BBGI Global Infrastructure Regulatory News (BBGI)

31 August 2022

BBGI Global Infrastructure S.A.

("BBGI" or the "Company")

Interim results for the six months ended 30 June 2022

The information contained within this Announcement is deemed by the Company to constitute inside information. Upon the publication of this Announcement via a Regulatory Information Service this inside information is now considered to be in the public domain.

BBGI Global Infrastructure S.A. (LSE ticker: BBGI), the global infrastructure investment company, is pleased to announce its interim results for the six months ended 30 June 2022.

SIX MONTHS IN NUMBERS

Financial highlights[i]

Portfolio highlights

Resilience in an uncertain world

§ Exceptionally strong performance, again generating value for all our stakeholders

§ Globally diversified portfolio of 55 high-quality, 100% availability-style public-private partnership ('PPP') infrastructure assets, which has delivered strong operational performance. Availability-style means that revenues are paid so long as the assets are available for use.

§ Consistently high level of asset availability rate of 99.9 per cent was maintained. Investment portfolio remains 99.5 per cent operational with all our investments located in highly-rated investment-grade countries with stable, well-developed operating environments. The portfolio has no exposure to demand-based or regulated investments.

§ Our portfolio remains well diversified across sectors in education, health, blue light, affordable housing, modern correctional facilities, clean energy and transport. Located in the UK, North America, Australia and Continental Europe, all Companies in our portfolio are located in stable, well developed and highly rated investment grade countries.

§ Our investment portfolio has a weighted average investment life of 20.8 years.

Generating secure, inflation-linked income

§ Equity cash flows are positively linked to inflation resulting in a £47 million increase in NAV, or 6.6pps on a NAV per share basis over the period and underpin the portfolio's genuine high-quality inflation-linkage.

§ Our high-quality inflation-linkage is achieved through annually updated contractual indexation in the Company's project agreements with our public sector clients at each Portfolio Company. The Company passes through the indexation mechanism to our subcontractors - on which we rely to support our assets' operations - and this provides an inflation cost hedge which allows the Company to effectively manage its cost base.

§ Strong cash dividend cover of 2.03x in the period ended 30 June 2022, which allows us to reaffirm our attractive and progressive two-year dividend targets to our shareholders of 7.63pps for 2023 and 7.78pps for 2024.

§ Our progressive dividend policy has helped to deliver a Total Shareholder Return since IPO of 150.3 per cent, or 9.1 per cent on a compounded annual basis.

§ Low five-year beta of 0.27 compared to the FTSE All-Share which demonstrates that the Company is largely uncorrelated to the movements of the wider equity market.

Robust, resilient, and defensive portfolio performance and investment proposition

§ Cash receipts ahead of expectations with no material lockups or defaults over the period.

§ Despite risk-free interest rates increasing discount rates have remained stable.

§ The Company's net asset value at 30 June 2022 increase by 6.7 per cent to £1,068.7 million (31 December 2021: £1,001.6 million), mainly as a result of the unwinding of the discount rate, portfolio performance, the net effect of actual inflation, and updated operating assumptions.

Value accretive asset management

§ The Management Board continues to focus on a value-driven active asset management approach which is aligned to six focused SDGs. Our activities include applying high-quality corporate governance frameworks, cost optimisations, refinancing transactions, and change order revenue.

Prudent financial management

§ At 30 June 2022, the Group had a strong net cash position of £30.2 million with £10 million of cash borrowing drawn under the £230 million multi-currency Revolving Credit Facility ('RCF'), with a five-year tenor (maturing in May 2026) to finance new acquisitions.

§ As an internally managed investment company, our interests remain fully aligned with those of our shareholders. The Company has again maintained the lowest annualised ongoing charge of 0.86 per cent through an efficient and cost-effective structure.

Focusing on further enhancing our strong ESG credentials

§ Our value-driven active asset management approach helps to ensure that we live, breathe, and deliver responsible investment in our daily operations and act as a reliable, long-term custodian for our Portfolio Companies, supported by the comprehensive stakeholder materiality assessment we conducted in 2021.

§ Scenario analysis is underway to determine Scope 1 and 2 emissions with findings to be reported by the end of 2022, with previous disclosures highlighting strong climate risk resilience.

Selective asset acquisitions

§ A £24 million investment in the period in the John Hart Generating Station Replacement Project ('John Hart Generating Station'), Canada's first PPP procured for hydroelectric power generation. Also, the Company announced it had entered into an agreement to acquire a 49 per cent equity interest in the A7 German motorway for approximately £40 million, which is expected to be complete in Q3 2022.

§ The Company continues to source investment opportunities from an attractive pipeline of availability-style investments, maximising the benefits of strategic investment partnerships with leading contractors seeking to divest operational assets.

Sarah Whitney, Non-Executive Chair of BBGI, commented:

"I am pleased to report that BBGI has delivered an exceptionally strong operational performance for the first half of 2022. This performance reflects the low-risk investment strategy that the Company has followed since IPO in 2011. Our cash dividend cover of 2.03x supports the Company's target dividend of 7.48 pps for 2022, and reaffirmed target dividend of 7.63pps for 2023 and of 7.78pps for 2024. Our progressive dividend policy has helped to deliver a Total Shareholder Return since IPO of 150.3 per cent, or 9.1 per cent on a compounded annual basis; a return track record of which we are extremely proud. This track record has renewed relevance as investors and the wider equity markets continue to contend with persistently high inflation and uncertain demand in the global economy. Over the period to 30 June 2022, the Company's high quality inflation-linked cash flows led to a total increase in NAV of £47 million, representing a 4.7 per cent uplift, and highlights the portfolio's genuine high-quality inflation-linkage. This contributed to a NAV per share increase of 6.5 per cent or 9.1 pence in the reporting period.

Despite this challenging macroeconomic backdrop, given the AAA and AA-rated countries in which we invest and the fundamentals of our investment proposition, we have confidence in our resilient and defensive strategy. In an uncertain world, I am reassured by our ability to continue to deliver long-term value to our stakeholders."

Duncan Ball and Frank Schramm, Co-CEOs of BBGI, said:

"We are pleased to update you on BBGI's past six months' exceptionally strong performance, again generating value for all our stakeholders. This performance underlines the robust, resilient, and defensive nature of our investment proposition, which is well placed to continue delivering secure, inflation-linked income to our shareholders and positive sustainable impact on the local communities our assets serve. The quality and security of our portfolio's cash flows has come into sharper focus given rising inflation globally. In the reporting period, 4.7 per cent out of the 6.5 per cent reported increase in NAV per share was driven by actual inflation and our updated two-year inflation forecast. We continue to focus on a value-driven active asset management approach which is aligned to six focused SDGs. Our activities include applying high-quality corporate governance frameworks, cost optimisations, refinancing transactions, and change order revenue resulting from additional capital investment at the client's request.

We have worked hard to create a portfolio that allows the Company to generate predictable, long-term, inflation-linked income and attractive, secure returns for our shareholders, regardless of the wider macroeconomic environment. We remain confident in the Company's ability to deliver stable returns now and into the future, while providing local communities with the essential social infrastructure they rely on every day."

PORTFOLIO AT A GLANCE

The fundamentals

Based on portfolio value as at 30 June 2022.

Investment type

100% availability-style revenue stream.

Investment status

Low-risk operational portfolio.

Geographical split

Geographically diversified in stable developed countries.

Sector split

Well-diversified sector exposure with large allocation to lower-risk availability-style road and bridge investments.

Investment life

Long investment life with 50% of portfolio by value with a duration of greater than 20 years; weighted average life of 20.8 years. Average portfolio debt maturity of 16.7 years.

Top five investments

Well diversified portfolio with no major single asset exposure.

Investment ownership

82% of assets by value in the portfolio are 50% owned or greater.

Country rating

All assets located in countries with ratings between AA and AAA[iv].

Projected portfolio cash flows

The portfolio has a steady stream of portfolio cash flows deriving from the Company's underlying assets until 2051. The cash flows are stable and long-term, with their predictability enhanced by government or government-backed counterparties, as well as their contracted nature. The index-linked provisions provided high quality inflation-linkage adding 6.6 pence on a NAV per share basis over the period.

The investment made over the period to 30 June 2022 contributed positively to stable cash flows. Based on current estimates, the existing portfolio is forecast to enter into the repayment phase in September 2038, after which cash inflows from the portfolio will be paid to the Company's shareholders as capital, and the portfolio valuation will reduce as assets reach the end of their concession term.

As at 30 June 2022, BBGI has a weighted average portfolio life of 20.8 years, an increase of 0.5 year compared with 31 December 2021.

FOR FURTHER INFORMATION, PLEASE CONTACT:

NOTES

BBGI Global Infrastructure (BBGI) is a responsible infrastructure investment company and a constituent of the FTSE 250 that invests in and actively manages for the long-term a globally diversified, low-risk portfolio of essential social infrastructure investments.

BBGI is committed to delivering stable and predictable cash flows with progressive long-term dividend growth and attractive, sustainable, returns for shareholders. BBGI has a proactive approach to preserving and enhancing the value of its investments, and to delivering well maintained social infrastructure for communities and end users, whilst serving society by supporting local communities.

All of BBGI's investments are availability-based and supported by secure public sector-backed contracted revenues, with inflation-protection characteristics, that is paid so long as the assets are available for use.

BBGI's investment portfolio is over 99% operational with all its investments located across highly rated investment grade countries with stable, well developed operating environments.

BBGI's in-house management team is incentivised by shareholder returns and consistently maintains low comparative ongoing charges to shareholders.

Further information about BBGI is available on its website at www.bb-gi.com*

The Company's LEI: 529900CV0RWCOP5YHK95

Any reference to the Company or BBGI refers also to its subsidiaries (where applicable).

* Neither the Company's website nor the content of any website accessible from hyperlinks on its website (or any other website) is (or is deemed to be) incorporated into, or forms (or is deemed to form) part of this announcement.

COMPANY OVERVIEW

ABOUT BBGI

BBGI Global Infrastructure S.A. (BBGI, the 'Company', and together with its consolidated subsidiaries, the 'Group') is a global infrastructure investment company helping to provide the responsible capital required to build and maintain critical social infrastructure[v] in the countries where we do business.

These are the important infrastructure assets that citizens rely on every day. They are the building blocks of the local economy, and as a long-term custodian, we partner with the public sector to help deliver and manage them.

In doing so, we follow a low-risk[vi], globally diversified and internally managed investment strategy to deliver long-term, predictable and sustainable shareholder returns.

WHY INVEST IN BBGI

BBGI provides access to a globally diversified portfolio of infrastructure investments that generate attractive long-term and sustainable returns and serve a critical social purpose in their local communities.

BBGI's portfolio includes education, healthcare, police and fire stations, affordable housing, modern correctional facilities, clean energy and transport infrastructure assets. The Management Board follows a proven operating model of value-driven active asset management, prudent financial management, and a selective acquisition strategy to preserve value and achieve portfolio growth.

In return, the Company receives stable, predictable, inflation-linked cash flows which are underpinned by government (backed) counterparties. The predictability of these availability-style[vii] revenues allow BBGI to return an attractive and progressive income stream to investors in the form of a semi-annual dividend while Environmental, Social and Governance ('ESG') considerations are embedded in our business model.

We are a responsible investor in global social infrastructure with a low-risk investment strategy focused on delivering long-term, predictable and sustainable returns.

1. Low-risk

The Company is committed to an availability-style social infrastructure investment platform and this strategy generates stable, predictable and inflation-linked cash flows backed by secure, public-sector revenues; the Management Board's key area of expertise.

2. Globally diversified

The investment strategy is deployed in stable, well established developed markets where governments and local authorities maintain support for availability-style models to finance public infrastructure. This provides focused exposure to highly-rated investment grade countries across the UK, North America, Australia and Continental Europe.

3. Strong ESG approach

The Company is a long-term custodian and responsible hands-on steward of critical social infrastructure. The Company aligns its active asset management approach to six focused UN Sustainable Development Goals ('SDGs') and ESG principles which are integrated into the Company's investment and operating model. In 2021 we became a signatory of the Net Zero Asset Managers' initiative and began implementing our plan to reach net zero greenhouse gas emissions by 2050, and certified as carbon neutral. This strong ESG approach serves to strengthen the non-financial returns the portfolio generates for all stakeholders. As a socially beneficial investment under SFDR's Article 8, we monitor and report social and environmental impact effectively, and incentivise strong ESG performance by directly linking results to executive compensation.

 4. Internally managed

The Company's in-house management team is focused on delivering shareholder value, incentivised by shareholder returns and growth in Net Asset Value ('NAV') per share. This means that no NAV-based management or acquisition fees are charged, and the internal management team's interests are fully aligned with those of the shareholders, resulting in pricing discipline when managing the portfolio and assessing investment opportunities. As a result, the Company consistently maintains the lowest comparative ongoing charges to its shareholders in the sector.

CHAIR'S STATEMENT

Dear Shareholders,

On behalf of the Supervisory Board, I am pleased to report that BBGI has delivered an exceptionally strong operational performance for the first half of 2022. This performance reflects the low-risk investment strategy that the Company has followed since IPO in 2011. The NAV per share increased by 6.5 per cent or by 9.1 pence in the reporting period.

BBGI remains well positioned to continue providing stable and predictable, inflation-linked cash flows from our globally diversified portfolio of essential social infrastructure investments. We pride ourselves on creating progressive, long-term dividend growth and sustainable returns for our shareholders.

We have a strong approach to ESG, which is integrated into our business model, and I am proud that the Company remains committed to contributing to the United Nations' Sustainable Development Goals ('SDG'). Our approach helps to ensure that BBGI continues to provide enduring positive value to all our stakeholders from our sustainable portfolio allocation.

Our investments are the essential assets on which people rely every day, such as education, healthcare, fire and police stations, affordable housing, modern correctional facilities and transport.

They are the building blocks of the local economy and, as a long-term custodian, BBGI partners with the public sector, underpinned by government or government-backed counterparties, to help responsibly deliver and manage these assets for the long-term.

Generating secure, inflation-linked income with progressive dividend growth

The predictability BBGI provides to shareholders is underpinned by the high-quality, long-term, and inflation-linked cash flows our portfolio generates. Our investment portfolio has a weighted average investment life of 20.8 years.

The revenue from the 55 assets, selectively acquired over the last decade, is 100 per cent availability-style. Availability-style means that revenues are paid so long as the assets are available for use. This delivers attractive, predictable, and resilient shareholder returns with a low correlation to the wider economy and other asset classes.

BBGI's investment portfolio remains 99.5 per cent operational with all our investments located in highly-rated investment-grade countries with stable, well-developed operating environments.

For the first half of 2022, I am pleased to announce that our cash dividend cover of 2.03x supports the Company's target dividend of 7.48 pps for 2022, and reaffirmed target dividend of 7.63pps for 2023 and of 7.78pps for 2024.

The Company has delivered a Total Shareholder Return since IPO of 150.3 per cent, or 9.1 per cent on a compounded annual basis; a return track record of which we are extremely proud.

This track record has renewed relevance as investors and the wider equity markets continue to contend with persistently high inflation and uncertain demand in the global economy. Over the period to 30 June 2022, the Company's high quality inflation-linked cash flows led to a total increase in NAV of £47 million, representing a 4.7 per cent uplift, and highlights the portfolio's genuine high-quality inflation-linkage. More detail about the Company's inflation indexation is included in the Strategic Report of the Management Board.

Focusing on further enhancing our strong ESG credentials

Our value-driven active asset management approach helps to ensure that we live, breathe, and deliver responsible investment in our daily operations and act as a reliable, long-term custodian for our Portfolio Companies, supported by the comprehensive stakeholder materiality assessment we conducted in 2021.

The Company's ESG Committee continues to govern our progress in managing non-financial risk and opportunity, including our forthcoming reporting of Scope 1 and 2 emissions on all of our Portfolio Companies which will be disclosed at the year-end.

Howard Myles, who served as a Non-Executive Director of the Company since IPO, stepped down at this year's annual General Meeting ('AGM') and I would again like to thank him for his service. In March, we were delighted to announce the appointment of June Aitken and Andrew Sykes to the Supervisory Board, who were formally approved at the AGM. Andrew has replaced Howard as Chair of the Remuneration Committee and Senior Independent Director and is a member of the Nomination and Audit Committees. June is a member of all three committees.

At the Company's AGM in April 2022, PricewaterhouseCoopers, Société coopérative was formally approved as the Company's statutory auditor, after a competitive market tender process in 2021 in accordance with EU auditor rotation rules. 

Resilience in an uncertain world

The macroeconomic environment is likely to remain volatile and inflation is expected to remain high at least for the near term. This uncertainty is further compounded by geopolitical events in Europe following the invasion of Ukraine in February 2022.

Despite this challenging macroeconomic backdrop, given the AAA and AA-rated countries in which we invest and the fundamentals of our investment proposition, we have confidence in our resilient and defensive strategy.

In an uncertain world, I am reassured by our ability to continue to deliver long-term value to our stakeholders. 

Sarah Whitney

Chair

30 August 2022 

STRATEGIC REPORT OF THE MANAGEMENT BOARD

MANAGEMENT BOARD'S STATEMENT

Dear Shareholders,

In leading the Company's Management Board, we are pleased to update you on BBGI's past six months' exceptionally strong performance, again generating value for all our stakeholders.

This performance underlines the robust, resilient, and defensive nature of our investment proposition, which is well placed to continue delivering secure, inflation-linked income to our shareholders and positive sustainable impact on the local communities our assets serve.

Predictable portfolio performance

As custodians, we consistently deliver on our underlying assets' commitments in providing essential public services to local communities, supported by our strong and disciplined ESG credentials.

For shareholders, our low-risk, 100 per cent availability-style investment portfolio, comprising 55 essential social infrastructure assets, again exceeded revenue expectations. These revenues are underpinned by secure government, or government-backed, availability-style revenues in highly-rated investment grade countries. They are paid as long as our assets are available for use, in turn strengthening the Company's financial performance.

Portfolio highlights:

· NAV per share increase of 6.5 per cent, principally driven by an increase in inflation and positive FX movements.

· Despite interest rates increasing across the markets in which we invest, transactional evidence points to discount rates remaining stable.

· Strong cash dividend cover of 2.03x in the period ended 30 June 2022, which allows us to reaffirm our attractive and progressive two-year dividend targets to our shareholders.

· Low five-year beta of 0.27 compared to the FTSE All-Share which demonstrates that the Company is largely uncorrelated to the movements of the wider equity market.

· No lock-ups or material defaults were recorded at any of our Portfolio Companies.

· Our value-driven active asset management helped generate a consistently high asset availability rate of 99.9 per cent.

Genuine, high-quality inflation-linkage

The quality and security of our portfolio's cash flows has come into sharper focus given rising inflation globally. In the reporting period, 4.7 per cent out of the 6.5 per cent reported increase in NAV per share was driven by actual inflation and our updated two-year inflation forecast.

Our high-quality inflation-linkage is achieved through annually updated contractual indexation in the Company's project agreements with our public sector clients at each Portfolio Company. The Company passes through the indexation mechanism to our subcontractors - on which we rely to support our assets' operations - and this provides an inflation cost hedge which allows the Company to effectively manage its cost base.

Inflation and interest rates have increased in all jurisdictions where BBGI invests. Should long-term interest rates substantially rise further, discount rates may well be affected. It is reasonable to assume that if discount rates increase, then deposit rates would also increase, and inflation rates may exceed our forecast and at least partly offset any negative effects on the NAV from rising discount rates.

A sensitivity analysis is provided in the Valuation section to illustrate the effect of this combined movement on the Company's NAV, in a scenario where we experience discount, inflation, and deposit rates rises across the portfolio.

Selective asset acquisitions

Our asset selection and project structuring remain critical to BBGI continuing to deliver robust long-term inflation-linked shareholder returns during times of global macroeconomic and geopolitical uncertainty.

Where we make new acquisitions, we follow a proven availability-style investment strategy. In practice, we assessed significantly more assets than the Company acquired and declined all potential investments which did not match our disciplined, selective investment and ESG criteria.

In February, the Company completed the approximately £24 million investment in Canada's first public-private partnership procured for hydroelectric power generation. Investing in InPower BC General Partnership, the entity responsible for delivering the 132 MW John Hart Generation Station, the Company is helping provide clean energy to over 80,000 homes on Vancouver Island.

The project agreement is 100 per cent availability-style, and the Company is not exposed to any power price risk. This asset has strong ESG credentials and is our first investment into availability-style renewable energy infrastructure.

In May, the Company announced that it had entered into an agreement to acquire a 49 per cent equity interest in the project company for the A7 motorway public-private partnership between Bordesholm and Hamburg in Germany for approximately £40 million. The project includes expansions and upgrades to certain critical sections of the A7 motorway. Availability payments are received from the Federal Republic of Germany. Construction completion was achieved in December 2019.

The increased efficiency of the A7 will help to minimise any increase in exhaust emissions from the higher traffic load by reducing congestion and traffic jams and is expected to achieve a consistent traffic flow and uniform driving speeds. Completion of this acquisition is expected in Q3 2022.

Value accretive asset management

The Management Board continues to focus on a value-driven active asset management approach which is aligned to six focused SDGs. Our activities include applying high-quality corporate governance frameworks, cost optimisations, refinancing transactions, and change order revenue resulting from additional capital investment at the client's request.

Prudent financial management

In managing our existing portfolio and new asset acquisitions, the Company maintains modest cash balances and draws on a £230 million multi-currency RCF with a five-year tenor (maturing in May 2026) to finance new acquisitions.

Under the RCF, BBGI has access to a further uncommitted £70 million accordion tranche which increases our flexibility to consider larger acquisitions. As at 30 June 2022, the RCF is drawn by a total £11.3 million, of which £1.3 million is being used to cover letters of credit.

As an internally managed investment company, our interests remain fully aligned with those of our shareholders. The Company has again maintained the lowest annualised ongoing charge of 0.86 per cent through an efficient and cost-effective structure.

Maintaining resilience

The market for availability-style transactions will continue to be competitive but the Company has a high degree of confidence concerning our future pipeline. Proven by our recent acquisitions, the trend of large contractors divesting and de risking availability-style assets once they have become operational will likely continue and the Company is well placed to assess such deal flow.

We have worked hard to create a portfolio that allows the Company to generate predictable, long-term, inflation-linked income and attractive, secure returns for our shareholders, regardless of the wider macroeconomic environment.

We remain confident in the Company's ability to deliver stable returns now and into the future, while providing local communities with the essential social infrastructure they rely on every day.

Duncan Ball Frank Schramm

Co-CEO Co-CEO

30 August 2022 

On behalf of the BBGI Management Board

OPERATING MODEL

The Management Board follows a proven operating model of value-driven active asset management, prudent financial management and a selective acquisition strategy in order to preserve value, achieve portfolio growth and ensure ESG considerations are embedded in our investment processes. These three operational pillars are fundamental to the Company's success.

We ensure stable operational performance through an active asset management approach, where we actively seek to preserve value and where possible also to identify and incorporate value enhancements over the lifetime of asset ownership. In turn, this helps to reduce costs for our public sector clients and the asset's end-users and enhance the operational efficiency of each asset. This active asset management approach allows the Company to generate a high level of asset availability, which supports high client satisfaction rates and underpins the strong social purpose of our entire portfolio.

Our prudent financial management is focused on efficient cash management and implementation of our foreign exchange hedging strategy. The portfolio's geographical diversification results in exposure to multiple currencies. We actively seek to mitigate foreign exchange risk by balance sheet hedging through foreign exchange forward contracts, hedging of forecast portfolio distributions, and borrowing in non-Sterling currencies. Furthermore, Euro-denominated running costs provide a natural hedge against the Euro-denominated portfolio distributions.

The Company's selective acquisition strategy ensures that the Management Board's focus remains within its area of expertise and that the strategic pillars defined by the Company's investment proposition are upheld.

We actively consider acquisitions that have inflation-protection characteristics; this approach supports the portfolio's inflation-linkage.

Value-driven active asset management

We pursue a standardised approach across all investments in the portfolio to help derive operational and value enhancements and preserve value, including:

· Preserving value and where possible identifying and delivering value enhancements to improve customer experience and financial performance.

· Focused management at the asset level to ensure distributions are on time, and on or above budget.

· Applying a high-quality corporate governance framework.

· ESG KPI tracking tool to evaluate non-financial performance of each investment.

· Climate resilience due diligence considers climate risks and opportunities within the portfolio.

· Comprehensive monitoring to ensure fulfilment of contractual and legal obligations, which additionally serves to maintain high availability levels and prevent deductions.

· Strong client relationship management, including regular meetings to uphold client satisfaction and monitor ESG performance.

· Focused and active asset management, including site visits to all significant investments annually and proactive management of issues.

· Focused cost management and portfolio-wide cost-saving initiatives leveraging economies of scale (e.g. portfolio insurance and standardised management contracts for project companies).

· Identifying and continuing initiatives at the individual asset level to outperform base case (e.g. lifecycle reviews).

· Measured exposure to construction risk to support NAV uplift by de risking assets over the construction period.

Prudent financial management

We maintain focus and attention to cash performance at the asset and portfolio level to drive efficiencies, including:

· Maintaining modest cash balances to limit cash drag.

· The portfolio's geographical diversification by necessity involves exposure to multiple currencies. We actively seek to manage and mitigate foreign exchange risk through our hedging strategy.

· Maintaining a low ongoing charge through an efficient and cost-effective internal management structure.

· Progressive future dividend growth underpinned by strong portfolio distributions.

Selective acquisition strategy and strategic investment partnership

We maintain strategic discipline in our acquisition strategy and portfolio composition to ensure we pursue growth that is accretive to shareholder value, not just for growth's sake, including:

· Broad industry relationships in multiple geographies.

· Pre-emption rights to acquire co-shareholders' interests.

· Global exposure to avoid geographical concentration.

· Robust framework embedding ESG principals into investment due diligence.

· Revolving corporate debt facility to support transaction execution.

· Visible pipeline through a North American strategic partnership.

· Maintaining focus on the Management Board's core areas of expertise.

The Company continues to leverage strong relationships with leading construction companies to source a potential pipeline that supports a low-risk and globally diversified investment strategy.

One notable relationship is the North American strategic partnership with SNC-Lavalin, which covers four assets. The Company estimates that further investment opportunities in excess of C$200 million could result from the pipeline agreement over the next few years; all of which will be assessed on a case-by-case basis.

Typically, these contractors have secured the mandate to design and build new assets but continue to look to divest financially after the construction period has finished - thereafter often maintaining facility management contracts through a long-term partnership. The Company is an attractive partner for a number of reasons:

· Our cost of capital is typically lower than construction companies, so involving BBGI can make the bid more competitive.

· We are a long-term investor which is attractive to government and government-backed counterparties.

· We are considered a reliable source of liquidity should a construction partner decide to sell.

· Having a financial partner is a pre requisite for some construction companies so they can avoid consolidating the Portfolio Company debt onto the balance sheet of their parent company.

· We have extensive asset credentials and a strong track record that can assist with the shortlisting process for new projects.

ESG INTEGRATION

As responsible investors in essential, social infrastructure, which creates unique value to local communities and a stable investment case, ESG has always been integral to BBGI's consistent and long-term investment strategy. The ESG landscape is evolving, as are our stakeholders' needs, so we are continuing to keenly address both financial and non-financial risks to ensure our sustainable, value-driven approach delivers long-term positive outcomes for society and all of our stakeholders.

Sustainability highlights

We are pleased to report the material progress we have made in the first half of the year to further integrate ESG considerations, including climate change risk management, in BBGI's business model and the non-financial returns the Company generates for its stakeholders:

• We have been preparing for the upcoming Sustainable Finance Disclosure Regulation ('SFDR') disclosure requirements which will come into effect on 1 January 2023. The Company is designated as an Article 8 under SFDR and will report on criteria for a social beneficially investment.

• In the continuation of the detailed climate risk assessment of our portfolio undertaken in 2021, we completed a 'deep dive' analysis on a selection of assets. Overall, scenario analysis has highlighted that the BBGI portfolio is very resilient to climate hazards, both today and under future climate warming scenarios.

• We submitted our 2022 Communication on Progress to UN Global Compact under the new extended framework. 

• Numerous Portfolio Company ESG initiatives were undertaken. Detailed progress on our 2022 targets will be reported in our next annual ESG report.

Frameworks

Find out more

ESG Report I ESG & Sustainability Risk Policy I SFDR Disclosures I www.bb-gi.com/esg/

PORTFOLIO REVIEW

Portfolio summary

The Company's assets as at 30 June 2022 consist of interests in 55 high-quality, availability-style social infrastructure assets, 99.5 per cent of which are fully operational (by portfolio value). The portfolio has no exposure to demand-based or regulated investments, and is well diversified across sectors in education, health, blue light, affordable housing, modern correctional facilities, clean energy and transport.

Located in the UK, North America, Australia and Continental Europe, all Companies in our portfolio are located in stable, well developed and highly rated investment grade countries.

Operating model in action

Preserving and enhancing value through active asset management

The portfolio value increased by £100.7 million from the rebased value[x] over the reporting period, which was driven largely by the net effect of actual inflation and a change in the short-term inflation and deposit rates forecast, the positive net effect of foreign exchange and the portfolio performance to reflect current expectations based on the Company's hands-on active asset management.

Our active value-driven approach to asset management and the robustness of our portfolio meant that the availability level of the Company's assets was recorded at approximately 99.9 per cent and deductions were either borne by third-party facility management companies and road operators, or were part of planned expenditures.

There were no material lock-ups or default events reported during the half-year period and we are very proud of this achievement.

Genuine, high-quality inflation-linkage

Inflation has exceeded forecast assumptions in all the regions where the Company is active, and this has contributed to BBGI's strong performance during the period.

BBGI's portfolio of 55 100 per cent availability-style projects have contractual income streams underpinned by government or government-backed counterparties. The obligations under the contractual arrangements between Portfolio Companies and public sector clients are bound by a Project Agreement.

Each Project Agreement is unique but generally follows a standard approach. The contractual revenues detailed in the Project Agreement are either partially or fully indexed to an appropriate inflation factor which is meant to compensate for increasing costs over the life of the concession. Partial indexation is most common in the Company's respective Project Agreements.

The Portfolio Companies typically enter into facilities management and operating subcontracts which mirror the inflation arrangements contained in the Project Agreement. In the UK, Project Agreements tend to have a Retail Price Index ('RPI') adjustment factor. In other regions, Consumer Price Index ("CPI") indexation is common, but some Project Agreements have a bespoke inflation index which, as part of the Company's asset management approach, are developed to reflect expected operations and maintenance costs. These might include an element of CPI, a labour index, or a key input cost (such as fuel cost or bitumen cost, in the case of a road project.)

The level of linkage a Portfolio Company has to inflation is affected by the portion of the income and costs that are linked to inflation versus its cost base. In many, but not all cases, the contractual arrangements at the Portfolio Companies are such that the cash flows are inflation-linked as the indexation of revenues is greater that the indexation of the expenses.

The high-quality and defensive nature of the Company's inflation-linkage are underpinned by:

· Contractual increases: The inflation adjustment is contractual in nature. It is paid as part of the 100 per cent availability-style cash flows to each Portfolio Company, supported by creditworthy government, or government-backed counterparties procured in AA-AAA geographies. The Company does not invest in demand-based assets. These types of assets might typically appear to offer strong inflation-linkage (e.g. the ability to increase prices in response to an increase in CPI) but are likely still subject to changes in elasticity of demand. For example, in the case of toll roads and student accommodation projects, such assets might appear to be able to increase prices in response to an increase in CPI but market demand may prevent meaningful increases in revenues, while at the same time costs may be increasing.

· Protection against rising costs: The Company passes the indexation mechanism on to our subcontractors - on which we rely to support our assets' operations - and this provides an inflation cost hedge which allows the Company to effectively manage its cost base.

· Not dependent on regulatory review: The inflation adjustment is automatic and contractual and is not subject to regulatory review. Once the relevant reference factor is published, the adjustment is mechanical.

· Portfolio approach: The Company's inflation-linkage comes from a variety of Portfolio Companies in different countries.

Prudent financial management

The assets continued to perform well during the reporting period with cash receipts during the year ahead of business plan. For the first half of 2022, our cash dividend cover of 2.03x supports the Company's target dividend of 7.48 pence per share for 2022, and reaffirmed dividend target of 7.63 pence per share for 2023 and 7.78 pence per share for 2024.

The net cash position as at 30 June 2022 was £30.2 million.

The Company has efficient cash management in place which aims to avoid cash drag. This includes using the proven financing methodology of drawing on its RCF before raising new equity to repay the temporary debt. The committed amount available to the company from the RCF is £230 million, which matures in 2026. Furthermore, the Company has the possibility of increasing the quantum to £300 million by means of an accordion provision.

This enables the Company to execute larger acquisitions in an efficient manner and to be a trusted and repeat partner in its key markets.

Selective acquisition strategy

The Company continued to pursue a selective acquisition strategy over the period, investing approximately £24 million.

One acquisition completed in February 2022:

John Hart Generating Station (Canada): BBGI completed the acquisition of an investment in InPower BC General Partnership, the entity responsible for delivering the John Hart Generating Station, an investment delivered through the existing strategic partnership between the Company and SNC-Lavalin Group Inc. The PPP consists of the design, construction, financing, maintenance and rehabilitation of a new three-turbine, 132-MW hydroelectric power generation station on the Campbell River, British Columbia, including a three generating-unit underground powerhouse, 2.1 km of water passage tunnels and a water bypass system to protect downstream fish habitat.

Service commencement was achieved in 2019. The asset is classified as availability-style under the investment policy of the Company. The investment is not subject to demand or power price-risk. Availability payments are received from the British Columbia Hydro and Power Authority (rated AA/Aaa by DBRS Morningstar and Moody's, respectively), a Crown corporation wholly-owned by the Government of British Columbia. The station generates clean and reliable energy for over 80,000 homes on Vancouver Island.

One acquisition announced in May 2022 investing approximately £40 million:

A7 Motorway Project (Germany): The Company announced it had entered into an agreement to acquire a 49 per cent equity interest in the project company for the A7 motorway public-private partnership between Bordesholm and Hamburg in Germany.

The project includes expansions and upgrades to certain critical sections of the A7 motorway and consists of the design, construction, financing, operation, maintenance and rehabilitation of 65 km widening from four to six lanes of a section of the A7 motorway. The project includes 11 interchanges, six parking facilities, four rest areas, 79 civil engineering structures, c. 100,000 m2 noise barriers and a c.550-metre noise enclosure tunnel. Availability payments are received from the Federal Republic of Germany, represented by DEGES (Deutsche Einheit Fernstraßenplanungs- und -bau GmbH), rated AAA/Aaa by S&P and Moody's, respectively. Construction completion was achieved in December 2019.

The project's increased efficiency of the A7 will help to minimise any increase in exhaust emissions from the higher traffic load by reducing congestion and traffic jams and is expected to achieve a consistent traffic flow and uniform driving speeds.

Completion of the acquisition is expected in Q3 2022.

Update on one acquisition agreement announced in October 2021:

Centre Hospitalier de l'Université de Montréal ('CHUM') (Canada): BBGI has entered into an agreement to acquire a 25 per cent interest in the design, construction, finance, operation and maintenance of a fully functional new hospital facility including new buildings, parking and commercial retail areas together with supporting infrastructure for the Province of Québec. Completion of this acquisition remains subject to certain conditions which have not yet been satisfied.

All projects acquired or committed to in the period add to the portfolio's diversification across multiple social infrastructure sectors where the demand for private sector investment remains high. The Management Board continues to source a selective pipeline of investments from construction companies and developers who are looking to divest assets.

Our asset selection and project structuring remain critical to BBGI continuing to deliver robust long-term inflation-linked shareholder returns during times of global macroeconomic and geopolitical uncertainty.

Supply-chain monitoring

The Management Board continually reviews the potential concentration risk of operational and maintenance ('O&M') contractors who provide counterparty services to the Company's assets. The table below illustrates the level of O&M contractor exposure as a percentage of portfolio value[xi].

The Management Board has not identified any significant risk exposure and remains comfortable with the current contractor allocation.

The Company benefits from a diversified contractor base and supply chain with no concentrated exposure, combined with a rigorous supply-chain monitoring policy. We pay close attention to how subcontractors are performing on an ongoing basis and have risk mitigation procedures in place in case of any supply-chain failure.

No material construction defects reported on any of the Company's portfolio assets

The Company routinely monitors the quality of its assets to identify any potential construction defects early on and to implement the appropriate remediation measures.

The responsibility for, and the cost of, remediation and related deductions falls to the relevant construction subcontractor on each asset, subject to statutory limitation periods. This is a key component of the Company's effective counterparty risk management.

Latent defects risk was mitigated over the period with 62 per cent of portfolio value covered by either limitation or warranty periods and there were no material defects reported on any of the Company's portfolio assets.

MARKET TRENDS & PIPELINE

Rising inflation and tighter financial conditions have presented several economic headwinds in the first half-year period in 2022. These conditions are partly the after-effects of very accommodative monetary and fiscal policies put in place during the global pandemic to support economic stability, further compounded by fallout following the invasion of Ukraine in February 2022. Since the start of 2022, many central banks began raising interest rates to cool higher than expected inflation.

Against this backdrop, infrastructure remains an attractive asset, largely because of its defensive nature, predictable cash flows, and its high quality inflation-linkage. Strong investment allocation to the infrastructure sector is evidenced by another record-breaking quarter for infrastructure fundraising and a new annual record, despite being only halfway through the year[xii].

Much of this fundraising has been focused on unlisted 'mega funds', which typically target much larger transactions which are further up the risk spectrum than those pursued by the Company. So, while interest in the overall infrastructure sector remains robust, we have not evidenced any major changes in the market dynamics for our niche within the broader sector.

As many market participants are evaluating the prospects of an economic recession, we take comfort in the contractual nature of our cash flows, paid by high credit quality government clients in return for delivering important social infrastructure.

Within the broader infrastructure sector, there has been a wide variation in how different types of assets have performed. Many demand-based assets like toll roads have experienced financial challenges due to reduced volumes or societal changes such as increased working from home. Going forward, economic infrastructure investments may be impacted if the economy grows at lower rates than forecast. The availability-style infrastructure assets in which the Company invests have largely been unaffected by these forces.

While the full consequences of rising interest rates and higher inflation remain unclear, the Company believes its business model continues to offer a significant degree of protection for investors. Rising interest rates have had negative effects on certain bond and other long-duration assets, but we have not seen a similar impact on the valuation of our assets within our portfolio. Additionally, our social infrastructure investments are typically financed with long term debt and they are generally not subject to refinancing risk. Our Portfolio Companies hedge substantially all of their floating rate interest liabilities against changes in underlying interest rates with interest rate swaps.

We have not seen evidence of any upward adjustment in the discount rates used to value our investments and there continues to be robust demand for availability-style social infrastructure assets in all the regions where the Company is active. In fact, the recent increases in short-term rates have positively impacted the Company's cash flows as we earn more from the cash balances held on deposit in various Portfolio Company reserve accounts. Similarly, higher than expected inflation has improved financial performance, due to the high quality inflation-linkage within our portfolio.

Since the first half of 2020, many investors have developed a greater appreciation for the robustness and resiliency of the availability-style infrastructure assets in which the Company invests, initially by seeing how the investments delivered steady returns despite the challenges of COVID-19, and more recently, during a potentially recessionary environment, marked with high and rising rates of inflation.

New primary opportunities

The level of PPP procurement is expected to vary between markets, but governments and local authorities in most of the countries where the Company operates acknowledge the current situation as a valuable opportunity to improve local and regional infrastructure and expand the economic opportunity this affords.

Significant infrastructure investment is also anticipated in many countries where climate change targets have been announced. As an example, the OECD forecast that US$6.9 trillion in global investment will be required in each year to 2030 to meet climate and development objectives.

We expect that most of BBGI's activity will continue to be in the secondary market, but primary market activity continues to be a useful barometer for future secondary activity in the medium to longer term. There is no certainty that the planned infrastructure spending noted below will follow a PPP or similar styled procurement methodology. However, the Company is optimistic that at least some of the infrastructure will be procured using a PPP or a similar style procurement model. This is because we believe public sector balance sheets will be stressed, in part due to the tremendous cost of the fiscal stimulus and support undertaken by governments during COVID-19, and governments will likely welcome the involvement of some private sector capital.

Canada: Through the 'Investing in Canada Plan', launched in 2016, the Government of Canada committed over C$180 billion over 12 years for a variety of infrastructure that benefits Canadians. To-date, over C$122 billion has been invested. In addition, the Government of Canada announced over C$100 billion to be spent over three years on infrastructure to support a resilient recovery. Significant expenditures are expected in public transit, initiatives to support a low-carbon transition, and to establish a national infrastructure fund.

UK: In order to catalyse growth in the UK and support the transition to Net Zero by 2050, the Government established the UK Infrastructure Bank in 2021.Together with the private sector and local government, the bank will lead a shared mission to accelerate investment in the UK's infrastructure. The Government expects to support at least £40 billion of investments in UK infrastructure. The strategy will focus on investing in projects to support UK shifts to Net Zero by 2050. The bank will also fund other sectors including transport, water, waste and digital.

US: In November 2021 a bipartisan bill was approved, and the US$1.2 trillion Infrastructure Investment and Jobs Act was signed into law. In each of the next five years, the federal government will now spend the equivalent of about one per cent of GDP on roads, bridges, rail, public transit, water systems, broadband, power systems and more. It is the largest such investment in more than a generation. It will raise federal infrastructure spending to its highest share of GDP since the early 1980s.

EU: The European Commission unveiled a major infrastructure investment strategy aimed at mobilising up to €300 billion of investments in global development by 2027. The strategy will seek to develop physical infrastructure in five key sectors: digital; climate and energy; transport; health; and education and research.

The strategy will allow the EU to leverage public and private investment in priority areas. The European Commission said the European Fund for Sustainable Development will make up to €135 billion available for guaranteed investments for infrastructure projects between 2021 and 2027.

Australia: The Australian Government is investing A$120 billion over ten years from 2022-23 in land transport infrastructure through its rolling infrastructure pipeline, most of which is delivered under the Infrastructure Investment Program. Across the Program, the Government has committed to upgrading key freight routes in the regions, reducing traffic congestion in cities, developing faster rail, improving road safety, and empowering local councils to support projects that matter to local communities.

Ongoing secondary opportunities

Historically, construction companies have been a good source of investment opportunities for BBGI and this trend has continued in 2022. In February, the Company completed an investment of c.£24 million into the John Hart Generating Station in Canada, and in May announced that it has entered into an agreement to acquire an interest in the A7 motorway in Germany. Both investments originated from construction companies. BBGI has developed well-established relationships with potential vendors over the years and enjoys a reputation for transacting quickly with low execution risk, which is appealing to vendors in the current market. The Management Board anticipates this trend to continue.

2022 and beyond: BBGI's pipeline for availability-style transactions remains strong

Investment activities in 2022 and beyond will involve sourcing, originating, and bidding for new operational availability-style assets, with consideration for measured exposure to construction assets to support valuation uplift.

The pipeline for availability-style transactions remains strong within the Company's target markets. The Company will assess any potential new assets on an individual basis, and we remain confident in our ability to originate attractive investment opportunities which match our investment criteria. We anticipate these will come from a variety of sources, including:

· Soliciting off-market transactions through the Company's extensive network of market participants in Europe, North America and Australia;

· A pipeline agreement with SNC-Lavalin covering four potential future availability-style PPP investment opportunities;

· Participating selectively in competitive sale processes;

· Participating selectively in primary investment opportunities and bidding on new availability-style assets as part of public sector procurement processes; and,

· Acquiring equity interests from co-shareholders in existing assets.

When the Company began in 2011, our initial portfolio consisted of 19 availability-style roads, schools, healthcare facilities and justice facilities. In more recent years we have expanded our scope and made investments in affordable housing, community centres and, earlier this year, our first investment in clean energy infrastructure taking the portfolio to a total of 55 assets.

The Company will continue to source essential social infrastructure assets that fit the requirements of our low-risk, availability-style and globally diversified investment strategy, and a strong approach to ESG. We are also an existing investor in Local Improvement Finance Trust (LIFT) assets. With the vast majority of the LIFT investments, BBGI has title to the land and building and the availability payments are fully indexed with RPI. The Company will continue to source opportunities to diversify and expand its essential social infrastructure portfolio by considering investment opportunities with similar characteristics of long-term and inflation linked revenues with public sector counterparties or a link to the public sector, whether these are through long dated concessions or direct ownerships of assets.

OPERATING & FINANCIAL REVIEW

The Management Board is pleased to present the Operating and Financial Review for the six months ended 30 June 2022.

Highlights and Key Performance Indicators

Certain key performance indicators ('KPIs') for the past 3.5 years are highlighted below:

Asset management

Cash Performance

The Company's portfolio of 55 high-quality, availability-style PPP infrastructure investments performed well during the period, with total cash flows ahead of business plan and the underlying financial models.

Construction exposure

The Company's investment policy is to invest principally in assets that have completed construction and are operational. Accordingly, investments in assets that are under construction are limited to 25 per cent of the portfolio's value. This aims to produce a stable dividend for our shareholders, while at the same time gaining some exposure to the potential NAV uplift that occurs when assets move from a successful construction stage to the operational stage.

As at 30 June 2022, 99.5 per cent of the assets were operational. Highway 104 in Canada is the only project currently in the construction phase. The Company reached financial close on the Highway 104 project in May 2020 and construction work is progressing to plan.

The Management Board believes the Company's ability to meet its dividend targets will not be compromised by measured construction exposure.

Investment performance

Return track record

The Company's share price maintained a strong premium to NAV per share through the reporting period.

Against the FTSE All-Share, the Company has shown a low five-year correlation of 30.5 per cent and a beta of 0.2714.

The share price closed at 158.6 pence on 30 June 2022, representing a 5.9 per cent premium to the NAV per share at the period-end.

TSR from IPO to 30 June 2022 was 150.3 per cent or 9.1 per cent on an annualised basis.

The Total NAV Return[xiv] per share from IPO to 30 June 2022 was 154.4 per cent or 9.3 per cent on an annualised basis.

Distribution policy

Distributions on the ordinary shares are planned to be paid twice a year, normally in respect of the six months to 30 June and the six months to 31 December.

Dividends

On 7 April 2022, the Company paid a second interim dividend of 3.665pps for the period 1 July 2021 to 31 December 2021. Together with the first interim dividend (which was paid in October 2021) the total dividend for the year ended 31 December 2021 amounted to 7.33pps. The Board approved a 2022 interim dividend of 3.74pps, which is in line with its target of 7.48pps, to be paid on 20 October 2022. Furthermore, the Board is reaffirming its 2023 dividend target of 7.63pps and a dividend target for 2024 of 7.78 pence per share.

· Average dividend increase of 3.1 per cent from 2012 to 2022

· FY 2023 target dividend of 7.63pps, 2024 7.78 pps[xv]

Strategic investment partnerships

The Company continues to leverage strong relationships with leading construction companies to source a potential pipeline that supports a low-risk and globally diversified investment strategy.

One notable relationship is the North American strategic partnership with SNC-Lavalin, which covers four availability-style assets. The Company estimates that further investment opportunities in excess of C$200 million could result from this pipeline agreement.

VALUATION

The Management Board is responsible for carrying out the fair market valuation of the Company's investments, which it then presents to the Supervisory Board for consideration as part of its approval of the Interim and Annual Reports. The valuation is undertaken on a six-monthly basis as at 30 June and 31 December each year, and is reviewed by an independent third-party valuation expert.

The Company's investments are principally non-market traded investments with predictable long-term availability-style revenue; therefore, the valuation is determined using the discounted cash flow methodology. The Company makes forecast assumptions for key macro-economic factors impacting upon the cash flow forecasts of investments such as inflation rates and deposit rates, based on market data, publicly available economic forecasts and long-term historical averages, and adjusts for any enacted changes in taxation rates during the reporting period. In addition, the Company exercises its judgement in assessing the expected future cash flows from each investment based on the detailed financial models produced by each Portfolio Company, adjusting these financial models where necessary to reflect the Company's assumptions as well as any specific cash flow assumptions. The Company's valuation is a sum-of-the-parts valuation with no further adjustments made to reflect scale, scarcity or diversification of the overall portfolio. 

The fair value for each investment is then derived from the application of an appropriate discount rate, alongside contracted foreign exchange rates, reporting period-end currency exchange rates and withholding taxes (as applicable). The discount rate considers risks associated with the investment, including the phase of the investment (construction, ramp-up or stable operation), investment-specific risks and opportunities, as well as country-specific factors. The Company uses its judgement in determining the appropriate discount rates. This judgement is based on its knowledge of the market, considering information obtained from its investment and bidding activities, benchmark analysis with comparable companies and sectors, discussions with advisers in the relevant markets and publicly available information. The valuation methodology remains unchanged from previous reporting periods.

A breakdown of the movements in the net asset value is shown in the table below.

NAV movement 31 December 2021 to 30 June 2022

The Company's net asset value at 30 June 2022 was £1,068.7 million (31 December 2021: £1,001.6 million), representing an increase of 6.7 per cent.

(i) These figures represent the net assets of the Group after excluding the investments at fair value through profit or loss ('Investments at FVPL'). Refer to the Pro Forma Balance Sheet in the Financial Results section of this Interim Report for further breakdown.

(ii) Refer to the Portfolio Review section of this Interim Report for further details on acquisitions during the year.

 (iii) While distributions from Investments at FVPL reduce the portfolio value, there is no impact on the Company's NAV as the effect of the reduction in the portfolio value is offset by the receipt of cash at the consolidated Group level. Distributions in the above graph are shown net of withholding tax.

(iv)  Portfolio Return comprises the unwinding of the discount rate, portfolio performance, the net effect of actual inflation, and updated operating assumptions to reflect current expectations.

 (v) Includes the net liability from balance sheet hedging of £12.7 million. Under IFRS, this net liability is recorded separately as a derivative financial liability in the Consolidated Statement of Financial Position. 

Key drivers for NAV change

The rebased opening portfolio value, after considering acquisitions in the reporting period of £23.6 million and cash distributions from investments of (£60.8) million was £938.0 million.

Portfolio Return comprises the unwinding of the discount rate, portfolio performance, the net effect of actual inflation, and updated operating assumptions:

During the period, the Company recognised £37.0 million, or a 3.7 per cent increase in NAV from the unwinding of discount rates, the net effect of actual inflation and portfolio performance to reflect current expectations based on the Company's hands-on active asset management. As the Company moves closer to forecasted investment distribution dates, the time value of those cash flows increases on a net present value basis and this effect is called unwinding.

Change in macro-economic assumptions:

During the period, the Company recognised an increase in the portfolio value of £31.3 million, or a 3.1 per cent increase in NAV, resulting from changes in the macro-economic assumptions. The main drivers are an increase in the short-term inflation and deposit rates, which were partially offset by a provision for additional Canadian taxes, likely to be realised based on the review of certain aspects of the current draft Canadian interest limitation rules[xvi].

Short-term inflation is forecast to remain at an elevated level and the Company believes it appropriate to incorporate two-year inflation forecast assumptions in our operational jurisdictions.

In total, the combined effect of revised short-term inflation forecasts and the update of actual inflation (included in Portfolio Return, above) resulted in a £47 million, or a 4.7 per cent increase in NAV, and this demonstrates the high-quality inflation-linkage of our investment proposition.

Foreign exchange:

The forecasted distributions from investments are converted to Sterling at either the hedged rate, for 100 per cent of cash flows forecast to be received over the next four years on an annual rolling basis, or at the closing rate for unhedged future cash flows.

A significant proportion of the Company's underlying investments are denominated in currencies other than Sterling. The Company maintains its accounts, prepares the valuation and pays dividends in Sterling. Accordingly, fluctuations in exchange rates between Sterling and the relevant local currencies will affect the value of the Company's underlying investments.

During the period ended 30 June 2022, the depreciation of Sterling against the Canadian Dollar, Australian Dollar, the Euro, and the US Dollar, and the appreciation of Sterling against the Norwegian Krone accounted for a net increase in the portfolio value of £32.4 million which includes the unrealised result from the Company's balance sheet hedging. Since IPO in December 2011, the net cumulative effect of foreign exchange movements on the portfolio value, after considering the effect of balance sheet hedging, has been an increase of £19.7 million, or 1.8 per cent of the 30 June 2022 NAV.

The table below shows those closing rates, which were used to convert unhedged future cash flows into the reporting currency at 30 June 2022.

Although the closing rate is the required conversion rate to use, it is not necessarily representative of future exchange rates as it reflects a specific point in time.

The Group uses forward currency swaps to (i) hedge 100 per cent of forecasted cash flows over the next four years on an annual rolling basis and (ii) to implement balance sheet hedging in order to limit the decrease in the NAV to approximately three per cent, for a ten per cent adverse movement in foreign exchange rates[xvii]. This is achieved by hedging a portion of the non-Sterling and non-Euro portfolio value[xviii]. The effect of the Company's hedging strategy can also be expressed as a theoretical or implicit portfolio allocation to Sterling exposure. In other words, on an unhedged basis, the portfolio allocation to Sterling exposure at 30 June 2022 would need to be approximately 70 per cent to obtain the same NAV sensitivity to a ten per cent adverse change in foreign exchange rates, as shown in the Foreign Exchange Sensitivity table below.

Macroeconomic events

The quality and security of portfolio cash flows has come into sharper focus given rising inflation globally. Against this backdrop, the Company is well-positioned through its high-quality inflation-linkage which is achieved through annually updated contractual indexation in the Company's project agreements.

The total effect of short-term inflation forecast and the update of actual inflation resulted in a £47 million, or a 4.7 per cent, increase in NAV, and this demonstrates the high-quality inflation-linkage of our investment proposition.

On the other hand, there has been no material adverse effect on the portfolio valuation resulting from COVID-19 or more recently the war in Ukraine. This strong portfolio performance is primarily as a result of the Company holding a low-risk, 100 per cent availability-style portfolio, coupled with strong stakeholder collaboration.

Discount rates

The market for availability-style transactions continues to be very competitive and discount rates have, based on our market observations, largely remained stable since December 2021. Investment demand in the availability-style social infrastructure sector remains elevated, whilst the supply of new greenfield infrastructure investments is not keeping pace.

Based on data from transactional activity, benchmark analysis with comparable companies and sectors, discussions with advisers in the relevant markets, and publicly available information, BBGI has maintained its weighted average discount rate at 6.55 per cent (31 December 2021: 6.55 per cent) which management believes to be towards the conservative end of the range for a portfolio of availability-style social infrastructure investments. This methodology calculates the weighted average based on the value of each investment in proportion to the total portfolio value i.e. based on the net present value of their respective future cash flows.

The discount rates used for individual investments range between 6.00 per cent and 8.55 per cent.

Specific discount rates consider risks associated with the investment including the phase the investment is in, such as construction, ramp-up or stable operation, investment-specific risks and opportunities as well as country-specific factors.

BBGI applies a risk premium for investments in construction to reflect the higher-risk inherent in the construction phase of any investment's lifecycle. Currently, the portfolio has one investment in construction, Highway 104, which represents c.0.5 per cent of the overall portfolio value. BBGI has also applied a risk premium to a limited number of other investments to reflect the individual situations. For example, adjustments have been applied to acute hospitals in the UK, where a risk premium of 50bps continues to be applied. The only UK acute hospital in the portfolio is Gloucester Royal Hospital, which represents less than 1.0 per cent of the overall NAV. The risk premium reflects the continued situation in the UK where some public health clients are under cost pressure and are actively looking for cost savings including deductions. To date, BBGI has not been affected.

While there is no direct correlation between government bond yields and the risk premium on the one hand and market discount rates on the other, the increase in 'risk-free' government bond yields could provide upward pressure on discount rates and BBGI will closely monitor future developments. To date, we have not observed any impact of increased interest rates on the discount rates.

Macro-economic assumptions

Apart from the discount rates, the Company uses the following assumptions ('Assumptions') for the cash flows:

(i) On the 25 November 2020, the UK Government announced the phasing out of RPI after 2030, and replacement with CPIH; the Company's UK portfolio indexation factor changes from RPI to CPIH beginning on 1 January 2031.

(ii) CPI indexation only. Where investments are subject to a basket of indices, a projection for non-CPI indices is used.

(iii) 80 per cent of Ohio River Bridges investment indexation factor for revenue is contractual and is not tied to CPI.

(iv) On 10 June 2021, the UK Government enacted an increase in the UK Corporate Tax rate to 25.0 per cent with effect from April 2023.

(v) Individual tax rates vary among Canadian Provinces: Alberta; Ontario, Quebec, Northwest Territory; Saskatchewan, British Columbia; New Brunswick.

(vi) Individual local trade tax rates are considered in addition to the tax rate above.

Sensitivities  

Discount rate sensitivity

The weighted average discount rate that is applied to the Company's portfolio of investments is the single most important judgement and variable.

The following table shows the sensitivity of the NAV to a change in the discount rate.

(i) Based on the weighted average rate of 6.55 per cent.

Inflation has increased in all jurisdictions across BBGI's geographies and interest rates have risen from historical lows. In the event long-term interest rates rise substantially further, this may have an effect on discount rates.

Combined sensitivity: inflation, deposit rates and discount rates

It is reasonable to assume if discount rates increase then deposit rates and inflation rates would also be affected. To illustrate the effect of this combined movement on the Company's NAV, a scenario was created assuming a one percentage point increase in the weighted average discount rate to 7.55 per cent, and a one percentage point increase in both deposit and inflation rates above the macro-economic assumptions.

Inflation sensitivity

The Company's investments are contractually entitled to receive availability-style revenue streams from public sector clients, which are adjusted every year for inflation. Facilities management subcontractors for accommodation investments and operating and maintenance subcontractors for transport investments have similar indexation arrangements. The portfolio cash flows are positively correlated with inflation (e.g. RPI, CPI, or a basket of indices).

This inflation-linkage is achieved through contractual indexation mechanics in the various project agreements with the public sector clients at the portfolio companies and the inflation adjustment updated at least annually.

The table below shows the sensitivity of the NAV to a change in inflation rates compared to the assumptions in the table above:

Foreign exchange sensitivity

As described above, a significant proportion of the Company's underlying investments are denominated in currencies other than Sterling.

The following table shows the sensitivity of the NAV to a change in foreign exchange rates:

(i) Sensitivity in comparison to the spot foreign exchange rates at 30 June 2022 and considering the contractual and natural hedges in place, derived by applying a 10 per cent increase or decrease to the Sterling/foreign currency rate.

Deposit rate sensitivity

Portfolio Companies typically have cash deposits that are required to be maintained as part of the senior debt funding requirements (e.g. six-month debt service reserve accounts and maintenance reserve accounts). The asset cash flows are positively correlated with the deposit rates.

The table below shows the sensitivity of the NAV to a percentage-point change in long-term deposit rates compared to the assumptions in the table above:

Lifecycle costs sensitivity

Lifecycle costs are the cost of planned interventions or replacing material parts of an asset to maintain it over the concession term. They involve larger items that are not covered by routine maintenance and, for roads, it will include items such as replacement of asphalt, rehabilitation of surfaces, or replacement of electromechanical equipment. Lifecycle obligations are generally passed down to the facility maintenance provider, with the exception of transportation investments, where these obligations are typically retained by the Portfolio Company.

Of the 55 investments in the portfolio at period-end, 19 investments retain the lifecycle obligations. The remaining 36 investments have this obligation passed down to the subcontractor.

The table below shows the sensitivity of the NAV to a change in lifecycle costs:

(i) Sensitivity applied to the 19 investments in the portfolio which retain the lifecycle obligation i.e. the obligation is not passed down to the subcontractor.

Corporate tax rate sensitivity

The profits of each Portfolio Company are subject to corporation tax in the country where the Portfolio Company is located.

The table below shows the sensitivity of the NAV to a change in corporate tax rates compared to the assumptions in the table above:

Refinancing: senior debt rate sensitivity

Assumptions are used where a refinancing of senior debt financing is required for an investment during the remaining investment concession term. There is a risk that such assumptions may not be achieved.

The table below shows the sensitivity of the NAV to a +100bps adjustment to the forecasted debt rate.

Gross Domestic Product ('GDP') sensitivity

The BBGI portfolio is not sensitive to GDP.

The principal risks faced by the Group and the mitigants in place are outlined in the Risk section

Key Portfolio Company and portfolio cash flow Assumptions underlying the NAV calculation include:

· Discount rates and the Assumptions, as set out above, continue to be applicable.

· The updated financial models used for the valuation accurately reflect the terms of all agreements relating to the Portfolio Companies and represent a fair and reasonable estimation of future cash flows accruing to the Portfolio Companies.

· Cash flows from and to the Portfolio Companies are received and made at the times anticipated.

· Non-UK investments are valued in local currency and converted to Sterling at either the period-end spot exchange rates or the contracted hedge rate.

· Where the operating costs of the Portfolio Companies are contractually fixed, such contracts are performed, and where such costs are not fixed, they remain within the current forecasts in the valuation models.

· Where lifecycle costs/risks are borne by the Portfolio Companies, they remain in line with the current forecasts in the valuation models.

· Contractual payments to the Portfolio Companies remain on track and contracts with public sector or public sector backed counterparties are not terminated before their contractual expiry date.

· Any deductions or abatements during the operations period of Portfolio Companies are passed down to subcontractors under contractual arrangements or are part of the planned (lifecycle) forecasts.

· Changes to the concession period for certain investments are realised.

· In cases where the Portfolio Companies have contracts which are in the construction phase, they are either completed on time or any delay costs are borne by the construction contractors.

· Enacted tax or regulatory changes on or prior to this reporting period-end with a future effect impacting cash flow forecasts, are reflected in the financial models. 

In forming the above assessments, BBGI works with Portfolio Company management teams, as well as using due diligence information from, or working with, suitably qualified third parties such as technical, legal, tax and insurance advisers.

FINANCIAL RESULTS

BASIS OF ACCOUNTING

The Group has prepared its Condensed Consolidated Interim Financial Statements in accordance with International Financial Reporting Standards ('IFRS') as adopted by the European Union ('EU'). In accordance with IFRS, the Company qualifies as an Investment Entity and, as such, does not consolidate its investments in subsidiaries that qualify as investments at fair value through profit or loss ('Investments at FVPL'). Certain subsidiaries that are not Investments at FVPL, but instead provide investment-related services or activities that relate to the investment activities of the Group, are consolidated. As an Investment Entity, the Company recognises distributions from Investments at FVPL as a reduction in their carrying value. These distributions reduce the estimated future cash flows which are used to determine the fair value of the Investments at FVPL.

INCOME AND COSTS

During the six-month period, the Group recognised a FVPL income of £100.4 million (30 June 2021: £32.6 million). This FVPL income is made up of a combination of the net positive effect of unwinding of the discount rate, the net effect of actual inflation on portfolio performance, the updated operating assumptions to reflect current expectations, the impact of changes in market discount rates, the change in macro-economic assumptions and the impact of foreign exchange movements on the portfolio value. Further detail on the components of FVPL income are provided in the Valuation section of this Report.

During the reporting period, the Company recognised a net loss of £13.6 million on balance sheet hedging and £14.1 million on cash flow hedging (30 June 2021: £0.3 million net gain on balance sheet hedging and £0.4 million net gain on cash flow hedging). For pro forma purposes the net result of balance sheet and cash flow hedging is included in the income from Investments at FVPL.

Administrative expenses include personnel expenses, legal and professional fees and office and administration expenses. See further detail in the Group Level Corporate Cost analysis.

Profit from continuing operations for the six-month period increased exceptionally by 273.0 per cent to £92.5 million (30 June 2021: £24.8 million).

Group Level Corporate Cost Analysis

The table below is prepared on an accrual basis.

The net finance result for the six-month period was £0.9 million (30 June 2021: £0.8 million) and reflects borrowing costs, commitment fees and other fees relating to the Group's RCF. At 30 June 2022, the Group had £10 million of borrowings outstanding under the RCF.

Personnel expenses for the six-month period were £3.7 million (30 June 2021: £3.3 million) with the increase driven largely by inflation adjustments to staff salaries. 

Acquisition-related costs incurred during the six-month period amounted to £0.4 million (30 June 2021: £1.3 million), which include unsuccessful bid costs amounting to less than £0.1 million (30 June 2021: £0.7 million).

Ongoing charges

Based on costs incurred to 30 June 2022, the Company's estimated annualised Ongoing Charges ('OGC') percentage at 30 June 2022 is 0.86 per cent (31 December 2021: 0.86 per cent).

The estimated annualised OGC percentage is prepared in accordance with the Association of Investment Companies ('AIC') recommended methodology[xix]. The percentage represents the annualised reduction or drag on shareholder returns as a result of recurring operational expenses incurred in managing the Group's consolidated entities and provides an indication of the level of recurring costs likely to be incurred in managing the Group in the future.

In accordance with the AIC recommended methodology, fees that are linked to investment performance could be viewed as analogous to performance fees paid by externally managed investment companies and should therefore be excluded from the principal OGC calculation.

Annualised fees directly linked to investment performance as a percentage of average NAV are estimated to be 0.1 per cent. Combined therefore, the estimated annualised aggregate of Ongoing Charges plus investment performance fees is 0.96 per cent.

Cash flows

The table below summarises the sources and uses of cash and cash equivalents for the Group.

(i) These distributions are shown gross of withholding tax. The associated withholding tax outflow is included in 'Net cash flows used in operating activities'.

The performance of the Group's portfolio of investments continued to be strong during the six-month period, with gross distributions coming in ahead of business plan, up 44.8 per cent on a comparative basis.

Cash dividends paid during the six months ended 30 June 2022 amounted to £25.1 million, an increase of £1.8 million on the comparative six months ended to 30 June 2021.

Refer to the Condensed Consolidated Interim Statement of Cash Flows for further details on cash flows during the six months ended 30 June 2022.

For the six months ended 30 June 2022, the Group achieved a cash dividend cover ratio of 2.03x (period ended 30 June 2021: 1.55x) calculated as follows:

The strong cash dividend coverage for the period was underpinned by BBGI's high-quality, contracted, inflation linked cash flows. Cash dividend cover for FY 2022 is currently forecast to be in the range of 1.4x to 1.5x. The drop off in coverage is largely due to a front-ended portfolio distribution profile in 2022. Furthermore, the Company received additional distributions during the reporting period that were outside of the contracted cash flows, including the proceeds from the completion of an opportunistic refinancing and a tax refund.

The Company has reaffirmed the target dividend of 7.63pps for 2023 and 7.78pps for 2024.

As at 30 June 2022, the Group has 55 availability-style Investments at FVPL (31 December 2021: 54).

As at 30 June 2022, cash and cash equivalents amounted to £40.2 million (£26.9 million as at 31 December 2021).

A reconciliation of net cash as compared to net borrowings is as follows:

The Investment Basis NAV increased by 6.70 per cent to £1,068.7 million at 30 June 2022 (31 December 2021: £1,001.6 million) or by 6.5 per cent on an Investment Basis NAV per share compare to the 2021 period. The Investment Basis NAV per share is the Investment Basis NAV divided by the number of Company shares issued and outstanding at the end of the reporting period. This information presents the residual claim of each shareholder to the net assets of the Group.

ALTERNATIVE PERFORMANCE MEASURES ('APM')

APM is understood as a financial measure of historical or future financial performance, financial position, or cash flows, other than a financial measure defined or specified under IFRS. The Group reports a selection of APM as summarised in the table below and as used throughout this Interim Report. The Management Board believe that these APM provide additional information that may be useful to the users of this Interim Report.

The APM presented here should supplement the information presented in the Financial Statement section of this Interim Report. The APM used are not measures of performance or liquidity under IFRS and should not be considered in isolation or as a substitute for measures of profit, or as an indicator of the Group's operating performance or cash flows from operating activities, as determined in accordance with IFRS.

Reconciliation of Investment Basis to IFRS

Reconciliation of Consolidated Income Statement

Reconciliation of Consolidated Statement of Financial Position

(i)Represents the value of the Group's total net assets under the Investment Basis NAV. The Investment Basis NAV represents the residual interest of the shareholders in the Group, after all the liabilities of the Group, if any, have been settled.

RISK

The Company follows a risk-based approach to internal controls. The Company's Risk Management Function facilitates the Management Board's duty to effectively govern and manage risks facing the Company. Given the nature of its assets and its interaction with the capital markets, the Company does not operate in a risk-free environment. In an uncertain environment, proactive action is required to address risks to achieve business and investment objectives.

All material risks are identified, analysed, assessed, reported, and managed. Risks to the Company are identified as early as possible to minimise their impact and are classified according to the following risk categories:

· Market risks;

· Credit risks;

· Counterparty risks;

· Liquidity risks;

· Operational risks;

· Sustainability risks.

All identified risks are analysed during the risk reporting process to identify the range of possible impacts on the Company. A review is undertaken to determine which risks are the material risks to pursue and respond to, and which risks require no further attention. This gives the Management Board a universal interpretation of risk. The Risk Management Function performs a risk assessment to determine the likelihood that a predefined event will occur and the impact it would have. This includes an estimation of the levels of risks involved in a particular situation, their comparison against benchmarks or standards, and determination of an acceptable level of risk.

In the Risk Profile all identified risks are classified according to the risk type, in line with the risk categories defined above. For the material risks identified, the Company's Risk Manager advises on the key risk indicators to be included in the Risk Profile and suggests appropriate quantitative and qualitative limits to mitigate the potential impact of those risks, which are discussed and approved by the Management Board before being formally included in the Risk Profile.

The inherent risk has been assessed and relevant mitigating factors been applied, to arrive at a remaining residual risk, which has been deemed manageable and acceptable by the Management Board.

This following section provides a summary of the assessment of the Company's material risks. This is not intended to be an exhaustive list of all the potential risks to the business. There may be other risks that are currently unknown or regarded as less material, which could turn out to materially impact the performance of the Company, its assets, capital resources and reputation. Where the Company has applied mitigation processes, it is unlikely that the techniques applied will mitigate the risk entirely.

Report on Review of Condensed Consolidated Interim Financial Statements

To the Management Board of

We have reviewed the accompanying condensed consolidated interim financial statements of BBGI Global Infrastructure S.A. and its subsidiaries (the "Group"), which comprise the condensed consolidated interim statement of the of financial position as at 30 June 2022, and the condensed consolidated interim income statement, the condensed consolidated interim statement of other comprehensive income, the condensed consolidated interim statement of changes in equity and the condensed consolidated interim statement of cash flows for the six-month period then ended, and a summary of significant accounting policies and other explanatory information.

The Management Board is responsible for the preparation and presentation of these condensed consolidated interim financial statements in accordance with IAS 34, "Interim Financial Reporting" as adopted by the European Union, and for such internal control as the Management Board determines is necessary to enable the preparation of condensed interim financial statements that are free from material misstatement, whether due to fraud or error.

Our responsibility is to express a conclusion on these condensed consolidated interim financial statements based on our review. We conducted our review in accordance with International Standard on Review Engagements (ISRE 2410 "Review of interim financial information performed by the independent auditor of the entity") as adopted for Luxembourg by the "Institut des Réviseurs d'Entreprises". This standard requires us to comply with relevant ethical requirements and conclude whether anything has come to our attention that causes us to believe that the condensed consolidated interim financial statements, taken as a whole, are not prepared in all material respects in accordance with the applicable financial reporting framework.

A review of condensed consolidated interim financial statements in accordance with ISRE 2410 is a limited assurance engagement. The "Réviseur d'entreprises agréé" performs procedures, primarily consisting of making inquiries of management and others within the Company, as appropriate, and applying analytical procedures, and evaluates the evidence obtained.

The procedures performed in a review are substantially less than those performed in an audit conducted in accordance with International Standards on Auditing. Accordingly, we do not express an audit opinion on these condensed consolidated interim financial statements.

Based on our review, nothing has come to our attention that causes us to believe that the accompanying condensed consolidated interim financial statements are not prepared, in all material respects, in accordance with IAS 34, "Interim Financial Reporting" as adopted by the European Union.

PricewaterhouseCoopers, Société coopérative Luxembourg, 30 August 2022

Represented by

Emanuela Sardi

Condensed Consolidated Interim Income Statement (Unaudited)

For the six months ended 30 June 2022

The accompanying notes form an integral part of the unaudited condensed consolidated interim financial statements.

Condensed Consolidated Interim Statement of Other

Comprehensive Income (Unaudited)

For the six months ended 30 June 2022