The Board regards ESG credentials as an
important component of the Company’s
investment processes, portfolio
construction considerations and overall
strong governance. The Board and the
Investment Manager are fully committed to
managing the business and its investment
strategyresponsibly.
Board engagement
The Board receives regular updates on Pantheon’s ESG strategy and provides feedback on its approach, which in turn can lead to changes in Pantheon’s
investmentapproach.
Full details on the Investment Manager’s ESG practices, including examples of interaction with Sponsors, can be found on pages53 to 65.
Strategic report Governance Financial statements Other information
69
Pantheon Infrastructure Plc
Annual report 2022
S172(1) statement continued
Revolving credit facility provider
Importance
Availability of funding is crucial to PINT’s
ability to take advantage of investment
opportunities as they arise, as well as to
meet future unfunded commitments.
Board engagement
The Company aims to demonstrate to its facility provider, Lloyds Bank Corporate Markets plc (‘Lloyds’) that it is a well‑managed business, capable of
consistently delivering long‑term returns. Regular dialogue between the Investment Manager and lenders is crucial to supporting the Company’s relationship
with its lenders. Further details of the Board’s decision to enter into the RCF during the year can be found on page 71.
Regulators
Importance
The Company can only operate as an
investment trust if it conducts its affairs in
compliance with such status. Interaction
through the Company Secretary with
regulators such as the Financial Conduct
Authority (FCA) and Financial Reporting
Council (FRC), who have a legitimate
interest in how the Company operates
inthe market and treats its shareholders,
as well as industry bodies such as the AIC,
is overseen by the Board.
Board engagement
The Company regularly considers how it meets various regulatory and statutory obligations and how any governance decisions it makes can have an impact
on its stakeholders, both in the shorter and in the longer term. The Board receives reports from the Company Secretary on the Company’s compliance
and from the Investment Manager and Auditor on their respective regulatory compliance and any inspections or reviews that are commissioned by
regulatorybodies.
Strategic report Governance Financial statements Other information
70
Pantheon Infrastructure Plc
Annual report 2022
S172(1) statement continued
The mechanisms for engaging with stakeholders are kept under review by the Directors and are discussed on a regular basis at Board meetings to ensure that they remain effective. Examples of the Board’s
principal decisions during the year, how the Board fulfilled its duties under section 172, and the related engagement activities, are set out below:
Principal decision Long‑term impact
Stakeholder considerations
and engagement
To enter into a new multi‑currency RCF. Following extensive discussions by the Board throughout the
period, on 20 December 2022, PINT announced that it had
agreed a new multi‑currency RCF for an aggregate commitment
of £62.5million with Lloyds. The RCF, which is secured on the
assets of the Company, includes an uncommitted accordion
feature, which will be accessible, subject to approval, by
additional lenders, and is intended to increase over time in line
with the Company’s NAV and its borrowing policy.
The RCF is denominated in GBP, with the option to be utilised
in other major currencies. PINT will pay an initial margin of
2.85% per annum over the relevant currency benchmark rate
or compounded reference rate on drawn amounts, reducing
to 2.65% per annum once certain expansion thresholds have
been met. Acommitment fee of 1.00% per annum is payable
on undrawn amounts, and the tenor of the RCF is three years,
withthe option to extend this further subject to lender approval.
Effective engagement by the Investment Manager with Lloyds
was key to agreeing the new facility. The Board considers that
the additional liquidity available for working capital, and to
support further investment in high‑quality infrastructure assets
from PINT’s near‑term investment pipeline, will help support
the Company’s growth opportunities while also maintaining a
robust balancesheet.
Strategic report Governance Financial statements Other information
71
Pantheon Infrastructure Plc
Annual report 2022
Principal risks and uncertainties
The Company is exposed to a variety of risks and uncertainties
and the Board is ultimately responsible for the risk management of
the Company. It seeks to achieve an appropriate balance between
mitigating risk and generating long‑term sustainable risk‑adjusted
returns for shareholders. Integrity, objectivity and accountability
are embedded in the Company’s approach to risk management.
The Board exercises oversight of this framework, through its Audit
and Risk Committee, and has undertaken a robust assessment
and review of the principal risks facing the Company, including
those that would threaten its business model, future performance,
solvency or liquidity.
The Company is reliant on the risk management frameworks of
the Investment Manager and other key service providers, as well
as on the risk management operations of each Portfolio Company.
The Board manages risks through reports from the Investment
Manager and other service providers and through regular
updates on the operational and fi nancial performance of Portfolio
Companies.
For each risk, and emerging risks, the likelihood and consequences
are identifi ed, and the management controls and frequency of
monitoring are confi rmed and reviewed during Audit and Risk
Committee meetings. Please see on the next page a summary
ofthe principal risks and their mitigation.
Integrity,objectivityand
accountabilityareembedded
intheCompany’sapproach
toriskmanagement.
Patrick O’Donnell Bourke
Chair of the Audit and Risk Committee
Risk management procedure
Monitoring and
reporting
Risk
identifi cation
and assessment
Control
and mitigation
Risk
appetite
Strategic report Governance Financial statements Other information
72
Pantheon Infrastructure Plc
Annual report 2022
Infrastructure asset risks
Risk Description of risk Mitigation
Market conditions
•
Macroeconomic or market volatility, as the result of the
Russian invasion of Ukraine and the recovery from Covid‑19,
presents a significant threat to the global economy, resulting
in a combination of rising inflation, interest rates and
uncertain supply chains, which flows through to pricing,
valuations and portfolio performance.
•
Recession in Europe, the US or the UK could impact the
growth prospects of one or more of the Portfolio Companies.
•
Rising inflation and interest rates may lead to higher
financing costs for a Portfolio Company which could
adversely impact its profits.
•
Discount rate pressures in light of the rising interest rate
environment.
•
The Company targets a diversified infrastructure programme with exposures across sectors and
geographies; historically, infrastructure sub‑sectors have exhibited low to moderate correlation
of returns relative to one another.
•
Portfolio Companies could put in place inflation protection by seeking to include inflation
adjustment mechanisms in their contracts.
•
Certain Portfolio assets already provide inflation protection via contracted revenues linked
toinflation.
•
Portfolio Companies could also put in place interest rate hedges.
Political and
regulatory changes
•
Political actions and regulatory changes may adversely
impact the operating and revenue structure of
PortfolioCompanies.
•
Complexity of government regulatory standards may result
in litigation/disputes over interpretation and enforceability.
•
The Company predominantly targets investments in North America, Europe and Australasia
which have broadly stable legal, political and regulatory regimes.
•
The Investment Manager conducts due diligence on the regulatory risks of a prospective
Portfolio Company to ensure protections in the underlying contracts are in place.
Falls in demand
•
A fall in demand for the Portfolio Companies’ services or
products. A Portfolio Company’s revenue is exposed to
market supply and demand forces. Falls in demand that are
below the levels used in underlying valuation assumptions
could lead to adverse financial performance of the
PortfolioCompany.
•
The Investment Manager conducts sensitivity analysis and demand stress testing in its due
diligence for assets.
•
The investment strategy is to target assets that have the majority of their cash flows protected
through contractual structures, which limits demand risk.
Principal risks and uncertaintiescontinued
Strategic report Governance Financial statements Other information
73
Pantheon Infrastructure Plc
Annual report 2022
Key:
Higher Level Reducing
Principal risks and uncertaintiescontinued
Investment strategy risks
Risk Description of risk Mitigation
Returns target
•
The Company may not meet its investment objective; this
could result in returns being materially lower than targeted
and dissatisfied investors.
•
The Investment Manager adheres to the investment policy and criteria when making
investmentdecisions.
•
The Board reviews the investment performance of the Company on a quarterly basis to ensure
adherence to the investment policy.
Investor sentiment
•
Investor sentiment could lead to the Company share price
falling below its NAV, which if it persisted for a long time,
would inhibit new equity capital raises. An inability to raise
new equity capital could be inhibitive to scaling the Portfolio
and disrupt liquidity levels.
•
Alternative forms of capital such as debt could be considered.
•
Opportunistic sale of targeted existing assets.
•
The Company has the ability to buy back shares.
•
The Investment Manager constantly targets new shareholders.
Lack of suitable
investment
opportunities
•
Unavailability of appropriate investments to acquire due to
unfavourable deal terms.
•
Re‑investment risk which could arise from delayed
redeployment of any proceeds from the sale of assets.
•
The Board reviews investment guidelines and will make appropriate recommendations to
shareholders if it believes changes are needed.
•
The Investment Manager seeks to continue actively sourcing appropriate investments by
engaging with its Sponsors and negotiate co‑investment rights when committing capital to the
Sponsors’ underlying funds.
•
The demand and need for infrastructure should ensure continuing deal flow.
Liquidity
management
including level and
cost of debt
•
Failure to manage the Company’s liquidity position, including
cash and credit facilities, could result in insufficient liquidity
to pay dividends and operating expenses or to make new or
support investments.
•
Excessive cash balances, introducing cash drag on the
Company’s returns.
•
High levels and cost of debt within the Company and/or
the special purpose vehicles which invest in the Portfolio
Companies could result in covenant breaches and/or
increased volatility in the Company’s NAV.
•
Regular reporting of current and projected liquidity, under both normal and stress conditions.
•
Liquidity availability is assessed during the allocation of new investment opportunities.
•
The Board and Investment Manager review Company debt levels and covenants, on a quarterly
basis, to ensure they stay within the leverage cap that has been established to limit exposure to
debt‑related risks.
•
Debt levels within Portfolio Companies are reviewed by the Investment Manager as part of
duediligence.
Strategic report Governance Financial statements Other information
74
Pantheon Infrastructure Plc
Annual report 2022
Key:
Higher Level Reducing
Principal risks and uncertaintiescontinued
Investment strategy risks continued
Risk Description of risk Mitigation
Portfolio
concentration risk
•
Portfolio concentration risk in relation to exposure to
individual assets, operators, geographies and asset types.
This could impact NAV and ultimately affect the Company’s
targeted rate of return.
•
The Board conducts quarterly reviews of the investment portfolio against the Company’s
investment policy and criteria.
•
Investment restrictions outlined in the investment policy are designed to reduce portfolio
concentration risk.
Operational risks
Risk Description of risk Mitigation
Investment
Manager
•
An over‑reliance on the Investment Manager. A failure of
the Investment Manager to retain or recruit appropriately
qualified personnel may have a material adverse effect on
the Company’s overall performance.
•
The Board performs an ongoing review of the Investment Manager’s performance in addition to
a formal annual review.
•
Pantheon continues to invest in its talent and regularly considers succession planning.
Tax status
and legislation
•
Failure to observe requirements to maintain investment trust
tax status in the UK.
•
Failure to understand tax risks when investing or divesting
could lead to tax exposure or financial loss.
•
The Board, through the Company Secretary, ensures that the Company meets the criteria to
maintain the current investment trust status of the Company.
•
The Board has engaged a third party to provide taxation advice and Pantheon’s investment
process incorporates the assessment of tax.
Third‑party
providers
•
Poor performance by third‑party service providers could
result in inability to perform key functions (e.g. reporting,
record keeping etc.) effectively. This could result in loss of
Company information, errors in published information or
damage to its reputation.
•
The Board reviews and signs off contractual arrangements with all key service providers.
•
The Board reviews the performance of key service providers annually.
Strategic report Governance Financial statements Other information
75
Pantheon Infrastructure Plc
Annual report 2022
Key:
Higher Level Reducing
Principal risks and uncertaintiescontinued
Operational risks continued
Risk Description of risk Mitigation
Cyber security
•
Cyber security risk which could arise from reputational
damage from theft or loss of confidential data through
cyberhacking.
•
The Audit and Risk Committee reviews service providers’ cyber security arrangements, controls
and business continuity processes to ensure any data loss is mitigated and reputational damage
is minimised.
Other risks
Risk Description of risk Mitigation
Geopolitical
turbulence
•
Geopolitical turbulence (e.g. Ukraine/Russia conflict):
medium and long‑term impact of global economies,
including energy prices and interest rates, and individual
companies to which the Company has exposure.
•
This risk is considered on an asset‑by‑asset basis.
•
The Company also monitors the impact of geopolitical trends on the overall Portfolio as well as
on individual sectors and companies.
Climate
change
•
Climate change causing physical and transition risks could
impact the financial performance of the Portfolio. Physical
risks arising from extreme weather events could impact the
operations of a Portfolio Company. In addition, transition risk
in terms of policy, legal, technological, market and reputation
risks could negatively impact the operations of the assets.
•
The Investment Manager conducts due diligence in relation to climate change matters
beforemaking investment decisions.
•
The Company invests in assets with strong management teams that have a long track record
ofactively managing physical risks such as maintenance schedules.
•
The Company has in place an ESG policy, including taking account of sector exclusions.
Strategic report Governance Financial statements Other information
76
Pantheon Infrastructure Plc
Annual report 2022
Key:
Higher Level Reducing
Viability statement
Pursuant to provision 31 of the UK Corporate Governance Code
2018, and the AIC Code of Corporate Governance, the Board has
assessed the viability of the Company over a three‑year period from
31 December 2022. The Directors consider that a three‑year period
to December 2025 is appropriate for assessing the Company’s
viability. There is greater predictability of the Company’s cash
flows over that time period and increased uncertainty surrounding
economic, political and regulatory changes over the longer term.
The Company has a diverse Portfolio of infrastructure investments,
expected to produce good and reasonably predictable levels
of income which cover the costs, and expected to cover the
Company’s dividend target as the Portfolio matures. The defensive
nature of the Portfolio and of the essential services that the
businesses in which the Company invest provide to their customers
are being demonstrated in the current climate, with infrastructure
assets providing strong downside protection across market
cycles given the regulated and contracted nature of cash flows,
whichtypically offer strong inflation protection.
Against this background, in making their assessment, the Directors
reviewed the reports of the Investment Manager in relation to the
resilience of the Company, taking account of its current position,
the principal risks facing it in a downside scenario due to the
geopolitical uncertainties as a result of the Russia‑Ukraine conflict,
including disruption to the supply chain and increases in the cost of
living as a result of this conflict, inflationary expectations, interest
rate rises and, the impact of climate change on the Company’s
portfolio. Asdiscussed in Note 1 to the financial statements, the
effectiveness of any mitigating actions and the Company’s risk
appetite were also considered as part of the various downside
liquidity scenario modelling carried out, after which the Directors
came to their conclusion as to the Company’s viability over the
three year period.
The Investment Manager considers the future cash requirements
of the Company before acquiring or funding Portfolio Companies.
Furthermore, the Board receives regular updates from the
Investment Manager on the Company’s cash and debt position,
which allows the Board to maintain its fiduciary responsibility
to the shareholders and, if required, limit funding for existing
commitments.
The Board considered the Company’s viability over the three
year period based on a working capital model prepared by the
Investment Manager. The working capital model forecasts key cash
flow drivers such as capital deployment rate, investment returns
and operating expenses. In connection with the preparation of the
working capital model, capital raises, realisations and distribution
payments were assumed not to occur during the three‑year period,
unless already predetermined. The working capital model also
considered other scenarios including an increase in the cost of debt
and restriction in debt availability, and an inability for the Company
to raise equity.
The results of stress testing showed that the Company would
be able to withstand the impact of various scenarios occurring
over the three‑year period. The Directors also considered the
Company’s position with reference to its investment trust
structure, its business model, its business objectives, the principal
risks and uncertainties as detailed on pages 72 to 76 of this
report and its present and projected financial position. As part
of the overall assessment, the Directors took into account the
Investment Manager’s culture, which emphasises collaboration
and accountability, the Investment Manager’s conservative
approach to balance sheet management, and its emphasis on
investing with underlying Sponsors that are focused on generating
outperformance.
To support their statement, the Directors also took into account
the nature of the Company’s business, including the available
liquidity, the potential of its portfolio of investments to generate
future income and capital proceeds, and the ability of the Directors
to minimise the level of cash outflows, if necessary. Based on the
above assessment, the Directors have a reasonable expectation
that the Company will be able to continue in operation and
meet its liabilities as they fall due over the three‑year period to
December2025.
On behalf of the Board
Vagn Sørensen
Chair
1 March 2023
Strategic report Governance Financial statements Other information
77
Pantheon Infrastructure Plc
Annual report 2022
Governance
What’s in this section
Chair’s introduction to
Corporate Governance 79
Board of Directors 80
Investment Manager 82
Statement on Corporate Governance 85
Audit and Risk Committee report 92
Nomination Committee report 95
Directors’ remuneration report 96
Directors’ report 100
Directors’ responsibility statement 104
Strategic report Governance Financial statements Other information
78
Pantheon Infrastructure Plc
Annual report 2022
Chair's introduction to Corporate Governance
I am pleased to introduce the Company’s first Corporate
Governance Statement. In this statement, we report on our
compliance with the AIC Code of Corporate Governance (the 'AIC
Code') and set out how the Board has operated during the past
year. The AIC Code, as published in 2019, sets out principles and
provisions regarding matters including stakeholder engagement
and the culture of the Company, against which the Company
reports in the strategic report. The Company is committed to
maintaining the highest standard of corporate governance and the
Directors are accountable to shareholders for the governance of
the Company’s affairs.
Statement of compliance
This statement, together with the statement of Directors’
responsibilities on page 104 forms part of the Directors' Report
and indicates how the Company has applied the principles of
recommended governance of the Financial Reporting Council's
(FRC) 2018 UK Corporate Governance Code (the ‘UK Code’).
TheAIC Code complements the UK Code and provides a
framework of best practice for investment trusts.
The Board considers that reporting against the principles and
provisions of the AIC Code, which has been endorsed by the FRC,
provides more relevant information to shareholders and that by
reporting against the AIC Code the Company meets its obligations
in relation to the UK Code and associated disclosure requirements
under paragraph 9.8.6 of the Listing Rules.
The UK Code is available on the FRC website (www.frc.org.uk).
TheAICCode is available on the AIC website (www.theaic.co.uk)
and includes an explanation of how the AIC Code adapts the
principles and provisions set out in the UK Code to make them
relevant for investment companies.
Throughout the period ended 31December2022, the Company
complied with the principles and provisions of the AIC Code which
incorporates the UK Code. The Board attaches great importance
to the matters set out in the UK Code and strives to observe its
principles in a manner that would enable shareholders to evaluate
how the principles have been applied. However, it should be
noted that where the principles and provisions are related to the
role of the Chief Executive, executive directors’ remuneration
and the establishment of a Remuneration Committee, the
Board considers these principles and provisions not relevant as
Pantheon Infrastructure Plc is an externally managed Company
with an entirely non‑executive Board and no employees or
internaloperations.
The principles of the AIC Code
The AIC Code is made up of 17 principles split into five sections
covering:
•
board leadership and purpose;
•
division of responsibilities;
•
composition, succession and evaluation;
•
audit, risk and internal control; and
•
remuneration.
Details of how the Company has applied the principles of the AIC
Code are set out in this report.
Viability statement
The viability statement can be found on page 77.
Vagn Sørensen
Chair
Strategic report Governance Financial statements Other information
79
Pantheon Infrastructure Plc
Annual report 2022
Board of Directors
Appointed to the Board 4 October 2021
Mr Vagn Sørensen is an experienced non‑executive chair and director of listed and private companies.
After attending Aarhus Business School and graduating with a MSc degree in Economics and
Business Administration, Mr Sørensen began his career at Scandinavian Airlines Systems in Sweden,
rising through numerous positions in a 17‑year career before becoming Deputy CEO with special
responsibility for Denmark. Between 2001 and 2006, Mr Sørensen was President and Chief Executive
Officer for Austrian Airlines Group in Austria, a business with approximately €2.5 billion of turnover,
8,000 employees and listed on the Vienna Stock Exchange. Mr Sørensen also served as Chair of the
Association of European Airlines in 2004. Since 1999, Mr Sørensen has been a Tier 1 senior industrial
adviser to EQT, a private equity sponsor, and has been a non‑executive director or Chair of a number
of their Portfolio Companies. Since 2008, Mr Sørensen has been a senior adviser to Morgan Stanley
Investment Bank.
Mr Sørensen is currently Chair of Air Canada (since 2017) and a non‑executive director of CNH
Industrial and Royal Caribbean Cruises. Notable previous non‑executive appointments have included
Chair of SSP Group (2006 to February 2020), Chair of Scandic Hotels AB (2007‑2018), Chair of TDC
A/S (2006‑2017) and Chair of FLSmidth & Co (2009‑2022).
Appointed to the Board 4 October 2021
Mr Patrick O’Donnell Bourke is an experienced board member with more than 25 years of experience
inenergy and infrastructure.
After graduating from Cambridge University, Mr O’Donnell Bourke started his career at Peat Marwick,
Chartered Accountants (now KPMG) and qualified as a Chartered Accountant. After that he held a
variety of investment banking positions at Hill Samuel and Barclays de Zoete Wedd. In 1995, hejoined
Powergen Plc, where he was responsible for mergers and acquisitions before becoming Group
Treasurer. In 2000, Mr O'Donnell Bourke joined Viridian Group Plc as Group Finance Director and later
became Chief Executive, appointed by the private equity shareholder following take‑over in 2006.
In2011, he joined JohnLaing Group, a specialist international investor in, and manager of, greenfield
infrastructure assets where he served as CFO until his retirement in 2019. While at John Laing, hewas
part of the team which launched the John Laing Environmental Assets Fund on the London Stock
Exchange in 2014.
Mr O’Donnell Bourke currently serves as Chair of Ecofin US Renewables Infrastructure Trust Plc and
as Chair of the Audit Committee of Harworth Group Plc (a leading UK regenerator of land and property
for development and investment). Mr O’Donnell Bourke was previously Chair of the Audit and Risk
Committee at Calisen Plc (an owner and operator of smart meters in the UK) and Chair of the Audit
Committee atAffinity Water.
Vagn Sørensen
C
Chair and Nomination Committee Chair
Patrick O’Donnell Bourke
C
Audit and Risk Committee Chair
Audit and Risk Committee
Management Engagement Committee
Nomination Committee
Remuneration Committee
Disclosure Committee
C
Committee Chair
C
Strategic report Governance Financial statements Other information
80
Pantheon Infrastructure Plc
Annual report 2022
Board of Directors continued
Appointed to the Board 4 October 2021
Ms Anne Baldock is an experienced board member and lawyer with over 30 years’ experience in the
infrastructure sector.
Ms Baldock graduated in law from the London School of Economics and was a qualified Solicitor
in England and Wales from 1984 to 2012. Ms Baldock was a Partner at Allen & Overy LLP between
1990 and 2012, during which time she was Managing Partner, Projects Group London (1995‑2007),
memberof the firm’s Global/Main Strategic Board (2000‑2006) and Global Head of Projects, Energy
and Infrastructure (2007‑2012). Notable transactions included the Second Severn Crossing, Eurostar,
the securitisation of a major UK water utility and several major PPP projects in the UK and abroad.
Ms Baldock’s current roles include Senior Independent Director for the Restoration and Renewal
Delivery Authority Limited (the delivery body created by parliament to deal with the restoration of
the Houses of Parliament), Senior Independent Director and Chair of Audit and Risk Committee
for East West Railways Limited (the Government‑owned company constructing the new Oxford to
Cambridge railway) and non‑executive director of Electricity North West Limited. Amongst previous
roles, MsBaldock was non‑executive director of Thames Tideway Tunnel, non‑executive director of
Hydrogen Group (AIM‑listed) and Trustee of Cancer Research UK.
Appointed to the Board 4 October 2021
Ms Andrea Finegan is an experienced infrastructure asset management professional with over
30years of sector experience.
After graduating from Loughborough University, Ms Finegan held investment banking roles at
Deutsche Bank and Barclays Capital, before joining Hyder Investments as Head of the Deal Closing
Team. Between 1999 and 2007, Ms Finegan worked at Innisfree Limited, the investment manager of
an £8 billion infrastructure asset portfolio, latterly as Board Director and Head of Asset Management.
MsFinegan was subsequently Chief Operating Officer, ING Infrastructure Funds and Fund Consultant
to Climate Change Capital.
In 2012, Ms Finegan joined Greencoat Capital LLP for the set up and launch of Greencoat UK Wind Plc,
the renewable infrastructure investment trust, in 2013, then became Chief Operating Officer until 2018,
a position that included structuring and launching another renewable energy infrastructure fund listed
on the London Stock Exchange and Euronext Dublin (Greencoat Renewables Plc) and a number of
private markets solar energy funds.
Ms Finegan is currently Chair of the Valuation Committee of Schroders Greencoat LLP, a role she has
held since 2015, and independent consultant to the board of Sequoia Economic Infrastructure Income
Fund Limited, working closely with the ESG & Stakeholder Committee and the Risk Committee.
Anne Baldock
C
Remuneration Committee Chair and Senior Independent Director
Andrea Finegan
C
Management Engagement Committee Chair
Audit and Risk Committee
Management Engagement Committee
Nomination Committee
Remuneration Committee
Disclosure Committee
C
Committee Chair
Strategic report Governance Financial statements Other information
81
Pantheon Infrastructure Plc
Annual report 2022
Kathryn is a Partner and Global Head of Real
Assets, whichincludes infrastructure, real
estate and other real assets. Kathryn is a
member of Pantheon’s Partnership Board,
InternationalInvestment Committee, Global
Infrastructure and RealAssets Committee
and Real Estate Investment Committee.
Priorto joining Pantheon, Kathryn was with
GIC Special Investments, before which she
was responsible for direct investments at
Centre Partners, a New York‑based private
equityfirm. Kathryn began her career in
Morgan Stanley's Investment Banking
Division where she pursued real estate
investments. Kathryn has a bachelor’s and
a master’s degree in modern languages
from Oxford University, andis based in
SanFrancisco.
Andrea is a Partner and Head of Pantheon’s
Global Infrastructure and Real Assets Team.
Andreais responsible for global infrastructure
and real assets investments covering primary,
secondaryand co‑investments. Andreais
a member of the International Investment
Committee and Global Infrastructure and Real
Assets Committee. Andrea has an engineering
industry background followed by 21 years’
experience in the infrastructure finance
and investment sectors. Priorto joining
Pantheon, Andrealed infrastructure direct and
co‑investment teams for Société Générale,
Macquarie Capital and ABN AMRO delivering
successful investments in both brownfield
operating and greenfield PPP assets. Andrea
has a BEng in mechanical engineering from
Imperial College of Science, Technologyand
Medicine. Andreais based inLondon.
Richard is a Partner and Head of Europe
in Pantheon’s Global Infrastructure and
Real Assets Investment Team where he
leads its European investment activity
and team. Richardis a member of the
Global Infrastructure and Real Assets
Committee. Richard has 25 years of
experience in infrastructure private equity,
corporatefinance and project finance at
leading institutions including InfraRed Capital
Partners, HSBC, ABN AMRO, andBNP
Paribas. Richard'sexperience spans investing
in primary, secondary, co‑investments and
direct‑investments across all infrastructure
sub‑sectors and global OECD markets.
Richardholds a BSc and MBA from Imperial
College of Science, Technology and Medicine.
Richardis based in London.
Kathryn Leaf
Partner (joined 2008, 24 years
of private marketsexperience)
Andrea Echberg
Partner (joined 2012, 26years
of private marketsexperience)
Richard Sem
Partner and manager of PINT
(joined 2017, 26 years of private
markets experience)
Investment Manager
Global Infrastructure and Real Assets Investment Committee
Key Pantheon personnel
Paul is a Partner in Pantheon’s
Global Infrastructure and Real Assets
Investment Team and a member of the
GlobalInfrastructure and Real Assets
Committee. Paulworked previously at
GIC, from 2012, where he was Senior Vice
President, Infrastructurewith a global
remit focusing on primary, secondary and
co‑investment opportunities. Paulalso has
expertise in infrastructure direct investing and
infrastructure debt transactions. Prior to GIC,
Paul worked at Challenger Infrastructure and
Macquarie Capital. Paulis currently based in
London but will relocate to San Francisco.
Paul Barr
Partner (joined 2021, 20 years
of private markets experience)
Strategic report Governance Financial statements Other information
82
Pantheon Infrastructure Plc
Annual report 2022
Evan is a Partner in Pantheon’s Global
Infrastructure and RealAssets Investment
Team and a member of Pantheon’s Global
Infrastructure and Real Assets Investment
Committee. Priorto joining Pantheon,
Evanheld positions at Polaris Venture
Partners in Boston and JP Morgan in London.
Evanreceived a BS from Boston University’s
School of Management with a concentration
in finance and a minor in economics.
Evanisbased in SanFrancisco.
Jérôme is a member of Pantheon’s Global
Infrastructure and Real Assets Investment
Team where he focuses on the analysis,
evaluation and completion of infrastructure
and real assets transactions in Europe.
Jérômeis a member of Pantheon’s Global
Infrastructure and Real Assets Investment
Committee and ESG Committee. Jérôme
joined from Paris‑based placement agent
Global Private Equity, wherehe worked for
over three years. Jérômeholds an MSc
in telecommunications from ESIGELEC
engineering school and a Master in Business
from the ESCP‑EAP European School of
Management. Jérômeis based inLondon.
Evan Corley
Partner (joined 2004, 17 years
of private markets experience)
Jérôme Duthu-Bengtzon
Partner (joined 2007, 19 years
of private markets experience)
Investment Manager continued
Global Infrastructure and Real Assets Investment Committee
Key Pantheon personnel continued
Matt is a Partner in Pantheon’s US
InvestmentTeam where he is actively
involved in both the US private equity
secondary investment activity as well as
the US Infrastructure and RealAssets
investment activity. Mattis a member of the
GlobalSecondary Investment Committee
and the GlobalInfrastructure and Real Assets
Committee. Mattjoined Pantheon in July
1999, havingworked the previous three years
with Cambridge Associates in their Boston
and Menlo Park offices. Mattreceived a BA in
history and economics from Brown University,
andis a CFA Charterholder. Mattis based in
SanFrancisco.
Dinesh is a Partner in Pantheon’s Global
Infrastructure and Real Assets Investment
Team where he focuses on the analysis,
evaluation and completion of infrastructure
and real asset investment opportunities in
the US. Prior to joining Pantheon, Dinesh was
a Vice President in Goldman Sachs’ Global
Natural Resources group where he executed
on a variety of M&A and capital markets
transactions across the infrastructure, power
and utilities sectors. Previously, Dinesh was in
the Power & Utilities group in the Investment
Banking Division at RBC in New York.
Dineshholds a BS in Electrical and Computer
Engineering from Cornell University and
MBA from NYU’s Stern School of Business.
Dineshis based in San Francisco.
Matt Garfunkle
Partner (joined 1999, 24 years
of private markets experience)
Dinesh Ramasamy
Partner, Global Infrastructure
and Real Assets
Strategic report Governance Financial statements Other information
83
Pantheon Infrastructure Plc
Annual report 2022
Investment Manager continued
Ben is a Principal in Pantheon’s Global
Infrastructure & Real Assets team, where
he is focused on portfolio management
for PINT. Ben has previously worked in
investment management roles at Gravis
Capital Management, Hadrian's Wall
Capital and John Laing. Ben holds a BEng
(Hons) in Manufacturing and Mechanical
Engineering from the University of Warwick
and has completed all three levels of the CFA
qualification. Ben is based in London.
Harriet is a Vice President in Pantheon’s
Global Infrastructure & Real Assets team,
where she is responsible for investor relations
and marketing activities focusing on PINT.
Harriet previously worked in the Infrastructure
team at Federated Hermes in business
development. Harriet has also held roles
at King Street, Värde, Ashmore and UBS.
Sheholds a bachelor’s degree in International
Management with French from the University
of Bath. Harriet is based in London.
Alex is a Managing Director, European
Private Wealth focusing on the distribution
of Pantheon’s investment trusts and other
retail‑focused products. He was previously
Head of Investment Trusts at Fidelity
International and is Non‑Executive Director
of the Association of Investment Companies.
He has undergraduate degrees in Chemistry
and Law from the University of Bristol. Alex is
based in London.
Ben Perkins
Principal (joined 2022, 15 years
of market experience)
Harriet Alexander
Vice President (joined 2022,
13years of market experience)
Alex Denny
Managing Director (joined 2022,
19 years of market experience)
Farid is a Senior Product Controller within
Pantheon’s Product Control Team, where he
has operational oversight for the reporting,
valuation and external audit of Pantheon's UK
listed products including PINT. Prior to joining
Pantheon, Farid was the Financial Controller
for JohnLaing Capital Management,
responsiblefor their listed funds. He also
spent time in various finance and operations
roles within 3i Group plc, before moving to
their listed infrastructure fund. Farid holds
a BSc(Hons) in Accounting & Computing
from Oxford Brookes University and is a
qualified chartered accountant. Farid is
basedinLondon.
Farid Barekati
Senior Product Controller,
(joined 2020, 12years of market
experience)
Other key personnel
Strategic report Governance Financial statements Other information
84
Pantheon Infrastructure Plc
Annual report 2022
Statement on Corporate Governance
The Board of Directors
The Board consists of four non‑executive Directors (two male and
two female) and the Company has no employees. TheBoard is
responsible for all matters of direction and control of the Company
and no one individual has unfettered powers ofdecision.
The Board seeks to ensure that it has the appropriate balance of
skills, experience, ages and lengths of service among its members.
TheDirectors possess a wide range of business, financial and
infrastructure expertise relevant to the direction of the Company.
During the period, the Board satisfied itself that all Directors were
and remain able to commit sufficient time to discharge their
responsibilities effectively having given due consideration to their
other significant commitments.
An external search consultancy, Nurole Limited ('Nurole'), was
used to provide a shortlist of Directors as part of the recruitment
process for the non‑executive Directors at IPO and Investec Bank
plc ('Investec') were also involved in the process. Neither Nurole nor
Investec have any connection to any of the non‑executiveDirectors.
Biographies of the Directors, including details of their other
directorships and significant commitments, can be found on pages
80 and 81.
In accordance with the Board Diversity Policy, the appointment of
any new Director will always be made on the basis of a candidate’s
merits and the skills/experience identified by the Board as being
desirable to complement those of the existing Directors. TheBoard
acknowledges the benefits of greater diversity, including diversity
of social and professional background, cognitive and personal
strengths, sexualorientation, disability status, gender and ethnicity,
and the Board remains committed to ensuring that the Company’s
Directors bring a wide range of skills, knowledge, experience,
backgrounds andperspectives.
A formal process will be established for the selection of new
Directors to the Company and the level of remuneration of the
Directors has been set in order to attract individuals of a calibre
appropriate to the future development of theCompany.
Further details on the Company's Board composition and diversity
can be found on page 87.
The terms and conditions of the appointment of the non‑executive
Directors are set out in letters of appointment, copies of which are
available for inspection at the registered office of the Company and
will be available at the AGM. None of the Directors has a contract of
service with the Company.
Further details on the Company’s purpose, culture and values can
be found in the strategic report on pages66to71.
Board and Committee meeting attendance
The Board has at least four scheduled meetings a year,
withadditional meetings if necessary. Directors’ attendance at
scheduled Board and Committee meetings held during the period
to 31December2022 is set out in the table below.
Performance evaluation
During the year, in order to review the effectiveness of the Board
as a whole, its Committees and individual Directors, including the
independence of each Director, the Directors undertook an internal
Board evaluation. Led by the Chair, the evaluation was conducted
using tailored questionnaires structured to analyse the focus of
Board composition and effectiveness, the efficiency of Board and
Committee meetings, and to assess whether the operation of
such meetings was appropriate, as well as whether any additional
information may be required to facilitate better Board discussions.
The Board was also asked to consider Board support, strategic
operational oversight, culture, shareholder engagement and
succession planning, and responses were collated by the Company
Secretary and the Chair and discussed between the Board
members. The independence of the Directors and their ability to
commit sufficient time to the Company’s activities was considered
as part of the evaluation process. The performance of the Chair
was similarly evaluated by the other Directors, led by the Senior
Independent Director (SID).
Board and Committee meeting attendance
Scheduled
Board meetings
Audit and Risk
Committee
meetings
Management
Engagement
Committee meetings
Nomination
Committee
meetings
Remuneration
Committee
meetings
Disclosure
Committee
meetings
Vagn Sørensen 6/6 3/3 1/1 1/1 1/1 2/2
Andrea Finegan 6/6 3/3 1/1 1/1 1/1 2/2
Patrick O’Donnell Bourke 6/6 3/3 1/1 1/1 1/1 2/2
Anne Baldock 6/6 3/3 1/1 1/1 1/1 2/2
Strategic report Governance Financial statements Other information
85
Pantheon Infrastructure Plc
Annual report 2022
Statement on Corporate Governance continued
Performance evaluation continued
To complement the external evaluation, the Chair also held
follow‑up discussions with each Director to review their individual
performance and the issues that arose from the Board evaluation.
The results of the evaluation process indicated that the Board
continues to work well and there are no significant concerns
among the Directors about the Board’s effectiveness. The resulting
actions agreed by the Directors will be monitored during the 2023
financial year.
As a result of the evaluation, the Board is satisfied that all the
current Directors contribute effectively and have the skills and
experience relevant to the leadership and direction of theCompany.
The Directors’ biographical details are set out on pages 80 and81
of this Report. These demonstrate the wide range of skills and
experience that they bring to the Board. All Directors will retire and
stand for re‑election at the Company's AGMon 30 March 2023.
Theindividual performance of each Director standing for election
has been evaluated and it is recommended that shareholders vote
in favour of their election atthe AGM.
Insurance and indemnity provisions
The Board has formalised arrangements under which the
Directors, in the furtherance of their duties, may take independent
professional advice at the Company’s expense. The Company has
arranged a Directors’ and Officers’ liability insurance policy which
includes cover for legal expenses.
Under the terms of appointment of each Director, the Company
has agreed, subject to the restrictions and limitations imposed by
statute and by the Company’s Articles of Association, to indemnify
each Director against all costs, expenses, losses and liabilities
incurred in execution of his/her office as Director or otherwise in
relation to such office. Save for such indemnity provisions in the
Company’s Articles of Association and in the Directors’ terms
of appointment, there are no qualifying third‑party indemnity
provisions inforce.
Chair and Senior Independent Director
The Board appointed Vagn Sørensen as Chair of the Company
on 4October2021. Vagn Sørensen is deemed by his fellow
independent Board members to be independent. He considers
himself to have sufficient time to commit to the Company’s affairs.
His other commitments are disclosed in his biography on page 80.
Anne Baldock was appointed SID of the Company on
4November2022. She provides a channel for any shareholder
concerns regarding the Chair and leads the Chair’s annual
performance evaluation.
Division of responsibilities
The following sets out the division of responsibilities between
theChair and the SID.
Role of the Chair
The Chair leads the Board and is responsible for its overall
effectiveness in directing the Company. The Chair:
•
demonstrates objective judgement;
•
promotes a culture of openness and debate;
•
facilitates constructive board relations and the effective
contribution of all Non‑Executive Directors;
•
ensures that Directors receive accurate, timely and clear
information;
•
in addition to formal general meetings, offers regular
engagement with major shareholders in order to understand
their views on governance and performance against the
Company’s investment objective and investment policy;
•
ensures that the Board as a whole has a clear understanding
ofthe views of shareholders; and
•
acts on the results of the annual evaluation of the performance
of the Board, its Committees and individual Directors by
recognising the strengths and addressing any weaknesses
ofthe Board.
Role of the SID
The role of the SID is to provide a sounding board to the Chair
and to serve as an intermediary for the other directors and
shareholders. Led by the SID, the non‑executive directors meet
without the Chair present at least annually to appraise the Chair’s
performance, and on other occasions as necessary.
Strategic report Governance Financial statements Other information
86
Pantheon Infrastructure Plc
Annual report 2022
Statement on Corporate Governance continued
Directors' independence
In accordance with the Listing Rules that apply to closed‑ended
investment entities, and taking into consideration the AIC Code,
theBoard has reviewed the status of its individual Directors
and theBoard as a whole. All Directors are considered to be
independent in both character andjudgement.
Chair and Director tenure/re-appointment
of Directors
In accordance with the AIC Code, the Board has determined that its
policy on the tenure of the Chair and the Directors is that the Chair
and all Directors will be subject to annual re‑election at each AGM.
Accordingly, resolutions to elect all Directors are contained within
the 2023 AGM Notice ofMeeting.
Board diversity
The Board acknowledges the new Financial Conduct Authority
(FCA) amendments to the Listing Rules which apply for
financial years starting on or after 1 April 2022 and which set
positive diversity targets for listed companies and build on the
recommendations from the Hampton‑Alexander Review on
gender diversity on boards and the Parker Review regarding ethnic
representation on boards. The Directors are pleased to report that
as at the reference date of 31 December 2022 and as at the latest
practicable date, 50% of the Company’s Non‑Executive Directors
are women, and the SID is a woman. None of the Directors identify
as an ethnic minority individual. Theinformation presented in the
following tables was collected ona self‑reportingbasis.
TheDirectors were provided with the prescribed table and asked
to confirm based on how they identify. Although not yet applicable
to the Company, the Board is mindful of the FCA’s new diversity
targets and while pleased that it has met most of them, notes that
it does not yet meet the requirement to have at least one Director
from an ethnic minority background.
Whilst the Board does not feel that it would be appropriate to set
targets as all appointments must be made on merit, the Board
supports the recommendation to have ethnic representation on the
Board and will include this as a key consideration in its succession
planning. Please refer to the Nomination Committee report on
page95.
Board composition and diversity
1,2
Number of Board members Percentage of the Board
Number of senior positions on the
Board (SID and Chair)
Men 2 50% 1
Women 2 50% 1
Not specified/prefer not to say — — —
Number of Board members Percentage of the Board
Numberofseniorpositionsonthe
Board (SID and Chair)
White British 2 50% 1
Other White (including
minority‑white groups)
2 50% 1
1. The composition of the Board is shown at the latest practicable date.
2. As an investment trust, the additional reporting relating to executive management under the Listing Rules is not applicable.
Strategic report Governance Financial statements Other information
87
Pantheon Infrastructure Plc
Annual report 2022
Statement on Corporate Governance continued
Board responsibilities and relationship
with the Investment Manager
There is a clear division of responsibilities between the Chair,
the Directors, the Investment Manager and the Company's other
third‑party service providers. The Directors are responsible for the
determination and implementation of the Company’s investment
policy and for monitoring compliance with the Company’s
objectives. The Company has contracted with the Investment
Manager to implement its strategy. At each Board meeting,
the Directors follow a formal agenda to review the Company’s
investments and other important issues, such as asset allocation,
gearing policy, corporate strategic issues, cash management,
peergroup performance, marketing, investor relations, governance
and investment outlook, to ensure that control is maintained over
the Company’s affairs.
The Directors regularly consider its overall strategy and monitor the
share price and level of premium or discount.
The Directors are responsible for the investment policy and
strategic and operational decisions of the Company and for
ensuring that the Company is run in accordance with all regulatory
and statutory requirements. These procedures have been
formalised in a schedule of matters reserved for decision by the
full Board, whichhas been adopted for all meetings. Thisincludes
establishing the investment policy, long‑term objectives,
commercial strategy and benchmarks, the level of permitted
gearing and borrowing and the Company’s policies on treasury and
share buybacks.
Decisions to invest in, and management of, the Company’s assets
are delegated to Pantheon. Ateach Board meeting, representatives
of Pantheon are in attendance to present verbal and written reports
covering its activity, the portfolio and investment performance
over the preceding period. Ongoing communication with the
Board is maintained between formal meetings. The Investment
Manager ensures that Directors have timely access to all relevant
management, financial and regulatory information to enable
informed decisions to be made and contacts the Board as required
for specific guidance on particular issues. Pantheon has discretion
to manage the assets of the Company in accordance with the
Company’s investment objectives and policies, subject to certain
additional investment restrictions (which may be amended by the
Company from time to time with the consent of the Investment
Manager).
The Board determines the parameters of investment strategy
and risk management policies within which the Investment
Manager can exercise judgement and sets the investment and
risk management strategies in relation to currency exposure.
TheCompany Secretary and Investment Manager prepare briefing
notes for Board consideration on matters of relevance, for example
changes to the Company’s economic and financial environment,
statutory and regulatory changes and Corporate Governance
bestpractice.
Institutional investors – use of voting rights
The Company has delegated the exercise of its voting rights to the
Investment Manager. Pantheon consults with the Directors of the
Company in the case of any corporate action where either there is
a conflict of interest between PINT and other Pantheon clients, or
where for any reason the proposed voting is inconsistent with the
advice given to Pantheon’s other clients.
Conflicts of interest
The Articles of Association permit the Board to consider and,
ifitsees fit, to authorise situations where a Director has an interest
that conflicts, or may possibly conflict, with the interests of the
Company. There is in place a formal system for the Board to
consider authorising such conflicts, whereby the Directors who
have no interest in the matter decide whether to authorise the
conflict and any conditions to be attached to such authorisations.
The process in place for authorising potential conflicts of interest
has operated effectively during the period.
The Directors are able to impose limits or conditions when giving
authorisation if they think this is appropriate in the circumstances.
A register of potential conflicts is maintained by the Company
Secretary and is reviewed at each Board meeting, to ensure that
any authorised conflicts remain appropriate. Directors are required
to confirm at these meetings whether there has been any change to
theirposition.
The Directors must also comply with the statutory rules requiring
company directors to declare any interest in an actual or proposed
transaction or arrangement with the Company.
Strategic report Governance Financial statements Other information
88
Pantheon Infrastructure Plc
Annual report 2022
Statement on Corporate Governance continued
Committees of the Board
The Board has formed a number of Committees, as set out below,
to which certain Board functions have been delegated. Eachof
these Committees has formal written terms of reference approved
by the Board, which clearly define its responsibilities and these can
be inspected at the registered office of the Company and viewed on
the Company’s website (www.pantheoninfrastructure.com).
Audit and Risk Committee
The Audit and Risk Committee comprises all Board members.
MrO’Donnell Bourke, who is the Chair of the Audit and Risk
Committee, is a qualified Chartered Accountant and contributes
his knowledge and experience to the Audit and Risk Committee.
It is felt by the Committee that he is sufficiently qualified for the
position of Chair of the Auditand Risk Committee given he has
recent and relevant financial experience.
Mr Vagn Sørensen is an experienced non‑executive Chair and
director of listed and private companies and it is considered
appropriate for the Chair of the Company to be a member of the
Audit and Risk Committee as he provides a valuable contribution to
the deliberations of the Committee. The size of the Board and the
dual function of the Committee in audit and risk matters are also
noted as factors.
The Audit and Risk Committee meets at least twice a year at
appropriate intervals in the financial reporting and audit cycle and
to review the Company's internal financial controls and internal
control and risk management systems. The Committee met on
three occasions during the period ended 31 December 2022. It
is intended that the Committee will continue to meet at least two
times a year, to review the half‑yearly report and to approve the
Company’s annual report andaccounts, and otherwise as required.
The report of the Audit and Risk Committee can be found on pages
92 to 94.
Nomination Committee
The Nomination Committee comprises all the Directors and is
chaired by Mr Vagn Sørensen, except when considering succession
of the Chair. It is considered appropriate that all Directors are
members of the Nomination Committee given the size of the Board
and that all Directors are independent. The Nomination Committee
meets at least once a year or more often if required.
Please refer to the Nomination Committee report on page 95.
Remuneration Committee
The Remuneration Committee meets at least once a year,
comprises the whole Board, and is chaired by MsAnneBaldock,
who also serves as the SID. TheCompany has no employees
and the Board is composed solely of non‑executive Directors.
It is the responsibility of the Remuneration Committee as a
whole to determine and approve Directors’ fees, following proper
consideration and having regard to the industry generally, the role
that individual Directors fulfil in respect of Board and Committee
responsibilities, the time committed to the Company’s affairs and
remuneration levels generally within the investment trust sector.
The Chair’s remuneration is decided and approved by the Board
under the leadership of the SID.
Detailed information on the remuneration arrangements for
the Directors of the Company can be found in the Directors’
remuneration report on pages 96 to 99.
Disclosure Committee
The Disclosure Committee comprises the whole Board and is
chaired by Mr Vagn Sørensen. The Disclosure Committee meets
as required. The Board has delegated to the Disclosure Committee
the responsibility for overseeing the disclosure of information
by the Company to meet its obligations under the Market Abuse
Regulation and the FCA’s Listing Rules and the Disclosure and
Transparency Rules.
Management Engagement Committee
The Management Engagement Committee (MEC) comprises all
Board members and is chaired by Ms Andrea Finegan. TheMEC
meets at least once a year or more often if required. The Board has
delegated to the MEC responsibility for monitoring and evaluating
the performance of the Investment Manager andthe Investment
Manager’s compliance with the Investment Management
Agreement, as well as assessing the performance and services
provided by the Company’s other service providers (including the
Administrator, Depositary, Registrar and Secretary). The MEC is
also responsible for reasonably satisfying itself that the systems
put in place by the Investment Manager are adequate to meet
relevant legal and regulatory requirements and for reviewing the
composition and performance of the key personnel performing
the services on behalf of the Investment Manager and ensuring
the continuing appointment of the Investment Manager is in the
interests of the shareholders as a whole.
Strategic report Governance Financial statements Other information
89
Pantheon Infrastructure Plc
Annual report 2022
Statement on Corporate Governance continued
Internal control review
The Directors acknowledge that they are responsible for the
Company’s risk management and systems of internal control and
for reviewing their effectiveness.
An ongoing process, in accordance with the guidance provided by
the FRC on risk management, internal control and related finance
and business reporting has been established for identifying,
evaluating and managing the risks faced by the Company.
Thisprocess, together with key procedures established with a
view to providing effective financial control, has been in place
throughout the period and up to the date the financial statements
were approved. Full details of the principal risks and uncertainties
faced by the Company can be found on pages 72 to 76.
The risk management process and systems of internal control
are designed to manage, rather than eliminate, the risk of failure
to achieve the Company’s objectives. It should be recognised that
such systems can only provide reasonable, rather than absolute,
assurance against material misstatement or loss.
Internal control assessment process
Regular risk assessments and reviews of internal controls
and the Company’s risk appetite are undertaken by the Board
in the context of the Company’s overall investment objective.
TheBoard, throughdelegation to the Audit and Risk Committee,
has undertaken a robust assessment and review of the emerging
and principal risks facing the Company. The review covers the
key business, operational, compliance and financial risks facing
theCompany.
In arriving at its judgement as to the risks the Company faces, the
Board has considered the Company’s operations in the light of the
following factors:
•
the nature and extent of risks which it regards as acceptable for
the Company to bear within its overall business objective;
•
the threat of such risks becoming a reality;
•
the Company’s ability to reduce the incidence and impact of risk
on its performance;
•
the cost to the Company and benefits related to the review of
risk and associated controls of the Company; and
•
the extent to which third parties operate the relevant controls.
Against this background, the Board has split the review into four
sections reflecting the nature of the risks being addressed.
Given the nature of the Company’s activities and the fact that most
functions are sub‑contracted, the Directors obtain information
from key third‑party suppliers regarding the controls operated by
them. To enable the Board to make an appropriate risk and control
assessment, the information and assurances sought from third
parties include the following:
•
details of the control environment;
•
identification and evaluation of risks and control objectives;
•
assessment of communication procedures; and
•
assessment of control procedures operated.
There were no significant matters of concern identified in the
Board’s review of the internal controls of its third‑party suppliers.
The key procedures which have been established to provide
effective internal financial controls are as follows:
•
BNP Paribas Trust Corporation UK Limited (previously BNP
Paribas Securities Services, London Branch) has been
appointed as Depositary;
•
the provision of administration and accounting is the
responsibility of Link Alternative Fund Administrators Limited;
•
the provision of company secretarial duties is the responsibility
of Link Company Matters Limited;
•
investment management is provided by Pantheon. The Board
is responsible for the implementation of the overall investment
policy and monitors the actions of the Investment Manager at
regular Boardmeetings;
•
the Directors of the Company clearly define the duties and
responsibilities of their agents and advisers in the terms of
their contracts. The appointment of key agents and advisers is
conducted by the Board after consideration of the quality of the
parties involved; the Board, via the MEC, monitors their ongoing
performance and contractual arrangements;
•
the duties of investment management and accounting are
segregated. The procedures of the individual parties are
designed to complement one another; and
•
the Board reviews detailed financial information produced by the
Investment Manager and the Administrator on a regular basis.
The Company does not have an internal audit function. All of the
Company’s management functions are delegated to independent
third parties whose controls are reviewed by the Board. It is
therefore felt that there is no need for the Company to have an
internal audit function. This need is reviewed periodically.
In accordance with guidance issued to directors of listed
companies, the Directors have carried out a review of the
effectiveness of the various systems of internal controls as
operated by the Company’s main service providers during the
yearincluding financial, operational and compliance controls and
found there to be no matters of concern.
Strategic report Governance Financial statements Other information
90
Pantheon Infrastructure Plc
Annual report 2022
Statement on Corporate Governance continued
Company Secretary
The Board has direct access to the advice and services of the
Company Secretary, Link Company Matters Limited, who is
responsible for ensuring that Board and Committee procedures
arefollowed and that applicable regulations are complied with.
The Company Secretary is also responsible to the Board for
ensuring the timely delivery of information and reports and for
ensuring that statutory obligations of the Company are met.
Dialogue with shareholders
Communication with shareholders is given a high priority by the
Board and the Investment Manager, and all Directors are available
to enter into dialogue with shareholders. All shareholders are
encouraged to attend and vote at the AGM, during which the Board
and the Investment Manager will be available to discuss issues
affecting the Company, and shareholders will have the opportunity
to address questions to the Investment Manager, the Board and the
Chairs of the Board’s Committees.
At each AGM, a presentation will be given by the Investment
Manager to all shareholderspresent.
There is regular dialogue with institutional shareholders and
a structured programme of shareholder presentations by the
Investment Manager to institutional investors will take place
following publication of the annual and half‑yearly results.
Adetailed list of the Company’s shareholders is reviewed at
eachBoard meeting.
The half‑yearly and annual reports of the Company are prepared
by the Board and its advisers to present a full and readily
understandable review of the Company’sperformance.
Copies are dispatched to shareholders by mail or electronically
as requested and are also available on the Company’s website:
www.pantheoninfrastructure.com. TheCompany always responds
to communications from shareholders. Shareholders wishing to
communicate directly with the Board should contact the Company
Secretary, by email to pint_cosec@linkgroup.co.uk or by writing to
the registered office shown on page 136, who will arrange for the
relevant Board member to contactthem.
Further details of our engagement with the Company’s
stakeholders and how the Board has regard to those stakeholders
in the Board’s decision‑making processes are set out in the
strategic report on pages 66 to 71.
On behalf of the Board
Vagn Sørensen
Chair
1 March 2023
Strategic report Governance Financial statements Other information
91
Pantheon Infrastructure Plc
Annual report 2022
Audit and Risk Committee report
I am pleased to present the Audit and Risk Committee report for
the period ended 31December2022.
The Audit and Risk Committee comprises myself, as Chair, and the
other members of the Board.
Further details about the composition of the Audit and Risk
Committee are set out on pages 80 and 81.
Audit and Risk Committee members consider that, individually and
collectively, they are independent and appropriately experienced
to fulfil the role required within the sector in which the Company
operates. The constitution and performance of the Audit and Risk
Committee is reviewed on a regular basis.
Role of the Audit and Risk Committee
Clearly defined terms of reference, which were reviewed and
updated during the period, have been established by the Board.
Theprimary responsibilities of the Audit and Risk Committee are:
•
to monitor the integrity of the financial statements, the financial
reporting process and the accounting policies of the Company;
•
to provide advice (where requested by the Board) on whether the
annual report and accounts, taken as a whole, are fair, balanced
and understandable; whether suitable and appropriate estimates
and judgements have been made in respect of areas which could
have a material impact on the financial statements; and provide the
information necessary for shareholders to assess the Company’s
position and performance, business model and strategy;
•
to review the effectiveness of the internal control environment
of the Company, including its service providers, and its
reporting processes and to monitor adherence to best practice
in Corporate Governance and compliance with applicable
regulatory and legal requirements;
•
to advise the Board on the Company’s overall risk appetite,
tolerance and strategy and the principal and emerging risks the
Company is willing to take in order to meet its long‑termobjectives;
•
to assess the Company’s emerging and principal risks and monitor
the Company’s risk management and internal financial controls and
to seek assurance regarding the risk exposures of the Company and
the effectiveness of risk management and internal control systems;
•
to make recommendations to the Board in relation to the tender
process, the appointment, re‑appointment and removal of the
external Auditor and to approve the Auditor’s remuneration and
terms of engagement, including scope of work;
•
to review and monitor the Auditor’s independence and
objectivity and the effectiveness of the audit process; and
•
to provide a forum through which the Company’s Auditor reports
to the Board.
The Audit and Risk Committee also reviews the Investment
Manager’s compliance, whistleblowing and fraudprocedures.
The Audit and Risk Committee has direct access to the Auditor,
Ernst & Young (EY), and representatives of EY attend each Audit
and Risk Committee meeting.
Matters considered during the period
We met on three occasions during the period ended
31December2022 and once since the period end.
TheBoardandCommittee meeting attendance table can
befoundon page85. Atthose meetings, the Audit and Risk
Committee:
•
reviewed and agreed the half‑year and year‑end portfolio
valuation and the Company's NAVs;
•
reviewed the Company’s financial statements for the half‑year
and year‑end and made formal recommendations to the Board;
•
reviewed the Company’s going concern and viability statements;
•
reviewed the internal controls and risk management systems of
the Company and its third‑party service providers;
•
agreed the audit plan and fees with the Auditor, including
the principal areas of focus, as well as the reporting by the
Auditor on its review and audit of the Company's 30June and
31December financial statements respectively;
•
reviewed the risk matrix covering the Company's key investment
and operating risks including how they are classified and
mitigated;
•
reviewed the whistleblowing policy together with the data
protection, fraud prevention and anti‑money laundering policies
of the Investment Manager (no incidents or risk areas were
reported during the period); and
•
reviewed compliance with the AIC code and its own terms
ofreference.
Patrick O’Donnell Bourke
Audit and Risk Committee Chair
Strategic report Governance Financial statements Other information
92
Pantheon Infrastructure Plc
Annual report 2022
Audit and Risk Committee report continued
Matters considered during the period
continued
The principal issues considered by the Committee were:
A. Valuation of assets
The Committee reviewed the basis of valuation of each investment
held by the Company at 31December2022 prepared by the
Investment Manager from information provided by each relevant
Sponsor. Questions raised by the Committee were addressed
by the Investment Manager. The Committee also reviewed the
Auditor's reporting on its testing of investment valuations using its
specialists as part of the year end audit. As a result, the Committee
satisfied itself that the Company's Portfolio was held atfair value.
B. Going concern and long‑term viability
The Committee considered the Company’s financial requirements
and viability for the twelve months from the date of these financial
statements, and over the subsequent two years. This assessment
included the review of various downside cases with varying
degrees of decline in investment valuations on financial statement
disclosures including those relating to principal risks. As a result
of this assessment, the Committee concluded that the Company
had adequate resources to continue in operation and meet its
liabilities as they fall due both for the twelve months from the date
of these financial statements, and over the subsequent two years.
Relatedgoing concern and long‑term viability disclosures are set
out on pages 77, 93 and 102 and Note1 on page116.
C. Maintenance of investment trust status
The Investment Manager and Administrator reported to
the Committee to confirm continuing compliance with
the requirements for maintaining investment trust status.
Theserequirements are also discussed with the Auditor as part
ofthe audit process.
D. Internal controls
The Audit and Risk Committee reviewed and updated,
whereappropriate, the Company’s risk matrix. This document is
reviewed by the Audit and Risk Committee every six months. It is
satisfied with the extent, frequency and quality of the reporting of
the Investment Manager’s monitoring to enable the Audit and Risk
Committee to assess the degree of control of the Company and
the effect with which risk is managed and mitigated. The Audit
andRisk Committee also received reports on internal controls
fromeach of the Company's service providers.
No incidents of significant control failings or weaknesses were
identified during the period ended 31December2022, withinthe
Company or its third‑party suppliers. It is noted that the Company
Secretary does not ordinarily produce internal control reports due
to the non‑financial nature of services it provides to the Board and
does not provide services outsourced by the Investment Manager.
Notwithstanding this, the Secretary has provided a letter to the
Committee as part of the annual report process, which confirms
that there have been no significant control failings or weaknesses
identified during the period.
The Company does not have an internal audit function as
substantially all of its day‑to‑day operations are delegated to third
parties, all of whom have their own internal control procedures.
The Audit and Risk Committee discussed whether it would be
appropriate to establish an internal audit function, and agreed that
the existing system of monitoring and reporting by third parties
remained appropriate and sufficient.
External audit
The Audit and Risk Committee monitors and reviews the
effectiveness of the external audit process for the publication of
the annual report and makes recommendations to the Board on
the re‑appointment, remuneration and terms of engagement of
theAuditor.
Audit fees
The audit fees incurred were £135,000 for the audit of the 2022
financial statements and £25,000 for the audit of the initial
accounts to 30 June 2022 to support the first dividend distribution.
TheAudit and Risk Committee will continue to monitor the level of
audit feesclosely.
Non-audit fees/independence
and objectivity of the Auditor
The Audit and Risk Committee reviews the scope and nature of all
proposed non‑audit services before engagement, to ensure that
the independence and objectivity of the Auditor are safeguarded.
TheBoard’s policy is that non‑audit services may be carried out
by the Company’s Auditor unless there is a conflict of interest or
someone else is considered to have more relevant experience.
Non‑audit services amounting to £35,000 were provided during
the period ended 31December2022, relating to the review of the
half‑year report and the year‑end NAV calculations. The Company
also paid EY fees of £70,000 prior to its launch for acting as
Reporting Accountant in respect of the Company’s IPO and for
advice relating to the C share issue proposed for September2022,
the latter of which did not proceed due to market conditions.
Theratio of non‑audit to audit fees is 66%.
The Audit and Risk Committee believes that it is appropriate for the
Company’s Auditor to provide such services to the Company as
these services are audit related and (subsequent to the Company's
launch) are considerably less than the annual statutory audit fee.
The Audit and Risk Committee has received assurances from the
Auditor that its independence is not compromised by the supply
oftheseservices.
Strategic report Governance Financial statements Other information
93
Pantheon Infrastructure Plc
Annual report 2022
Audit and Risk Committee report continued
Effectiveness of external audit process
The Audit and Risk Committee meets at least twice a year with the
Auditor. The Auditor provides a planning report in advance of the
annual audit, a report on the annual audit and a report on its review
of the half‑year financial statements. The Audit and Risk Committee
has an opportunity to question and challenge the Auditor in respect
of each of these reports. In addition, at least once a year, theAudit
and Risk Committee has an opportunity to discuss any aspect of
the Auditor’s work with the Auditor in the absence of the Investment
Manager. Aftereach audit, the Audit and Risk Committee reviews
the audit process and considers its effectiveness.
Appointment of the Auditor
The Board of PINT appointed EY as PINT’s first auditors in 2021.
A resolution to re‑appoint EY as the Company’s Auditor will be
proposed at the Company’s AGM.
A competitive tender must be carried out by the Company at least
every tenyears. The Company is therefore required to carry out
a tender no later than in respect of the financial period ending
31December2033. The current lead audit partner, MrMatthew
Price, has been in place since the IPO in 2021. Ethicalstandards
generally require the rotation of the lead audit partner every five
years for a listed client.
The Committee monitors the Company’s relationship with the
Auditor and has discussed and considered its independence
and objectivity. The Auditor also provides confirmation that it is
independent within the meaning of all regulatory and professional
requirements and that objectivity of the audit is not impaired.
TheCommittee is therefore satisfied that EY is independent,
especially considering the term of appointment to date, and will
continue to monitor this position.
Takinginto account the performance and effectiveness of the
Auditor and the confirmation of its independence, the Committee
has recommended to the Board that a resolution to re‑appoint EY
as Auditor be put to shareholders at the forthcoming AGM. EY has
confirmed its willingness to continue in office.
Fair, balanced and understandable
As a result of the work performed, the Audit and Risk Committee
has concluded that the annual report for the period ended
31December2022, taken as a whole, is fair, balanced and
understandable and provides the information necessary for
shareholders to assess the Company’s position and performance,
business model and strategy, and has reported on these findings
tothe Board.
Patrick O’Donnell Bourke
Audit and Risk Committee Chair
1 March 2023
Strategic report Governance Financial statements Other information
94
Pantheon Infrastructure Plc
Annual report 2022
Nomination Committee report
TheNomination Committee, asand when necessary, makes
recommendations to the Board with regard to criteria for future
Board appointments and the methods ofselection. Italso
considers and reviews the appointment of a SID, membership of
the Board’s Committees, and the re‑appointment of those Directors
standing for re‑election atAGMs.
In addition, the Nomination Committee is responsible for assessing
the time commitment required for each Board appointment and
ensuring that the present incumbents have sufficient time to
undertake them, and for reviewing the Directors’ performance
appraisalprocess.
As part of ongoing succession planning, the Nomination
Committee ensures that all Board appointments are subject to a
formal, rigorous and transparent procedure. TheCompany seeks
to ensure that any Board vacancies are filled by the most qualified
candidates based on objective criteria and merit in the context of
the skills, knowledgeand experience that are needed for the Board
to be effective.
TheBoard supports diversity and inclusion at Board level and
acknowledges the benefits of diversity, includingdiversity of
gender, socio‑economic and ethnic background, sexualorientation,
disability and cognitive and personal strengths. TheBoard remains
committed to ensuring that the Company’s Directors bring a
wide range of skills, knowledge, experience, backgrounds and
perspectives to the Board.
The Board welcomes the recent changes to the Listing Rules which
incorporate the recommendations from the Hampton‑Alexander
Review on gender diversity on boards and the Parker Review
regarding ethnic representation on boards, into law.
The UK Listing Rules require listed companies to disclose annually
their position against the following board diversity targets:
•
at least 40% of women on the Board;
•
at least one of the senior Board positions to be held by a woman
(such as Chair, SID, ChiefExecutive or Chief Financial Officer); and
•
at least one Director from an ethnic minority background.
At 31 December 2022, PINT met two of the three targets above, with 50%
women on the Board and MsAnneBaldock in the position of SID.
During the year, the Nomination Committee met once and all Committee
members were in attendance. The Committee agreed and recommended
to the Board a Diversity Policy and reviewed the balance of skills and
diversity on the Board. Further information on the Diversity Policy is set
out on page 87. Itwas agreed that whilst the current structure, size and
composition of the Board was appropriate and balanced and that it was
too early to begin succession planning for the Chair or the non‑executive
Directors in 2022, the Nomination Committee would review this position
during 2023 and any potential additions to the Board would include
a preference for candidates from an ethnic minority background.
The Nomination Committee is also responsible for conducting an
annual performance evaluation of the Board, theBoard’s Committees
and individual Directors and for reviewing the results of the performance
evaluation that relate to the composition of the Board and succession
planning. TheNomination Committee will also review the effectiveness
of the performance evaluation process as a whole and ensure its
ongoing suitability. Detailsof the performance evaluation of the Board
undertaken shortly after the year end and the rationale for re‑election of
the Directors are provided on pages 85 and 86.
Vagn Sørensen
Nomination Committee Chair
1 March 2023
Vagn Sørensen
Nomination Committee Chair
The Nomination Committee comprises all the Directors and is
chaired by MrVagnSørensen, exceptwhen considering succession
of the Chair. It is considered appropriate that all Directors are
members of the Nomination Committee given the size of the Board
and that all Directors are independent. TheNomination Committee
meets at least once a year or more often ifrequired.
The role of the Nomination Committee is to undertake the formal
process of reviewing the balance, effectiveness and diversity of
the Board and to consider succession planning, identifyingthe
skills and expertise needed to meet the future challenges and
opportunities facing the Company and the individuals who might
best provide them.
Strategic report Governance Financial statements Other information
95
Pantheon Infrastructure Plc
Annual report 2022
Directors’ remuneration report
Statement from the Chair
I am pleased to present the Directors’ remuneration report for the
period ended 31 December 2022. The Remuneration Committee
comprises myself, as Chair, and the other members of the Board.
It is considered appropriate for all Directors to be members of the
Remuneration Committee given the size of the Board and it is felt
that members are, individually and collectively, independent and
appropriately experienced to fulfil the role required within the sector
in which the Company operates.
Directors’ remuneration is determined by the Remuneration
Committee, at its discretion within an aggregate limit of
£500,000per annum, set out in the Company’s Articles of
Association and in accordance with the AIC Code of Corporate
Governance. No Director is involved in deciding his or her
ownremuneration.
During the period the Remuneration Committee held one meeting.
Individual attendance by the Directors is included in the table on
page 85.
The Remuneration Committee’s main functions include: (i)agreeing
the policy for the remuneration of the Directors and reviewing and
proposing changes to the policy, as necessary; (ii)agreeing the
policy for authorising claims for expenses from Directors; and
(iii)establishing the selection criteria, selecting, appointing and
setting the terms of reference for any remuneration consultants
who advise the Committee (currently none).
Companies are required to ask shareholders to approve the annual
remuneration report, which includes the annual remuneration
paid to Directors each year, and formally to approve the Directors’
Remuneration Policy on a three‑yearly basis. Any change to the
Directors’ Remuneration Policy requires shareholder approval.
Thevote on the Directors’ remuneration report is an advisory
vote, while the Directors’ Remuneration Policy is subject to a
bindingvote.
The Board consists entirely of non‑executive Directors and the
Company has no employees. There is, therefore, nothing to report
on those aspects of remuneration that relate to executive Directors.
In accordance with the Remuneration Policy, the fees payable to
Directors were set at the rate of £55,000 for the Chair, £45,000
for the Chair of the Audit and Risk Committee and £40,000 for the
otherDirectors.
Directors' Remuneration Policy
The Directors’ Remuneration Policy (the 'Policy') will be put to
shareholders’ vote at least once every three years, and in any year
that a change in the Policy is proposed. A resolution to approve
the Policy will be put to shareholders at the Company’s first AGM
which is scheduled for 30March2023. The results of the votes
cast at the 2023 AGM relating to the remuneration report and
Remuneration Policy will be included in the subsequent annual
report forreference.
Anne Baldock
Remuneration Committee Chair
The Board has prepared this report in accordance with the
requirements of the Large and Medium‑sized Companies and
Groups (Accounts and Reports) (Amendment) Regulations 2013.
The law requires the Company’s Auditor to audit certain
disclosures provided. Where disclosures have been audited,
theyare indicated as such. The Auditor’s opinion is included in the
IndependentAuditor’s report on pages 105 to 111.
Strategic report Governance Financial statements Other information
96
Pantheon Infrastructure Plc
Annual report 2022
Directors’ remuneration report continued
The policy
The Board’s policy is that remuneration of non‑executive
Directors should reflect the experience of the Board as a whole
and be determined with reference to comparable organisations
and appointments. The level of remuneration has been set
in order to attract individuals of a calibre appropriate to the
future development of the Company and to reflect the specific
circumstances of the Company, the duties and responsibilities of
the Directors, and the value and amount of time committed to the
Company’s affairs.
The Chair does not participate in any discussions relating to his
own fee, which is determined by the other Directors. Directors
are entitled to be paid all travelling, hotel or other expenses
properly incurred by them in connection with their attendance
at Director or shareholder meetings or otherwise in connection
with the discharge of their duties as Directors. There are no
performance conditions attaching to the remuneration of the
Directors as the Board does not believe that this is appropriate for
non‑executive Directors. Under the Company's Articles, the Board
and a Non‑executive Director may agree that any fee payable
to the Non‑executive Director may consist (wholly or partly) of
payments by way of pension contributions or premiums to secure
pension benefits, whether in accordance with a pension scheme or
otherwise. The Directors do not currently receive pension benefits,
nor do they receive long‑term incentive schemes or share options.
All Directors act in a non‑executive capacity and the fees for their
services are approved by the whole Board. There are no service
contracts in place. Each directorship may be terminated by either
party on three months' prior written notice. The fees for the
Directors are determined within the limits set out in the Company’s
Articles of Association, or any greater sum that may be determined
by ordinary resolution of the Company.
Directors’ and Officers’ liability insurance cover is maintained by
theCompany on behalf of the Directors.
Directors' remuneration components
The Directors are entitled only to the fees as set out in the table
below from the date of their appointment. No component of
Directors’ remuneration is subject to performance factors.
Fees will be reviewed annually in accordance with the policy below.
The fee for any new Director appointed to the Board will be
determined on the same basis. The Company is committed
to ongoing Shareholder dialogue and any views expressed by
Shareholders on the fees being paid to Directors would be taken
into consideration by the Board when reviewing the Directors’
Remuneration Policy and in the annual review of Directors’ fees.
Remuneration type Description and approach to determination
Fixed fees Annual fees are set for each of the Directors, reflect the experience of the Board as a whole and are determined
with reference to comparable organisations and appointments.
When making recommendations for any changes in fees, the Committee will consider wider factors such as the
average rate of inflation over the period since the previous review, and the level and any change in complexity
of the Directors’ responsibilities (including additional time commitments as a result of increased regulatory or
corporate governance requirements).
The total amount of the fees paid to all of the Non‑Executive Directors excluding any remuneration for special or
additional services paid as set out below shall not exceed £500,000 in each year or any higher amount decided
by the Company by ordinary resolution.
The Chair does not participate in any discussions relating to his own fee, which is determined by the
otherDirectors.
Additional fees The Board may decide to award extra fees (whether by way of salary, commission, percentage of profits or
otherwise) to a Director (holding either an executive or a non‑executive office) who serves on a committee,
acts as chair or deputy chair, devotes special attention to the Company's business or who otherwise performs
services which the Board decides are outside the scope of his or her ordinary duties; or goes or lives abroad in
connection with the Company's business.
Expenses Directors are entitled to be paid all travelling, hotel or other expenses properly incurred by them in connection
with their attendance at Director or shareholder meetings or otherwise in connection with the discharge of their
duties as Directors.
Other The Board and a Non‑executive Director may agree that any fee payable to the Non‑executive Director may
consist (wholly or partly) of payments by way of pension contributions or premiums to secure pension benefits,
whether in accordance with a pension scheme or otherwise. The Directors do not currently receive pension
benefits, nor do they receive long‑term incentive schemes or share options.
Strategic report Governance Financial statements Other information
97
Pantheon Infrastructure Plc
Annual report 2022
Directors’ remuneration report continued
The policy continued
Directors’ service contracts
None of the Directors have a contract of service with the Company.
Each Director has entered into terms of appointment as a
non‑executive Director of the Company. There has been no other
contract or arrangement between the Company and any Director
at any time during the year. Under the Articles of Association, each
Director shall retire and be subject to re‑appointment at the first AGM
following appointment, and at least every three years thereafter. After
nine years’ service, Directors are subject to annual re‑appointment.
In accordance with the AIC Code, all Directors are subject to annual
re‑election at each AGM. There are no agreements between the
Company and its Directors concerning compensation for loss of office
or which could give rise to, or impact on, remuneration payments.
Directors' fee levels per annum (effective from
1 January 2023)
Annual report on Directors’ remuneration
Directors’ remuneration for the period ended
31 December 2022 (audited)
The Directors who served during the period received the amounts
set out in the table opposite for services as non‑executive Directors
for the period ended 31December2022 as well as reimbursements
for expenses necessarily incurred.
An additional non‑taxable reimbursement of expenses of £141 was
paid in the first quarter of 2023 in respect of Directors' expenses.
Noother additional fees are payable for membership of the
Board’sCommittees.
No sums were paid to any third parties in respect of Directors’
services and no sums were paid to any third parties in respect
ofadvice from remuneration advisers.
Fees for any new Director appointed will be made on the
above basis. Fees payable in respect of subsequent years
will be determined following market reviews to ensure fees
remainappropriate.
Any views expressed by shareholders on the fees being paid to
Directors would be taken into consideration by the Board.
Expected fees
for year to
31 December
2023
£
Fees for
period to
31 December
2022
4
£
Chair
1
55,000 67,128
Audit and Risk
CommitteeChair
2
45,000 54,923
Non‑executive Director 40,000 48,821
Expenses
3
2023 Q1 expense 141 55
1. A reimbursable expense of £55 was claimed during the period. An additional
reimbursable expense of £141 was claimed in Q1 2023.
Period ended 31 December 2022
Director
Remuneration
£
Taxable
benefits£
Total
£
Vagn Sørensen 67,128 – 67,128
Patrick O’Donnell
Bourke
1
54,923 55 54,978
Andrea Finegan 48,821 – 48,821
Anne Baldock 48,821 – 48,821
219,693 55 219,748
1. The Chair of the Board is paid a higher fee than the other Directors to reflect the
more onerous role.
2. The Chair of the Audit and Risk Committee is paid a higher fee than the other
Directors to reflect the more onerous role.
3. Reimbursement of expenses incurred in the performance of duties as a Director.
4. From 12 October 2021 to 31 December 2022.
Period Three months Six months One year
Since launch
(Nov-21)
NAV per share (0.4%) 3.1% 1.9% (0.1%)
Share price (1.3%) (10.8%) (11.7%) (10.0%)
S&P Global Infrastructure Index (TR) 5.7% (3.5%) 0.8% 6.4%
Company performance
In setting Directors’ remuneration, consideration is given to the
relative size and performance of the Company. The table below
sets out PINT’s total NAV and share price returns to ordinary
shareholders since launch, compared with the S&P Global
Infrastructure Index over the same period. The S&P Global
Infrastructure Index is used as a benchmark as the constituents
are comparable in asset type with the Company’s investments
portfolio. For the year ended 31December2022, total shareholder
return was (10.0%), compared with the S&P Global Infrastructure
Index which was 6.4%.
Strategic report Governance Financial statements Other information
98
Pantheon Infrastructure Plc
Annual report 2022
Directors’ remuneration report continued
Annual report on Directors’ remuneration
continued
Relative importance of spend on pay
The table below shows the proportion of the Company’s income
spent on pay.
Annual percentage change in Directors’
remuneration
Directors’ fees were unchanged in the period from inception to
31December2022.
Directors’ interests (audited)
The Company’s Articles of Association do not require a Director to
own shares in the Company. The interests of the Directors and any
connected persons in the Ordinary Shares of the Company at
31December2022 and at 31December2021 are shown in the
tablebelow:
1. Mr Sem retired from the Board on 4 October 2021.
2. Ms Echberg retired from the Board on 4 October 2021.
All the holdings of the Directors are beneficial. None of the Directors
or any person connected with them had a material interest in the
Company’s transactions, arrangements or agreements during
theperiod.
There have been no changes in the Directors’ interests between
31December 2022 and the date of this report.
Approval
On behalf of the Board and in accordance with Part 2 of Schedule 8
of the Large and Medium‑sized Companies and Groups (Accounts
and Reports) (Amendment) Regulations 2013, I confirm that the
above report on remuneration summarises, as applicable, for the
period to 31December2022:
•
the major decisions on Directors’ remuneration;
•
any substantial changes relating to Directors’ remuneration
made during the period; and
•
the context in which the changes, if any, occurred and decisions
have been taken.
The Directors’ remuneration report was approved by the Board of
Directors and signed on its behalf by:
Anne Baldock
Remuneration Committee Chair
1 March 2023
12 October 2021 to 31 December 2022
£ %
Directors’ fees 219,693 2.7
Management fee and other
expenses 3,194,000 38.9
Dividend payments 4,800,000 58.4
Share buybacks — —
Director
Number
of shares
31December
2022
Number
of shares
31December
2021
Richard Sem
1
N/A –
Andrea Echberg
2
N/A –
Vagn Sørensen 120,000 100,000
Anne Baldock 30,000 25,000
Andrea Finegan 30,000 25,000
Patrick O’Donnell Bourke 60,000 50,000
Strategic report Governance Financial statements Other information
99
Pantheon Infrastructure Plc
Annual report 2022
Directors’ report
The Directors are pleased to present their report, together with the
audited financial statements of the Company, for the period ended
31December2022.
In accordance with the Companies Act 2006 (as amended),
theListing Rules and the Disclosure Guidance and Transparency
Rules, the Corporate Governance Statement, Directors’
remuneration report, report from the Audit and Risk Committee
and the statement of Directors’ responsibilities should be read in
conjunction with one another and the strategic report. Aspermitted
by legislation, some of the matters normally included in the
Directors’ report have instead been included in the strategic
report, as the Board considers them to be of strategic importance.
Therefore, a review of the business of the Company, recent events
and outlook can be found on pages 1 to 52 and information
regarding ESG issues can be found on pages 53 to 65.
Particulars of important events affecting the Company which have
occurred since 31 December 2022 are contained in Note 25 to
thefinancial statements.
Information required to be part of this Directors’ report can be
found elsewhere in the annual report and is incorporated into this
report by reference, as indicated below:
•
events subsequent to 31 December 2022 can be found in
Note25 to the financial statements;
•
board engagement with key stakeholders can be found on
pages 66 to 70; and
•
principal decisions taken during the period can be found on
page 71.
Directors
The Directors during the period were:
The names and full biographies of the Directors can be found on
pages80 and 81. As at 31December2022 and as at the latest
practicable date prior to publication of this report, the Board
comprised two male Directors and two female Directors.
All Directors will retire and stand for election at the AGM on
30March2023. Further details regarding the selection and
appointment of Directors, including the Company’s policy on
diversity, can be found on page87.
The rules concerning the appointment and replacement of
Directors are set out in the Company’s Articles of Association and
in the Companies Act 2006. There are no agreements between the
Company and its Directors concerning any compensation for their
loss of office that occurs because of a takeover bid.
Articles of Association
Any amendments to the Articles of Association must be made by
special resolution at a general meeting of the shareholders.
Share capital
The rights attaching to the Company’s shares are set out in the
Company’s Articles of Association. Further details can be found in
Note16 of the financial statements.
As at 31December2022 and as at the date of this report,
theCompany had shares in issue as shown in the table overleaf,
allof which were listed on the official list maintained by the FCA
and admitted to trading on the London Stock Exchange. No shares
were held in treasury at the year end.
There are no restrictions on the free transferability of the Shares,
subject to compliance with applicable securities laws and
provisions in the Articles entitling the Board to decline to register
certain transfers in a limited number of circumstances, such as
where the transfer might cause the Company to be subject to or
operate in accordance with ERISA and other US laws.
The powers given to the Directors are contained within the
Company's articles, are subject to relevant legislation and,
incertain circumstances (including in relation to the issuing or
buying back by the Company of its shares), are subject to the
authority being given to the Directors by shareholders.
Prior to the Company's listing on 13 October 2021, the Directors
were authorised in accordance with the Articles to allot up to a
maximum of two billion Ordinary and/or C Shares and to disapply
pre‑emption rights in respect of those Ordinary and/or C shares,
such authority to expire on 13 October 2024. To date, no Shares
have been allotted under this authority.
Appointed Resigned
Richard Sem 9 September 2021 4 October 2021
Andrea Echberg 9 September 2021 4 October 2021
Vagn Sørensen 4 October 2021
Anne Baldock 4 October 2021
Andrea Finegan 4 October 2021
Patrick O’Donnell Bourke 4 October 2021
Strategic report Governance Financial statements Other information
100
Pantheon Infrastructure Plc
Annual report 2022
Directors’ report continued
Share capital continued
An authority to repurchase up to 14.99% of the Company’s issued
share capital to be held in treasury or for cancellation was also
granted to the Directors on 12 October 2021, however this will
expire at the conclusion of the 2023 AGM when a resolution for its
renewal will be proposed, as explained in the separate 2023 AGM
Notice. To date, no Shares have been repurchased by the Company
under this existing authority.
Dividends
The Board is declaring a second interim dividend of 1p per share for
the period ended 31December2022, payable on 31March2023.
Afirst interim dividend of 1p per Ordinary Share for the period
ended 30 June 2022 was paid on28October2022.
Financial risk management
Details in relation to the Company’s use of derivative financial
instruments, financial risk management objectives and policies,
including policies for hedging each major type of forecasted
transaction for which hedge accounting is used; as well as the
Company’s exposure to price, credit, liquidity, or cash flow risk are
set out in Note 23 to the financial statements.
Management
The Company entered into an Investment Management
Agreement with the Company’s Investment Manager, Pantheon,
on 13October2021, under which Pantheon was appointed as
the Company’s Alternative Investment Fund Manager (AIFM).
Pantheon, which is part of the Pantheon Group, has been approved
as an AIFM by the FCA.
Pantheon is one of the world’s foremost private equity fund
investors and has acted as Investment Manager to the Company
since the Company’s inception in 2021.
Affiliated Managers Group, Inc. (AMG), alongside senior members
of the Pantheon team, acquired the Pantheon Group in 2010.
Theownership structure, with Pantheon senior management
owning a meaningful share of the economics in the business,
provides a framework for long‑term succession and enables
Pantheon management to continue to direct the firm’s day‑to‑day
operations. AMG is a global asset management company
with equity investments in leading boutique investment
managementfirms.
Under the terms of the Investment Management Agreement,
Pantheon has been appointed as the sole and exclusive
discretionary manager of all the assets of the Company and
to provide certain additional services in connection with the
management and administration of the Company’s affairs,
including monitoring the performance of, and giving instructions on
behalf of the Company to, other service providers to the Company.
The Investment Manager is entitled to a monthly management fee
at an annual rate of:
i. 1.0% of the part of the Company’s NAV up to and including
£750million; and
ii. 0.9% of the part of such NAV in excess of £750million.
The Management Agreement is capable of being terminated
(without penalty to the Company) by either party giving not less
than twelve months’ notice in writing at any time on or after the
fourth anniversary of the admission of the Ordinary Shares of the
Company on the Main Market of the London Stock Exchange and
on the Official List of the FCA as contemplated by the Company’s
Prospectus dated 13October2021 (or at the Company's option, by
making a payment in lieu of such notice).
The Management Agreement is capable of being terminated by
the Company (without penalty to the Company) immediately if,
amongother things, the Investment Manager materially breaches
its obligations (and cannot or does not remedy the breach) or
goes into liquidation. The Investment Manager has the benefit
of an indemnity from the Company in respect of liabilities arising
out of the proper performance by the Investment Manager of
its duties and compliance with instructions given to it by the
Board and an exclusion of liability save to the extent of any fraud,
gross negligence, wilful default, bad faith or knowing violation of
applicable laws.
Share capital
and voting rights
Number of
shares
in issue
Voting rights
attached
to shares
Number of
shares held
in treasury
At Initial Public Offering
Ordinary Shares
of 0.01p each 400,000,000 400,000,000 —
Subscription Shares
of 0.01p each 80,000,000 80,000,000 —
At31December2022
Ordinary Shares
at 0.01p each 480,000,000 480,000,000 —
Strategic report Governance Financial statements Other information
101
Pantheon Infrastructure Plc
Annual report 2022
Directors’ report continued
Management continued
Pantheon sources, evaluates and manages investments on
the Company’s behalf, allocating investments to the Company,
inaccordance with Pantheon’s investment allocation policy,
that are in line with the strategy agreed with the Board and the
Company’s investment objective and policy.
Related party transactions
Related party transactions for the period can be found in Note 24
tothe financial statements.
Continuing appointment of the
Investment Manager
The Board keeps the performance of the Investment Manager
under continual review, and the MEC carries out an annual review
of the Investment Manager’s performance and the terms of the
Management Agreement. The ongoing review of the Investment
Manager includes activities and performance over the course of
the year and review against the Company’s peer group. The Board
is of the opinion that it is in the interests of shareholders as a whole
tocontinue the appointment.
The reasons for this view are that the investment performance is
satisfactory and the Investment Manager is well placed to continue
to manage the assets of the Company according to the Company’s
strategy. Further details of the Board’s engagement with the
Investment Manager are set out on page68.
Service providers
BNP Paribas Trust Corporation UK Limited (previously BNP
ParibasSecurities Services, London Branch) acts as the Company’s
Depositary in accordance with the AIFM Directive, subject to the
terms and conditions of a Depositary Agreement, as updated in
2022 by a Deed of Novation and Amendment, entered into between
the Company, the AIFM and the Depositary. Full details of the
Board’s engagement with service providers are set out on page69.
Going concern
The Company’s business activities, together with the factors
likely to affect its future development, performance and position,
including its financial position, are set out in the strategic report
and Investment Manager’s report. The Directors have made
an assessment of going concern, taking into account both the
Company’s financial position at the balance sheet date and the
expected performance of the Company, using the information
available up to the date of issue of the financial statements.
Total available financing as at 31 December 2022 stood at
£245.4million, comprising £182.9million in available cash
balances and £62.5million through the Company's RCF, which
matures in December 2025. The Company maintains a policy to
hold liquidity sufficient to cover all future operating and financial
commitments due in the next twelve months. This includes all
forecast operating costs, dividend payments, foreign exchange
hedge settlements due (based on mark‑to‑market valuations),
and all unfunded investment commitments which could be called
during the period as detailed in the Cash and liquidity management
section on page 19.
The Directors considered downside liquidity modelling scenarios
with varying degrees of decline in investment valuations and key
drivers such as deployment rate, investment returns and operating
expenses. In connection with the preparation of the model, capital
raises, realisations and distribution payments were assumed not
to occur during the assessment period. In the event of a downside
scenario, the Company can take steps to limit or mitigate the
impact on the balance sheet, including drawing on its RCF, which
includes the provision of additional liquidity for working capital.
After due consideration of the activities of the Company, its assets,
liabilities, commitments and financial resources, the Directors
concluded that the Company has adequate resources to continue
in operation for at least twelve months from the approval of the
financial statements as at 31 December 2022. For this reason,
they consider it appropriate to continue to adopt the going concern
basis in preparing the financial statements.
Political donations
The Company made no political donations during the period to
31December 2022. The Company has in place an anti‑bribery and
charitable & political donations policy which was approved by the
Board in May 2022.
Strategic report Governance Financial statements Other information
102
Pantheon Infrastructure Plc
Annual report 2022
Directors’ report continued
Substantial shareholdings
As at 31December2022, the Company had received notification
ofthe following disclosable interests in the voting rights of
theCompany:
It should be noted that these holdings may have changed
since notified to the Company and may not therefore be wholly
accurate statements of actual holdings as at 31December2022.
However,notification of any change is not required until the next
applicable threshold is crossed.
•
On 2 February 2023, Evelyn Partners Limited notified the
Company that it had reduced its shareholding to11.99%.
•
On 23 February 2023, Investec Wealth & Investment Limited
notified the Company that it had reduced its shareholding
to17.99%.
Greenhouse gas emissions and Task
Force on Climate-related Financial
Disclosures (TCFD)
All the Company’s activities are outsourced to third parties.
Assuch, it does not have any physical assets, property, employees
or operations of its own and does not generate any greenhouse
gas or other emissions or consume any energy reportable
under the Companies Act 2006 (Strategic Report and Directors’
Report) Regulations 2013 or the Companies (Directors’ Report)
and LimitedLiability Partnerships (Energy and Carbon Report)
Regulations 2018, implementing the UK government’s policy on
Streamlined Energy and Carbon Reporting. Under Listing Rule
15.4.29(R), the Company, as a closed‑ended investment fund,
iscurrently exempt from complying with the TCFD.
Further details of the Investment Manager’s approach to
responsible investment practices and ESG standards can be
foundin the strategic report on pages53 to 59.
Modern Slavery Act
As an investment trust, the Company does not provide goods
or services in the normal course of business, and does not have
employees, customers or turnover. Accordingly, the Company is
not in scope of the Modern Slavery Act (the 'Act') and is therefore
not required to make any slavery or human trafficking statement
under the Act. The Company’s own supply chain, which consists
predominantly of professional advisers and service providers in the
financial services industry, is considered to be low risk in relation to
this matter. However, the Company has a zero‑tolerance approach
to modern slavery and as such has adopted its own Modern Slavery
and Human Trafficking Statement which was approved by the
Board of Directors in May 2022. Details of the Company’s approach
to modern slavery can be found in the strategic report on page56.
Future developments
The outlook for the Company is set out in the Chair’s statement
onpage10.
Requirements of the Listing Rules
Listing Rule 9.8.4 requires the Company to include certain
information in a single identifiable section of the annual report
or a cross reference table indicating where the information is set
out.The Directors confirm that there are no disclosures to be
madein this regard.
Annual General Meeting (AGM)
The Company’s AGM will be held on 30 March 2023. The business
to be proposed at the AGM will be set out in a separate Notice of
Meeting which will be published shortly.
Audit information
The Directors who held office at the date of approval of the
Directors' report confirm that, so far as they are aware, there is
no relevant audit information of which the Company’s Auditor is
unaware; and each Director has taken all steps that he or she ought
to have taken as a Director to make himself or herself aware of
any relevant audit information and to establish that the Company’s
Auditor is aware of that information.
Approval
The Directors’ report has been approved by the Board.
On behalf of the Board
Vagn Sørensen
Chair
1 March 2023
Shareholders
Number of
shares held
% of total
voting rights
Investec Wealth &
Investment Limited
90,563,698 18.87%
Evelyn Partners Limited 59,914,479 12.48%
Close Asset Management Limited 20,870,685 4.78%
Quilter PLC 41,171,287 8.58%
Strategic report Governance Financial statements Other informationStrategic report Governance Financial statements Other information
103
Pantheon Infrastructure Plc
Annual report 2022
Directors’ responsibility statement
1. Rebranded Evelyn Partners from 14 June 2022.
The Directors are responsible for preparing the annual report
and the financial statements in accordance with applicable laws
and regulations. Company law requires the Directors to prepare
financial statements for each financial year. Under that law they
have elected to prepare the financial statements in accordance
with applicable law and UK Accounting Standards (United Kingdom
Generally Accepted Accounting Practice). Under company law the
Directors must not approve the financial statements unless they
are satisfied that they give a true and fair view of the state of affairs
of the Company as at the end of each financial year and of the profit
or loss of the Company for that period.
In preparing these financial statements, the Directors are
requiredto:
•
present a true and fair view of the financial position, financial
performance and cash flows of the Company;
•
select suitable accounting policies in accordance with FRS102
and then apply them consistently;
•
present information, including accounting policies, in a
manner that provides relevant, reliable, comparable and
understandableinformation;
•
make judgements and estimates that are reasonable
andprudent;
•
state whether applicable UK Accounting Standards have been
followed, subject to any material departures disclosed and
explained in the financial statements; and
•
prepare the financial statements on a going concern basis
unless it is inappropriate to presume that the Company will
continue in business.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company’s
transactions and disclose with reasonable accuracy at any time
the financial position of the Company and enable them to ensure
that the financial statements comply with the Companies Act2006.
They are also responsible for safeguarding the assets of the
Company and hence for taking reasonable steps for the prevention
and detection of fraud and other irregularities.
The Directors are also responsible for preparing the strategic
report, the Directors’ report, the Directors’ remuneration report,
the Corporate Governance Statement and the report of the Audit
and Risk Committee in accordance with the Companies Act
2006 and applicable regulations, including the requirements of
the Listing Rules and the Disclosure Guidance and Transparency
Rules. TheDirectors have delegated responsibility to the
Investment Manager for the maintenance and integrity of the
Company’s corporate and financial information included on
the Company’s website (www.pantheoninfrastructure.com).
Legislation in the United Kingdom governing the preparation and
dissemination of financial statements may differ from legislation
inotherjurisdictions.
Each of the Directors, whose names are listed on pages80 and 81,
confirms that to the best of his or her knowledge:
•
the financial statements, prepared in accordance with applicable
accounting standards, give a true and fair view of the assets,
liabilities, financial position and profit of the Company; and
•
the strategic report contained in the annual report and
financial statements includes a fair review of the development
and performance of the business and the position of the
Company, together with a description of the principal risks
anduncertainties that it faces.
The UK Corporate Governance Code requires Directors to ensure
that the annual report and financial statements are fair, balanced
and understandable. In order to reach a conclusion on this matter,
the Board has requested that the Audit and Risk Committee
advises on whether it considers that the annual report and financial
statements fulfil these requirements. The process by which the
Audit and Risk Committee has reached these conclusions is set out
in its report on pages92 to 94. As a result, the Board has concluded
that the annual report and financial statements for the period
ended 31December2022, taken as a whole, are fair, balanced
and understandable and provide the information necessary for
shareholders to assess the Company’s position and performance,
business model and strategy.
Signed on behalf of the Board by
Vagn Sørensen
Chair
1 March 2023
Strategic report Governance Financial statements Other information
104
Pantheon Infrastructure Plc
Annual report 2022
Opinion
We have audited the financial statements of Pantheon Infrastructure Plc
(the‘Company’) for the period ended 31December2022 which comprise the
income statement, the statement of changes in equity, the balance sheet, the cash
flow statement, and the related notes 1 to 25 including a summary of significant
accounting policies. The financial reporting framework that has been applied in their
preparation is applicable law and United Kingdom Accounting Standards including
FRS 102 ‘The Financial Reporting Standard applicable in the UK and Republic of
Ireland’ (United Kingdom Generally Accepted Accounting Practice).
In our opinion, the financial statements:
•
give a true and fair view of the Company’s affairs as at 31 December 2022 and
ofits profit for the period then ended;
•
have been properly prepared in accordance with United Kingdom Generally
Accepted Accounting Practice; and
•
have been prepared in accordance with the requirements of the Companies
Act2006.
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 believe that the audit evidence we have obtained is sufficient and appropriate
toprovide a basis for our opinion.
Independence
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 Ethical Standard as applied to public interest entities,
and we have fulfilled our other ethical responsibilities in accordance with these
requirements.
The non-audit services prohibited by the FRC’s Ethical Standard were not provided
to the Company and we remain independent of Company in conducting the audit.
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:
•
confirming our understanding of the Company’s going concern assessment
process and engaging with the Directors and the Company Secretary to
determine if all key factors were considered in their assessment;
•
inspecting the Directors’ assessment of going concern, including the portfolio
cash flow forecast, for the periods to 1 March 2024 which is at least twelve
months from the date the financial statements were authorised for issue.
Inpreparing the portfolio cash flow forecast, the Company has concluded
thatitis able to continue to meet its ongoing costs as they fall due;
•
reviewing the factors and assumptions, including the impact of the Covid-19
pandemic and the Russia/Ukraine conflict, applied to the portfolio cash flow
forecast and the liquidity assessment of the investment portfolio. We considered
the appropriateness of the methods used to calculate the portfolio cash flow
forecast and the liquidity assessment and determined, through testing of the
methodology and calculations, that the methods, inputs and assumptions
utilised were appropriate to be able to make an assessment for the Company;
•
inspecting the Directors’ assessment of the risk of breaching the loan facility
covenants as a result of a reduction in the value of the Company’s portfolio.
We recalculated the Company’s compliance with loan facility covenants in the
scenarios assessed by the Directors, who also performed reverse stress testing
in order to identify what factors would lead to the Company breaching the
financial covenants;
•
considering the mitigating factors included in the portfolio cash flow forecasts
and covenant calculations that are within the control of the Company; and
•
reviewing the Company’s going concern disclosures included in the annual
report in order to assess that the disclosures were appropriate and in conformity
with the reporting standards.
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
the period to 1 March 2024.
Independent
Auditor’s
report
to the members
of Pantheon
Infrastructure Plc
Strategic report Governance Financial statements Other information
105
Pantheon Infrastructure Plc
Annual report 2022
Independent
Auditor’s
report
to the members
of Pantheon
Infrastructure Plc
continued
Conclusions relating to going concern continued
In relation to the Company’s reporting on how it 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. However, because not all future
events or conditions can be predicted, this statement is not a guarantee as to the Company’s ability to continue as a going concern.
Overview of our audit approach
Key audit matters
•
Risk of inaccurate valuation of investments.
Materiality
•
Overall materiality of £4.7million which represents 1% of shareholders’ funds.
An overview of the scope of our audit
Tailoring the scope
Our assessment of audit risk, our evaluation of materiality and our allocation of performance materiality determine our audit scope for the Company. This enables us to form
an opinion on the financial statements. We take into account size, risk profile, the organisation of the Company and effectiveness of controls, including controls and changes
in the business environment, when assessing the level of work to be performed. All audit work was performed directly by the audit engagement team based in London.
Climate change
Stakeholders are increasingly interested in how climate change will impact the Company. The Company has determined that the most significant future impacts from climate
change on its operations will be from changes in regulations that may adversely affect its underlying portfolio investments. Its approach to managing climate and other ESG
risks as part of managing investment risk is explained on pages 72 to 76 of the strategic report, which form part of the ‘Other information’, rather than the audited financial
statements. Our procedures on these disclosures therefore consisted solely of considering whether they are materially inconsistent with the financial statements orour
knowledge obtained in the course of the audit or otherwise appear to be materially misstated.
Our audit effort in considering climate change was focused on the adequacy of the Company’s disclosures in the financial statements as set out in Note 1 and conclusion
that there was no material impact from climate change on the financial statements. We also challenged the Directors’ considerations of climate change in their assessment
of going concern and viability and associated disclosures. Where considerations of climate change were relevant to our assessment of going concern, these are
describedabove.
Based on our work we have not identified the impact of climate change on the financial statements to be a key audit matter or to impact a key audit matter.
Strategic report Governance Financial statements Other information
106
Pantheon Infrastructure Plc
Annual report 2022
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
themost 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 our opinion thereon, and we do not provide a separate opinion on these matters.
Risk Our response to the risk
Risk of inaccurate valuation of investments
(£301.4 million)
Refer to the Audit and Risk Committee report (page 93);
Accounting policies (page 116); and Note 10 of the financial
statements (page 123).
Investments represent 63% of the net asset value (NAV)
of the Company and consist of unlisted investments in
infrastructureassets.
The valuation of the assets held in the investment portfolio
is the key driver of the Company’s net asset value and total
return. Incorrect investment valuation could have a significant
impact on the return generated for shareholders.
We attribute a higher risk of estimation uncertainty to a
portfolio of this nature and deem the valuation of unlisted
investments at fair value to be a fraud and significant auditrisk.
We performed the following procedures:
We obtained an understanding of the Company’s processes and controls surrounding investment
valuation by performing walkthroughs to assess the design and implementation of controls in place
and attending the Investment Manager’s period end valuation committee as an observer.
With the assistance of our valuation specialists, we obtained and reviewed the valuation models
used to calibrate the purchase price for a sample of investments in order to validate that the cost of
investment represents fair value consistent with the requirement of FRS 102 and the IPEV guidelines.
We held discussions with the Investment Manager and attended its period end valuation committee
to understand the key movements in the valuation models and with the assistance of our valuation
specialists, assess their appropriateness based on the nature of the asset and our understanding of
the relevant markets in which they operate.
We checked the clerical accuracy of the valuation models, agreed key inputs to supporting
documents and substantiated unrealised FX gains/losses which were a principal driver of fair
valuation movements during the period.
Where applicable, we corroborated key performance metrics relevant to the underlying infrastructure
investments during 2022 to supporting documentation and reporting provided by the General
Partners to the Investment Manager.
For a sample of investments, our specialists reviewed the market data of comparable companies
and observable transactions to provide a benchmarking analysis of the implied movements in
Enterprise Value and Transaction Multiples as at 31 December 2022, which was then compared to
the movement in fair value applied to the investments sampled subsequent to their purchase up to
the period end.
Key observations communicated to the Audit and Risk Committee
The results of our procedures identified no material misstatement in relation to the risk of inaccurate valuation of investments.
Independent
Auditor’s
report
to the members
of Pantheon
Infrastructure Plc
continued
Strategic report Governance Financial statements Other information
107
Pantheon Infrastructure Plc
Annual report 2022
Independent
Auditor’s
report
to the members
of Pantheon
Infrastructure Plc
continued
Our application of materiality
We apply the concept of materiality in planning and performing the audit, in
evaluating the effect of identified misstatements on the audit and in forming our
audit opinion.
Materiality
The magnitude of an omission or misstatement that, individually or in the
aggregate, could reasonably be expected to influence the economic decisions of
the users ofthe financial statements. Materiality provides a basis for determining
the nature and extent of our audit procedures.
We determined materiality for the Company to be £4.7million, which is 1% of
shareholders’ funds. We believe that shareholders’ funds provide us with materiality
aligned tothe key measure of the Company’s performance.
During the course of our audit, we reassessed initial materiality and made no
changes to the basis of calculation from our original assessment at the planning
stage.
Performance materiality
The application of materiality at the individual account or balance level. It is
set at an amount to reduce to an appropriately low level the probability that the
aggregate of uncorrected and undetected misstatements exceeds materiality.
On the basis of our risk assessments, together with our assessment of the
Company’s overall control environment, our judgement was that performance
materiality was 50% of our planning materiality, namely £2.4million. We set
performance materiality at this percentage due to this being the first annual report
and financial statements of theCompany.
Reporting threshold
An amount below which identified misstatements are considered as being
clearlytrivial.
We agreed with the Audit and Risk Committee that we would report to them all
uncorrected audit differences in excess of £0.2million, which is set at 5% of planning
materiality, as well as differences below that threshold that, in our view, warranted
reporting on qualitative grounds.
We evaluate any uncorrected misstatements against both the quantitative measures
of materiality discussed above and in light of other relevant qualitative considerations
in forming our opinion.
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 this 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 the other
information, we are required to report that fact.
We have nothing to report in this regard.
Strategic report Governance Financial statements Other information
108
Pantheon Infrastructure Plc
Annual report 2022
Independent
Auditor’s
report
to the members
of Pantheon
Infrastructure Plc
continued
Opinions on other matters prescribed by the
Companies Act 2006
In our opinion, the part of the Directors’ remuneration report to be audited has been
properly prepared in accordance with the Companies Act 2006.
In our opinion, based on the work undertaken in the course of the audit:
•
the information given in the strategic report and the Directors’ report for the
financial period for which the financial statements are prepared is consistent with
the financial statements; and
•
the strategic report and Directors’ report have been prepared in accordance with
applicable legal requirements.
Matters on which we are required to report
by exception
In light of the knowledge and understanding of the Company and its environment
obtained in the course of the audit, we have not identified material misstatements in
the strategic report or Directors’ report.
We have nothing to report in respect of the following matters in relation to which the
Companies Act 2006 requires us to report to you if, in our opinion:
•
adequate accounting records have not been kept, or returns adequate for our
audit have not been received from branches not visited by us;
•
the financial statements and the part of the Directors’ remuneration report to be
audited are not in agreement with the accounting records and returns;
•
certain disclosures of Directors’ remuneration specified by law are not made; or
•
we have not received all the information and explanations we require for our audit.
Corporate Governance Statement
We have reviewed 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 by the Listing Rules.
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 or our knowledge obtained during the audit:
•
the Directors’ statement with regard to the appropriateness of adopting the going
concern basis of accounting and any material uncertainties identified set out on
page 102;
•
the Directors’ explanation as to their assessment of the Company’s prospects,
the period this assessment covers and why the period is appropriate set out on
page77;
•
the Directors’ statement on whether they have a reasonable expectation that the
Company will be able to continue in operation and meets its liabilities set out on
page 102;
•
the Directors’ statement on fair, balanced and understandable set out on page94;
•
the Board’s confirmation that it has carried out a robust assessment of the
emerging and principal risks set out on page 104;
•
the section of the annual report that describes the review of effectiveness of risk
management and internal control systems set out on page 93; and
•
the section describing the work of the Audit and Risk Committee set out on
page92.
Strategic report Governance Financial statements Other information
109
Pantheon Infrastructure Plc
Annual report 2022
Independent
Auditor’s
report
to the members
of Pantheon
Infrastructure Plc
continued
Responsibilities of Directors
As explained more fully in the Directors’ responsibilities statement set out on
page104, 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.
Auditor’s responsibilities for the audit of the
financial statements
Our objectives are to obtain reasonable assurance about whether the financial
statements as a whole are free from material misstatement, whether due to fraud
or error, and to issue an auditor’s report that includes our opinion. Reasonable
assurance is a high level of assurance, but is not a guarantee that an audit conducted
in accordance with ISAs (UK) will always detect a material misstatement when it
exists. Misstatements can arise from fraud or error and are considered material if,
individually or in the aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these financial statements.
Explanation as to what extent 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, todetect irregularities, including fraud. The risk of not detecting a material
misstatement due to fraud is higher than the risk of not detecting one resulting
from error, as fraud may involve deliberate concealment by, for example, forgeryor
intentional misrepresentations, or through collusion. The extent to which our
procedures are capable of detecting irregularities, including fraud, is detailed below.
However, the primary responsibility for the prevention and detection of fraud rests
with both those charged with governance of the Company and management.
Weobtained an understanding of the legal and regulatory frameworks that are
applicable to the Company and determined that the most significant are United
Kingdom Generally Accepted Accounting Practice, the Companies Act 2006, the
Listing Rules, the UK Corporate Governance Code, the Association of Investment
Companies’ Code and Statement of Recommended Practice, section1158 of
the Corporation Tax Act 2010 and The Companies (Miscellaneous Reporting)
Regulations 2018.
Strategic report Governance Financial statements Other information
110
Pantheon Infrastructure Plc
Annual report 2022
Independent
Auditor’s
report
to the members
of
Pantheon
Infrastructure Plc
continued
Explanation as to what extent the audit was
considered capable of detecting irregularities,
including fraud continued continued
We understood how the Company is complying with those frameworks through
discussions with the Audit and Risk Committee and the Company Secretary and a
review of Board minutes and the Company’s documented policies and procedures.
•
We assessed the susceptibility of the Company’s financial statements to
material misstatement, including how fraud might occur, by considering the key
risks impacting the financial statements. We identified a fraud risk with respect
to management override in relation to investments and investment income.
Furtherdiscussion of our approach is set out in the section on the key audit
mattersabove.
•
Based on this understanding we designed our audit procedures to identify
non-compliance with such laws and regulations. Our procedures involved a
review of the Company Secretary’s reporting to the Directors with respect to
the application of the documented policies and procedures and review of the
financial statements to confirm compliance with the reporting requirements of
the Company.
A further description of our responsibilities for the audit of the financial statements
is located on the FRC’s website at https://www.frc.org.uk/auditorsresponsibilities.
Thisdescription forms part of our Auditor’s report.
Other matters we are required to address
•
Following the recommendation from the Audit and Risk Committee, we were
appointed by the Company on 4 August2022 to audit the financial statements for
the period ended 31December2022 and subsequent financial periods.
•
The period of total uninterrupted engagement including previous renewals and
reappointments is oneyear, covering the period ended 31December2022.
•
The audit opinion is consistent with the additional report to the Audit and
RiskCommittee.
Use of our report
This report is made solely to the Company’s members, as a body, in accordance
with Chapter 3 of Part 16 of the Companies Act 2006. Ouraudit 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. Tothe
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, forour audit work,
for this report, or for the opinions we have formed.
Matthew Price (Senior statutory auditor)
for and on behalf of Ernst & Young LLP, Statutory Auditor
London
1 March 2023
Strategic report Governance Financial statements Other information
111
Pantheon Infrastructure Plc
Annual report 2022
Income
statement
For the period from
9 September 2021 to
31 December 2022
9 September 2021 to 31 December 2022
Note
Revenue
£’000
Capital
£’000
Total
£’000
Gain on investments at fair value through profit or loss
1
10 — 19,592 19,592
Losses on derivative financial instruments at fair value through profit or loss 13 — (8,520) (8,520)
Foreign exchange gains on cash and cash equivalents — 5 5
Investment management fees 2 (3,194) — (3,194)
Other expenses 3 (1,360) (555) (1,915)
(Loss)/profit before financing and taxation (4,554) 10,522 5,968
Finance income 5 2,096 — 2,096
Interest payable and similar expenses 6 (36) — (36)
(Loss)/profit before taxation (2,494) 10,522 8,028
Taxation recovered/(paid) 7 — — —
(Loss)/profit for the period, being total comprehensive income for the period (2,494) 10,522 8,028
Earnings per share – basic and diluted 8 (0.58p) 2.45p 1.87p
1. Includes foreign exchange movements on investments.
The Company does not have any income or expense that is not included in the return for the period, therefore the return for the period is also the total comprehensive income
for the period. The supplementary revenue and capital columns are prepared under guidance published in the Statement of Recommended Practice (SORP) issued by the
Association of Investment Companies (AIC). The total column of the statement represents the Company’s statement of total comprehensive income prepared in accordance
with FRS 102.
All revenue and capital items in the above statement relate to continuing operations.
The Notes on pages 116 to 131 form part of these financial statements.
Strategic report Governance Financial statements Other information
112
Pantheon Infrastructure Plc
Annual report 2022
Note
Share
capital
£’000
Share
premium
£’000
Capital
redemption
reserve
1
£’000
Capital
reserve
1
£’000
Revenue
reserve
1
£’000
Total
£’000
Balance at 9 September 2021 — — — — — —
Share issue costs – (9,267) — — — (9,267)
Ordinary Shares issued 16 4,800 395,200 — — — 400,000
Subscription shares issued (subsequently
converted to Ordinary Shares) 16 — 80,800 — — — 80,800
Cancellation of share premium — (387,284) 387,284 — — —
Interim dividend paid 9 — — (4,800) — — (4,800)
Profit/(loss) for the period — — — 10,522 (2,494) 8,028
Closing equity shareholders’ funds 4,800 79,449 382,484 10,522 (2,494) 474,761
1. The capital redemption reserve, capital reserve and revenue reserve are all the Company’s distributable reserves. The capital redemption reserve has arisen from the cancellation of the Company’s share premium account
and is a distributable reserve.
The Notes on pages 116 to 131 form part of these financial statements.
Statement
of changes
in equity
For the period from
9 September 2021 to
31 December 2022
Strategic report Governance Financial statements Other information
113
Pantheon Infrastructure Plc
Annual report 2022
Balance sheet
As at 31 December
2022
Note
31 December
2022
£’000
Non-current assets
Investments at fair value 10 301,382
Debtors 11 740
Current assets
Debtors 11 959
Cash and cash equivalents 12 182,937
183,896
Creditors: Amounts falling due within one year
Other creditors 14 (2,737)
(2,737)
Net current assets 181,159
Total assets less current liabilities 483,281
Creditors: Amounts falling due after one year
Derivative financial instruments 13 (8,520)
Net assets 474,761
Capital and reserves
Called-up share capital 16 4,800
Share premium 17 79,449
Capital redemption reserve 17 382,484
Capital reserve 17 10,522
Revenue reserve 17 (2,494)
Total equity shareholders’ funds 474,761
NAV per Ordinary Share 18 98.9p
The financial statements were approved by the Board of Pantheon Infrastructure Plc on 1 March 2023 and were authorised for issue by:
Vagn Sørensen
Chair
Company Number: 13611678
The Notes on pages 116 to 131 form part of these financial statements.
Strategic report Governance Financial statements Other information
114
Pantheon Infrastructure Plc
Annual report 2022
9 September
2021 to
31 December
2022
£’000
Cash flow from operating activities
Investment management fees paid (1,994)
Operating fees paid (1,581)
Other cash payments (110)
Net cash outflow from operating activities (3,685)
Cash flow from investing activities
Purchase of investments (281,790)
Net cash outflow from investing activities (281,790)
Cash flow from financing activities
Share issue proceeds 480,800
Share issue costs (9,267)
Dividends paid (4,800)
Bank charges (1)
Finance income 1,675
Net cash inflow from financing activities 468,407
Increase in cash in the period 182,932
Cash and cash equivalents at the beginning of the period —
Foreign exchange gains on cash and cash equivalents 5
Cash and cash equivalents at the end of the period 182,937
The Notes on pages 116 to 131 form part of these financial statements.
Cash flow
statement
For the period from
9 September 2021 to
31 December 2022
Strategic report Governance Financial statements Other information
115
Pantheon Infrastructure Plc
Annual report 2022
1. Accounting policies
Pantheon Infrastructure Plc (the ‘Company’) is a listed closed-ended investment
company incorporated in England and Wales on 9September2021, with registered
“company number” 13611678. TheCompany began trading on 15November2021
when the Company’s shares were admitted to trading on the London Stock
Exchange. Theregistered office of the Company is Link Company Matters Limited,
6th Floor, 65Gresham Street, London, EC2V7NQ.
A. Basis of preparation
The Company’s financial statements have been prepared in compliance with
FRS 102 as it applies to the financial statements of the Company for the period
from 9September2021 to 31December2022. They have also been prepared on
the assumption that approval as an investment trust will continue to be granted.
TheCompany’s audited financial statements are presented in GBP and all values are
rounded to the nearest thousand pounds (£’000) except when indicatedotherwise.
The financial statements have been prepared in accordance with the SORP for
the financial statements of investment trust companies and venture capital trusts
issued by the AIC in July2022.
The financial statements comprise the results of the Company only. The Company
has control over a number of subsidiaries, further details of which are given
in Note20. Where the Company owns a subsidiary that is held as part of the
investment portfolio and its value to the Company is through the fair value rather
than as the medium through which the Group carries out business, the Company
excludes it from consolidation. The subsidiaries have not been consolidated in the
financial statements under FRS 102. These subsidiaries are included at fair value
within investments in accordance with 9.9C(a) of FRS 102.
These are the Company’s first annual financial statements, for the period
9September2021 to 31December2022. Consequently, there are no comparatives
for a previousperiod.
B. Going concern
The financial statements have been prepared on the going concern basis and under
the historical cost basis of accounting, modified to include the revaluation of certain
assets at fairvalue.
The Directors have made an assessment of going concern, taking into account the
Company’s current performance and financial position as at 31December2022.
In addition, the Directors have assessed the outlook, which considers the ongoing
geopolitical uncertainties as a result of the Russia-Ukraine conflict including disruption
to global supply chains and increases in the cost of living as a result of this conflict,
persistent inflation, interest rate rises and the impact of climate change on the Company’s
Portfolio using the information available up to the date of issue of the financialstatements.
In reaching this conclusion, the Board considered budgeted and projected results of
the business, including projected cash flows, various downside modelling scenarios
and the risks that could impact the Company’s liquidity.
Having performed their assessment, the Directors considered it appropriate
to prepare the financial statements of the Company on a going concern basis.
TheCompany has sufficient financial resources and liquidity, is well placed to
manage business risks in the current economic environment, and can continue
operations for a period of at least twelve months from the date of issue of these
financial statements.
C. Segmental reporting
The Directors are of the opinion that the Company is engaged in a single segment
of business, beinginvestment in infrastructure to generate investment returns while
preserving capital. Thefinancial information used by the Directors and Investment
Manager to allocate resources and manage the Company presents the business as
a single segment comprising a homogeneousportfolio.
D. Investments
The nature of the Company’s underlying assets comprises unlisted investments,
themajority of which are held through its subsidiary, Pantheon Infrastructure Holdings
LP (PIH LP) with one held directly. While the Company operates a robust and consistent
valuation process, there is significant estimation uncertainty in the underlying asset
valuations which are estimated at a point in time. Accordingly, while relevant information
relating to but received after the measurement date is considered, the Directors will only
consider an adjustment to the financial statements if it were to have a significant impact
and is indicative of conditions present at the measurement date.
The Company has fully adopted sections 11 and 12 of FRS 102. All investments held
by the Company are classified as ‘fair value through profit or loss’. TheCompany’s
business is investing in infrastructure assets with a view to profiting from their total
return in the form of interest, dividends or increases in fair value. Theinvestments
are recognised at fair value on initial recognition represented by the cost of
acquisition and the Company manages and evaluates the performance of its
investments on a fair value basis.
Notes to
the financial
statements
Strategic report Governance Financial statements Other information
116
Pantheon Infrastructure Plc
Annual report 2022
The fair value will generally reflect the latest valuations available from the Sponsor
which may not coincide with the Company’s reporting date. In such cases the
Investment Manager performs a roll forward from the latest available valuation
to the relevant reporting date. The roll forward process takes consideration of the
following factors:
i. transactions and foreign-exchange movements in the intervening period; and
ii. adjustments for expected performance of the investment in the intervening
period.
This may also include, but is not limited to, in consultation with the Sponsor,
changes in multiples/discount rates, asset fundamentals (for instance operating
performance) and the macroeconomic environment.
On an annual basis the Investment Manager receives the annual audited financial
statements from the Sponsors of the asset. The Investment Manager utilises the
audited accounts to gain comfort that the underlying infrastructure asset is fair
valued in line with recognised accounting standards and audited by a recognised
auditor. This is in addition to the analysis performed by the Investment Manager
to determine the reasonableness of the valuation and that it is appropriate to the
investment and performance thereof.
If the Sponsor does not provide audited financial statements, to the extent that
the Board of the Company or the Investment Manager deem it appropriate, and it
is possible to do in conjunction with the Sponsor, the valuation of the underlying
infrastructure asset is independently verified. The scope of this verification is
determined on a case-by-case basis and, dependent on the asset, could include an
independent valuation report from a valuation provider engaged by the Investment
Manager. The Investment Manager then analyses the independent valuation report
to determine the reasonableness of the valuation and that it is appropriate to the
investment and performance thereof before presenting to the Investment Manager’s
Valuation Committee and the Board for approval.
1. Accounting policies continued
D. Investments continued
Upon initial recognition investments held by the Company are classified ‘at fair value
through profit or loss’. All gains and losses are allocated to the capital column within
the Income Statement as ‘Gains on investments held at fair value through profit or
loss’. When a purchase or sale is made under a contract, the terms of which require
delivery within the time frame of the relevant market, the investments concerned
are recognised or derecognised on the trade date. Subsequent to initial recognition,
investments are valued at fair value through profit or loss. The fair values for
the Company’s investments are established by the Directors after discussion
with the Investment Manager using valuation techniques in accordance with the
International Private Equity and Venture Capital (IPEV) guidelines. Valuations are
based on the net asset value of those funds ascertained from periodic valuations
provided by the Sponsors of the investments and recorded up to the measurement
date. Such valuations are necessarily dependent upon the reasonableness of the
valuations by the Sponsor of the underlying assets. In the absence of contrary
information the values are assumed to be reliable. These valuations are reviewed
periodically for reasonableness and recorded up to the measurement date.
TheSponsor is usually the best placed party to determine the appropriate valuation.
The annual and quarterly reports received from the Sponsors are reviewed by the
Investment Manager to ensure consistency and appropriateness of approach to
reported valuations.
The basis of valuation for infrastructure assets provided by the Sponsors depends
on the nature of the underlying assets and will typically involve a fair value approach
in line with recognised accounting standards and industry best practice guidelines
such as IPEV. Infrastructure assets often display particular characteristics which will
affect the valuation approach tending to result in a higher prevalence of discounted
cash flows in the valuation, where the fair value is estimated by deriving the present
value of the expected cash flows generated by the investment through the use of
reasonable assumptions such as appropriate discount rate(s) to reflect the inherent
risk of the asset(s) forming the investment.
The discounted cash flow basis requires assumptions to be made regarding future
cash flows, terminal value and the discount rate to be applied to these cash flows.
There is also consideration given to the impact of wider megatrends such as the
transition to a lower-carbon economy and climate change.
Notes to
the financial
statements
continued
Strategic report Governance Financial statements Other information
117
Pantheon Infrastructure Plc
Annual report 2022
G. Expenses
All expenses are accounted for on an accruals basis. Expenses, including
investment management fees, are charged through the revenue account,
exceptexpenses which are incidental to the acquisition or disposal of an
investment. Theseare treated as capital costs, separatelyidentified, and
chargedtothe capital account of the Income Statement.
H. Finance income
Finance income comprises interest received on funds invested into deposit
accounts. Financeincome is accounted for on an accrualsbasis.
I. Finance costs
Finance costs consist of interest and other costs that the Company incurs in
connection with bank and other borrowings. Finance costs also include the
amortisation charge of arrangement or other costs associated with the set-up
of borrowings; these are amortised over the period of the loan. Allother finance
costsare expensed in the period in which theyoccur.
J. Taxation
Corporation tax is recognised in profit or loss except to the extent that it relates
toitems recognised directly in equity, in which case it is recognised inequity.
Deferred tax is provided on temporary differences between the carrying amounts
of assets and liabilities for financial reporting purposes and the amounts used for
taxation purposes. Theamount of deferred tax that is provided is based on the
expected manner of realisation or settlement of the carrying amount of assets and
liabilities, using tax rates enacted or substantially enacted at the period enddate.
Deferred tax is not provided on capital gains and losses arising on the revaluation
ordisposal of investments because the Company meets (and intends to continue
for the foreseeable future to meet) the conditions for approval as an investment
trust company, pursuant to sections 1158 and 1159 of theCTA.
Deferred tax assets are only recognised if it is considered more likely than not that
there will be suitable profits from which the future reversal of timing differences can
bededucted.
1. Accounting policies continued
E. Financial instruments
The Company makes investments and has commitments in currencies other
than GBP, its reporting currency, and accordingly, a significant proportion of its
investments and cash balances are in currencies other than GBP. TheCompany
uses forward foreign currency exchange contracts to hedge foreign exchange risks
associated with its underlying investment activities. Thecontracts entered into
bythe Company are denominated in the currency of the geographic area in which
the Company has significant exposure against its reportingcurrency.
Forward foreign currency exchange contracts are initially recognised and
subsequently measured at fair value, the amount for which an asset, liability
or equity instrument could be exchanged or settled between knowledgeable,
willingparties in an arm’s length transaction. Premiumspayable under such
arrangements are initially capitalised on the Balance Sheet.
The Company uses valuation techniques that are appropriate in the circumstances
and for which sufficient data is available to measure fair value, maximising the
use of relevant observable inputs and minimising the use of unobservable inputs
significant to the fair value measurement as a whole. TheCompany has elected
not to apply hedge accounting and therefore changes in the fair value of forward
foreign currency exchange contracts are recognised within the capital column of
theIncome Statement in the period in which theyoccur.
F. Income
Distributions receivable are recognised on the ex-dividend date. Whereno
ex-dividend date is quoted, distributions are recognised when the Company’s right
to receive payment is established. UKdistributions are shown net of tax credits
and foreign dividends are gross of the appropriate rate of withholding tax, with any
withholding tax suffered being accounted for separately.
Other income is accounted for on an accruals basis.
Gains or losses resulting from the movement in fair value of the Company’s
investments held at fair value through profit or loss are recognised in the Income
Statement at each valuationpoint.
Notes to
the financial
statements
continued
Strategic report Governance Financial statements Other information
118
Pantheon Infrastructure Plc
Annual report 2022
Q. Capital redemption reserve
The capital redemption reserve represents cancelled share premium less dividends
paid from this reserve. Thisis a distributable reserve. Thisreserve also includes the
cost of acquiring theCompany’s Ordinary Shares if the Company is in a position to
buy backshares.
R. Capital reserve
The following are accounted for in this reserve:
•
gains and losses on the realisation of investments;
•
unrealised gains and losses on investments;
•
gains and losses on foreign exchange forward contracts;
•
realised foreign exchange differences of a capital nature; and
•
expenses, together with related taxation effect, charged to this reserve
inaccordance with theabovepolicies.
S. Revenue reserve
The revenue reserve represents the surplus of accumulated profits from the revenue
column oftheIncome Statement and isdistributable.
T. Foreign exchange
The functional and presentational currency of the Company is GBP because
it is the primary currency in the economic environment in which the Company
operates and, as a UK listed company, GBP is also its capital raising currency.
Transactionsdenominated in foreign currencies are recorded in the local currency
at actual foreign exchange rates as at the date of transaction. Monetary assets and
liabilities denominated in foreign currencies at the period end are reported at the
rates of foreign exchange prevailing at the period end. Anygain or loss arising from
a change in exchange rates subsequent to the date of the transaction is included
as a foreign exchange gain or loss in the revenue or capital column of the Income
Statement depending on whether the gain or loss is of a capital or revenue nature.
Fornon-monetary assets these are recognised as fair valueadjustments.
1. Accounting policies continued
K. Cash and cash equivalents
Cash and cash equivalents include cash in hand, deposits held at call with banks
and other short-term highly liquid investments with original maturities of three
months or less at the date of placement, freeof any encumbrances, which are
readily convertible into known amounts of cash and subject to insignificant risk of
changes invalue.
L. Debtors
Trade and other debtors are initially recognised at transaction value.
Subsequentmeasurement is at the initially recognised value less any cash
payments from the debtor, and less provision or write off for doubtful debts.
Aprovision is made where there is objective evidence that the Company will not be
able to recover balances in full. Anyadjustment is recognised in profit or loss as an
impairment gainorloss.
M. Creditors
Trade and other creditors are initially recognised at fair value and subsequently held
at amortisedcost.
N. Interest-bearing loans and liabilities
All bank borrowings are initially recognised at transaction value net of attributable
transaction costs. Afterinitial recognition, allbank borrowings are measured at
amortised cost using the effective interestmethod.
O. Dividends payable to shareholders
Equity dividends are recognised when they become legally payable. Interimequity
dividends are recognised when paid. Finalequity dividends are recognised when
approved by shareholders at an Annual GeneralMeeting.
P. Share premium
The share premium account represents the accumulated premium paid for shares
issued above their nominal value less issue expenses. Thisis a reserve forming part
of the non-distributable reserves. Thefollowing items are taken to thisreserve:
•
costs associated with the issue of equity; and
•
premium on the issue of shares.
Notes to
the financial
statements
continued
Strategic report Governance Financial statements Other information
119
Pantheon Infrastructure Plc
Annual report 2022
1. Accounting policies continued
U. Significant judgements, estimates and assumptions
The preparation of financial statements requires the Company and Investment Manager to make judgements, estimates and assumptions that affect the reported amounts
of investments at fair value at the financial reporting date and the reported fair value movements during the reporting period. However, uncertainty about these assumptions
and estimates could result in outcomes that require a material adjustment to the carrying amount of the investments at fair value in future years. Details of how the fair values
of infrastructure assets are estimated and any associated judgements applied are provided in section (D) of this note and also within the ‘market price risk’ section in Note23.
2. Investment management fees
Period ended 31 December 2022
Revenue
£’000
Capital
£’000
Total
£’000
Investment management fees 3,194 — 3,194
3,194 — 3,194
The Investment Manager is entitled to a quarterly management fee as at an annual rate of:
•
1.0% of the part of the Company’s Net Asset Value up to and including £750million and
•
0.9% of the part of such Net Asset Value in excess of £750million.
As at 31December2022, £1,199,679 was owed for investment management fees.
The Investment Manager does not charge a performance fee.
Notes to
the financial
statements
continued
Strategic report Governance Financial statements Other information
120
Pantheon Infrastructure Plc
Annual report 2022
3. Other expenses
Period ended 31 December 2022
Revenue
£’000
Capital
£’000
Total
£’000
Secretarial and accountancy services 201 — 201
Depositary services 74 — 74
Fees payable to the Company’s Auditor for audit-related assurance services
– Initial accounts 25 — 25
– Annual financial statements 135 — 135
Fees payable to the Company’s Auditor for non-audit-related assurance service
1
35 — 35
Directors’ remuneration (see Note 4) 220 — 220
Employer’s National Insurance (see Note 4) 24 — 24
Legal and professional fees 186 534 720
Other fees 460 21 481
1,360 555 1,915
1. The non-audit fees payable to the Auditor relate to the review performed by EY of the Company’s Half-Yearly Report for the period ended 30 June 2022. Inaddition, the Company paid EY £70,000 for acting as the
ReportingAccountant in respect of the Company’s IPO and the C share issue proposed for September 2022, which did not proceed due to market conditions. Thisfee has been included within the share issue costs
chargedtoshare premium.
4. Directors’ remuneration
Period ended
31 December
2022
£’000
Directors’ fees 220
Employer’s National Insurance 24
Total remuneration 244
As at 31 December 2022, there were no outstanding liabilities in relation to Directors’ fees and Employer’s National Insurance. A breakdown is provided in the Directors’
remuneration report on pages 96 to 99.
Notes to
the financial
statements
continued
Strategic report Governance Financial statements Other information
121
Pantheon Infrastructure Plc
Annual report 2022
7. Taxation
Tax charge
The tax credit/(charge) for the period differs from the standard rate of corporation
tax in the UK (19%). Thedifferences are explainedbelow:
Period ended 31 December 2022
Revenue
£’000
Capital
£’000
Total
£’000
(Loss)/profit before tax (2,494) 10,522 8,028
Tax at UK corporation tax rate
of 19% (474) 1,999 1,525
Non-taxable investment,
derivative and foreign
exchange gains — (1,999) 1,999
Carry forward management
expenses 474 — 474
— — —
Factors that may affect future tax charges
The Company is an investment trust and is therefore not subject to tax on capital
gains. Deferredtax is not provided on capital gains and losses arising on the
revaluation or disposal of investments because the Company meets (and intends
to meet for the foreseeable future) the conditions for approval as an investment
trust company. Nodeferred tax asset has been recognised in respect of excess
management expenses and expenses in excess of taxable income as they will only
be recoverable to the extent that there is sufficient future taxable revenue.
As at 31December2022, the Company had no unprovided deferred tax liabilities.
As at 31 December 2022, excess management expenses are £3.05million as at
31December 2022.
The UK Government has announced that it intends to increase the main rate of
corporation tax from 19% to 25% from April 2023. As the Company is an investment
trust it is not anticipated that the change in the corporation tax rate will impact
theCompany.
5. Finance income
Period ended
31 December
2022
£’000
Finance income 73
Bank Interest 2,023
Total 2,096
6. Interest payable and similar expenses
Period ended
31 December
2022
£’000
Commitment fees payable on borrowings 22
Amortisation of loan arrangement fee 13
Bank interest expense 1
36
Notes to
the financial
statements
continued
Strategic report Governance Financial statements Other information
122
Pantheon Infrastructure Plc
Annual report 2022
8. Earnings per share
Earnings per share (EPS) are calculated by dividing profit for the period attributable
to ordinary equity holders of the Company by the weighted average number of
Ordinary Shares in issue since IPO. Asthere are no dilutive instruments outstanding,
basic and diluted earnings per share are shownbelow:
Revenue Capital Total
Earnings from
9September2021 to
31December2022 (£’000) (2,494) 10,522 8,028
Weighted average Ordinary
Shares (number) — — 428,272,575
Basic earnings per share (0.58)p 2.45p 1.87p
Diluted earnings pershare (0.58)p 2.45p 1.87p
There were no meaningful shareholders or corporate activity between incorporation
of the Company on 9September2021 and 16November2021, the IPO date, and
therefore this period has not been included for the purpose ofcalculating the
weighted average number of shares.
9. Dividends paid
Period ended
31 December
2022
£’000
Interim dividends paid during the period 4,800
4,800
On 22 September 2022 the Company announced its first interim dividend of 1p
per Ordinary Share for the period ended 30 June 2022. The dividend was paid on
28October 2022 and was marked as ex-dividend on 6 October 2022.
10. Investments
31 December
2022
£’000
Cost brought forward —
Opening unrealised appreciation on investments held
– Unlisted investments —
Valuation of investments brought forward —
Movement in period:
Acquisitions at cost 281,790
Appreciation on investments held 19,592
Valuation of investments at period end 301,382
Cost at period end 281,790
Closing unrealised appreciation on investments held
– Unlisted investments 19,592
Valuation of investments at period end 301,382
Notes to
the financial
statements
continued
Strategic report Governance Financial statements Other information
123
Pantheon Infrastructure Plc
Annual report 2022
14. Other creditors
31 December
2022
£’000
Investment management fees payable 1,200
Other creditors and accruals 1,537
2,737
15. Interest-bearing loans and borrowings
31 December
2022
£’000
Interest-bearing loans and borrowings —
Loan arrangement fee incurred in the period 1,100
Amortised loan arrangement fee for the period (13)
Loan arrangement fee carried forward 1,087
Total credit facility payable —
The Company entered into a £62.5million revolving credit facility (RCF) with
LloydsBank Corporate Markets in December2022. The RCF remained undrawn
asat31December2022.
The RCF is denominated in GBP, with the option to be utilised in other major
currencies. The rate of interest will be the relevant currency benchmark plus
an initial margin of 2.85%perannum. A commitmentfee of 1.00%perannum
is payable on undrawn amounts, andthe tenor of the RCF is threeyears. The
facility is secured against the assets held in the Company’s subsidiary, Pantheon
Infrastructure Holdings LP.
Borrowing costs associated with the RCF are shown as interest payable and similar
expenses in Note 6 to these financial statements.
11. Debtors
31 December
2022
£’000
Other debtors – non-current
1
740
Other debtors – current 486
Prepayments and accrued income 473
1,699
1. Relates to the RCF arrangement fees which are to be released to the Income Statement until
the loan maturity date of 18 December 2025.
12. Cash and cash equivalents
31 December
2022
£’000
Cash 26,670
Cash equivalents 156,267
182,937
Cash equivalents of £156,267,000 were held in a money market fund at
31December 2022.
13. Derivative financial instruments
31 December
2022
£’000
Financial Liabilities: derivatives at fair value 8,520
8,520
The Company uses forward foreign currency exchange contracts to minimise the
effect of fluctuations in the investment portfolio from movements in exchangerates.
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 December 2022, the notional amount of the forward foreign currency
exchange contracts held by the Company was £278.9million.
Notes to
the financial
statements
continued
Strategic report Governance Financial statements Other information
124
Pantheon Infrastructure Plc
Annual report 2022
16. Called-up share capital
31 December 2022
Allotted, called up and fully paid: Shares £’000
Ordinary Shares of £0.01
Opening balance — —
Ordinary Shares issued in the period 400,000,000 4,000
Conversion of subscription shares to Ordinary
Shares in the period 80,000,000 800
Closing balance 480,000,000 4,800
Total called-up share capital 480,000,000 4,800
On 11November2021, the Company raised gross proceeds of £400.0million
through the issue of 400million Ordinary Shares at IPO for an issue price of
100pper Ordinary Share. Eachholder of Ordinary Shares is entitled, on a show
ofhands, to one vote and, on a poll, to one vote for each Ordinary Share held.
Subscription Shares were issued to subscribers as part of the Company’s IPO on
the basis of one Subscription Share for every five Ordinary Shares subscribed for.
Each Subscription Share conferred the right (but not the obligation) to subscribe
for one Ordinary Share on exercise of the rights attaching to the Subscription
Shares. The subscription price per Ordinary Share payable on the exercise of the
subscription rights was 101p, exercisable on either 30June2022, 29July2022
or31August2022.
The Company announced on 5July2022 that 36,509,658 Subscription Shares had
been converted into 36,509,658 Ordinary Shares which were admitted to trading on
the Main Market of London Stock Exchange plc on 13July2022.
The Company announced on 3August2022 that 13,188,554 Subscription Shares
had been converted into 13,188,554 Ordinary Shares which were admitted to trading
on the Main Market of London Stock Exchange plc on 11August2022.
The Company announced on 2September2022 that 24,117,160 Subscription
Shares had been converted into 24,117,160 Ordinary Shares. Inaddition, theFinal
Subscription Trustee exercised the Subscription Rights attaching to the 6,184,628
outstanding Subscription Shares on the sameterms. Therefore, in aggregate,
30,301,788 new Ordinary Shares were admitted to trading on the Main Market of
London Stock Exchange plc on 9September2022. Thereremain no Subscription
Shares in issue and the Subscription Share line was cancelled on 9September2022.
Notes to
the financial
statements
continued
Strategic report Governance Financial statements Other information
125
Pantheon Infrastructure Plc
Annual report 2022
17. Reserves
Share
premium
£’000
Capital
redemption
reserve
£’000
Capital
reserve
£’000
Revenue
reserve
£’000
Total
£’000
Opening balance — — — — —
Ordinary Shares issued 395,200 — — — 395,200
Subscription shares issued (subsequently converted to Ordinary Shares) 80,800 — — — 80,800
Share issue costs (9,267) — — — (9,267)
Cancellation of share premium (387,284) 387,284 — — —
Losses on derivative financial instruments at fair value through profit or loss — — (8,520) — (8,520)
Gain on investments at fair value through profit or loss — — 19,592 — 19,592
Foreign exchange gains on cash and cash equivalents — — 5 — 5
Legal and professional expenses charged to capital — — (534) — (534)
Other fees — — (21) — (21)
Profit/(loss) for the period — — — (2,494) (2,494)
Interim dividend paid — (4,800) — — (4,800)
Closing balance 79,449 382,484 10,522 (2,494) 469,961
On 17 June 2022, the Company announced that the share premium account had been cancelled in accordance with the provisions of the Companies Act 2006 in order to
create a distributable reserve, thecapital redemption reserve, that is capable of being applied in any manner in which the Company’s profits available for distribution are
lawfully able to be applied.
The Company is able to distribute realised gains from the capital reserve. As at 31 December 2022 there were £nil reserves available for distribution from this reserve.
Notes to
the financial
statements
continued
Strategic report Governance Financial statements Other information
126
Pantheon Infrastructure Plc
Annual report 2022
20. Subsidiaries
The Company has formed two wholly owned subsidiaries. The Company has
ownership and control over these two entities and as such they have been deemed
tobe subsidiaries by the Board.
i. PIH LP was incorporated on 5November2021 with a registered address in
the State of Delaware, National Registered Agents, Inc., 209 Orange Street,
Wilmington, Delaware, 19801, USA and is wholly owned by theCompany.
The Company holds an investment in PIH LP. Inaccordance with FRS 102, the
Company has not consolidated the subsidiary on the grounds it does not carry
out business through the subsidiary and that it is held exclusively with a view to
subsequent resale. It is therefore considered part of an investmentportfolio.
Several of the investments in the Portfolio are held through PIH LP and are
valued based on the fair value of the investments held in thoseentities.
The Company holds a 99.9% investment in PIH LP, with the remaining holding
held by Pantheon Infrastructure Holdings GP LLC (PIH GP).
ii. PIHGP was incorporated on 5 November 2021 with a registered address in
the State of Delaware, National Registered Agents, Inc., 209 Orange Street,
Wilmington, Delaware, 19801, USA and is wholly owned by theCompany.
The Company has not consolidated PIH GP as it is immaterial. Thistreatment
is supported by the Companies Act 2006, section 405 (2), whereby a subsidiary
undertaking may be excluded from consolidation if its inclusion is not material for
the purpose of giving a true and fairview.
21. Contingencies, guarantees and financial
commitments
At 31 December 2022, there were capital commitments outstanding of £57.9million
in respect of investments in infrastructure assets. TheCompany expects 100% of
the capital commitments outstanding to be called within the next twelve months.
Thesecommitments will be funded using the Company’scash resources.
18. Net asset value per share
NAV per share is calculated by dividing net assets in the Balance Sheet attributable
to ordinary equity holders of the Company by the number of Ordinary Shares
outstanding at the end of the period. Asthere are no dilutive instruments
outstanding, both basic and diluted NAV per share are shownbelow:
31 December
2022
Net assets attributable (£’000) 474,761
Ordinary Shares 480,000,000
NAV per Ordinary Share 98.9p
19. Reconciliation of loss before financing costs
and taxation to net cash flows from operating
activities
9 September
2021 to
31 December
2022
£’000
Profit before financing costs and taxation 5,968
Gains on investments (19,592)
Foreign exchange gains on cash and non-portfolio assets (5)
Increase in debtors (182)
Increase in creditors 1,606
Losses on derivative financial instruments at fair value
throughprofit or loss 8,520
Net cash flows from operating activities (3,685)
Notes to
the financial
statements
continued
Strategic report Governance Financial statements Other information
127
Pantheon Infrastructure Plc
Annual report 2022
22. Fair value
Fair value hierarchy
Financial assets are carried in the Balance Sheet at their fair value or approximation of fair value. Thefair value is the amount at which the asset could be sold inan orderly
transaction between market participants, at the measurement date, other than a forced liquidationsale.
The Company measures fair values using the following fair value hierarchy that reflects the significance of the inputs used in making the measurements.
Categorisationwithin the hierarchy has been determined on the basis of the lowest level input that is significant to the fair value measurement of the relevant assets
asfollows:
Level 1: Quoted (unadjusted) market prices in active markets for identical assets or liabilities.
Level 2: Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable.
Level 3: Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.
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
thehierarchy by reassessing categorisation at the end of each reporting period.
Financial assets and liabilities at fair value through profit or loss at 31 December 2022
Level 1
£’000
Level 2
£’000
Level 3
£’000
Total
£’000
Investments — — 301,382 301,382
Derivatives – financial instruments — (8,520) — (8,520)
— (8,520) 301,382 292,862
The fair value of these investments and Derivatives – financial instruments is recorded in the Balance Sheet as at the periodend.
There have been no transfers between Level 1 and Level 2 during the period, nor have there been any transfers between Level 2 and Level 3 during theperiod.
The carrying amount of all assets and liabilities, detailed within the Balance Sheet, isconsidered to be the same as their fairvalue.
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 and the interest rates assumption used to project the future cash flows and the forecast
cash flows themselves. Increasing the discount rate used in the valuation of each asset by 0.5% would reduce the value of the Portfolio by £10.5million. Decreasing the
discount rate used in the valuation of each asset by 0.5% would increase the value of the Portfolio by £11.2million. The WADR of the Portfolio at 31December2022 is14.2%.
The majority of assets held within Level 3 have revenues that are linked, partially linked or in some way correlated to inflation. The impact of increasing the inflation rate
assumption by 0.5% would increase the value of the Portfolio by £3.7million. Decreasing the inflation rate assumption used in the valuation of each asset by 0.5% would
decrease the value of the Portfolio by £2.6million.
The valuations are sensitive to changes in interest rates. 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 each asset by 0.5% would reduce the value of the Portfolio by £5.9million. Decreasing
the interest rate assumption borrowings used in the valuation of each asset by 0.5% would increase the value of the Portfolio by £6.0million. This calculation does not take
account of any offsetting factors which may be expected to prevail if interest rates changed, including the impact of inflation discussed above.
Notes to
the financial
statements
continued
Strategic report Governance Financial statements Other information
128
Pantheon Infrastructure Plc
Annual report 2022
As at 31December2022, liquidity risk was considered low given the cash and cash
equivalents available to the Company.
31 December
2022
£’000
Cash and cash equivalents 182,937
Other creditors (2,737)
As at 31 December 2022, the capital commitments outstanding totalled
£57.9million, therefore liquid resources available after commitments were
£184.8million.
Interest rate risk
Interest rate movements may affect the level of income receivable on cash deposits
and interest payable on variable rate borrowings. Cashdeposits generally comprise
overnight call or short-term money market deposits and earn interest at floating
rates based on prevailing bank base rates. Increases in interest rates may also
ultimately impact the discount rates used to valueinvestments.
Interest rate movements may affect the interest rate paid on financial liabilities.
Intereston the RCF is payable at variable rates determined subject to drawdown.
Asat 31December 2022, the RCF had not been drawn down.
Changes in interest rates may have an impact on consolidated earnings over the
longer term. The table below provides indicative sensitivity data.
31 December 2022 £’000
Effect on profit before tax
Increase in interest
rates by 1%
Decrease in interest
rates by 1%
Increase/(decrease) 2,422 (1,205)
23. Analysis of financial assets and liabilities
The primary investment objective of the Company is to seek to maximise
long-term capital growth for its shareholders by investing in equity or equity-related
investments in a diversified portfolio of infrastructure assets. Investmentsare not
restricted to a single market and are made when opportunities arise and on an
internationalbasis.
The Company’s financial instruments comprise infrastructure investments
andderivatives.
The principal risks the Company faces in its portfolio management activitiesare:
•
liquidity risk;
•
interest rate risk;
•
credit risk;
•
market price risk; and
•
foreign exchange risk.
The Investment Manager monitors the financial risks affecting the Company on a
regular basis and the Directors regularly receive financial information, which is used
to identify and monitor risk.
In accordance with FRS 102, an analysis of financial assets and liabilities, which
identifies the risk tothe Company of holding such items, is given below.
Liquidity risk
Due to the nature of the Company’s investment policy, the largest proportion of the
Portfolio is invested in infrastructure assets through the Company’s subsidiary,
which are generally less readily marketable than listed equities. TheDirectors
believe that the Company, as a closed-end fund with no fixed wind-up date, is ideally
suited to making long-term investments in instruments with limited marketability.
Theinvestments are monitored by the Board on a regular basis.
As a result, the Company may not be able to quickly liquidate its investments at an
amount close to their fair value in order to meet its liquidity requirements, including
the need to meet outstanding undrawn commitments. TheCompany manages
its liquid investments to ensure sufficient cash is available to meet contractual
commitments and also seeks to have cash available to meet other short-term
financialneeds.
Notes to
the financial
statements
continued
Strategic report Governance Financial statements Other information
129
Pantheon Infrastructure Plc
Annual report 2022
Thecontracts are measured at fair value and are recorded in the balance sheet as
Derivatives – financial instruments. TheCompany has not elected to apply hedge
accounting therefore the fair value changes are taken to the capital reserve.
The table below sets out the Company’s foreign exchange exposure:
Foreign exchange risk
GBP
£’000
USD
1
£’000
EUR
1
£’000
Total
£’000
At 31 December 2022
Cash and cash
equivalents 181,987 828 122 182,937
Investments held at
fair value through
profitorloss — 217,282 84,100 301,382
Other debtors 1,699 — — 1,699
Other payables (2,737) — — (2,737)
Derivatives – financial
liabilities (8,520) — — (8,520)
1. These values are expressed in GBP.
If there had been an increase/(decrease) in the GBP/USD exchange rate of 10%
it would have the effect of (decreasing)/increasing equity shareholders’ funds
by £(6.8)million/£8.3million which includes the impact of the foreign currency
exchange contracts to partially offset the movement in value. The calculations are
based on the financial assets and liabilities and the foreign exchange rate as at
31December2022 of 1.2029GBP/USD.
If there had been an increase/(decrease) in the GBP/EUR exchange rate of 10%
it would have the effect of (decreasing)/increasing equity shareholders’ funds
by £3.1million/£(3.7)million which includes the impact of the foreign currency
exchange contracts to partially offset the movement in value. The calculations are
based on the financial assets and liabilities and the foreign exchange rate as at
31December2022 of 1.1271GBP/EUR.
23. Analysis of financial assets and liabilities
continued
Credit risk
Credit risk is the risk that a counterparty will cause a financial loss to the Company
by failing to discharge its obligations to the Company when they fall due.
Cashdeposits are placed with approved counterparties, all of whom have a credit
rating of A- or above.
At the period end, the Company’s financial assets exposed to credit risk amounted
to the following:
31 December
2022
£’000
Cash and cash equivalents 182,937
Market price risk
The fair value of future cash flows of an investment held by the Company may
fluctuate. This market risk may comprise: foreign exchange risk, and/or fair value
risk. TheBoard of Directors reviews and agrees policies for managing these risks.
TheInvestment Manager assesses the exposure to market risk when making
each investment decision, and monitors the overall level of market risk across the
Company’s investments on an ongoing basis.
The nature of the Company’s investments means that they are valued by the
Directors after due consideration of the most recent available information.
If the Portfolio fell by 20% from its 31 December 2022 valuation, with all other
variables held constant, this would have led to a reduction of £64.5million in the
return before taxation. An increase of 20% would increase the return before taxation
by £53.9million.
Foreign exchange risk
Since it is the Company’s policy to invest in a diverse portfolio of investments based
in a number of countries, the Company is exposed to the risk of movement in foreign
exchange rates. The Company enters into forward foreign currency exchange
contracts to hedge the foreign exchange risks associated with its investment
portfolio. Thecontracts entered into by the Company are denominated in the
currency of the geographic areas in which the Company has significant exposure
against its reporting currency.
Notes to
the financial
statements
continued
Strategic report Governance Financial statements Other information
130
Pantheon Infrastructure Plc
Annual report 2022
23. Analysis of financial assets and liabilities
continued
Managing capital
The Company’s equity comprises Ordinary Shares as described in Note 17. Capitalis
managed so as to maximise the return to shareholders while maintaining a capital
base that allows the Company to operate effectively in the marketplace and sustain
future development of the business.
The Company considers its capital to comprise called-up share capital and
reserves. Asat 31December2022, the Company had entered into an RCF to
increase the Company’s liquidity. Details of available borrowings at the period end
can be found earlier in this note.
The Company’s assets and borrowing levels and the Company’s capital
requirements are reviewed regularly by the Board ofDirectors.
24. Transactions with the Investment Manager
and related parties
The amounts payable to the Investment Manager, together with the details of the
Investment Management Agreement, and outstanding amounts are disclosed in
Note 2. Theexistence of an independent Board of Directors demonstrates that the
Company is free to pursue its own financial and operating policies and therefore,
under the AIC SORP, the Investment Manager is not considered to be a relatedparty.
The Company’s related parties are its Directors and the fees paid to the Company’s
Board are disclosed in Note 4 alongside the outstanding amounts payable as at
31December2022. Thereare no other identifiable related parties at the periodend.
25. Subsequent events
Commitments
In the period to 31 December 2022, the Company committed to £346million across
ten investments. At 31 December the Company had undrawn commitments of
£57.9million outstanding.
On 31 January 2023 the Company completed an investment in GD Towers, aleading
digital infrastructure company, committing £43.4million.
Notes to
the financial
statements
continued
Strategic report Governance Financial statements Other information
131
Pantheon Infrastructure Plc
Annual report 2022
The Company is an Alternative Investment Fund (AIF) for the purposes of the
Alternative Investment Fund Managers Directive (Directive 2011/61/EU) (AIFMD),
and the Investment Manager was appointed as its Alternative Investment Fund
Manager (AIFM) for the purposes of the AIFMD. TheInvestment Manager is a ‘full
scope’ AIFM for the purposes of the AIFMD. TheAIFMD requires certain disclosures
to be made in the annual report of the Company. Manyof these disclosures are
already required by the Listing Rules and/or UKAccounting Standards, and these
continue to be presented in other sections of the annual report, principally the
strategic report (pages 1 to 77), the Investment Manager’s report (pages 12 to
22) and the financial statements (pages 105 to 131). Thissection completes the
disclosures required by theAIFMD.
Assets subject to special arrangements
The Company holds no assets subject to special arrangements arising from their
illiquid nature.
Remuneration disclosure
The total number of staff of the Investment Manager as at 31December2022,
including staff remunerated by affiliates of the Investment Manager, was
approximately 465, ofwhom 22 were senior management or other members of staff
whose actions have a material impact on the risk profile of the Company (‘identified
staff’). Thetotal remuneration paid by the Investment Manager and its affiliates to
staff of the Investment Manager in respect of the period ended 31December2022
attributable to work relating to the Company was as follows:
12 months to 31 December 2022
£’000 Fixed Variable Total
Senior management 70 96 166
Staff 190 143 333
Total staff 260 238 499
Identified staff 44 61 105
No carried interest was paid in respect of the Company during the period.
The above disclosures reflect only that element of the individuals’ remuneration
which is attributable to the activities of the Investment Manager relating to the
Company. Itis not possible to attribute remuneration paid to individual staff directly
to income received from any fund and hence the above figures represent a notional
approximation only calculated by reference to the assets under management
of the Company as a proportion of the total assets under management of the
PantheonGroup.
In determining the remuneration paid to its staff, the Investment Manager takes
into account a number of factors including the performance of the Company,
the Investment Manager and each individual member of staff. Thesefactors
are considered over a multi-year framework and include whether staff have met
the Investment Manager’s compliance standards. Inaddition, the Investment
Manager seeks to ensure that its remuneration policies and practices align financial
incentives for staff with the risks undertaken and results achieved by investors, for
example by ensuring that a proportion of the variable income received by identified
staff is deferred for a period of at least three years.
Full details of the Pantheon Group’s remuneration policies and practices for staff
(which includes the Investment Manager’s staff) can be found at http://pantheonms.
wpenginepowered.com/wp-content/uploads/2021/10/Pillar-3-disclosure-
Pantheon-2020.pdf.
The AIFMD requires the Investment Manager of the Company to set leverage limits
for the Company. Forthepurposes of the AIFMD, leverage is any method by which
the Company’s exposure is increased, whether through the borrowing of cash or
by the use of derivatives or by any other means. TheAIFMD requires leverage to be
expressed as a ratio between the Company’s exposure and its NAV and prescribes
two methodologies, the gross method and the commitment method (as set out in
Commission Delegated Regulation No.231/2013), for calculating suchexposure.
The following leverage limits have been set for the Company:
i. the maximum leverage of the Company calculated in accordance with the gross
method (underArticle 7 of Commission Delegated Regulation No.231/2013 is
450%; and
ii. the maximum leverage of the Company calculated in accordance with the
commitment method (under Article 8 of the AIFMD Regulation) is 450%.
AIFMD
disclosures
Strategic report Governance Financial statements Other information
132
Pantheon Infrastructure Plc
Annual report 2022
Remuneration disclosure continued
Using the methodologies prescribed under the AIFMD, the Company’s leverage as at
31December2022 is shown below:
Gross method
Commitment
method
Leverage ratio 121% 160%
There have been no changes to the maximum level of leverage which the
Investment Manager may employ on behalf of the Company during the period to
31December2022. Thereare no collateral or asset reuse arrangements in place as
at the periodend.
Risk profile and risk management
The principal risks to which the Company is exposed and the approach to
managing those risks are set out in the strategic report (pages 72 to 76) and
also in Note23 to the financial statements (pages 129 to 131). The investment
restrictions which seek to mitigate some of those principal risks in relation to the
Company’s investment activities are set out in the investment policy (page 25)
and under ‘Boardresponsibilities and relationship with the Investment Manager’
in the Statement on Corporate Governance (page85 to 91). Additionally, the
individual counterparty exposure limit for deposits with each of the Company’s bank
counterparties has been set at c.£135million or the equivalent in foreign currencies.
The Investment Manager’s risk management system incorporates regular review of
the principal risks facing the Company and the investment restrictions applicable
to the Company. TheInvestment Manager has established appropriate internal
control processes to mitigate the risks, including those described in the ‘Mitigation’
column in the ‘Risk management and principal risks’ section of the strategic report
(pages 72 to 76). Theseinvestment restrictions were not exceeded in the period
to31December2022.
Article 23(1) disclosures to investors
The AIFMD requires certain information to be made available to investors in the
Company before they invest and requires that material changes to this information
be disclosed in the annual report of the Company. The information required to be
disclosed is contained in the document ‘Information for Investors’, which is available
on the Company’s website at www.pantheoninfrastructure.com. There have been no
material changes to this information requiring disclosure.
AIFMD
disclosures
continued
Strategic report Governance Financial statements Other information
133
Pantheon Infrastructure Plc
Annual report 2022
AIC
The Association of Investment Companies.
AIC Code
The AIC Code of Corporate Governance.
Approved investment trust company
An approved investment trust company is a corporate UK tax resident which fulfils
particular UK tax requirements and rules which include that for the company to
undertake portfolio investment activity it must aim to spread investment risk.
Inaddition, the company’s shares must be listed on an approved stock exchange.
The ‘approved’ status for an investment trust must be authorised by the UK tax
authorities and its key benefit is that a portion of the profits of the company,
principallyits capital profits, are not taxable in theUK.
AUM
Assets Under Management are the total market value of investments held under
management by an individual or institution. When referring to Pantheon’s AUM,
thisfigure includes assets managed on a fully discretionary basis.
Carried interest
Portion of realised investment gains payable to a Sponsor as a profit share.
Cloud
Cloud computing is the on-demand availability of computer system resources,
especially data storage (cloud storage) and computing power, without direct active
management by the user.
Co-investment
Direct shareholding in a company by invitation alongside a Sponsor.
Commitment
The amount of capital that the Company agrees to contribute to an investment
whenandas called by the Sponsor.
Company
Pantheon Infrastructure Plc or ‘PINT’.
Exit
Realisation of an investment, usually through trade sale, sale by public
offering(including IPO), orsale to a financial buyer.
Funds under management
Funds under management includes both assets under management and
assets under advisory (assets managed on a non-discretionary basis and
oradvisorybasis).
GIRAC
Global Infrastructure and Real Assets Committee.
Initial public offering (IPO)
The first offering by a company of its own shares to the public on a regulated
stockexchange.
Internet of things
This term describes the network of physical objects (things) that are embedded
with technologies such as sensors or software for the purpose of connecting
andexchanging data with other devices and systems via the internet.
Investment thesis
Pantheon’s final stage of approval for infrastructure co-investments.
Investment Manager
Pantheon Ventures (UK) LLP.
IRR
Internal Rate of Return is the annual rate of growth that an investment is expected
togenerate over its life.
Latency
The delay before a transfer of data begins following an instruction for its transfer.
Market capitalisation
Share price multiplied by the number of shares outstanding.
Multiple of invested capital (MOIC or cost multiple)
A common measure of private equity performance, MOIC is calculated by dividing
the fund’s cumulative distributions and residual value by the paid-incapital.
Net asset value (NAV)
Amount by which the value of assets of a company exceeds its liabilities.
Glossary
Strategic report Governance Financial statements Other information
134
Pantheon Infrastructure Plc
Annual report 2022
Portfolio or operating company
A company that PINT invests in. These portfolio or operating companies in turn
ownand operate infrastructureassets.
Portfolio investment return
Total movement in the valuation of the underlying assets comprising the Portfolio,
expressed as a percentage of opening portfolio value. Foreign exchange effects
andother expenses are excluded from thecalculation.
Primaries
Commitments made to private equity funds at the time such funds areformed.
Private equity
Privately negotiated investments typically made in non-public companies.
Secondaries
Purchase of existing private equity fund or company interests and commitments
from an investor seeking liquidity in such funds or companies.
Share price premium (discount)
Occurs when a company’s share price is higher (lower) than the NAV pershare.
Sponsor or general partner
The entity managing a private equity fund that has been established as a limited
partnership, also commonly referred to as the Sponsor.
Total return
This is expressed as a percentage. The denominator is the opening NAV, net of
the final dividend for the previous year, and adjusted (on a time weighted average
basis) to take into account any equity capital raised or capital returned in the year.
Thenumerator is total NAV growth and dividends paid.
Total shareholder return
Return based on interim dividends paid plus Share Price movement in the period,
divided by the opening share price.
WADR
Weighted average discount rate based on each investment’s relative proportion
ofPortfolio valuation.
Glossary
continued
Strategic report Governance Financial statements Other information
135
Pantheon Infrastructure Plc
Annual report 2022
Directors
and advisers
Directors
Vagn Sørensen
Anne Baldock
Andrea Finegan
Patrick O’Donnell Bourke
Investment Manager
Pantheon Ventures (UK) LLP
Authorised and regulated by the FCA
10 Finsbury Square
4th Floor
London
EC2A 1AF
Email: pint@pantheon.com
PINT website: www.pantheoninfrastructure.com
Pantheon website: www.pantheon.com
Secretary and registered office
Link Company Matters Limited
6th Floor, 65 Gresham Street
London
EC2V 7NQ
Telephone: +44 (0)333 300 1950
Auditor
Ernst & Young LLP
25 Churchill Place
London
E14 5EY
Broker
Investec Bank plc
30 Gresham Street
London
EC2V 7QP
Depositary
BNP Paribas Trust Corporation UK Limited
10 Harewood Avenue
London
NW16 6AA
Registrar
Link Group
10th Floor
Central Square
29 Wellington Street
Leeds
LS1 4DL
Solicitors
Hogan Lovells International LLP
Atlantic House
Holborn Viaduct
London
EC1A 2FG
Strategic report Governance Financial statements Other information
136
Pantheon Infrastructure Plc
Annual report 2022
Designed and produced by
lyonsbennett.com
This report is printed on Nautilus which is made from 100% FSC
®
recycled certifi ed
post-consumer waste pulp which is PCF (Process Chlorine Free). The FSC
®
label on this
report ensures responsible use of the world’s forest resources. Printed sustainably in
the UK by Pureprint, a CarbonNeutral
®
company with FSC
®
chain of custody who recycle
100% of all dry waste. Both the mill and Pureprint are ISO 14001 certifi ed (environmental
management system). If you have fi nished with this document and no longer wish to retain
it, please pass it on to other interested readers or dispose of it in your recycled waste.
Disclosure 1 – Investments
This annual report provides information about certain investments
made by PINT. Theyshould NOT be regarded as a recommendation.
Pantheon makes no representation or forecast about the
performance, profi tability or success of suchinvestments.
Youshould not assume that future investments will be
profi tableor will equal the performance of past recommendations.
Thestatementsmade refl ect the views and opinions of Pantheon
asof thedate of the investment analysis.
Pantheon Infrastructure Plc
10 Finsbury Square
4th Floor
London EC2A 1AF
United Kingdom
Telephone
+44 (0)20 3356 1800
Email
pint@pantheon.com
Website
www.pantheoninfrastructure.com
Registered in England
number: 13611678
A member of the Association
of Investment Companies
Pantheon Infrastructure Plc Annualreport 2022