ANNUAL REPORT
for the period 8 January 2021
to 31 December 2021
COMPANY OVERVIEW
Page
Who We Are
6
What We Do
7
Key Highlights
10
STRATEGIC REPORT
Chair’s Statement
14
Strategy and Business Model
21
The Strategy in Practice: Verne Global
32
Key Performance Indicators
38
Investment Manager’s Report
40
The Investment Manager
46
Sustainability Report
48
Section 172(1) Statement
66
Risk Management
70
Going Concern and Viability
78
Board Approval of the Strategic Report
79
GOVERNANCE
Chair’s Introduction
82
Board of Directors
83
Corporate Governance
86
Audit Committee Report
90
Management Engagement Committee Report
95
Nomination Committee Report
97
Risk Committee Report
100
Directors’ Remuneration Report
101
Directors’ Report
107
Directors’ Responsibilities Statement
111
Independent Auditor’s Report
112
PwC Limited Assurance Report
120
FINANCIAL STATEMENTS
Statement of Comprehensive Income
126
Statement of Financial Position
127
Statement of Changes in Equity
128
Statement of Cash Flows
129
Notes to the Financial Statements
130
Unaudited Alternative Performance Measures
149
INFORMATION
Glossary and Definitions
154
Shareholder Information
156
Forward Looking Statements
157
Annex 1 - Reporting Principles and Methodologies
158
Annex 2 - TCFD Disclosure
160
Company
Overview
WHO WE ARE
Digital 9 Infrastructure plc (Ticker: DGI9) (“D9” or
the “Company”) is helping to bring people closer
together by meeting the global demand for improved
speed, reliability, accessibility and learning from data.
By investing in critical Digital Infrastructure, including
subsea cables and data centres, D9 drives our
interconnected world, promoting economic growth and
sustainable development – all whilst targeting recurring
income and capital growth for investors.
Our purpose-driven investment strategy targets the
provision of key infrastructure for data transfer and
data storage around the world, helping to address
burgeoning demand for global digital communications.
Our focus is to provide Digital Infrastructure that
leverages
greener, cleaner power in line with the
UN’s Sustainable Development Goal 9 (“SDG9”):
“Build resilient infrastructure, promote inclusive and
sustainable industrialization and foster innovation”.
SDG9 encourages nations and firms alike to reduce the
global digital divide by increasing access to information
and communications technology, while at the same time
decarbonising Digital Infrastructure energy usage.
Digital 9 Infrastructure plc
Page 6
WHAT WE DO
We seek to improve the accessibility
of reliable, functional internet to
billions of people worldwide –
including developing countries.
The assets we invest in typically
comprise of future proofed, scalable
platforms and technologies that
facilitate communications, data
transfer, interconnectivity and data
storage. These assets come from the
following sectors:
•
Data centres;
•
Subsea fibre optic networks;
•
Terrestrial fibre optic networks;
and
•
Wireless networks.
Our primary focus is Digital
Infrastructure investments that
are already operational. These
investments typically have secured
medium to long-term contracts that
are underpinned by investment
grade counterparties or from a
diversified portfolio of shorter-
term contracts providing essential
underlying services. We expect
target acquisitions to have high
cash flow visibility and resilience
embedded in their business models.
Where suitable opportunities
arise, we may provide limited
funding during the construction or
development phase of an asset,
in particular. This would be on
a forward funding basis where
development risk for D9 is limited,
subject to certain restrictions.
Closing the digital divide:
The internet is the lifeblood
of the future. We are leading
the way in carrier neutral
connectivity globally and
democratising access to critical
digital infrastructure.
Connecting the world:
As a major partner to the
world’s most connected
companies, we’re creating
a unique, interconnected
ecosystem that is bringing
people together and helping to
change lives on a global scale.
Fuelling a better,
cleaner future:
Our open-access, clean-
connectivity platforms harvest
renewable energy to provide
a more sustainable solution to
exponential growth in global
data demand.
Levelling up all
stakeholders:
Our team shares one core
ambition: to empower societies,
unleash economies, and connect
investors to cutting edge
opportunities that deliver stable
income and capital growth.
Accelerating progress:
We are engaging global
stakeholders on the urgent
need for a cleaner solution,
spearheading urgent change in
one of the world’s most energy
intensive industries.
Digital 9 Infrastructure plc
Page 7
Access to the internet has become a fundamental human right
in the twenty-first century; and yet nearly 3 billion people –
overwhelmingly in developing countries – lack access altogether.
CRITICAL GLOBAL INFRASTRUCTURE FOR OUR CONNECTED
WORLD
Digital 9 Infrastructure plc
Page 8
•
Backbone of the internet
•
98%
of the world’s data is carried by subsea cables
•
40%
shortfall in transatlantic subsea capacity by 2026
1
SUBSEA
FIBRE
•
Only
15%
of households in the UK currently benefit
from Fibre To The Home (FTTH) capability
•
The government is targeting
85%
of households to have
fibre access by 2025, providing the foundations for
substantial growth
TERRESTRIAL
FIBRE
•
c.80%
of online time is now mobile – increased by
c.380% over the last decade
•
$800 billion
in 5G investment is required
•
Only
10%
of enterprise IT spending has moved to the
cloud with $600 billion a year still to move
2
•
Over
1.1 million
GB per second of data will be created
by 2024
3
DATA
CENTRES
1
TeleGeography Bandwidth Demand in Pandemic
2
Gartner Big Clouds Ahead
3
Data Gravity Index 2020
WIRELESS
NETWORKS
Digital 9 Infrastructure plc
Page 9
£38 million
1.04%
PROFIT BEFORE TAX
ONGOING CHARGES RATIO
4
The profit before tax was £38 million for
the period ended 31 December 2021.
The ongoing charges ratio was 1.04% as at 31 December 2021 and
is a ratio of annualised ongoing charges expressed as a percentage
of average NAV from 31 March 2021 to 31 December 2021.
£746 million
IFRS INVESTMENT VALUATION
Portfolio valued at £746 million on an
IFRS basis as at 31 December 2021.
6.0 pence annualised
DIVIDEND PER ORDINARY SHARE
Dividends declared in respect of the period from 31 March 2021
to 31 December 2021 totalled 4.5 pence per share, in line with the
Company’s 6.0 pence per annum target.
9.77 pence
EARNINGS PER SHARE
Earnings per share for the period to
31 December 2021 were 9.77 pence. EPS
is based on earnings and including the fair
value gain on investments, calculated on
the weighted average number of shares in
issue during the period.
104.62 pence
per share
IFRS NET ASSET VALUE
The NAV as at 31 December 2021 was
104.62 pence per share.
4
Alternative Performance Measure
Digital 9 Infrastructure plc
Page 10
KEY HIGHLIGHTS
£822 million
MARKET CAPITALISATION
POST BALANCE
SHEET ACTIVITY
16.94% or
23.08% annualised
TOTAL SHAREHOLDER RETURN
4
A measure of the return based upon share price movements
over the period and assuming reinvestment of dividends.
On a share price performance basis, Total Shareholder Return
since IPO was 16.94%, which represents the increase in share
price to 31 December 2021. This equates to an annualised
Total Shareholder Return of 23.08%.
The Total Shareholder Return calculation takes into account the
Dividend per Ordinary Share paid to shareholders since IPO.
CAPITAL RAISED
In January 2022, the
Company raised gross
proceeds of £95.2 million at
an issue price of 108 pence
per share.
In March 2022, the Company
completed on a new
syndicated revolving credit
facility (“RCF”) for £300
million, led by Royal Bank
of Scotland International,
including DNB (UK) Limited,
Royal Bank of Canada and
Banco Santander. The RCF will
be used by the Company to
finance acquisitions on a short-
term basis.
DEPLOYMENT
In January 2022, the
Company announced a
follow up investment of $93
million into Verne to expand
capacity on the data centre
campus to 40MW.
9.82%, or
13.09% annualised
TOTAL RETURN
On a NAV performance basis, Total Return since IPO was
9.82%, which represents the increase in NAV and dividends
paid per share for the period from IPO to 31 December
2021. This equates to an annualised Total Return of
13.09%.
Market capitalisation
of £822 million as at
31 December 2021.
EQUITY RAISED
The IPO in March 2021 raised gross proceeds of
£300 million at an issue price of 100 pence per
share. A second fundraise in June 2021 raised
gross proceeds of £175 million at an issue price
of 105 pence per share and a third fundraise in
September 2021 raised gross proceeds of £275
million at an issue price of 107.5 pence per share.
£750 million
£462 million
(including committed funds)
CAPITAL DEPLOYED
4
Deployment, including committed
funds, was £462 million as at
31 December 2021.
Digital 9 Infrastructure plc
Page 11
Strategic
Report
CHAIR’S STATEMENT
Introduction
I am pleased to present the Company’s first annual report, for the period
from its incorporation on 8 January 2021 to 31 December 2021. Since our
admission to the Specialist Fund Segment of the Main Market of the London
Stock Exchange on 31 March 2021, the Group has made strong progress
including two subsequent fundraises in June 2021 and September 2021,
followed by a further fundraise in January 2022, raising total gross proceeds
of £845.2 million. In addition to this, we have put in place a £300 million
revolving credit facility, which puts us in a strong position to act decisively
when securing transactions. We have been busy implementing our strategy
of investing into a range of Digital Infrastructure investments which provide
key infrastructure for global data transfer and data storage and support
global digital communication. We would like to thank shareholders for their
support, without which the successes we have achieved during this period
would not have been possible.
Jack Waters
Chair
Digital 9 Infrastructure plc
Page 14
Investment Activity
These fund raises have enabled D9
to make the following investments
since IPO.
Aqua Comms
A leading owner and operator
of 20,000km of modern subsea
fibre systems, with a customer
base comprising hyperscalers
and global carriers (April 2021,
£170 million);
EMIC-1
A partnership with Meta on a new
10,000km 2Africa Pearls fibre
system linking Europe to India
(July 2021, £22 million initially,
potentially rising to £50 million);
Verne Global
The leading Icelandic data centre
platform, delivering 24MW of
high intensity computing solutions
to its enterprise customers
in a geographically optimal
environment, powered by 100%
renewable power for its regular
operational load, making it one
of the most efficient data centres
in Europe (September 2021,
£231 million);
SeaEdge UK1
A data centre and the UK’s only
landing station for the North
Sea Connect subsea cable,
which improves connectivity in
northern England and forms part
of the North Atlantic Loop subsea
network, which includes D9’s Aqua
Comms’ AEC-1 and AEC-2 cables.
(December 2021, £15 million).
Aside from acquisitions, D9 has also
committed to deploy further cash
into two of its growth platforms,
Aqua Comms and Verne Global.
In January 2022, D9 announced a
follow-on investment of $93 million
(£71 million) in Verne Global over
the next 12 months to fund the
expansion of capacity by a further
20.7MW in response to accelerated
customer demand from new and
existing customers. This will take
total capacity at Verne Global to
approximately 40MW out of a
possible 100MW on the existing
campus. We are also expecting
Aqua Comms to launch the AEC-
3 subsea fibre cable, providing
connectivity from the US to the
UK, adding further resilience to its
existing transatlantic AEC-1 and
AEC-2 fibre network links.
The Company’s intercontinental
reach is illustrated in the map below.
Digital 9 Infrastructure plc
Page 15
Spain
Portugal
France
Ireland
United
Kingdom
North
Sea
Denmark
Netherlands
Belgium
Germany
Czechia
Poland
Austria
Italy
Tyrrhenian
Sea
Algeria
Morocco
Guinea
Tunisia
Libya
Egypt
Sudan
Ethiopia
Eritrea
Somalia
Kenya
Central
African
Republic
Nigeria
Faso
Ghana
Benin
Saudi Arabia
Jordan
Israel
Lebanon
Syria
Mediterranean Sea
Greece
Bulgaria
Serbia
Croatia
Hungary
Slovakia
Romania
Moldova
Ukraine
Belarus
Lithuania
Latvia
Estonia
Turkey
Black Sea
Iran
Iraq
Azerbaijan
Georgia
Turkmenistan
Uzbekistan
Kazakhstan
Caspian
Sea
Russia
Kyrgyzstan
Tajikistan
Afghanistan
Pakistan
India
Nepal
Bangladesh
Bhutan
China
Mongolia
Myanmar
(Burma)
Thailand
Laos
Oman
Yemen
United Arab
Emirates
Persian Gulf
Arabian Sea
Sri Lanka
Bay of Bengal
Chad
Gulf of Aden
Red Sea
EMIC-1
Part of the 2Africa Pearls
system developed by
Asset: EMIC-1
Investment: £50m
Location: Global
IPO pipeline asset?: Yes
ASSET INVESTMENT 2:
SUBSEA & TERRESTRIAL FIBRE
Ireland
United
Kingdom
CC-2
NSC
AEC-2
Developed in
partnership with:
AEC-1
CC-1
AEC-3
Developed alongside:
Denmark
North Sea
Norway
Iceland
Labrador Sea
Hudson Bay
North
Atlantic
Ocean
Netherlands
Germany
Belgium
France
Portugal
Spain
Italy
Austria
Asset: Aqua Comms
Investment: £170m
Location: US, Europe
IPO pipeline asset?: Yes
ASSET INVESTMENT 1:
SUBSEA FIBRE
Asset: Verne Global
Investment: £231m
Location: Nordics
IPO pipeline asset?: Yes
ASSET INVESTMENT 3:
DATA CENTRE
Ireland
United
Kingdom
CC-2
NSC
AEC-1
CC-1
Denm
North Sea
Netherlands
Ge
Asset: SeaEdge UK1
Investment: £15m
Location: UK
IPO pipeline asset?: Yes
ASSET INVESTMENT 4:
DATA CENTRE
PORTFOLIO LOCATIONS
PROVIDING THE BACKBONE TO THE INTERNET IN THE NORTHERN HEMISPHERE
Digital 9 Infrastructure plc
Page 16
PORTFOLIO
Digital 9 Infrastructure plc
Page 17
CHAIR’S STATEMENT
Investment Performance
Aqua Comms
Aqua Comms finished 2021 with
revenues of $32.7 million, a 10%
uplift on 2020. We are forecasting a
steady 10% growth over the coming
years. During 2021, Aqua Comms also
paid its first dividends of $4 million,
following a capital reduction and
restructure of shares after acquisition
by D9.
Operational highlights during the year
included:
•
In March, Aqua Comms upgraded its
two transatlantic subsea cables (AEC-
1 and AEC-2) with Ciena’s GeoMesh
Extreme solution. This allows us to
deliver 400GB wavelength services
across both systems. It reduces the
number of circuit ports and cross
connects needed to support our
customers network platforms driving
efficiencies for our customers. Further
to this collaboration in May Aqua
Comms and Telia Carrier (now Arelion)
completed a trial 400GbE commercial
service between New York and Frankfurt.
This was the first time ever this has been
done commercially in the world.
•
In July, D9 invested in the 2Africa
Pearls/EMIC-1 system. Aqua Comms
has been appointed to manage and
develop this investment for D9 as
part of its network.
•
In December, we completed the final
splice on the Havhingsten system.
This system comprises of two cables:
CeltixConnect-2, from Dublin to
Blackpool, including Isle of Man;
and NorthSeaConnect-1, connecting
Newcastle UK to Houstrup Denmark.
These have gone live in Q1 2022.
The NorthSeaConnect-1 cable lands
in D9’s SeaEdge UK1 landing station
data centre.
•
Aqua Comms professional services
revenues increased 58% year over
year with a number of new contracts
signed during 2021.
•
Aqua Comms has begun
augmenting its FTE base to deliver
the growth ambition of the company.
The company is now 29 members
strong, growing to 30 by the end
of 2022. This will reduce business
continuity risk.
Looking ahead, in 2022, customer
pipeline development remains the
biggest management priority. We are
actively working towards presales on
the EMIC-1 and AEC-3 routes, and
large capacity sales on Havhingsten
while continuing to grow the customer
base on the existing Atlantic network
EMIC-1
We have committed £22 million with
potential for up to £50 million to the
development of the EMIC-1 subsea
cable, expected to be ready for sale
by the end of 2023. Construction on
the cable system and negotiations with
the various stakeholders along the
route are on time and on budget.
Verne Global
Verne Global outperformed its budgets
in 2021, with revenues growing 80%
to $37.8 million and EBITDA rising to
$22 million, with a margin of just under
60%. Verne Global is now at a c.15x
EBITDA multiple, compared to the 20x
paid on acquisition in September 2021.
Verne Global has already booked its
remaining built capacity, leading to
D9’s $93 million follow-on investment in
January 2022. This will increase capacity
to 40MW out of a possible 100MW on
the campus. Once this expansion is
complete and sold, the effective EBITDA
multiple will reduce to below 9x. We
are delighted to have added such an
outstanding team and excellent asset
at a competitive price, an asset which
is closely aligned to our wider strategy
and ambitions.
Other highlights during the year
included:
•
Wirth Research, a leading
Computational Fluid Dynamics
consultancy, has relocated its
supercomputer to Verne Global’s
campus, which enables them to analyse
and optimise the performance of
designs for its industry customers at
zero carbon cost.
•
Verne Global and Sensa have
partnered to provide organisations
with access to a comprehensive
range of sustainable NVIDIA DGX-
Ready colocation services. Peptone,
the molecular computational physics
company has elected to colocate and
install a NVIDIA DGX A100 system at
Verne Global’s campus as it is powered
by 100% renewable energy.
SeaEdge UK1
D9 owns the underlying real estate
of the SeaEdge UK1 (also known as
Stellium DC1) data centre asset and
subsea fibre landing station, located
on the UK’s largest purpose-built data
centre campus in Newcastle. The asset
is leased on fully repairing and insuring
terms to the tenant and operator,
Stellium Data Centres Limited, via a 25-
year occupational lease. The operator
is up to date with all payments under
the triple-net lease, delivering on D9’s
target yield at acquisition.
Page 18
Digital 9 Infrastructure plc
Customer Breakdown – Resilience in Income Streams
Through the acquisition of Aqua Comms, Verne Global
and SeaEdge UK1, D9 has grown its end customer base.
Careful consideration is given to the contract stacks
before acquiring an asset, particularly the underlying
customer mix. D9 targets assets with high revenue
visibility from customers across a wide array of sector,
offering resilient income with inflation protections in
place.
Across its investments, D9 has a total of 95 customers
generating an estimated recurring monthly revenue of
£3.6 million, not including one-off payments, of which
global tech giants (e.g. FAANGs plus Microsoft) make up
35%. In terms of customer concentration, the customer
mix is as follows for the top revenue generating
customers across the platform.
Financial Results
The NAV per share was 104.62 pence at 31 December
2021. The portfolio, consisting of four investments
held via the Company’s subsidiaries, was valued at
£487 million as at 31 December 2021 and the Company
and its subsidiaries held cash of £259 million at the
reporting date.
D9 made a profit before tax of £38.3 million for the
period, equal to 9.77 pence per share calculated on the
weighted average number of shares in issue during the
period. This was the net result of income received from
investments acquired and revaluation gain arising on the
investments held at fair value through profit or loss as at
31 December 2021.
The Company’s annualised ongoing charges ratio
(“OCR”) was 1.04%. We expect the OCR to increase
proportionately in line with the operational costs of
the Company as funds are deployed. The Board will
continue to monitor the OCR closely as we seek to grow
D9 and deliver value to our shareholders.
Share Price and Distributions
Our share price has performed well since IPO and
maintained a healthy premium to NAV, reflective of our
strong shareholder base since we launched in March
2021. We continue to believe there is a significant
market opportunity for Digital Infrastructure investments
and are confident that delivering on our outlined
strategy will continue to support our share price
performance.
The Board anticipates paying quarterly interim
dividends, targeting a total annualised dividend of
6 pence per share
underpinned by robust long-term
contractual payments. We are pleased to report that we
have declared dividends totalling 4.5 pence per share for
the nine month period from IPO to 31 December 2021,
in line with our target. The Company will seek to adopt a
progressive dividend policy.
CUSTOMER BY REVENUE
MONTHLY RECURRING
REVENUE (“MRR”) GBP 000
% OF TOTAL MRR
Top 5
1,865
52%
Top 10
2,528
71%
Top 20
2,993
84%
Digital 9 Infrastructure plc
Page 19
CHAIR’S STATEMENT
Environmental, Social
and Governance
The Board recognise that Digital
Infrastructure is critical to a future
sustainable economy, but in order to
fulfil its role, the infrastructure developed
must have ESG considerations at its core.
Our Investment Manager has long been
committed to responsible investment
and to offering strategies which help
solve problems that society faces, while
creating opportunities for investors. In
alignment with this position, D9’s purpose
driven strategy is closely aligned with
Sustainable Development Goal 9 and takes
a structured and material approach to ESG
integration throughout the investment
decision making process and throughout
asset ownership.
More information can be found in our
sustainability report on pages 64 to 65.
Director Changes
As previously announced, as a result of
having been offered the Chief Executive
Officer role at a new, US based digital
infrastructure operating company, I will not
be standing for election at the Company’s
2022 Annual General Meeting. It has been
a privilege to chair the Board of D9 in this
first year since its inception and to have
seen it grow to a billion dollar investment
company in less than 12 months. I am
sorry to be departing from the Company
so soon but I leave knowing that, as D9
embarks on its second year of operation,
it has a strong pipeline of investment
opportunities coupled with the financial
capacity to execute on those transactions.
The Board, led by Lisa Harrington, Chair
of the Nomination Committee, have
undertaken a robust succession exercise
and we are pleased to have identified
Phil Jordan as my successor. Phil has
a successful track record in the digital
infrastructure and technology sectors, both
in an executive and non-executive capacity.
Phil’s executive career includes country,
regional and group Chief Information
Officer roles, including spending over
10 years at Vodafone, over seven years
with Telefonica, where in addition to the
Group CIO role, he was CEO and the Chair
of Telefonica Global Technology. He is
currently Group CIO of Sainsbury’s, a role
he has held for over four years. He has also
acted as a non-executive industry adviser
to HSBC and was a non-executive director
of Talk Talk Telecom Group PLC until it was
taken private in 2021. Phil will be appointed
as Chair with effect from 23 May 2022,
following the conclusion of the Annual
General Meeting, following an induction
period and completion of the standard
Jersey regulatory confirmations.
I am delighted that Phil will be joining the
Board as my successor and I believe that his
background, skills and enthusiasm will serve
the Company and investors well for what, I
trust, will be an equally exciting future.
Additionally, we are pleased to report that
Aaron Le Cornu will be appointed as a
Non-Executive Director with effect from 1
April 2022, following an induction period
and completion of the standard Jersey
regulatory confirmations. Aaron, who is
based in Jersey, has been appointed as
a replacement for Monique O’Keefe who
has informed the Board of her intention to
step down from her role as a Director to
pursue a senior executive role limiting her
ability to hold non-executive positions. As
a result, she will also not be standing for
re-election at the AGM.
Aaron comes from a financial background.
Having qualified as a Chartered Accountant
with Arthur Andersen in London, he worked
for HSBC for over 10 years. During his
time with HSBC, he held several board
positions for HSBC subsidiaries, including
as Deputy CEO for HSBC International and
was also involved in acquisitions such as the
purchase of Marks & Spencer Money. He
has since held a number of senior executive
roles including at Ogier (offshore legal and
fiduciary services provider), Elian (a fiduciary
firm headquartered in Jersey) and, latterly, at
GLI Finance, an alternative finance provider
and strategic investor in numerous fintech
platforms. Aaron is currently the Chair of
the Aberdeen Standard Capital Offshore
Strategy Fund Ltd. He also served as a non-
executive director for Jersey Electricity plc,
having stepped down in 2021 after 10 years
on the Board.
I am also pleased to welcome Aaron as a
Non-Executive Director, who will bring his
considerable experience across finance,
M&A, ESG and risk management to Board
discussions. On behalf of the Board, I wish
Monique well in her new role and thank her
for her valuable contribution to the Board
to date.
Further detail regarding the process
undertaken, can be found in the
Nomination Committee Report on pages
97 to 99.
Outlook
The deeply distressing events unfolding in
Ukraine have far-reaching implications for
the world, the economy and capital markets.
Whilst the full impact of the conflict is yet
to be fully understood, the potential to fuel
increased inflation globally is highly probable.
We believe that the quality and growth of
our portfolio companies positions D9 well to
mitigate the wider economic impact of the
conflict. To be clear, D9 has no exposure to
Russia or eastern European territories. Our
currency exposure is primarily to US Dollar,
Sterling and Euro, and Verne Global has
a 10-year fixed power supply contract for
100% baseload renewable electricity. We
will, however, continue to remain vigilant in
maintaining a resilient portfolio, particularly
when considering future data centre
acquisitions and their associated power terms.
The digital transformation of our societies
has been evident over the last few decades,
but no more so than in the last two years,
when the Covid-19 pandemic dramatically
accelerated the key drivers and trends
already fundamental to the growth in
demand for Digital Infrastructure. I believe
that, as a result of these societal shifts,
we are at the dawn of a much broader
transformation.
We intend to build on our initial
cornerstone investments into Aqua Comms,
Verne Global, and SeaEdge, continuing our
focus on global investment into the critical
infrastructure required to underpin this
unstoppable change. Digital inclusion and
environmental impact will be at the heart of
all our investment decisions. The internet
is fundamental to all our futures. D9 is
committed to help shape that future, and is
leading the way in promoting carrier-neutral
connectivity globally, and in democratising
access to critical digital infrastructure.
Jack Waters
Chair
16 March 2022
Digital 9 Infrastructure plc
Page 20
STRATEGY AND BUSINESS MODEL
The Board is responsible for the
Company’s Investment Objective
and Investment Policy and has
overall responsibility for ensuring the
Company’s activities are in line with
such overall strategy. The Group’s
Investment Policy and Investment
Objective are published below.
Investment Objective
The Company’s investment objective
is to generate a total return for
investors comprising sustainable and
growing income and capital growth
through investing in a diversified
portfolio of resilient Digital
Infrastructure Investments.
Investment Policy
The Company intends to achieve its
investment objective by investing
in a diversified portfolio of Digital
Infrastructure Investments which
provide key infrastructure for global
data transfer (subsea fibre-optic
networks, wireless networks and
terrestrial fibres) and data storage
(data centres), all of which contribute
to facilitating global digital
communication.
The Company is focused on the
provision of Digital Infrastructure
integrated with green and cleaner
power in line with UN Sustainable
Development Goal 9: “Build resilient
infrastructure, promote inclusive
and sustainable industrialization and
foster innovation”.
The Company seeks to invest in
assets or Investee Companies which
typically have secured medium to
long-term contracts underpinned by
high quality counterparties.
The Company invests (directly
or via subsidiary companies) in a
range of Digital Infrastructure assets
which deliver a reliable, functioning
internet. The portfolio will typically
comprise future proofed, non-legacy,
scalable platforms and technologies
including (but not limited to) subsea
fibre, data centres, terrestrial fibre,
tower infrastructure and small cell
networks which meet the following
criteria:
•
assets and Investee Companies
which deliver communications,
data transfer, interconnectivity
and data storage;
•
assets and Investee Companies
which derive a significant
proportion of their revenues
from high quality counterparties
(meaning, for these purposes,
companies (or their parent
companies) which are included
in the FTSE 350 (or equivalent)
or which are investment-grade
rated by a recognised grading
agency) and/or a diversified
portfolio of counterparties
that, by reason of its diversity,
is resilient and well placed to
weather economic downturns;
•
assets and Investee Companies
with high cash flow visibility
and resilience, specifically from
medium to long-term contracts
or from a diversified portfolio of
shorter-term contracts providing
essential underlying services.
The Group focuses, primarily, on
Digital Infrastructure Investments
where the assets (or Investee
Companies which own the assets)
are operational and, where
appropriate, there is a contract in
place with the end user and/or off-
taker. Where suitable opportunities
arise, however, the Group may
provide limited funding during the
Construction Phase or Development
Phase of a Digital Infrastructure
asset, in particular, on a forward
funding basis where development
risk for the Company is limited,
subject to the restrictions set
out page 22.
Digital 9 Infrastructure plc
Page 21
STRATEGY AND BUSINESS MODEL
Investment Restrictions
The Company invests and manages
its assets with the objective of
spreading risk and, in doing so, will
maintain the following investment
restrictions:
•
the Company will not invest
more than 25% of Adjusted
Gross Asset Value in any single
asset or Investee Company.
When the Gross Asset Value
reaches £2 billion (as notified by
the Company in its annual or half
year financial results report), this
restriction will change to 20% of
Adjusted Gross Asset Value;
•
investments will be focused
on acquiring a controlling
interest (meaning more than
a 50% interest) in the relevant
investment assets or Investee
Companies being acquired
or invested in but can also
comprise minority interests
(where appropriate minority
protections are in place);
•
at least 50% of Adjusted Gross
Asset Value will be invested in
developed markets, in particular
(but not limited to), the UK, EU
and US;
•
neither the Company nor any of
its subsidiaries will invest in any
assets or Investee Companies
located in or with co-investment
exposure to any Restricted
Territories;
•
neither the Company nor any of
its subsidiaries will invest in any
assets or Investee companies
using technologies or equipment
under any current prohibition
ruling by relevant UK, EU, or
respect of maintenance or repairs
to the underlying assets or the
investment of expansion capital,
will not be considered as a breach
of the investment limits. Further, in
the event that an Investee Company
develops or acquires an additional
asset, which requires further
investment from the Company, or
the Company chooses to invest in a
new, separate asset via an existing
Investee Company, such investment
will be considered as a standalone
investment, including the application
of any of the above investment
restrictions.
For the purposes of the foregoing,
the term
“Adjusted Gross Asset
Value”
shall mean the aggregate
value of the total assets of the
Company as determined with the
accounting principles adopted by
the Company from time to time as
adjusted to include any third-party
debt funding drawn by, or available
to, any Group company (which, for
the avoidance of doubt, excludes
Investee Companies).
Gearing
The Directors do not intend to
use gearing at the Company level,
other than utilising short-term credit
facilities for financing acquisitions
(which could be at the level of the
Company or a Group company
(which, for the avoidance of doubt,
excludes Investee Companies)), such
borrowings to be at a Conservative
level. Intragroup debt between the
Company and its subsidiaries, and
the debt of Investee Companies, will
not be included in the definition of
borrowings for these purposes.
US authorities, unless such
equipment is in the process of
being removed in line with the
guidelines of such UK, EU or US
authorities;
•
the Company may invest a
limited amount in assets (or
Investee Companies which own
assets) which are predominantly
in construction, which typically
will be undertaken via a forward
funding arrangement which pays
a return during the Construction
Phase, with any investments
which expose the Company to
development risk limited to, in
aggregate, no more than 5%, of
Adjusted Gross Asset Value, and
the aggregate value of assets
in construction or development
being no more than 20% of
Adjusted Gross Asset Value (such
amount to be calculated as the
aggregate value of all material
construction or development
activities, including forward
funded developments, within
Investee Companies);
•
neither the Company nor any
of its subsidiaries will invest in
any listed entities, or in private
closed-ended investment
companies or any funds of any
kind; and
•
the Company itself will not
conduct any trading activities
which are significant in the
context of the Group as a whole.
Compliance with the above
investment limits will be measured
at the time of investment and
non-compliance resulting from
changes in the price or value of
assets following investment, the
need to invest further capital in
Digital 9 Infrastructure plc
Page 22
Long-term gearing is likely to be
applied at an Investee Company
level in order to enhance returns
but will be at a prudent level,
appropriate for the particular
Investee Company and sub-sector.
Hedging and Derivatives
The Company will not employ
derivatives for investment purposes.
Derivatives may however be used for
efficient portfolio management. In
particular, the Company may engage
in interest rate or currency hedging
or otherwise seek to mitigate the
risk of interest rate increases and
currency movements.
The Group will only enter into
hedging contracts and other
derivative contracts when they are
available in a timely manner and on
acceptable terms. The Company
reserves the right to terminate any
hedging arrangement in its absolute
discretion. Any such hedging
transactions will not be undertaken
for speculative purposes.
Cash Management
The Company may hold cash on
deposit for working capital purposes
and awaiting investment and, as
well as cash deposits, may invest
in cash equivalent investments,
which may include government
issued treasury bills, money market
collective investment schemes, other
money market instruments and
short-term investments in money
market type funds (“Cash and Cash
Equivalents”). There is no restriction
on the amount of Cash and Cash
Equivalents that the Company may
hold and there may be times when
it is appropriate for the Company
to have a significant Cash and Cash
Equivalents position.
Changes to and compliance
with the Investment Policy
The Investment Policy was amended
following shareholder approval with
effect from 27 February 2022.
Digital 9 Infrastructure plc
Page 23
D9 creates shareholder value by investing in companies
and assets that provide the critical Digital Infrastructure
required to deliver equal, ubiquitous internet access to
people and organisations across the globe. Furthermore,
our open-access clean-connectivity platform provides a
sustainable solution to exponential growth in global data
demand, fuelling a greener future.
We are leading the way in carrier-neutral connectivity
globally and are committed to democratising access to
critical digital infrastructure. By building a diversified
portfolio of investments across the key sectors, we aim
to offer our customers access to a resilient and uniquely
interconnected ecosystem.
BACKBONE OF THE INTERNET
98% of international internet traffic
flows through undersea cables
SUBSEA FIBRE LINK
LANDING STATION (DATA CENTRE)
LANDING STATION
DATA CENTRE
TERRESTRIAL FIBRE
CELL TOWERS & SMALL CELLS
END USER
TERRESTRIAL FIBRE
Digital 9 Infrastructure plc
Page 24
STRATEGIC REPORT
The digital infrastructure market is
driven by subsea fibre cables, which
transports 98% of all international
data flows. These cables constitute
the backbone of the internet and
are critical to the functioning of the
global economy and social inclusion.
If subsea cable networks are the
backbone, then data centres are
the brain. These facilities are where
the world’s data is stored: websites,
videos, music, corporate data, and
more. They are where the internet
lives. It is estimated that the growth
of data centre capacity correlates
to submarine cable capacity with a
coefficient of 0.98, implying a near
direct correlation and demonstration
of the inter-connectedness between
both.
This correlation absolutely
underpins our inter-connected
platform approach.
Our data centre strategy is focused
on growth, identifying strategic
locations that are suitable based on
their level of connectivity, access to
“eyeballs”, and access to renewable
energy. We will leverage our growing
subsea network to drive connectivity
to these locations, so that customer
data can be stored and processed –
the symbiotic relationship between
subsea networks and data centres
is a significant differentiator of
our platform-based approach to
Digital Infrastructure. Both our
subsea and data centre business
models follow our global expansion
platform approach, adopting a
modular growth strategy to build
assets in response to customer
demand, which includes the largest
technology companies globally.
Overlaying D9’s platform-based
investment strategy is our steadfast
commitment to decarbonise Digital
Infrastructure. Indeed, this focus is
critical to the success of our business
model. Through our data centre
platform, Verne Global, we have a
strong foothold in the Nordic data
centre market, one of the fastest
growing markets globally, that is
uniquely suited to provide data
centre services, and supports energy
intensive workloads, due to its cool
climate and access to renewable
power. Please see pages 32 to 37 for
a deeper analysis of Verne Global
and D9’s decarbonisation aims.
The terrestrial fibre and wireless
infrastructure subsectors represent
the capillaries of digital infrastructure,
leveraging the connectivity offered
by subsea fibre systems, combined
with the data stored and processed
in data centres, to bring data to
and from the end consumer. The
wireless sector in particular offers
the opportunity to invest in mature,
cash-generative businesses, which
will support our dividend yield
alongside the growth opportunities
from our platforms in subsea fibre
and data centres. Achieving this
balance is important to our business
model which aims to deliver growth
by investing in the underlying
megatrends, whilst maintaining a
healthy dividend.
Wireless infrastructure includes
mobile communication towers,
used for the transmission and
receipt of radio frequency signals
from mobile devices. This includes
“small cells”, or in-building digital
antenna systems (DAS), which
allow for the provision of wireless
services within a geographical area
or large building. Terrestrial fibre
infrastructures include a combination
of Fibre-to-the-Premises (“FTTP”)
and Fibre-to-the-Home (“FTTH”),
offering services to enterprises and
households alike.
The business model for each target
sector depends on the sector’s
characteristics and location, but
they each exhibit a fundamental
commonality that is critical for our
wider business model, being the
interconnectedness of our assets
delivering a resilient ecosystem
to our customers. Through this
we target a robust customer base
delivering a creditworthy, inflation-
linked income stream to deliver
returns to our shareholders.
Investment Approach
Our purpose-driven investment
strategy targets the provision of key
infrastructure for global data transfer
and data storage, all of which help
to address this critical demand for
sustainable digital communications.
The key themes in this investment
approach are both consistent
with SDG9 and are driven by two
powerful megatrends, digitalisation
and sustainability. We aim to:
•
significantly increase access to
information and communications
technology; and
•
improve the environmental
sustainability of Digital
Infrastructure, which includes
decarbonisation.
We target investment opportunities
which align to this overlay, which have
high revenue visibility, and which
benefit from high quality management
teams with a comprehensive
understanding of the sector.
Through this investment approach,
we aim to build a global platform
that promotes scalability, flexibility,
reliability and neutrality across the
Digital Infrastructure value chain.
We intend to build upon our deep
sectoral expertise within the Digital
Infrastructure ecosystem – with
over $300 billion of transaction
experience – by optimising
investment across network
convergence amidst a rapidly
shifting landscape. Our ultimate
focus is to provide a network and
infrastructure which offers high
reliability and superior experience
consistent with SDG9. This in turn
will deliver long-term, reliable
returns to our shareholders, portfolio
companies and investments.
Digital 9 Infrastructure plc
Page 25
STRATEGY AND BUSINESS MODEL
Subsea Fibre
The roll out of subsea connectivity helps bridge
the digital divide by bringing people together
and changing lives on a global scale.
We seek to identify key locations for internet
traffic demand globally, a factor that has
led to our investment in the EMIC-1 cable
between Europe and India, demonstrating
how the D9 investment approach responds to
market demand.
Through the Aqua Comms subsea platform,
we are a major partner to the world’s most
connected companies. The subsea network is
a major competitive advantage to D9, allowing
us to leverage its connectivity and customer
base with 95% of revenues from global tech
giants
and global telecoms carriers. The subsea
network automatically produces more deal flow
for D9, which has been demonstrated following
the acquisition of Aqua Comms leading to that
of SeaEdge UK1 as its landing station for the
North Sea Connect cable.
Subsea fibre is the cornerstone for our global
interconnected platform of Digital Infrastructure.
Our strategy is to expand our resilient, reliable
network to new regions, driving connectivity
to our data centre investments and, wherever
possible, landing stations. This will enable
us to improve our existing relationships with
key customers, which rely on our Digital
Infrastructure ecosystem to deliver on their own
business models.
Digital 9 Infrastructure plc
Page 26
Data Centres
The Company’s data centre strategy is primarily
focused on opportunities leveraging key network
connectivity and optimising renewable energy
sourcing, leveraging the Aqua Comms platform
and creating customer synergies. The strategy
comprises of:
1.
Landing station: where a subsea cable comes
ashore is a natural location for a data centre,
offering low latency and reliable access to a
global network.
2.
Green Data Centres: affordability of land and
optimising access to renewable energy and
natural cooling.
3.
Metro/Edge facilities: located primarily
in or near urban centres offering robust
connectivity to customers which require low
latency solutions or are location sensitive.
The acquisition of Verne Global delivers on
both strategies 1 and 2, whereas the recent
acquisitions of SeaEdge UK1 delivers on 1. We
continue to assess opportunities globally with
this overarching strategy in mind.
Typically, data centre investments will have
secure, long-term, inflation-adjusted contracts in
place and benefit from high revenue visibility.
Digital 9 Infrastructure plc
Page 27
Terrestrial Fibre
Our terrestrial fibre strategy has been focused
mainly on the UK market. The UK is lagging
other European countries in terms of FTTH
deployment, which is accentuating the digital
divide. High levels of capital expenditure are
required to improve the UK’s coverage, creating
a huge opportunity for investment. The UK
Government’s target is to reach 85% of homes
with full fibre connectivity by 2025, which is
going to require £30 billion of capex. FTTH
platforms are scalable by nature (operations,
systems, processes, etc.) and we are ideally
positioned to take advantage of that growth.
Bridging the UK digital divide is aligned with the
Company’s purpose to “significantly increase
access to information and communications
technology”. D9 is focused on both rural and
urban areas, which existing providers have so far
neglected, in order to be a first mover and create
a high barrier to entry. We also target FTTH
investments that provide significant expansion
opportunities in the country, but we remain
cautious around FTTH market multiples.
Following a similar logic, we are also interested
in FTTH investment opportunities in other
countries. Those opportunities are typically larger
and more mature. We will also be opportunistic
when it comes to more traditional long-haul and
B2B fibre opportunities, which could also be
a good fit for the fund, both strategically and
financially.
STRATEGY AND BUSINESS MODEL
Digital 9 Infrastructure plc
Page 28
Similar to terrestrial fibre, our wireless strategy
initially focuses on the UK market and serves to
prepare our infrastructure for the 5G and Internet
of Things (“IoT”) revolution.
Online traffic is already growing at an exponential
rate. The expectation is that 5G will account for
20% of global connections by 2025, with take-up
particularly strong across developed Asia, North
America and Europe. However, operators will
find it difficult, time consuming and expensive to
deploy the infrastructure themselves. To support
the generational shift and further drive consumer
engagement, operators are expected to invest
$1.1 trillion worldwide between 2020 and 2025
in mobile capex of which 80% will be in 5G
networks. Today, most operators have divested
their tower assets to fund future investments
and there has been significant consolidation.
Consequently, the macro-tower market is not
a core area of focus for D9, but we assess
transactions opportunistically.
However, wireless infrastructure is also important
to future connectivity, including small cells and
fixed wireless access (“FWA”). Estimates suggest
that global mobile data usage will grow almost
fourfold between 2019 and 2025. Small cells
can provide high capacity solutions in areas
of dense demand. FWA has the potential to
match or exceed the performance of traditional
wired networks, providing a complementary and
resilient alternative to traditional fibre.
Driven by the potential of advanced use cases for
5G and IoT, the “edge” is becoming increasingly
attractive. The drive for the “edge” is producing
interesting opportunities for further investment
along the data centre and wireless infrastructure
value chain.
Benefiting from our breadth of digital
infrastructure experience and focused approach,
we continue to explore emerging opportunities
across the shifting landscape.
Wireless Networks
Digital 9 Infrastructure plc
Page 29
Digital 9 Infrastructure plc
Page 30
The Investment Manager’s Digital Infrastructure team employs a rigorous investment process when
appraising new opportunities presented to it for consideration.
Quarterly risk and portfolio monitoring
report presented.
Investment Committee paper presented
for review and comment.
Discuss top Risks to Investors.
Valuations presented for approval.
AIFM report presented for approval.
Triple Point Risk and
Valuation Committee
Board and Board Committees
(and investors as required)
Opportunity thesis development.
Target identification and ultimately iterative review of selected targets.
SDG9/ESG scorecard.
Investment Team Exec Review
1
2
3
4
5
6
Portfolio Monitoring
and Risk Review
Quarterly updates, risk review
with
Triple Point PMG (includes Investment
Committee).
Quarterly reports to D9 Board.
Risk register review.
Active Portfolio Monitoring
Weekly engagement with management
Bi-weekly Team Partner review of
portfolio.
Monthly management account updates
Bi-monthly Portfolio Co. Board meetings
(include Partners and NEDs).
SDG9/ESG scorecard tracking.
Triple Point
Investment Committee
Meetings to analyse proposed
deals, pre-approve expenditure,
and final sign off on investment
after full Investment Team
due diligence.
INVESTMENT PROCESS
Digital 9 Infrastructure plc
Page 31
Critical infrastructure
for our connected world
By 2025, it’s predicted that 200+ zettabytes of data
will be captured in cloud storage around the world.
It is nearly impossible to comprehend how big that
number really is. A single zettabyte of storage is
equivalent to as much information as there are grains
of sand on all the world’s beaches.
Processing this data is also becoming increasingly
complex as organisations turn to high performance
computing (“HPC”), artificial intelligence (“AI”),
machine learning, and more to move their business
forward. These workloads process billions of
calculations a second every day for weeks or months
on end. Data sets are used to drive research for
vaccine trials, autonomous cars, and climate change
for society as a whole. They are also used to deliver
better customer experiences, increase financial
performance and streamline operations for companies
around the world.
Sustainability moves
to the forefront
Our lives are increasingly dependent on the internet,
making us more dependent upon data centres than
ever before. However, we need to ensure they are
a net positive for the environment. Worldwide, data
centres consume 2% of electricity and contribute 2%
to CO
2
emissions. Much of that power consumption
goes towards keeping the servers housed in data
centres cool, potentially as much as 40% of a data
centre’s energy consumption.
The
Strategy in
Practice:
Verne
Global
Digital 9 Infrastructure plc
Page 32
THE STRATEGY IN PRACTICE: VERNE GLOBAL
Data centres house the infrastructure for cloud
computing. Cloud computing is the delivery of
computing services over the Internet. It offers faster
innovation, flexible resources, and economies of scale
that have helped power a generation of entrepreneurs.
Companies no longer need to source their own IT, they
can simply scale up a hyperscale offering (e.g., Amazon’s
AWS, Microsoft Azure, Google Cloud) for access to
compute previously found only in government or
academic supercomputers.
As demand for the cloud has grown, so too has the
number of data centres. While data centres themselves
have become more efficient over time, HPC and AI
workloads are pushing the boundaries of traditional
cooling technologies. Data centre operators have begun
exploring new cooling methods, but have also looked to
alternatives for their fuel sources. The hyperscalers have
begun to build their own renewable capacity, while many
operators in the industry tend to rely on power purchase
agreements to offset data centre energy use. These
agreements, depending on the country they originate
from, do not provide a clear picture of where electricity is
coming from and exactly how clean it is.
Building regulatory and accountability consensus
within the industry is very much up for debate. Most
commitments to climate change have been voluntary
which has led to lax enforcement or definition. In some
worst case scenarios, it has also led to greenwashing –
where companies provide misleading information about
how environmentally friendly their product or services
really are. There are several industry-led initiatives that
D9 is involved with, which are establishing guidelines
for greater self-regulation. This includes the Sustainable
Digital Infrastructure Alliance (SDIA) and the Climate
Neutral Data Centre Pact (CNDCP).
Turning to the Nordics
The focus on sustainability is driving companies to rethink
where their data centres are located. Organisations have
become comfortable with the idea of locating their IT
equipment and applications in specialist data centres
providing colocation and cloud-based services, particularly
those powered by renewable resources. Data centres no
longer need to be next to corporate headquarters for the
vast majority of business applications.
Countries in Europe and around the world are also facing
energy scarcity issues in relation to their power grids.
Both Singapore and the Netherlands have stopped
issuing new data centre permits because of the strains on
the local electrical grids. According to Marietje Schaake,
the international policy director at Stanford University’s
Cyber Policy Center, almost 30% of Ireland’s electricity
demand will come from data centres in 2028, while the
sector will also be responsible for 15% of Denmark’s
power consumption by 2030. Even if data centres in
those countries “go green”, they are still using finite
resources. Shifting to net renewable surplus countries
makes the most long-term sense.
Digital 9 Infrastructure plc
Page 33
D9 is investing in abundant, ultra-efficient, 100%
renewable-electricity powered Nordic data centres
to reduce the energy used and emissions created by
the data centre industry. Our focus is on shifting the
energy-intensive processing of these huge and growing
data sets to the Nordics, which have abundant green
power, free cooling – and the lowest power prices in
Europe. They also generate a lot of renewable power
– the highest proportion in the world – with Sweden
generating 65% of its electricity from renewables,
Norway 90%, and Iceland 100%.
Turning positive energy
into unreal results
Iceland is the only country in Europe that generates
nearly 100% of its power from renewable sources. It
has an abundance of hydroelectric power generation
and a vast amount of untapped geothermal energy that
can help solve one of the world’s greatest and growing
challenges – the ever-expanding demand for power
driven by the exponential growth in data creation and
consumption.
Verne Global, one of D9’s portfolio companies, is a
leading Nordic data centre platform, based in Iceland,
powered entirely by renewable, baseload hydroelectric
and geothermal electricity. Founded in 2012, Verne
Global delivers data centre solutions for high intensity
computing, engineered for optimal high performance
compute. The company has been at the forefront in
establishing what has become Iceland’s thriving data
Digital 9 Infrastructure plc
Page 34
THE STRATEGY IN PRACTICE: VERNE GLOBAL
centre industry, as well as educating the market on why
shifting latency insensitive data to areas of abundant
green energy makes good business sense. Verne Global
has become the “go to” destination for organisations
that are as serious about their compute as they are their
carbon footprint.
As more companies work to decarbonise their digital
infrastructure, Verne Global’s sustainable, high intensity
compute solutions will continue to be in great demand.
One of the ways enterprises are measuring their carbon
emissions is through the Greenhouse Gas Protocol
(GHCP). The GHCP sets out the emissions generated
by a companies’ operations into three “scopes” – from
directly created to indirect – all of which contribute to a
business’s overall carbon footprint.
Verne Global is taking key steps to ensure customers’
sustainability more than any other data centre operator
in the industry. These include improving power usage
effectiveness (“PUE”), carbon usage effectiveness
(“CUE”), and water usage effectiveness (“WUE”) for its
customers, all whilst reducing the total cost of operations
without any premium for choosing sustainable
infrastructure. Verne Global is enabling its customers to
benefit from the lowest carbon footprint in the industry
by setting a new standard for best in class visibility and
reporting.
Digital 9 Infrastructure plc
Page 35
Verne Global customer examples
Verne Global powers some of the world’s most innovative and demanding industries, including financial
services, engineering, scientific research and AI. These include:
BMW
Verne Global has been assisting car manufacturers
like BMW with their HPC powered computer-aided
design, modelling and simulation since 2012.
BMW moved a number of applications – including
crash simulations, aerodynamic calculations and
computer aided design and engineering (CAD/
CAE) – to Verne Global’s campus in the early phase
of their electric vehicle roll out. The electric vehicles
yield the same performance and driveability – as
all cars BMW has designed for more than a century
– with a commitment to taking an ethical path
towards an electrified future.
By initially moving ten of its HPC clusters from its
German facilities to Verne Global, BMW was able
to reduce the cost of powering its HPC applications
by as much as 82% and reduce its annual carbon
emissions by 3,570 metric tons; the equivalent
of the carbon produced by burning 1.46 million
litres of petrol. Since 2012, BMW has continued to
benefit from this carbon reduction many times over.
Peptone
Peptone is a computational molecular physics
company that leverages Artificial Intelligence to
analyse the anomalous behaviour of proteins and
speed up drug development research.
Locating its compute with Verne Global has allowed
Peptone the freedom to focus on its ground-
breaking research; it can flexibly scale its AI-driven
protein engineering system on-demand, while
maintaining full visibility of operations and keeping
the data in sight at all times.
Verne Global is
the ideal partner
for our hybrid
supercomputing
cloud approach due to its
foundation in sustainability, global
connectivity and reassuring
ability to keep our world-leading
practical research completely
secure,” said Dr. Kamil Tamiola
Founder & CEO, Peptone.
Digital 9 Infrastructure plc
Page 36
Wirth Research
Wirth Research is pioneering the use of advanced
virtual engineering technologies to make life more
enjoyable and sustainable. It uses high resolution
Computational Flow Design (CFD) analyses to
design and develop innovative airflow solutions
for buildings in a wide variety of sectors and uses,
ultimately helping them to achieve energy savings.
CFD simulations require a huge number of
calculations and a vast amount of computing
power. Wirth Research turned to Verne Global
to help improve the speed, performance and
reliability of its applications. By moving to Verne
Global, Wirth Research’s costs were reduced so
significantly that the savings in energy usage easily
justified a significant investment in upgraded
hardware.
Wirth was also moving its headquarters to a newly
developed eco building that enabled it to reduce
its workplace carbon output to zero. The flexible
workspace provides access to virtual workstations
powered from Verne Global’s campus in Iceland.
DeepL
DeepL is a German-based technology company
specialising in natural language translation. Its
service was created to develop a more advanced,
deep neural network translation service that shifts
language translation from stilted to more natural
dialog.
DeepL utilises advanced AI and neural network
machine translation technologies to analyse and
train its service. Supercomputers such as DeepL’s
are power hungry and require specialised HPC
infrastructure and support to enable them to
operate fluently. After evaluating the data centre
options in Germany, DeepL quickly concluded that
it needed an HPC specialist provider, but German
data centres have been slow to design and optimise
infrastructure for these types of HPC workloads and
lack the scalable power profiles needed to support
them.
DeepL struck a partnership with Verne Global,
which enabled the start-up to grow incrementally
within the data centre, in line with customer
demand. This approach, together with the long
term, low cost power, and free cooling, has enabled
DeepL to take advantage of an optimised data
centre solution at a 70% lower cost than available in
continental Europe.
Digital 9 Infrastructure plc
Page 37
KEY PERFORMANCE INDICATORS
In order to track the Group’s progress the following key performance indicators are monitored:
KPI AND
DEFINITION
RELEVANCE TO
STRATEGY
PERFORMANCE
COMMENT
1. Dividends per share (pence)
Dividends paid and declared
on every ordinary outstanding
share in relation to the period.
The dividend reflects the
Company’s ability to deliver
a growing income stream
from the portfolio.
The Company will pay
an annualised dividend
of 6.0 pence per share
equivalent to 4.5 pence per
share in respect of the period
from IPO to 31 December
2021 (see Note 15).
The Company has paid or
declared
dividends of 4.5 pence
per share in respect of the
period from IPO to 31 December
2021, in line with our target.
2. Total return (%)
The increase in NAV in the
period and dividends paid
per share in the period.
The total return highlights the
underlying performance of the
portfolio’s investment valuations,
including dividends paid.
9.82% (13.09% annualised)
in respect of the period from
IPO to 31 December 2021.
A medium-term total return target of
10% per annum was set out at IPO.
3. Total shareholder return (%)
5
The increase in share price in
the period and dividends paid
per share in the period.
A measure of the return based
upon share price movements
over the period and assuming
reinvestment of dividends.
The total shareholder return
highlights the gross return to
investors including dividends paid.
16.94%
(23.08% annualised)
in respect of the period
from IPO to 31 December
2021 (see page 150).
A medium-term total shareholder
return target of 10% per
annum was set out at IPO.
4. Earnings per Share (pence)
The post-tax earnings attributable
to shareholders divided by
weighted average number of
shares in issue over the period.
The EPS reflects our ability
to generate earnings from
our investments including
valuation increases.
9.77 pence per share
for the period from
IPO to 31 December
2021 (see Note 20).
EPS is based on earnings and
including the fair value gain on
investment, calculated on the
weighted average number of
shares in issue during the period.
5. NAV per share
NAV divided by number of shares
outstanding as at the period end.
The NAV per share reflects our
ability to grow the portfolio and
to add value to it throughout
the life cycle of our assets.
104.62 pence per Share
(see Note 21).
This is an increase of 6.8%
since IPO driven by growth in
the underlying valuation of the
Company’s investments.
6. Cash dividend cover
5
Operational cash flow
divided by dividends paid to
shareholders during the year.
The cash dividend cover reflects
the Company’s ability to cover
its dividends from the income
generated by its portfolio.
Dividend cover for the
period to 31 December
2021 was 39.61%. Dividend
cover is measured as
total dividends paid and
payable at 31 December
2021, as a percentage of
total operating cash flows
for the Company and its
subsidiaries. (see page 149).
D9 will monitor dividend cover as the
Company continues to deploy funds.
5
Alternative Performance Measure. See Unaudited Alternative Performance Measures section on pages 149 to 150.
Digital 9 Infrastructure plc
Page 38
KPI AND
DEFINITION
RELEVANCE TO
STRATEGY
PERFORMANCE
COMMENT
7. Ongoing charges ratio
5
Annualised ongoing charges are
the Company’s management fee
and all other operating expenses
(i.e. excluding acquisition costs
and other non-recurring items)
expressed as a percentage of
the average published undiluted
NAV in the period, calculated in
accordance with Association of
Investment Companies guidelines.
Ongoing charges show the
drag on performance caused
by the operational expenses
incurred by the Company.
1.04% annualised.
(see page 149).
A key measure of our operational
performance. Keeping costs low
supports our ability to pay dividends.
8. Points of presence (POPs)
A Point of Presence is a discrete
geographic location within the
portfolio company network,
containing portfolio company
owned exchange equipment
and allows for connection
into the wider network.
Points of presence represent a
physical demonstration of the
fibre networks distribution to a
wider set of customers. We seek
growth in this value over time.
17
POPs, with kilometres of fibre and
growth in network capacity provide a
picture of the connectivity provided
the Company. These KPIs are
intended to be tracked over time
and their growth demonstrate an
increase in connectivity as a result
of the Company’s investments.
9. Kilometres of fibre
The total length of fibre
(operational and in development)
owned or part-owned by
portfolio companies
6
.
Kilometres of fibre represent a
physical demonstration of the
fibre networks presence. We seek
growth in this value over time.
32,000
7
Kilometres of fibre, with POPs and
growth in network capacity provide a
picture of the connectivity provided
by the Company. These KPIs are
intended to be tracked over time
and their growth demonstrate an
increase in connectivity as a result
of the Company’s investments.
10. Growth in network capacity
A
The increase in sold capacity
across fibre networks, between
two points in time.
Growth in network capacity
represents the network’s ability
to respond to and deliver on
demand for more connectivity.
We seek a positive percentage
growth year on year.
7%
Growth in network capacity, with
kilometres of fibre and POPs provide
a picture of the connectivity provided
by the Company. These KPIs are
intended to be tracked over time
and their growth demonstrate an
increase in connectivity as a result
of the Company’s investments.
11. Power Usage Effectiveness (PUE)
A
PUE is the total energy entering
a datacentre divided by the
energy used by IT equipment
inside the datacentre.
PUE is a measure of our energy
efficiency and represents the
decarbonisation of our investments
either through targeting assets
with the most advanced energy
efficiency practices, or through
improvements of existing systems.
The decarbonisation measure
reflects the Company’s success
in aligning to SDG9, target 9.4.
1.22
8
PUE is applicable to Data Centre assets
and represents an important measure
in the environmental sustainability of
an asset. Efficiency and increases in
efficiency can contribute to a lower
carbon emission
and better use of
natural resource.
Industry average is
commonly reported to be 1.3 in cold
air temperature locations and 1.4 in
warm air temperature locations.
Independent limited assurance has been provided only over 2021 data marked with this symbol. PwC’s assurance statement can be found on pages 120 to 123.
Triple Point’s Reporting Principles and Methodologies can be found in Annex 1.
A
6
Total kilometres of fibre owned or part-owned 32,035km (14,268km operational; 17,767km in development).
7
Subsea cable lengths are measured between cable landing stations.
8
Audited PUE includes power used in construction. The unaudited number excluding construction is 1.18.
Digital 9 Infrastructure plc
Page 39
INVESTMENT MANAGER’S REPORT
Review of the Period
Our cornerstone platform investments into Aqua Comms, Verne Global
and SeaEdge UK1 create a launchpad for D9 from which to enable further
accretive investment in the subsea and data centre sectors. The investments
are aligned to our wider strategy of bridging the digital divide and
decarbonising digital infrastructure. As we continue to build the portfolio,
we believe further accretive opportunities will continue to compound, as
represented by the synergistic acquisitions of EMIC-1 and SeaEdge UK1.
Market Review
Any business that requires the internet to function is reliant on Digital
Infrastructure in order to operate. In essence, the greater the demand for the
internet, the greater the need for the infrastructure to support it.
Digital Infrastructure is an asset class that requires £400 billion of annual
invested capital, and growing rapidly as our demand and dependency on it
continues to increase. This demand continues to be driven by a set of growth
pillars, which have been accelerated by the coronavirus pandemic’s impact
on lifestyles, work practices and the global supply chain.
2016
300
500
700
900
1100
1300
1500
1700
1900
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
ACCELERATING
GLOBAL DATA
DEMAND
38%
Forecast 2021 – 2027 CAGR
Thor Johnsen
Head of Digital
Infrastructure
Digital 9 Infrastructure plc
Page 40
Over the last five years, on average there has
been 27,000 new internet users per hour. After
the radio was invented, it took 38 years to
reach 50 million users. It took 75 years for the
telephone to do the same. However, from its
inception, the internet managed to reach 50
million users in just four years.
1
More users
3
A connected car will create 25GB of data per
hour, equivalent to nearly 30 hours of HD
video.
More data
2
There will be an estimated 30 billion networked
devices by 2023, nearly half of which will be
machine-to-machine.
More devices
4
Amazon claims that every 100 milliseconds of
latency costs them 1% in sales.
At faster speeds
Digital 9 Infrastructure plc
Page 41
INVESTMENT MANAGER’S REPORT
Sector Review and
M&A Activity
This growing dependency on
technology is evidenced by the
tech M&A market. The value of tech
deals announced in 2021 surpassed
$1 trillion for the first time in history,
topping 2019 and 2020 combined
9
.
Whilst inflationary pressures and
the threat of rising interest rates
may slow down M&A activity and
stock market performance for tech
companies, recent market activity
points to the continued adoption
of products created by these
businesses for the end consumers.
These products and their ever-
increasing connectivity requirements
are underpinned by the Digital
Infrastructure.
Data Centres
The data centre market has been
highly active. Both before the
pandemic, and particularly since,
it has attracted interest from
specialist investors as well as
generalist investors that are new
to the sector, which have typically
invested in traditional infrastructure.
Competition among different types
of buyers has propelled overall
valuations to very high levels,
reaching over 30x EBITDA in many
instances.
Across a sample of 60 global
comparable transactions in the
retail and wholesale data centre
markets over the last seven years,
the weighted average transaction
EBITDA multiple is 17x, rising to 26x
in the last three years, and up to 29x
in the last 12 months, demonstrating
a clear upward pressure on pricing.
D9 acquired Verne Global at a 20x
EBITDA multiple demonstrating
its ability to execute bilateral, off-
market transactions at competitive
pricing. This is due to the Investment
Manager’s decades of operational
know-how and $300 billion of
transaction experience in Digital
Infrastructure which gives us a wide-
reaching global network.
Subsea Fibre
The subsea market is characterised
by a shortfall in global capacity in
the face of huge growth in demand.
There will be an estimated 40%
shortfall in transatlantic subsea
capacity by 2026 as legacy cables
reach the end of their 25-year design
lives. Aqua Comms’ two transatlantic
fibre cables (AEC1 & 2) are some of
the most modern connecting North
America and Europe, with further
transatlantic cables being developed
in partnership with global tech firms.
Despite this shortfall, the subsea
industry has still seen considerable
capacity increase, due to the
inherent upgradeability of modern
cables. Capacity along the
transatlantic routes will increase
at a CAGR of 22.7% over the next
several years reaching over 3,000
Tbps in 2025. The fastest growing
demand for traffic comes from the
global internet content providers,
accounting for 66% of overall
submarine traffic in 2020.
One of the fastest-growing routes
for subsea capacity demand is
the Middle East into Asia, which
underlies D9’s investment into
EMIC-1. Further opportunities along
this route are being considered to
increase resilience, as demonstrated
in the Atlantic.
Subsea fibre infrastructure is a
complex and capital-intensive
business with high barriers to entry.
New cables require international
efforts from all stakeholders,
including governments, as well as
an expert management team with a
deep understanding of the product
and market. As a result of these
barriers, the subsea fibre market
is not as active or widely explored
as the data centre market, but is
beginning to attract new investment
due in part to the high proportion
of long-term contracts with
creditworthy counterparties, and
with that, higher EBITDA multiples.
Across a sample of 47 global
comparable transactions in the
subsea, dark and enterprise fibre
markets over the last seven years,
the weighted average transaction
EBITDA multiple is 14.0x, rising
to 19.5x in the last 12 months,
demonstrating a clear upward
pressure on pricing. D9 acquired
Aqua Comms in a bilateral off-
market transaction below 12x
EBITDA, again demonstrating its
ability to execute on competitive
terms.
Terrestrial Fibre
The terrestrial fibre market continues
to attract infrastructure capital, yet
may be showing early signs that
valuations are plateauing or even
eroding in some instances.
The traditional long-haul/B2B fibre
space has gone through years of
consolidation and roll-up activity.
This means that deals have become
relatively scarce and dominated
by infrastructure funds, who like
the strong cash generation and
9
451 Research: Tech M&A Outlook 2022: Another year for the ages?
Digital 9 Infrastructure plc
Page 42
opportunity for both top line growth
and cost rationalisation. Despite
that, valuations have been stable
around 13-14x EBITDA in Europe.
While Polhem Infra’s acquisition of
Telia Carrier in October 2020 marked
a new high in the sector (18.9x
EBITDA), other recent transactions,
such as iSquared’s acquisition of
GTT’s Infrastructure division (12.6x)
and Asterion’s acquisition of Retelit
(10.0x) have been more reasonable.
This sub-sector generally attracts
lower valuations than fibre to the
home (FTTH), yet we still expect
investors to look to pay premiums
for quality assets.
European FTTH is also very popular
with infrastructure funds. Each
European country has seen a small
number of dominant FTTH platforms
emerge in recent years. Those
platforms are usually open networks
in nature but underpinned by a
strong anchor tenant, typically an
incumbent or well-established altnet.
This model guarantees solid growth,
limited downside and meaningful
operating cash flows. With several
large assets trading above 20x
EBITDA, such as KKR’s acquisition of
Reintel (22.1x) or Ardian’s acquisition
of Adamo (25x), valuations still seem
to be rising. Consolidation is still
limited but could soon gather pace
as FTTH roll-outs slow down or even
come to an end in some markets.
The UK FTTH market is quite
peculiar: much less mature than
most European markets, very
fragmented with dozens of
platforms having raised several
billion pounds in recent years and
with a dominance of the vertically
integrated ISP model. The market’s
lack of maturity means that most
assets are still EBITDA negative
with EV/homes passed often used
as the main valuation metric.
Using that metric, it seems that the
market may be cooling down a little
bit: whereas several major assets
traded around £4,000 per home
passed during the 2018-20 period,
more recent transactions point to
a £2,000-2,500 range. As winners
emerge more clearly, we expect
investors to be increasingly selective
and consolidation to become more
prominent.
Wireless Infrastructure
The wireless infrastructure
market continues to be driven
by consolidation and limited
opportunities in the traditional
macro tower market. Major players
continue to be large operating
companies including the likes of
Cellnex and American Tower, and
large generalist infrastructure players
such as Brookfield competing
on consortium deals. Given the
maturity of the macro tower market,
these major players are propelling
valuations to high levels, such as
Brookfield’s and Alecta’s acquisition
of Telia Towers for $1.8 billion
on a 27.2x EBITDA multiple in
December 2021.
Given the current valuation metrics
and average deal size over the
last two years, the macro tower
market remains challenging for D9’s
investment criteria. However, D9
will continue to be opportunistic,
particularly around high yielding
assets servicing transitioning or
legacy use cases. While these will
not be considered core assets within
D9’s broader portfolio they will help
support the dividend target of the
Fund.
Outside of the more traditional
macro tower market, 5G and IoT use
cases are propelling opportunities
in fixed wireless access and other
alternate wireless connectivity
solutions. While these opportunities
are limited their valuations are more
attractive, such as DigitalBridge’s
acquisition of Boingo in March
2021 was for $854 million at a
10.2x EBITDA multiple. While these
opportunities are more technology
specific, D9’s investment team
and highly experienced operating
partners are well placed to
undertake in-depth analysis of an
otherwise “secondary” focus sector
for most infrastructure investors.
This promotes exclusive deal
opportunities for the Fund and the
ability to execute on transactions.
However, these assets will primarily
be valued on their ability to interact
with the wider portfolio and industry
trends.
Digital 9 Infrastructure plc
Page 43
INVESTMENT MANAGER’S REPORT
Pipeline
Activity and competition for good
quality Digital Infrastructure projects
remains strong. New entrants from
the wider infrastructure sector are
coming into the market seeking
diversification from their existing
portfolio in response to the impact
of the Covid-19 pandemic and
are attracted to it by the resilience
demonstrated during this period.
Our alignment to the UN SDG9 and
improving connectivity globally, our
subsea and data centre platforms,
as well as our team’s sectoral
specialism, with over $300 billion
of Digital Infrastructure transaction
experience, gives us a unique
advantage in competitive processes
and bilateral opportunities. As such,
we continue to build out our strong
pipeline of opportunities.
The pipeline is spread across the
subsectors and is reflective of the
longer-term asset mix we intend to
achieve for D9. At a target £2 billion
AUM, we would expect, data
centres and subsea fibre to form
approximately 60-70% of assets, and
terrestrial fibre and wireless
30-40%. The opportunities are
across a global profile primarily
in the UK & Ireland, the Nordics,
North America, the Middle East
and Asia Pacific, with longer-
term opportunities in Africa and
Latin America.
D9 has c. £2 billion of pipeline
opportunities under consideration,
including over £500 million of more
immediate pipeline opportunities
that the Investment Manager is
actively progressing.
9
We have secured exclusivity on
c. £150 million of opportunities.
Following our most recent
equity raise in January 2022 and
completion of a £300 million
RCF, we anticipate completing on
these at various stages over the
coming months and look forward
to announcing their successful
completion to the market in
due course.
Many opportunities are bilateral, off-
market projects that are not part of
a competitive process, sourced via
the Investment Manager’s network
of relationships, built through $300
billion of transactional experience in
the Digital Infrastructure sector and
decades of operational experience.
While these projects can take longer
to execute and ensure the necessary
Total Pipeline
Data Centres
£1 billion
51% of pipeline
Subsea Fibre
£360 million
18% of pipeline
Terrestrial Fibre
£90 million
5% of pipeline
£510 million
26% of pipeline
Wireless Networks
9
N.B. These figures are not probability weighted
Digital 9 Infrastructure plc
Page 44
robust due diligence is carried out,
this enables us to secure better
acquisition terms.
We remain encouraged by the
significant and growing pipeline that
the Company’s investment strategy
presents.
Financing
During the reporting period, D9 has
raised gross equity proceeds of, in
aggregate, £750 million through
the issue of ordinary shares at IPO
in March 2021 and two further
fundraises completed in June 2021
and September 2021. This was
supplemented by a further equity
raise in January 2022 of £95 million,
bringing total gross proceeds raised
to £845.2 million.
To achieve an efficient capital
structure, D9 intends to introduce
prudent leverage, resulting in
enhanced returns for our investors,
particularly in the current economic
climate with domestic borrowing
rates remaining well below our
portfolio yields. To assist in short
term funding of the Company’s
pipeline of investment opportunities,
in March 2022, D9 raised
£300 million through its first debt
facility, being a bespoke RCF with an
international syndicate of four banks.
RBSI acted as structuring bank, sole
coordinator and bookrunner for the
new facility. The RCF is structured
to support the Company’s pipeline,
benefiting from an uncommitted
accordion provision allowing the
Company to request an increase,
subject to Lenders’ approval, of the
amount provided under the RCF by
up to an additional £200 million. We
are pleased to welcome the Bank
Syndicate as new counterparties into
our relationship group and value
their strong support of the Digital
Infrastructure sector. The level of
lender interest we have received
on this transaction reaffirms the
attractive fundamentals and growth
prospects of this asset class and the
quality of our existing portfolio.
As set out in the Prospectus, gearing
will only be used by the Company
to finance acquisitions on a short-
term basis, with long-term gearing
likely to be applied at an investee
company level.
Outlook
Digitalisation has taken hold of our
everyday lives and interaction with
appliances, driving endless demand
for the digital infrastructure supporting
this unstoppable transformation.
We’re solving the world’s biggest
problems by closing the digital
divide and creating greener, more
sustainable connectivity. Invest in
our portfolio to accelerate economic
growth, social development and
critical climate action.
We believe big problems create
strong demand, strong demand
drives good investments, and good
investments solve big problems. The
internet is the lifeblood of progress,
and we’re making sure its progress
benefits people and planet alike.
Thor Johnsen
Head of Digital Infrastructure
Triple Point Investment Management
LLP
16 March 2022
£’m
%
No. of
assets
Bilateral or
Exclusive
£’m
Data Centre
108
20%
5
38
Subsea
Fibre
–
–
0
–
Terrestrial
90
16%
2
90
Wireless
350
64%
2
350
Total
548
100%
9
478
Near Term
£’m
%
No. of
assets
Bilateral or
Exclusive
£’m
Data Centre
908
64%
5
490
Subsea
Fibre
360
25%
3
–
Terrestrial
–
–
0
–
Wireless
160
11%
1
160
Total
1,428
100%
9
650
Wider Term
Digital 9 Infrastructure plc
Page 45
THE INVESTMENT MANAGER
Digital 9 Infrastructure plc
Page 46
Key representatives of the Investment Manager
James Cranmer, Managing Partner
James joined the Investment Manager in 2007 to develop its origination and investment capability. He has over
20 years’ experience in structured, asset and vendor finance. He has been responsible for in excess of £1 billion
of funding into UK Local Authorities, NHS Hospital Trusts, FTSE 100 including numerous investments in the
infrastructure, energy and low carbon sectors. James has led Triple Point’s infrastructure investments over the years.
He became co-Managing Partner in 2016.
Thor Johnsen, Head of Digital Infrastructure
Thor has over 15 years’ experience in infrastructure investment and over 22 years in M&A, deploying over $3 billion,
including as head of infrastructure investment for Arcapita Bank across Europe. He has managed digital infrastructure
portfolios for 7 years.
Andre Karihaloo, Investment Director
Andre has over 15 years’ experience in financial services, starting in investment management at HSBC. In digital
infrastructure, he has invested over $700 million into projects and businesses and advised on over $4 billion of
transactions.
Arnaud Jaguin, Investment Director
Arnaud has over 15 years’ experience in telecoms and digital infrastructure. Arnaud began his career in telecoms
M&A advisory at UBS Investment Bank in London, advising on almost £50 billion of transactions. At Level 3
Communications and RETN, he worked on corporate development, corporate strategy, segmentation and sales
operations. Arnaud graduated with an MSc in Finance & Strategy from Sciences Po, Paris.
SUSTAINABILITY REPORT
SIGNATORY OF PRI: PRINCIPLES FOR RESPONSIBLE INVESTMENT
PRI is recognised as the leading global network for investors who are committed to integrating environmental,
social and governance (ESG) considerations into their investment practices and ownership policies. The
Principles demonstrate best practice in ESG integration, guide signatories in improvements and promote closer
alignment between the objectives of institutional investors and those of society at large.
Triple Point became a member of PRI in 2019. The first Assessment Report period of 2020-2021 was a fallow
reporting year for PRI to accommodate the launch of a new reporting and scoring system. Triple Point’s first
Assessment Report will be published in 2023.
Triple Point believes that investing
in the solutions to socio-economic
problems creates a flywheel effect.
The scale of the problem drives
the size of the demand, which in
turn underpins the strength of the
investment. With long-lasting social
impact comes long-term sustainable
returns.
In line with this business mission
and the commitment to responsible
investment, Triple Point has applied
to become a B Corporation (status
pending). Certified B Corporations
are businesses that meet the
highest standards of verified social
and environmental performance,
public transparency, and legal
accountability to balance profit and
purpose.
In 2019, Triple Point became a
signatory to the Principles for
Responsible Investing (“PRI”),
to demonstrate best practice in
investor ESG integration and guide
continued improvement.
Triple Point seeks to promote
these principles throughout its
business, and they are reflected in
its Sustainable Business Objectives
document. These principles ensure
all investment processes have sound
and appropriate integration of ESG
practice and are overseen by the
Triple Point Sustainability Group.
This means investment teams are
aware of, and can make informed
investments decisions about, key
ESG risks and opportunities.
Through our people, and the partnerships we build,
Triple Point unlocks investment opportunities that have
purpose, while generating profits for investors.
A committed Investment Manager
Triple Point’s mission statement is:
Triple Point’s adoption of the six Principles for Responsible Investment
Digital 9 Infrastructure plc
Page 48
PRI PRINCIPLE
HOW TRIPLE POINT ADOPTS THE PRINCIPLES FOR D9
1
We will incorporate ESG
issues into investment
analysis and decision-
making processes.
ESG analysis is considered by the investment team alongside financial,
and shared in Investment Committee papers to inform the final
investment decision.
2
We will be active owners
and incorporate ESG issues
into our ownership policies
and practices.
Investments made by D9 are frequently majority or fully owned. Triple
Point acts as asset manager on behalf of the Company and uses initial
ESG analysis to implement an ESG engagement programme with
portfolio companies, to drive improvements in ESG behaviours. These
are reported in our annual report.
3
We will seek appropriate
disclosure on ESG issues
by the entities in which we
invest.
ESG topics are investigated in all due diligence of acquisitions/
investments. ESG topics are monitored through Board meetings and the
ESG engagement programme and reported on annually.
4
We will promote
acceptance and
implementation of the
principles within the
investment community.
The value of the principles and importance of the role of ESG factors in
good decision making are proactively promoted.
5
We will work together to
enhance the effectiveness
in implementing the
principles.
D9 uses the best practice promoted by the principles to inform the
engagement programme with portfolio companies and others in our
investment network to encourage best practice and seek change.
6
We will each report on
our activities towards
implementing the
principles.
D9 reports annually on ESG activities. PRI signatories are required to
report on their responsible investments activities annually. The next and
first published Assessment Report for Triple Point will be in 2023.
Digital 9 Infrastructure plc
Page 49
SUSTAINABILITY REPORT
The importance of sustainability to D9
We follow a best practice approach to sustainable
investment, based on these four pillars:
1. Sustainable outcomes and Sustainable Development
Goal 9 (“SDG9”) alignment
2. ESG research and analysis
3. Engagement programme
4. Transparency and Governance
1. Sustainable outcomes and SDG9 alignment
Sustainable Outcomes, the bigger picture
SDG9 alignment is at the heart of the Company and a
key source of sustainability outcomes for the strategy.
In addition to SDG9 alignment, the D9 network has the
opportunity to create wider sustainability outcomes
over time.
The UN Sustainable Development Goals (SDGs): In
2015, world leaders gathered at the UN to adopt 17
Sustainable Development Goals to achieve several
objectives by 2030: end poverty, promote prosperity
and well-being for all, and protect the planet. The UN
Sustainable Development Goals have been adopted by
193 countries. D9’s business and investment approach
has the potential to help address SDG9, 11, 12 and 14.
Table 2 shows the full SDG alignment opportunity for
D9.
Page 50
Digital 9 Infrastructure plc
Page 50
UN SDG
UN SDG TARGET
HOW D9 CONTRIBUTES TO
THIS GOAL AND TARGET
PORTFOLIO
COMPANIES
CORE ALIGNMENT
9
Build resilient
infrastructure,
promote
inclusive and
sustainable
industrialisation
and foster
innovation
9.c.1
Significantly increase
access to information and
communications technology,
and strive to provide
universal and affordable
access to the Internet in
least developed countries.
Investing in subsea and
terrestrial fibre networks that
are managed in a responsible
and sustainable way and can
provide connectivity growth and
a reduction in digital shortfall.
Aquacomms
EMIC 1
9.4
By 2030, upgrade infrastructure
and retrofit industries to
make them sustainable,
with increased resource-use
efficiency and greater adoption
of clean and environmentally
sound technologies and
industrial processes, with
all countries taking action
in accordance with their
respective capabilities.
Investing in infrastructure which
considers environmental impact
and efficiency in its construction
and processes, and in particular
ensuring that data centre
investments (the most energy
intensive in our sub sectors)
are working to, or already
offer, a low carbon service.
Verne Global
SeaEdge
WIDER ALIGNMENT SDG OPPORTUNITY
11
Make cities
and human
settlements
inclusive, safe,
resilient and
sustainable
11.3
By 2030, enhance inclusive
and sustainable urbanization
and capacity for participatory,
integrated and sustainable
human settlement planning and
management in all countries.
Investing in responsibly
managed and sustainable
digital infrastructure which can
contribute to connectivity across
developed and developing
jurisdictions promotes
capacity for participatory and
sustainable human settlement.
Aquacomms
EMIC 1
12
Ensure
sustainable
consumption
and production
patterns
12.2
By 2030, achieve the
sustainable management
and efficient use of
natural resources.
Investing in responsibly
managed and sustainable digital
infrastructure which influences
supply chain behaviours and
looks to implement low energy
solutions, and in particular
ensuring that data centre
investments (the most energy
intensive in our sub sectors)
are working to or already
offer high energy efficiency.
Verne Global
SeaEdge
14
Conserve and
sustainably use
the oceans,
sea and marine
resources for
sustainable
development
14.1
By 2025, prevent and
significantly reduce marine
pollution of all kinds, in
particular from land-based
activities, including marine
debris and nutrient pollution.
Investing in data centres with
sustainable and responsible
cooling systems contributes to
reduction in marine pollution
from land-based activities.
Verne Global
SeaEdge
14.2
Sustainably manage and
protect marine and coastal
ecosystems to avoid significant
adverse impacts, including by
strengthening their resilience,
and take action for their
restoration in order to achieve
healthy and productive oceans.
Ensuring the responsible
construction, deployment and
management of subsea fibre
contributes to reduction in
marine and coastal ecosystem
pollution and damage.
Aquacomms
EMIC 1
D9’s SDG alignment opportunity
Digital 9 Infrastructure plc
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The Impact Management Project (IMP): From 2016-2018, the IMP brought together more than 2,000 practitioners
from across the value chain to agree on the dimensions of performance that matter for impact measurement,
management and reporting. In 2018, the IMP began facilitating a structured network of standard-setting
organisations to coordinate efforts with a shared vision of getting to global consensus. The Project developed
the ABC of impact performance which links the impact of an asset, or portfolio of assets, to an investor’s
specific intentions.
To be categorised as “Contribute to Solutions”, assessment of an enterprise must be a yes for each
assessment question:
Does (or may)
cause harm
A
ct to avoid harm
“I have regulatory requirements
to meet (e.g. I have to cut my
carbon emissions)”
“I want to mitigate risk”
“I want to behave responsibly”
B
enefit stakeholders
“I want to have a positive effect
on the world to sustain long-
term financial performance”
“I want a world where all
businesses try to have a
positive effect on society”
C
ontribute to solutions
“We want to help tackle
malnutrition in Africa”
“We want to help tackle the
education gap”
Is the enterprise acting to avoid harm to its
stakeholders?
Does/may cause harm
Act to avoid harm
Benefit stakeholders
Contribute to solutions
Are some of the enterprise’s effects generating
positive effects for stakeholders?
Are any of the enterprise’s effects contributing to
solutions to social or environmental challenges?
Yes
Yes
Yes
No
No
No
Digital 9 Infrastructure plc
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SUSTAINABILITY REPORT
QUESTION
ENTERPRISE ANSWER
AQUACOMMS
EMIC1
VERNE GLOBAL
SEAEDGE
1
Is the enterprise acting to avoid
harm to its stakeholders?
Y
Y
Y
Y
2
Are some of the enterprise’s
effects generating positive
effects for stakeholders?
Y
Y
Y
Y
3
Are any of the enterprise’s
effects contributing to solutions
to social or environmental
challenges?
Y
Y
Y
Y
#YES
3
3
3
3
IMP A,B,C
ALIGNMENT
C
C
C
C
RATIONALE
Creating a network of digital infrastructure that considers environmental
implications, is energy efficient, and working towards lowest possible
carbon footprint, while accounting for connectivity needs and access, is
expected to contribute to SDG9 aligned outcomes:
•
Increased connectivity and reducing digital shortfall
•
Environmentally sustainable and lower carbon infrastructure
SDG alignment is considered a relevant framework for identifying
contribution to social or environmental challenges.
This categorisation is based on the requirement that all other aspects of
a portfolio company are managed in a responsible and sustainable way.
Strong ESG integration in due diligence and ownership helps to support
the ability for a thematic fund such as D9 to align to the “Contribute”
category.
D9’s Impact Management Project ABC alignment
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SUSTAINABILITY REPORT
SDG9 Alignment
D9 will only invest in Digital
Infrastructure opportunities which
align with at least one of two
purpose-driven themes aligned with
SDG9: “Build resilient infrastructure,
promote inclusive and sustainable
industrialization and foster
innovation”. Investments must:
i.
Significantly increase access to
information and communications
technology to improve digital
access, for all sections of society.
and/or
ii. Improve the environmental
sustainability of Digital Infrastructure,
including energy use by targeting
assets with the most advanced
energy efficiency practices, or
where strong improvement can be
achieved.
These two purpose driven overlays
are directly derived from SDG
targets 9.c and 9.4. Where an
investment does not align to either
of these purpose statements, or
where there is no opportunity to
create improvements D9 will not
invest.
Examples of investments we have
rejected on the ground of poor
SDG9 alignment
•
A data centre opportunity
housing bitcoin mining
operations but obtaining its
power from a gas power plant.
This deal did not align to either
of the SDG9 purpose-driven
overlay themes, and it did not
present any opportunity to
engage for improvement, as a
result the opportunity was not
progressed beyond the initial
screening stage.
•
A data centre opportunity
housing purely bitcoin mining
was rejected on the grounds
of no potential to transition
the capacity away from bitcoin
mining to enterprise, despite the
renewable energy credentials.
•
A data centre opportunity was
rejected on the grounds of weak
environmental and governance
credentials. There was no strong
pathway to greening the power,
coupled with evidence of poor
management.
Evidencing SDG9 alignment
To demonstrate D9’s commitment to
and success in alignment to SDG9,
five Key Performance Indicators have
been identified for on-going tracking
and reporting.
D9’s SDG9-linked Key Performance Indicators
SDG9 ALIGNMENT
SUB SECTOR
METRIC
Target 9.4
Decarbonisation of
digital infrastructure
All sub sectors
Scope 1 and 2 emissions
Data Centre
Data Centre PUE
Target 9.c.1
Increasing connectivity
and reducing
digital shortfall
Subsea and terrestrial fibre
POPs – Points of presence
(presented as a number)
Kilometres of fibre
Growth in network
capacity (a % of
terabyte growth)
Digital 9 Infrastructure plc
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What is PUE, and how can you improve it
Power usage effectiveness (“PUE”) is a metric
used to determine the energy efficiency of
a data centre. It was created by members of
the Green Grid, an industry group focused on
data centre energy efficiency
The metric is calculated by dividing the
amount of power entering a data centre by the
power used to run the computer infrastructure
within it. PUE is therefore expressed as a
ratio, with overall efficiency improving as the
quotient decreases towards 1.
Efficient server utilisation in combination with
low energy heating and cooling methods
contribute to a PUE closer to 1.0. Best
practice guidance from the Carbon Neutral
Data Centre pact sets a PUE of 1.3 in cold
environments and 1.4. in warm
We require all our portfolio
companies to report their
Scope 1 and 2 emissions,
and to provide details
of the carbon emission
reduction initiatives they
have in place. This enables
us to monitor their absolute
emissions. We have
implemented a programme
with our portfolio
companies to work towards
Scope 3 and embodied
carbon data reporting.
We target a year-on-year
reduction in GHG emissions
intensity per portfolio
company for fully owned
companies.
For our data centres we use
a further measure of energy
efficiency (PUE) to assess
their ability to contribute to
decarbonisation. We target
a weighted average PUE
of 1.3 across the portfolio
of data centre assets. 1.3
is widely considered to
be industry best standard
for data centres in cold air
locations. Where we acquire
a data centre with a weaker
PUE we engage to drive
improvement.
We measure our fibre
network’s contribution to
digital connectivity through
the number of POPs (points
of presence), the kilometres
of fibre, and growth in
network capacity (attributed
to the reporting period as a
% of terabyte growth). We
look for growth across each
of these metrics.
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SUSTAINABILITY REPORT
2. ESG research and analysis
ESG integration delivers value
during the initial investment
decision-making process and on
an ongoing basis. D9 undertakes
both a broad and deep analysis
in order to build a clear picture of
the sustainability credentials of a
potential investment, as well as to
drive continuous improvement.
i.
Breadth – We align to cross-
sector ESG expectations defined by
the United Nations Global Compact.
ii. Depth – We align our ESG
expectations to sector relevant risks
and opportunities drawn from, but
not exclusively, the Sustainability
Accounting Standards Board
(“SASB”) and the Sustainable Digital
Infrastructure Alliance (“SDIA”)
assessing each potential investment
for climate risk, using the Task
Force on Climate-related Financial
Disclosures (“TCFD”) framework for
guidance.
ESG integration and the
investment process
ESG will be considered by the
Investment Manager at every stage
of the investment process:
1. Sourcing – All investments are
assessed for alignment to one of
our two purpose driven themes.
2. Due Diligence – We systematically
consider the breadth and depth of
an investment’s ESG credentials.
All investments are assessed for
alignment to the ten principles
of the UN Global Compact, to
ensure due attention to the key
areas of human rights, labour,
environment and anti-corruption
(for further detail see Table 5). A
deep bespoke analysis of industry
specific ESG themes and topics
is conducted guided by SASB,
SDIA, TCFD and other relevant
industry practice. At this stage
we identify any possible concerns
or areas for further interrogation,
including climate risk/opportunity.
Where appropriate a second
opinion from the Sustainable
Investment Sub Group is sought,
a group consisting of investment
professionals and Partners from
across the Investment Manager
to provide a sounding board and
further layer of governance to
sustainability decision making.
3. Preparation for approval – Once
the Investment Manager has
determined to progress with an
opportunity, a comprehensive
review is conducted which, where
possible, includes a site visit.
At this stage the Investment
Manager will seek clarification on
any areas of concern previously
identified, to enable final
completion of the ESG tracker.
At this stage the Investment
Manager will baseline current
performance on key ESG areas.
4. Investment Committee Review
– Deal screening papers and full
investment committee papers
include ESG and climate analysis
for the Investment Committee’s
consideration. All Triple Point
Investment Committee members
receive specialist ESG training,
to ensure they fully understand
the ESG integration approach in
place and can assess investment
opportunities in the correct
context.
5. Execution – Metrics are
established that will be collected
for future reporting. D9 will use
its influence as owners to drive
ongoing improvement.
6. Monitoring & Reporting – Triple
Point will collect and report
on key ESG metrics across
investments.
7. Holding & Exit Strategy – the
Investment Manager, will work
with portfolio companies to
continue to improve sustainability
behaviours and bring further
added value to the business
model. At the point of sale, we
will seek buyers for assets which
support and uphold the highest
standards of ESG within their
business conduct.
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D9 SUPPORTS UN
GLOBAL COMPACT
PRINCIPLE
HOW D9 SUPPORTS
THE PRINCIPLE
The 10 Principles of the UN
Global Compact
The United Nations Global
Compact is a United Nations
initiative to encourage
businesses worldwide to
adopt sustainable and socially
responsible policies, and to
report on their implementation.
The UN Global Compact is a
principle-based framework
for businesses, stating ten
principles in the areas of human
rights, labour, the environment,
and anti-corruption. These
principles are derived from the
Universal Declaration of Human
Rights, the International Labour
Organization’s Declaration
of Fundamental Principles
and Rights at Work, the Rio
Declaration on Environment
and Development, and the UN
Convention Against Corruption.
D9 references these Principles
within the ESG analysis process,
to ensure all companies meet a
strong baseline of sustainable
behaviours. Where weaknesses
are identified, the investment
manager’s engagement
programme is designed to
improve behaviours.
1
Businesses should support
and respect the protection
of internationally proclaimed
human rights.
All portfolio companies are assessed for
their statement on protection of human
rights and
equal opportunities approach.
2
Businesses should make sure
they are not complicit in
human rights abuses.
All portfolio companies are assessed for
their human rights approach, employee
health and safety approach and record
and exposure, oversight and influence on
supply chain.
3
Businesses should uphold the
freedom of association and
the effective recognition of the
right to collective bargaining.
All portfolio companies are assessed for
their respect for an employee’s right to
join a trade union and representative
organisation of their own choosing.
4
Businesses should uphold
the elimination of forced and
compulsory labour.
All portfolio companies are assessed
for their approach to managing modern
slavery risk within their own workforce
and those they are exposed to through
suppliers and counterparties.
5
Businesses should uphold the
effective abolition of child
labour.
All portfolio companies are assessed for
their human rights and modern slavery risk
approach and management.
6
Businesses should uphold the
elimination of discrimination
in respect of employment and
occupation.
All portfolio companies are assessed for
their approach to equal opportunities and
worker health and safety.
7
Businesses should support
a precautionary approach to
environmental challenges.
All portfolio companies are assessed
for their approach to environmental
management and climate risk
management.
8
Businesses should undertake
initiatives to promote greater
environmental responsibility.
On behalf of D9, Triple Point are
members of the Sustainable Digital
Infrastructure Alliance, an independent
alliance of stakeholders working across
the digital sectors to execute a roadmap
for sustainable digital infrastructure.
All portfolio companies are actively
encouraged to join relevant initiatives.
9
Businesses should encourage
the development and diffusion
of environmentally friendly
technologies.
D9 has been structured to drive the
deployment of sustainable digital
infrastructure assets, with a focus
on environmental sustainability and
decarbonisation.
10
Businesses should work
against corruption in all its
forms, including extortion and
bribery.
All portfolio companies are assessed
for their approach to prevention of
corruption, appropriate corporate
governance, ability to demonstrate fair
treatment of customers and avoidance of
anti-competitive behaviours.
Integration of the UN Global Compact in D9 ESG analysis
Digital 9 Infrastructure plc
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Topics of assessment
While the approach to ESG must
take into account the individual
nature of the target asset, for
example, its size and type, region,
operational environment and stage
of project cycle,
there are common
measures that can be systematically
applied to calculate the longevity
of an infrastructure asset’s value.
For responsible infrastructure
investments, we always follow
this approach:
Environmental
We consider greenhouse gas
emissions and air pollution,
their creation, management and
monitoring during build and asset
life. Use, generation and intensity
of energy, and the nature of the
energy (e.g. renewable) along
with water use and its pollution.
The Investment Manager will also
look at levels of waste generated,
avoided and disposed of, the
approach to raw material sourcing
and supply chain sustainability,
and potential risk to biodiversity
and habitat.
Social
We consider the asset and
its quality and fit with a more
sustainable economy, including
relevance/appropriateness to
the locality. The Investment
Manager will seek reassurance of
good customer and stakeholder
relations, including management
of land and territorial sea rights
and accessibility and social
inclusion of access to the asset.
We expect strong management
and reporting of health and
safety as well as good labour
management including staff
wellbeing, diversity and inclusion
practices, appropriate training,
fair pay, and reassurance of the
absence of modern slavery.
Governance
We scrutinise the management
team’s responsibility and their
ability to promote a corporate
governance structure that is
accountable and responsive to
stakeholders by addressing issues
such as boards of directors and
trustees, pay structure, ownership
and accounting practices.
Examination of governance
reveals important information on
a company’s business ethics, and
the Investment Manager looks
for evidence of best practice
in approaches to tax policy,
management of bribery and
corruption, conflicts of interest and
appropriate senior level ownership
of ESG issues.
Climate analysis
Within our initial deal scanning
and on-going pre acquisition
due diligence, we consider the
implications of climate change
on the long-term value of the
company. Details of our approach
to the management of climate risk
and opportunity are captured in
our TCFD disclosure.
Staying close to the sustainable
digital infrastructure agenda
The research we conduct to
ensure risks and opportunities
are integrated into our decision
making process do not stop
once we have acquired an asset.
Sustainability is a living and
developing arena. The Investment
Manager’s sustainability and
investment teams work together
to stay on top of emerging issues
and will revise topics of analysis
as they emerge and evolve.
Close engagement between
our portfolio companies and the
Investment Manager ensures
on-going sharing of insight and
experience, creating a valuable
network of information. Through
membership of the SDIA the teams
stay informed of latest activities,
collaborations and best practice
behaviours and performance.
Insight from this forum feeds into
the analysis process and influences
the expectations we place on
portfolio companies.
SUSTAINABILITY REPORT
Digital 9 Infrastructure plc
Page 58
Contributing to, and learning
from, sector knowledge
D9 portfolio company Aqua
Comms has contributed data to
an international research project
run out of New York University,
exploring the carbon intensity
of fibre, relative to that of data
centres. The research aims to
empower data-driven strategic
decision making in the growth of
the digital infrastructure market.
This is insight D9 will utilise in our
own acquisition strategy.
Preliminary research from the
Sustainable Subsea Networks
project, a joint academic-industry
initiative, shows that subsea cables
are an underutilised resource
with significant potential for
decarbonising the Information and
communication Technology (ICT)
sector more broadly. Cables and
cable landing stations are often
omitted from ICT climate impact
analyses because their energy
needs are significantly smaller
than terrestrial data centres or
fixed/wireless access network
infrastructures. This marginal
status, however, is a strength; it
means that, whenever latency and
data sovereignty concerns are not
acute, subsea pathways can be
mobilised to route data to and
from parts of the world with lower-
carbon energy grids or to shifting
data from locations where storage
is carbon intensive to data centres
with advanced sustainability
designs. This also reduces the
need to deploy redundant edge
cache servers.
In short, significant
climate gains can be made in the
future with more cables connecting
strategically-located data centres.
Aqua Comms actively participate
with appropriate industry bodies. It
has recently joined the World Ocean
Council. Through this membership
it intends to participate in and
contribute to a community aligned
to the sustainable use, development
and stewardship of the world’s
oceans.
Digital 9 Infrastructure plc
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SUSTAINABILITY REPORT
3. Engagement programme
Engagement on sustainability and
ESG actions forms an important
part of the long-term value add
strategy for D9. It is through our
engagement programme that we
work with our portfolio companies
to drive forward improvements in
sustainability credentials, support
best practice and innovation, and
benefit from each other’s experience
and strengths.
This process drives
long-term value for our investors,
our portfolio and for society at large.
For each acquisition we implement
an engagement programme based
on the results of our ESG analysis.
Programmes are tailored to each
portfolio company, but all align to
D9’s broader strategy – to create
a low carbon linked network of
connectivity – to materialise. Their
strategy is underpinned by two
principles:
1. Engagement allows us to invest
in assets which offer the right
strategic credentials, but where
the benefits of our sustainability
experience can add value to the
asset over the long term.
2. Engagement allows us to guide
and support strong sustainability
performing companies into
positions of market leaders,
influencers and innovators.
Experience which in turn can
benefit other assets within the
portfolio.
These two principles underpin the
sustainability engagement ambitions
for D9. While we are still in the early
stages of this programme, initial
activities have already generated
positive outcomes.
ACQUISITION
DATE ENTERED
PORTFOLIO
ESG RISK/
OPPORTUNITY
IDENTIFIED
ACTION FOR CHANGE
Aqua Comms
04/21
Modern Slavery risk
management
Aqua Comm conducted a review of their
modern slavery risk and implemented a
modern slavery policy.
Emissions data
management and
reporting
Implementation of a full review of the
network and landing sites to implement
energy use data collection, to enable
emissions calculations. Furthermore,
this process led to a review of energy
providers and planning for renewable
energy on landing sites.
Continue industry
engagement
Aqua Comm have joined the World
Ocean Council. Aqua Comm CEO was
a lead author on a Frontiers publication
exploring the use of SMART cables to
support climate and ocean observation,
sea level monitoring, observations
of Earth structure, and tsunami and
earthquake early warning and disaster
risk reduction, including hazard
quantification.
Verne Global
09/21
Health & Safety approach
An opportunity for improvement was
identified, which led to
Verne Global
implementing a new process and policy
around health and safety management.
Creating Sustainability Outcomes through Engagement, from acquisition to 31 December 2021
Digital 9 Infrastructure plc
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4. Transparency and Governance
There is a strong approach to
information sharing and oversight
for Sustainability across Triple Point
and D9.
The Board, in conjunction with Triple
Point’s Head of Digital Infrastructure,
Thor Johnsen, have oversight of all
sustainability risks. These risks are
reported into the Company’s risk
register. The D9 investment team are
responsible for completing the D9 risk
register, which is owned by the Board.
This risk register is reviewed and
discussed through the portfolio risk
review meeting, involving members
of the investment, risk and the
sustainability teams. The risk register
is reviewed by Risk Committee bi-
annually and is presented to the Board
on a quarterly basis. The Board are
also kept informed of sustainability
risks and opportunities facing
portfolio companies through updates
provided by the investment team and
Triple Point’s Head of Sustainability,
including deep dives into sustainability
integration, engagement, target
setting and performance.
Responsibility for the ESG
integration strategy across
Triple Point sits with the Head of
Sustainability, Lindsay Smart, who
leads the Triple Point Sustainability
Team. There are a number of
oversight functions in place to
ensure the effective implementation
of ESG by the Sustainability Team.
Triple Point operates a Sustainability
Group which consists of senior
partners and managers from
across the Investment Manager.
This Group meets monthly to
discuss Sustainability initiatives and
concerns from across the company.
The Group is chaired by Triple
Point’s co-Managing Partner; and
both Managing Partners sit on the
Group. The Sustainable Investment
Sub Group reports to this Group.
The sub-Group consists of senior
investment team members from
across Triple Point’s investment
strategies. This Group meets every
eight weeks to share best practice,
latest industry activity and ESG ideas
from across the business. This Group
can also be called to review a deal
which has received a critical level of
ESG flag at the due diligence stage,
or to act as a sounding board for
critical debate should a deal present
a complex sustainability profile. A
D9 investment opportunity receiving
nine or more flags is brought to
the Group for opinion which must
then be shared within Investment
Committee papers.
The Sustainability Team conducts an
annual ESG monitoring programme
to assess the effectiveness of ESG
integration across each of Triple
Point’s strategies, including D9. Each
strategy is subject to a review of
their adherence to their strategy’s
ESG integration policy, and
opportunity for development and
evolution. The findings of this audit
are presented to the Sustainability
Group for discussion and further
action if appropriate.
The Sustainability Team are also
subject to quarterly risk reviews by
the risk team, and any identified
sustainability risks are recorded on
the Triple Point Group risk register,
which is reviewed quarterly by the
Group’s Risk Committee.
The Head of Sustainability also sits
on the Risk Committee to ensure
that the Group outlook for risk
appropriately considers sustainability
issues.
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SUSTAINABILITY REPORT
Our commitment to strong
governance and transparency is also
demonstrated in our sustainability-
related disclosures in the financial
services sector (the “EU Sustainable
Finance Disclosure Regulation” or
“SFDR”).
The Investment Manager as AIFM
has determined that D9 is subject
to Article 8 of the EU Sustainable
Finance Disclosure Regulation.
Article 8 applies where a financial
product promotes, among other
characteristics, environmental
or social characteristics, or a
combination of those characteristics,
provided that the companies in
which the investments are made
follow good governance practices.
Our full disclosure on our website:
The transparency of our sustainability
activities is an important aspect
of our commitment. The data
we provide reflects our SDG9
commitments and the disclosure
expectations we respond to
in relation to EU Taxonomy
requirements and those associated
with being subject to Article 8 of the
EU Sustainable Finance Disclosure
Regulation, and those associated
with our commitment to disclose
details in line with the expectations
of the Task Force for Climate Related
Disclosure (TCFD).
The following table shows metrics,
for operational and fully owned
D9 portfolio companies, which
demonstrate our commitment to
align with SDG9 through sustainable
investment in digital infrastructure
and contribution to connectivity.
We will report these metrics each
year and look to show progress over
time. As this is Year 1 for the strategy
comparison is not yet possible,
however we are pleased to point to
our aggregated PUE value of 1.22
which is stronger than industry best
practice (in cool air temperatures)
of 1.3. We are also pleased to
report growth in connectivity since
acquisition of 7%. Also provided is
an emissions comparison chart to
show how the emissions savings of
our largest data centre, compares to
an equivalent data centre drawing
from a non-renewables grid.
Notes:
–
Independent limited assurance has been provided only over 2021 data marked with this symbol. PwC’s assurance statement can be found on pages 120 to 123.
Triple Point’s Reporting Principles and Methodologies can be found in Annex 1.
–
Data is shown for operational and fully owned D9 portfolio companies.
–
The weighted average Scope 1 and 2 (location-based) emissions intensities are 42 tCO
2
e/£Mrevenue and 134 tCO
2
e/GWh.
–
Verne Global’s GHG emission results include carbon emissions from geothermal energy, and biogenic carbon and methane emissions from hydropower reservoirs.
This reflects Verne Global’s energy supplier (Landsvirkjun) approach and is a broader scope than is typical for energy providers in other markets, including the UK.
For further details on assumptions associated with calculations in this table please refer to Reporting Principles and Methodologies detail in Annex 1.
–
Audited PUE includes power used in construction. The unaudited number excluding construction is 1.18.
SDG 9
ALIGNMENT
SUB
SECTOR
METRIC
UNITS
VERNE
GLOBAL
AQUA
COMMS
WEIGHTED
AVERAGE
(BY INVESTMENT
VALUE)
Decarbonisation of
digital infrastructure
All sub sectors
Scope 1 and 2
(market-based)
emissions
intensity
tCO
2
e/£M
revenue
16
23
19
tCO
2
e/GWh
4
217
93
Data Centre
Data Centre
Power Usage
Effectiveness
PUE
1.22
n/a
1.22
Increasing
connectivity and
reducing digital
shortfall
Subsea and
terrestrial fibre
Points of presence
(PoPs)
Number
n/a
17
17
Fibre distance
(operational & in
development fibre)
Kilometre
n/a
32,000
32,000
Growth in network
capacity
% of terabyte
growth
n/a
7%
7%
Metrics and data associated with SDG alignment from acquisition to 31 December 2021
A
A
A
Digital 9 Infrastructure plc
Page 62
The chart below demonstrates context for the emissions for one of our data centres, Verne Global, and shows full
year emissions for Verne Global compared to full year emissions for an equivalent data centre operating in the UK at
the same efficiency levels.
Contextualising decarbonisation results
Few digital infrastructure strategies report their carbon intensity. When comparing D9s footprint to different sectors,
D9’s low carbon footprint relative to other sectors is evident.
The chart below demonstrates context for the emissions for our data centre, Verne Global, and shows full year
emissions for Verne Global compared to full year emissions for an equivalent data centre operating in the UK or the
US using the same amount of energy.
Verne Global’s tCO2 emissions are shown to be 98.4% lower than those of an equivalent UK Data Centre and 99.2%
lower than those of an equivalent US Data Centre.
Sustainability Chart 1: Emissions Comparison. A data centre with the same energy use as Verne Global, and sourcing
average grid mix electricity for each country for calendar year 2021, would produce 26,365 tCO
2
11
if located in the
UK and 50,314 tCO2
12
if located in the US, compared to Verne’s 414 tCO2 (Landsvirkjun 2020, market-based).
Further data requirements
EU Taxonomy requirements and those associated with being subject to Article 8 of the EU Sustainable Finance
Disclosure Regulation require disclosure of indicators in accordance with reporting guidance. The following tables
provide this information for the Digital 9 Infrastructure investments.
Table 1 refers to data for Verne Global and Aqua Comms. Table 2 refers to data for SeaEdge.
It should be noted that in accordance with the SFDR disclosure guidance we report SeaEdge according to the SFDR
Real Estate reporting requirements and all data is reported for the calendar year to 31 December 2021.
Notes:
–
ETF information is MSCI sourced. ETFs are reported in USD and have been converted using Bank of England spot rate for 31 December 2021.
–
6
D9 data is based on £million revenue; ETF data is based on $million sales.
STRATEGY
DESCRIPTOR
tCO
2
e/£MILLION
6
D9
Sustainable digital infrastructure
18.93
iShares US Technology ETF
Large technology companies e.g.
Microsoft, Meta, Apple, Alphabet
27.26
iShares Core S&P 500 ETF
An example US economy snapshot
173.21
iShares North American Natural Resources
ETF
Oil & Gas
860.84
GHG Emissions (tCO2)
414
26,365
50,314
Verne Global
UK Data Centre
US Data Centre
11 UK Government GHG Conversion Factors for Company Reporting
12 EPA eGrid 2020 - US Average
Digital 9 Infrastructure plc
Page 63
SUSTAINABILITY REPORT
Sustainability Data Table 1: SFDR Aligned data (covering Aqua Comms and Verne Global)
INDICATORS APPLICABLE TO INVESTMENTS IN INVESTEE COMPANIES
ADVERSE SUSTAINABILITY INDICATOR
METRIC
IMPACT (2021)
CLIMATE AND OTHER ENVIRONMENT-RELATED INDICATORS
Greenhouse
gas emissions
1. GHG emissions
A
Scope 1 GHG emissions (tCO
2
e)
33
Scope 2 GHG emissions (location-based, tCO
2
e)
2,087
Scope 2 GHG emissions (market-based, tCO
2
e)
962
Total GHG emissions (tCO
2
e)
995
2. Carbon footprint
Carbon footprint (tCO
2
e/£Million investment value)
2.14
3. GHG intensity of investee companies
GHG intensity of investee companies (tCO
2
e/£Million revenue)
13
19
4. Exposure to companies active
in the fossil fuel sector
Share of investments in companies active in the fossil fuel sector
0%
5. Share of non renewable energy
consumption and production
A
Share of non-renewable energy consumption and non-renewable energy
production of investee companies from non-renewable energy sources
compared to renewable energy sources, expressed as a percentage
1.34%
6. Energy consumption intensity
per high impact climate sector
Energy consumption in GWh per million GBP of revenue of investee
companies, per high impact climate sector (GWh/£Million)
N/A
Biodiversity
7. Activities negatively affecting
biodiversity – sensitive areas
Share of investments in investee companies with sites/operations
location in or near to biodiversity-sensitive areas where activities
of those investee companies negatively affect those areas
0%
Water
8. Emissions to water
Tonnes of emissions to water generated by investee companies
per million GBP invested, expressed as a weighted average
0
Waste
9. Hazardous waste ratio
Tonnes of hazardous waste generated by investee companies
per million GBP invested, expressed as a weighted average
–
14
SOCIAL AND EMPLOYEE, RESPECT FOR HUMAN RIGHTS, ANTI-CORRUPTION AND ANTI-BRIBERY MATTERS
Social and
employee matters
10. Violations of UN Global Compact
principles and Organisation for Economic
Cooperation and Development (OECD)
Guidelines for Multinational Enterprises
Share of investments in investee companies that have
been involved in violations of the UNGC principles or
OECD Guidelines for Multinational Enterprises
0%
11. Lack of processes and compliance
mechanisms to monitor compliance
with UN Global Compact principles and
Organisation for Economic Cooperation
and Development (OECD) Guidelines
for Multinational Enterprises
Share of investments in investee companies without policies
to monitor compliance with the UNGC principles or OECD
guidelines for Multinational Enterprises or grievance/complaints
handling mechanisms to address violations of the UNGC
principles or OECD Guidelines for Multinational Enterprises
0%
12. Unadjusted gender pay gap
A
Median unadjusted gender pay gap of investee companies
14%
Mean unadjusted gender pay gap of investee companies
8%
13. Board gender diversity
A
Average ratio of female to male board members in investee companies
0%
14. Exposure to controversial weapons
(anti personnel mines, cluster munitions,
chemical weapons and biological weapons)
Share of investments in investee companies involved in
the manufacture or selling of controversial weapons
0%
–
A
Independent limited assurance has been provided only over 2021 data marked with this symbol. PwC’s assurance statement can be found on pages 120 to 123. Triple Point’s Reporting
Principles and Methodologies can be found in Annex 1.
–
13
Weighted Average Carbon Intensity (tCO
2
e/£M).
–
14
A ratio has not been calculated here as hazardous waste data was not collected by Verne Global for 2021. This is considered to be a small amount and will be tracked from the 2022
reporting period onwards.
INDICATORS APPLICABLE TO INVESTMENTS IN REAL ESTATE ASSETS
ADVERSE SUSTAINABILITY INDICATOR
METRIC
IMPACT (2021)
Greenhouse
gas emissions
17. GHG emissions
Scope 1 GHG emissions generated by real estate assets
14
Scope 2 GHG emissions generated by real estate assets
0
Total GHG emissions generated by real estate assets
14
Energy
consumption
18. Energy consumption intensity
Energy consumption in kWh
15
of owned real
estate assets per square metre
457
For further details on assumptions associated with these calculations please refer to Reporting Principles and Methodologies detail in Annex 1.
15
kWh used over GWh.
Table 2: Additional climate and other environmental-related indicators (covering SeaEdge)
Digital 9 Infrastructure plc
Page 64
For further details on assumptions associated with the reporting of these indicators please refer to Reporting
Principles and Methodologies detail in Annex 1.
In accordance with the Task Force for Climate Disclosure we also collate and report our approach to climate risk
management. Our full TCFD disclosure can be found
in Annex 2 of this Report.
Digital 9 Infrastructure plc
Page 65
Digital 9 Infrastructure plc
Page 66
SECTION 172(1) STATEMENT
The Board is committed to promoting the long-term success of the Company whilst conducting business in a fair, ethical,
and transparent manner.
The Board makes every effort to understand the views of the Company’s key stakeholders and to take into consideration
these views as part of its decision making process.
As an investment company, the Company does not have any employees and conducts its core activities through third-
party service providers. The Board seeks to ensure each service provider has an established track record, has in place
suitable policies and procedures to ensure they maintain high standards of business conduct, treat shareholders fairly,
and employ corporate governance best practice.
As a Jersey incorporated entity, the Company voluntarily discloses how the Directors have had regard to the matters set
out in section 172(1)(a) to (f) and fulfils the reporting requirements under section 414CZA of the Companies Act 2006
(the “Act”).
The following disclosure describes how the Directors have had regard to the matters set out in section 172(1) (a) to (f)
when performing their duty under s172 and forms the Directors’ statement required under section 414CZA of the Act.
Stakeholder Engagement
Stakeholder
Why is it important
to engage?
How have the
Investment Manager/
Directors engaged?
What were the key topics
of engagement?
What was the feedback
obtained and the outcome
of the engagement?
Shareholders
Shareholders and their
continued support is
critical to the continuing
existence of the
business and delivery of
our long-term strategy.
The Investment
Manager has been
heavily engaged with
shareholders through
the IPO and subsequent
fundraises.
Given the ongoing
restrictions enforced as
a result of the Covid-19
pandemic, meetings
with shareholder have
been held virtually.
Directors met with
shareholders upon
request in advance of
IPO and during placing
offers. The Board as a
whole remain cognisant
of shareholder views and
during decision making.
The Board’s shareholder
engagement
programme is kept
under review and is
a key focus for the
financial year ending
31 December 2022.
An important topic
of engagement with
shareholders has been
sustainability. The
Investment Manager has
been responsive to due
diligence requests on
the matter.
In early January 2022,
the Board considered
changing the Company’s
Investment Policy
and conducted a
consultation with
shareholders before
proceeding.
The Company held a
consultation to amend
the Investment Policy in
January 2022. Feedback
from the consultation
was implemented into
the change of Investment
Policy which was
approved in February
2022.
Digital 9 Infrastructure plc
Page 67
Stakeholder
Why is it important
to engage?
How have the
Investment Manager/
Directors engaged?
What were the key topics
of engagement?
What was the feedback
obtained and the outcome
of the engagement?
Investment Manager
The Investment
Manager is responsible
for executing the
Investment Objective
within the Investment
Policy of the Company.
The Board maintains
regular and open
dialogue with the
Investment Manager
at Board meetings and
has regular contact
on operational and
investment matters
outside of meetings.
As the relationship
has progressed since
IPO the Board have
been able to provide
constructive feedback
to the Investment
Manager on the content
of reporting, which
has allowed for more
focused discussion.
The Board established
a risk appetite during
the course of the
year which provided
additional clarity to the
Investment Manager on
the parameters in which
they should operate.
As a result of the
engagement between
the Board and the
Investment Manager, the
Group has been able to
execute its investment
strategy, which has also
resulted in the Company
raising £845.2 million as
at the date of this report.
Portfolio companies
The performance and
long-term success of the
Company is linked to
the performance of the
companies in which we
invest.
On acquisition of Verne
Global, the Investment
Manager went to
Iceland to visit the site
and meet management.
The Investment
Manager has held
regular meetings
with the board and
management of each of
the portfolio companies
and received regular
reporting including
financial.
Once a portfolio
company has been
acquired the Investment
Manager establishes
a 180-day plan, which
seeks to embed
various processes and
procedures to ensure
the Company receives
appropriate reporting.
On an ongoing basis
the Investment Manager
engages with the
portfolio companies
on matters including
finance, ESG and
strategy.
A key focus of the 180-
day plan has been ESG
reporting. At the time of
acquisition Aqua Comms
did not report data on
carbon emissions, the
Investment Manager
has worked closely with
Aqua Comms to improve
this and the business
now reports Scope 1
and 2 emissions data in
line with best practice
reporting standards.
SECTION 172(1) STATEMENT
Digital 9 Infrastructure plc
Page 68
Stakeholder
Why is it important
to engage?
How have the
Investment Manager/
Directors engaged?
What were the key topics
of engagement?
What was the feedback
obtained and the outcome
of the engagement?
Suppliers
The Company’s
suppliers include
third-party service
providers, each of which
is essential in ensuring
the ongoing operational
performance of
the Company. The
Company relies on the
performance of third-
party service providers
to undertake all its main
activities.
The Board maintains
close working
relationships with all its
key advisers.
The Management
Engagement Committee
has responsibility
for overseeing and
monitoring the
performance of each
supplier. A detailed
annual assessment is
undertaken of each
supplier to ensure
they continue to fulfil
their duties to a high-
standard.
As it was the Company’s
first year in operation,
the Management
Engagement
Committee did not
meet to review the
performance of service
providers, but will meet
and conduct a review in
the financial year ending
31 December 2022.
As relationships have
developed, the Board
has been open in
providing feedback to its
service providers to make
clear their expectations.
Regulators
Engagement with the
regulator is imperative
to the Company’s ability
to operate.
During the period the
Company has had to
engage with various
regulators (including
the Financial Conduct
Authority and Jersey
Financial Services
Commission) on a
number of different
matters.
Following the
acquisition of Aqua
Comms the Company
has undertaken a
change of control
process with the Federal
Communications
Commission in the
US, without which the
acquisition of Aqua
Comms could not have
been successful.
Without engagement
with the regulator the
Company would not
have been able to
complete additional
equity raises, acquisitions
or its change of
investment policy.
Digital 9 Infrastructure plc
Page 69
Principal Decisions
Principal decisions have been defined as those that have a material impact to the Group and its key stakeholders. In
taking these decisions, the Directors considered their duties under section 172 of the Act.
Equity Raises
Following the Company’s IPO in March 2021, two subsequent equity raises were completed in June and September
2021, followed by a further fundraise in January 2022, raising total gross proceeds of £845.2 million. The additional
equity enabled the Company to complete acquisitions of attractive assets, ultimately aiding in the achievement of the
Company’s investment objective.
Deployment of capital
During the year, deployment of the IPO proceeds and subsequent fundraises, has been a focus for the Company. The
Board considered each investment in the context of the Company’s Investment Policy, potential returns to investors and
also from a sustainability perspective.
Change of Investment Policy
In January 2022, the Company held a consultation with shareholders regarding proposed changes to the Investment
Policy. The Board felt it important to consult with shareholders in advance of publishing the circular, in order to provide
an opportunity for shareholders to share their views. As a result of the consultation, the wording of the Investment
Restriction was amended such that “…the Company will not invest more than 25% of Adjusted Gross Asset Value in
any single asset or Investee Company. When the Gross Asset Value reaches £2 billion (as notified by the Company in its
annual or half year financial results report), this restriction will change to 20% of Adjusted Gross Asset Value.” This is in
recognition of the growth aspirations of the Company. The change of Investment Policy was approved by shareholders
and became effective on 27 February 2022.
Digital 9 Infrastructure plc
Page 70
RISK MANAGEMENT
Framework
The Board and the Investment Manager recognise that risk is inherent in the operation of the Company and are
committed to effective risk management to ensure that shareholder value is protected and maximised.
As an externally managed investment company, we outsource key services to the Investment Manager and other
service providers and rely on their systems and controls. The Board has ultimate responsibility for risk management and
internal controls within the Company and has convened a Risk Committee to assist it in these responsibilities. The Risk
Committee undertakes a formal risk review twice a year to assess and challenge the effectiveness of our risk management
and to help define risk appetite and controls to manage risks within that appetite, particularly those which would threaten
its business model, future performance, solvency, valuation, liquidity or reputation. Further details of the Risk Committee’s
activities can be found in the Risk Committee Report on page 100.
The Investment Manager has responsibility for identifying potential risks at an early stage, escalating risks or changes to
risk and relevant considerations and implementing appropriate mitigations which are recorded in the Group’s risk register.
Where relevant the financial model is stress tested to assess the potential impact of recorded risks against the likelihood
of occurrence and graded suitably. In assessing risks, both internal and external controls and factors that could mitigate
the risk are considered. A post mitigation risk score is then determined for each principal risk. The Board regularly reviews
the risk register to ensure gradings and mitigating actions remain appropriate.
Risk appetite
Managing risk is fundamental to the delivery of the Company’s strategy, and this is achieved by defining risk appetite and
managing risks within that appetite. Risk appetite is the level of risk the Company is willing to take to achieve its strategic
objectives. The Board is responsible for setting the Company’s risk appetite and ensuring that the Company operates
within these parameters. The Board has a defined risk appetite for each risk and has implemented controls to manage
risks within that appetite, particularly those which would threaten its business model, future performance, solvency,
valuation, liquidity or reputation. Risk appetite is identified by reference to the same impact and probability criteria as the
risk evaluation.
The Board has reviewed the Company’s appetite for each of the principal risks set out below. The Company seeks to
take risk in executing its strategy and in line with its Investment Policy. The Company’s risk management framework is
designed to manage rather than eliminate the risk of failure to achieve objectives and breaches of risk appetite.
The Board will review and monitor the Group’s risk appetite on an annual basis to ensure that it remains appropriate and
consistent with the Investment Policy.
Risk Impact
High
7
Moderate
to High
1, 5
2
Moderate
8
3, 4, 6,
9, 10
Low to
Moderate
Low
Low
Low to Mod-
erate
Moderate
Moderate
to High
High
Likelihood
Risk
1
Interruptions or poor-quality services as a result of failure of infrastructure, equipment and/or
third-party networks.
2
Investments operate in a highly regulated sector and which will be subject to the different
regulatory regimes of all the countries in which they operate.
3
Dependence on key personnel within investee companies level and the Investment
Manager.
4
External competition - well-funded competitor acquiring a market share and competitive
market for target acquisitions.
5
Risk of security breaches of both the Digital Infrastructure Investments and the Investment
Manager, Administrator and other service providers.
6
The risk that the Company has invested in a concentrated pool of investments or sector of
the market.
7
The Company’s ability to access further capital, either equity or debt, will limit our ability to
grow and pay a progressive dividend.
8
Reliance on the Investment Manager.
9
The Company’s investment performance is dependent on the performance of its portfolio
performance.
10
The Investment Manager is not able to source a sufficient number of suitable investments
within a reasonable timeframe whether by reason or lack of demand, competition or
otherwise.
Digital 9 Infrastructure plc
Page 71
Principal Risks and Uncertainties
The table below sets out what we believe to be the principal risks and uncertainties facing the Group. The table does
not cover all of the risks that the Group may face. The Board defines the Group’s risk appetite, enabling the Group, in
both quantitative and qualitative terms, to judge the level of risk it is prepared to take in achieving its overall objectives.
Additional risks and uncertainties not presently known to management or deemed to be less material at the date of this
report may also have an adverse effect on the Group.
Risk Category
Risk Description
Risk Impact
Risk Mitigation
Impact
Likelihood
Appetite
1
External
– Business
Interruption
Interruptions or
poor-quality services
as a result of failure
of infrastructure,
equipment and/or
third-party networks.
D9’s investee
companies rely
on infrastructure
and technology
to provide their
customers with
a highly reliable
service. There
may be a failure to
deliver this level
of service as a
result of numerous
factors. Failure to
deliver may breach
performance
conditions in
contracts with
customers and
therefore affect
revenue streams,
which in turn
could impact the
performance of
D9 and therefore
adversely impact
the NAV.
There are
appropriate
insurances in place
to cover issues
such as accidental
damage and power
issues.
Furthermore, the
Digital Infrastructure
Investments in
which the Group
invests use proven
technologies,
typically backed
by manufacturer
warranties, when
installing applicable
machinery and
equipment.
Moderate
to High
Moderate
to Low
Medium
Digital 9 Infrastructure plc
Page 72
Risk Category
Risk Description
Risk Impact
Risk Mitigation
Impact
Likelihood
Appetite
2
Operational –
Regulation
D9 acquires Digital
Infrastructure
Investments which
operate in a highly
regulated sector and
which will be subject
to the different
regulatory regimes
of all the countries in
which they operate.
Failure of D9’s
investee companies
to comply with
their regulatory
obligations and/
or maintain a
relevant permit or
licence may result in
sanctions from the
applicable regulator
including fines and/
or the revocation
of its authorisation
to provide services.
This could result
in the relevant
infrastructure ceasing
to be operable and
possibly subject to
decommissioning
requirements
which may in turn,
have a material
adverse effect on
the performance of
the Company, the
NAV, the Company’s
earnings and returns
to Shareholders.
Experts are
engaged to ensure
compliance with all
relevant regulations.
Thorough due
diligence is
carried out prior
to completing on
investments to
assess the likelihood
of regulatory risk
taking place and
in what shape it
may do so. After
completion, the
Investment Manager
and Investee
Companies maintain
a frequent and
ongoing dialogue
on the subject to
ensure compliance
and preparedness
for any change.
Moderate
to High
Moderate
Medium
3
Business –
Key Personnel
Dependence on key
personnel within
investee companies
level and the
Investment Manager.
Key personnel
leaving or being
incapacitated long
term could impact
the performance of
an investee company
or Investment
Manager and
therefore adversely
impact the NAV of
the Company.
The Company
will ensure that
appropriate
incentive and
succession plans are
in place to mitigate
any key person risk.
Moderate
Moderate
Medium
RISK MANAGEMENT
Digital 9 Infrastructure plc
Page 73
Risk Category
Risk Description
Risk Impact
Risk Mitigation
Impact
Likelihood
Appetite
4
External –
Competition
There are two key
types of competition
risk which the
Company faces.
Firstly a well-funded
competitor acquiring
market share in the
markets in which
the Company’s
investee companies
operate, that may
adversely affect the
revenue and margins
of the Company’s
investments.
The second is
the competitive
market for target
acquisitions.
Increased
competition could
make it harder
for the investee
companies to
access good pricing
and gain market
share. Increasing
competition in the
Digital Infrastructure
sector has also led,
in certain markets,
to declines in prices
the operators of
such assets are able
to charge for the
services provided.
The Company
invests in an
increasingly
competitive
environment, as new
investors seek to
invest into the sector
from traditional
infrastructure or
other sectors, and
global content
companies, such as
the FAANGs, may
choose to invest in
the infrastructure
directly, rather than
as a customer.
Such competition
creates pricing risk
when bidding on
target acquisitions,
with EBITDA
multiples increasing,
which drives
higher pricing. This
could result in the
Company being out-
bid on a particular
asset or paying a
premium which, in
turn, could impair
D9’s ability to deploy
funds therefore
affecting the NAV,
the Company’s
earnings and returns
to Shareholders.
Frequent
communication
between the
Company and
its investee
companies will lead
to innovative and
reactive thinking
regarding its
services to remain
competitive and
adapt to emerging
technologies
and customer
preferences.
The Investment
Manager carries
out thorough due
diligence and
applies realistic
assumptions before
acquiring assets
to ensure the total
return target can
be met.
Where possible,
the Investment
Manager seeks to
secure off-market
assets with strategic
benefits through an
alignment with D9’s
existing investee
companies, thus
avoiding competitive
bidding situations.
Moderate
Moderate
High
Digital 9 Infrastructure plc
Page 74
Risk Category
Risk Description
Risk Impact
Risk Mitigation
Impact
Likelihood
Appetite
5
Business –
Data Security
Digital Infrastructure
Investments, in
particular data
centre assets, may
be vulnerable to
security breaches
which could include
unauthorised
access to computer
systems, loss or
destruction of data,
computer viruses,
malware, distributed
denial-of-service
attacks or other
malicious activities.
In addition,
attempts may be
made to access
the IT systems and
data used by the
Investment Manager,
Administrator
and other service
providers through
a cyber attack or
malicious breaches
of confidentiality.
Increased regulation,
laws, rules and
standards related
to cyber security,
could impact
the Company’s
reputation or
result in financial
loss through the
imposition of fines.
Suffering a cyber
breach will also
generally incur costs
associated with
repairing affected
systems, networks
and devices. The
effect of a cyber
security breach may
result in reputational
damage which may
affect relationships
D9 has with partners,
investors and other
third parties, impair
the ability of the
Company to operate
and/or expose D9 to
fines and penalties
which could have
an effect on the
Company’s revenue
and ultimately the
Company’s NAV.
Cyber security
policies and
procedures
implemented by key
service providers
are reported to the
Board regularly to
ensure conformity.
Thorough third-
party due diligence
is carried out
on all suppliers
engaged to service
the Company. All
providers have
processes in place
to identify cyber
security risks and
apply and monitor
appropriate
risk plans.
Each of the
portfolio companies
manages their
own data security
appropriately
according to
the level of risk
their business is
exposed to.
Moderate
to High
Low to
Moderate
Medium
RISK MANAGEMENT
Digital 9 Infrastructure plc
Page 75
Risk Category
Risk Description
Risk Impact
Risk Mitigation
Impact
Likelihood
Appetite
6
Business –
Portfolio
concentration
The risk that the
Company has
invested in a
concentrated pool
of investments or
sector of the market.
If a particular
investment or sector
that the Company
has a large exposure
to underperforms,
investment
performance could
be negatively
impacted.
The Company has
been established
with a specific
investment criteria
as set out in the
Prospectus.
The Company will
make a series of
investments during
its life spread across
targeted jurisdictions
(UK/US and Europe)
and in a diversified
portfolio of Digital
Infrastructure
Investments
which provide key
infrastructure for
global data transfer
(subsea fibre-optic
networks, wireless
networks and
terrestrial fibres)
and data storage
(data centres),
to reduce the
concentration risk by
diversification.
Moderate
Moderate
Low.
The
Company
is currently
outside its
risk appetite
in relation
to Portfolio
Concentra-
tion. The
company
has a strong
pipeline
of oppor-
tunities
that, when
executed,
will bring
this risk
back within
appetite
7
Financial –
Availability of
capital
The Company’s
ability to access
further capital,
either equity or
debt, will limit our
ability to grow and
pay a progressive
dividend.
Without sufficient
capital at sustainable
rates, we will be
unable to pursue
suitable investments
in line with our
Investment
Policy. This would
significantly impair
our ability to
pay dividends to
shareholders at the
targeted rate.
The Company
completed on a
new syndicated RCF
for £300 million
on 15 March 2022
that will be used to
finance acquisitions
on a short-term
basis. As the fund
grows and matures,
D9 will assess its
options with regard
to an accordion
facility and/or further
equity capital raising.
High
Moderate
Medium
Digital 9 Infrastructure plc
Page 76
Risk Category
Risk Description
Risk Impact
Risk Mitigation
Impact
Likelihood
Appetite
8
Corporate –
Third Party
Management
Reliance on the
Investment Manager.
We rely on the
Investment
Manager’s services
and its reputation
in the Digital
Infrastructure
market. As a result,
our performance
will, to a large
extent, depend
on the Investment
Manager’s abilities
in the market.
Termination of
the Investment
Management
Agreement would
severely affect our
ability to effectively
manage our
operations and may
have a negative
impact on the
share price of the
Company.
Unless there is a
default, either party
may terminate
the Investment
Management
Agreement by
giving not less
than 12 months’
written notice,
with such notice
not to be served
before the fourth
anniversary of the
date of the IPO. The
Board will regularly
review and monitor
the Investment
Manager’s
performance. In
addition, the Board
meets regularly
with the Manager
to ensure that we
maintain a positive
working relationship.
Moderate
Low to
Moderate
Medium
9
Business –
Performance
of portfolio
companies
The Company’s
investment
performance is
dependent on the
performance of its
portfolio.
In the event there is
under-performance
in any of the
Company’s portfolio
investments, the
Company may be at
risk of not delivering
target returns.
The Investment
Manager ensures
due diligence is
carried out on all
new investments and
where possible third
party valuations will
be obtained.
The Investment
Manager ensures the
Company’s portfolio
is actively monitored.
This ensures any
under-performance
is identified early
and allows corrective
action to be taken.
Moderate
Moderate
Medium
10
Financial –
deployment
and cash drag
The Investment
Manager is not
able to source a
sufficient number of
suitable investments
within a reasonable
timeframe whether
by reason of
lack of demand,
competition or
otherwise.
This could result in
a greater proportion
of the Company’s
assets being held
in cash for longer
than anticipated
and the Company’s
ability to achieve its
investment objective
will be adversely
affected and result
in reduced IRR to
investors.
A significant
portion of the
Company’s capital
has been invested
in cash generative
businesses providing
material contribution
to dividend cover.
The Company also
has a very strong
pipeline of future
investments.
Moderate
Moderate
Medium
RISK MANAGEMENT
Digital 9 Infrastructure plc
Page 77
Emerging Risks
Introduction of, or amendment to laws, regulations, or technology (especially in relation to climate
change)
The global ambition for a more sustainable future has never been greater, particularly in light of recent events such
as Covid-19 and various climate-related events across the globe. There is increasing pressure for governments and
authorities to enforce green-related legislation. This could materially affect organisations which are not set up to deal
with such changes in the form of financial penalties, operational and capital expenditure to restructure operations and
infrastructure, or even cease certain activities.
As part of our purpose-driven investment strategy and thorough ESG due diligence process, we will continue to
actively seek acquisitions that deliver on sustainability targets and are aligned with our ambition to decarbonise digital
infrastructure.
Global supply chain pressure
As a result of Covid-19, global supply chains are showing increasing signs of pressure. This could result in delays in the
supply of key hardware required to maintain or improve infrastructure. As part of our ongoing monitoring of investments
and assessment of new opportunities, supply chain pressures will be considered and, where necessary, mitigation plans
will be put in place.
Development of disruptive technology
The digital infrastructure sector is constantly evolving. As a result, there is a risk that disruptive technology emerges
which results in current digital infrastructure assets becoming obsolete. The Company constantly monitors the emerging
technology trends with digital infrastructure to ensure investee companies evolve their business models where required
and new investment opportunities are accurately assessed.
New capital raised
There are an increasing number of companies focusing on digital infrastructure and as such increasing capital being
raised into the sector. The Company is confident that it has a competitive advantage due to the focus and breadth of
digital infrastructure experience it holds. However, as competition increases, the availability of capital is likely to decrease.
Rising inflation and interest rates
Material increases in inflation could adversely impact construction costs for both data centres and subsea cables. This
is partially mitigated by the ability of the investee companies to pass through this increase to customers in the form of
higher prices and indexation.
Rising interest rates could impact the discount rates used in the Company’s valuations and therefore its ability to raise
NAV in future, even if investee companies grow their cash flows in line with forecasts. In a rising interest rate environment
it is expected that investee companies will be in a position to increase prices which would partially mitigate this risk.
Digital 9 Infrastructure plc
Page 78
Going Concern
The Strategic Report and financial statements have set out the current financial position of the Company and its
investments in its underlying subsidiaries. The Board has regularly reviewed the position of D9 and its ability to continue
as a going concern in Board meetings throughout the year. The Group has targeted high-quality properties in line with
yield expectations and will continue to analyse investment opportunities to ensure that they are the right fit for the
Group.
The Company has invested £462 million including transaction costs up to 31 December 2021. The cash balance of
the Company at year end was £11.3 million, the remaining uninvested cash of £237 million is held by its wholly owned
subsidiary Digital 9 Holdco Limited for investment purposes.
The Company was admitted to trading on the Specialist Fund Segment of the Main Market of the London Stock
Exchange on 31 March 2021, which was a year after the UK entered into its first lockdown in response to the Covid-19
pandemic. As a result, the Investment Manager and Administrator had already successfully implemented business
continuity plans to ensure business disruption was minimised and had been operating effectively whilst working remotely.
All staff are able to continue to assume their day-to-day responsibilities. To date, Covid-19 has not impacted the
Company’s ability to continue as a going concern. As a result, the Directors believe that the Company is still well placed
to manage its financing and other business risks and will remain viable, continuing to operate and meet its liabilities as
they fall due despite the risk of Covid-19.
The Board believes that there are currently no material uncertainties in relation to the Company’s ability to continue
for a period of at least 12 months from the date of the approval of the Company’s financial statements and, therefore,
has adopted the going concern basis in the preparation of the financial statements, please see Note 2 of the financial
statements for more information.
Viability Statement
In accordance with Principle 21 of the AIC Code, the Board has assessed the prospects of the Group over a period
longer than 12 months required by the relevant “Going Concern” provisions. The Board has considered the nature of the
Group’s assets and liabilities, and associated cash flows, and has determined that five years, up to 31 December 2026, is
the maximum timescale over which the performance of the Group can be forecast with a material degree of accuracy and
therefore is the appropriate period over which to consider the viability.
In determining this timescale, the Board has considered the following:
•
That the business model of the Group assumes the future growth in its investment portfolio through the
acquisition of a diversified portfolio of digital infrastructure investments which are intended to be held for the
duration of the viability period.
•
On 15 March 2022 the Company secured a floating rate Revolving Credit Facility with an initial term of three
years which may be extended by a further year to March 2026.
•
Market Comparisons have been considered to similar funds in the infrastructure space who apply a five-year
forecast in their viability statements. It would seem appropriate to benchmark to similar funds.
•
In assessing the Company’s viability, we carried out a robust assessment of the emerging risks and principal risks
facing the Group, including those that would threaten its business model, future performance, solvency, liquidity
and dividend cover for a five-year period.
GOING CONCERN AND VIABILITY
Digital 9 Infrastructure plc
Page 79
In assessing the Company’s viability, the Board has carried out a robust assessment of the emerging risks and principal
risks facing the Group, including those that would threaten its business model, future performance, solvency, liquidity and
dividend cover for a five-year period.
The Directors’ assessment has been made with reference to the principal risks and uncertainties and emerging risks
summarised on pages 71 to 77 and how they could impact the prospects of the Company both individually and in
aggregate.
The business model was subject to a sensitivity analysis, which involved flexing a number of key assumptions underlying
the forecasts. The sensitivities performed were designed to provide the Directors with an understanding of the
Company’s performance in the event of a severe but plausible downturn scenario, taking full account of mitigating
actions that could be taken to avoid or reduce the impact or occurrence of the underlying risks outlined below:
•
Inflation: 8% for 2022, 2023, 4% for 2024, 2025 and return to long-term target of 2% thereafter.
•
Interest rates: increase the margin by 2.00% in response to the current economic climate.
•
Distributions from investments: apply a discount of 16% to all portfolio investments. This figure is arrived at by
removing each investment’s largest revenue contributor indefinitely from the revenue stream. We have then
weighted the Net Operating Profit After Tax (“NOPAT”) margin to the revenues generated from those customers
to arrive at a D9 weighted NOPAT margin from its revenue-generating investments.
•
Portfolio valuations: apply a discount of 16% to the portfolio valuations, in line with the loss in dividends paid up
to D9.
The outcome in the downturn scenario on the Company’s covenant testing is that there are no breaches, and the
Company can maintain a covenant headroom on the existing facility.
In the downturn scenario mitigating actions would be to reduce variable costs to enable the Group to meet its future
liabilities.
The remaining principal risks and uncertainties, whilst having an impact on the Company’s business, are not considered
by the Directors to have a reasonable likelihood of impacting the Company’s viability over the five-year period.
Based on the results of this analysis, the Directors have a reasonable expectation that the Company will be able to
continue in operation and meet its liabilities as they fall due for the next five years.
Board Approval of the Strategic Report
The Strategic Report has been approved by the Board of Directors and signed on its behalf by the Chair.
Jack Waters
Chair
16 March 2022
DIGITAL 9 INFRASTRUCTURE PLC
Governance
Digital 9 Infrastructure plc
Page 82
GOVERNANCE
Chair’s Introduction
I am pleased to present the Company’s first Corporate Governance Report which covers the financial period to 31 December 2021.
Since inception the Board has dedicated significant time to ensuring robust governance processes are in place and has interacted
extensively with the Investment Manager and other third party services providers to continue to develop and strengthen these
processes through the first period of operation. The Board acknowledges that strong corporate governance is integral to the
achievement of the Company’s objectives and provides the foundation for open, informed and transparent communication with our
shareholders. The Board continue to work together effectively to deliver long-term success of the Company.
The Board are pleased to welcome Aaron Le Cornu as a Non-Executive Director, effective from 1 April 2022 and Phil Jordan as Chair
of the Board immediately following the AGM which will take place on 23 May 2022. At IPO, the Board benefited from a detailed
induction process covering Director duties, including in respect of its listing, and a similar induction process will be undertaken for our
new Directors to ensure a streamlined transition and succession. I am delighted that Phil will be joining the Board as my successor and
have every confidence that he will build on the high standards of governance that have been implemented to date.
This section of the Annual Report sets out the corporate governance principles the Board has adopted, how these have been applied
and highlights the key governance events which have taken place during the period.
Statement of Compliance
The Board of Digital 9 Infrastructure plc has considered the Principles and Provisions of the AIC Code of Corporate Governance (AIC
Code). The AIC Code addresses the Principles and Provisions set out in the UK Corporate Governance Code (the UK Code), as well as
setting out additional Provisions on issues that are of specific relevance to Digital 9 Infrastructure plc.
The Board considers that reporting against the Principles and Provisions of the AIC Code, which has been supported by the Jersey
Financial Services Commission provides more relevant information to shareholders.
The Company has complied with the Principles and Provisions of the AIC Code or otherwise explained non-compliance below.
The AIC Code is available on the AIC website (www.theaic.co.uk). It includes an explanation of how the AIC Code adapts the Principles
and Provisions set out in the UK Code to make them relevant for investment companies.
Provision
Explanation
17.
Annual review of contractual relationships and
performance of, the manager.
Given the Company’s short period of operation, the Management
Engagement Committee did not meet in the period to review the
relationship with and performance of the Investment Manager. The
Management Engagement Committee has subsequently met since
the period end and will report on these activities in the Company’s
2022 Annual Report.
18.
Evaluation of other service providers (such as the company
secretary, custodian, depositary, registrar and broker).
Given the Company’s short period of operation, the Management
Engagement Committee did not meet in the period to evaluate the
performance of the service providers. The Management Engagement
Committee has subsequently met since the period end and will report
on these activities in the Company’s 2022 Annual Report.
37.
38.
41.
42.
Establishment and reporting of a remuneration
committee
The Group does not have any executive Directors or employees, and,
as a result, operates a simple and transparent remuneration policy
with no variable element; the Board does not consider it necessary to
establish a separate remuneration committee and those functions are
undertaken by the Board as a whole.
On behalf of the Board:
Jack Waters
Chair
16 March 2022
Digital 9 Infrastructure plc
Page 83
BOARD OF DIRECTORS
John (Jack) Waters Jr, Chair
Appointed
5 March 2021
Skills and experience
Jack Waters has significant experience in the digital infrastructure sector with an
executive career spanning over 30 years. Most recently, Jack was President of Zayo
Networks and Chief Operating Officer at Zayo Group Holdings Inc (“Zayo”) which was
listed on the New York Stock Exchange prior to its US$14.3 billion take private in 2019.
During his tenure, Zayo owned c.13 million miles of fibre and 45 data centres in the US
and Europe. Jack oversaw the company’s global business. Prior to joining Zayo, Jack
was Chief Technology Officer and one of the founding senior executives at Level 3
Communications, where he was focused on global network technology, architecture,
engineering, process and security. He also held management positions at MCI
Communications and the Southeastern University Research and Academic Network.
Jack has served on the board of directors for the Colorado Technology Association
and the U.S. Federal Communications Commission Technical Advisory Council.
Committee memberships
Nomination Committee
Risk Committee (Chair)
Principal external appointments
N/A
Keith Mansfield, Non-executive Senior Independent Director
Appointed
5 March 2021
Skills and experience
Keith Mansfield is a Chartered Accountant by background and brings extensive
accountancy experience, having worked at PricewaterhouseCoopers LLP (“PwC”)
for over 30 years, during which time he served as Chair of PwC in London
responsible for assurance, tax and advisory services. As a partner for 22 years, he
advised many public and private companies across a range of industry sectors.
Keith is a Non-executive Director (and Chair of the Audit Committee) of Tritax
EuroBox plc (of which he is also Senior Independent Director) and Motorpoint
Group plc. He is Chair of the board of Albermarle Fairoaks Airport Limited and also
sits on the investment advisory board of Nexus Investment Ventures Limited.
Committee memberships
Audit Committee (Chair)
Management Engagement Committee
Principal external appointments
Tritax Eurobox Plc (Director)
Motorpoint Group Plc (Director)
Charlotte Valeur, Independent Non-executive Director
Appointed
5 March 2021
Skills and experience
Charlotte Valeur has over 35 years’ experience in finance, primarily in Denmark
and UK. Charlotte’s previous non-executive roles include Chairing Kennedy Wilson
Europe Real Estate Plc (FTSE 250) and DW Catalyst Fund Ltd, and Non-executive
Director on the boards of 3i Infrastructure Plc (FTSE 250), NTR Plc, Renewable
Energy Generation Limited and JPMorgan Convertibles Income Fund Ltd. She
was also the former Chair of the UK institute of directors. She is currently Chair of
Blackstone/GSO Loan Financing Ltd, a Non-executive Director of Laing O’Rourke
Ltd, and a member of the Primary Markets Group of the London Stock Exchange.
Committee memberships
Management Engagement Committee (Chair)
Nomination Committee
Risk Committee
Principal external appointments
Blackstone GSO Loan Financing Ltd (Chair)
Laing O’Rourke Corporation Ltd (Director)
Global Governance Group (Director)
Monique O’Keefe, Independent Non-executive Director
Appointed
5 March 2021
Skills and experience
Monique O’Keefe has over 25 years’ experience in finance and law. She is currently
a Non-executive Director on the boards of Foresight Solar Fund Limited and
Phoenix Spree Deutschland Limited, as well as a number of private equity funds.
She also sits on the Board of Commissioners at the Jersey Financial Services
Commission and is the co-founder of Jersey-based investment consultancy
business, Kairos Wealth Limited. Prior to this, Monique was at Merrill Lynch and
Goldman Sachs in London and New York working in structured finance, and
previously a structured finance lawyer at Clifford Chance.
Committee memberships
Audit Committee
Risk Committee
Principal external appointments
Kairos Wealth Limited (Director)
Phoenix Spree Deutschland Limited (Director)
Jersey Financial Services Commission (Deputy Chair)
Cevian Capital Limited (Manager)
Foresight Solar Fund Limited (Director)
AGG Capital Management Limited (Manager)
Lisa Harrington, Independent Non-executive Director
Appointed
5 March 2021
Skills and experience
Lisa Harrington is a tech executive and has spent 25 years growing and transforming
business across a range of sectors including telecommunications, technology and
utilities. Joining British Telecom (“BT”) in 2007, Lisa spent 10 years in a range of
leadership positions with her final role being Chief Customer Officer BT Group,
reporting to the CEO. In 2021, Lisa held the interim Managing Director role at
Hyperoptic Ltd, a private equity backed fibre alternative network. Lisa is currently a
Non-Executive Director of Post Office Limited and has previously held non-executive
posts on the boards of Southern Water,
West London NHS Mental Trust and Calisen
plc (FTSE250). She started her career at Accenture in Ireland and the UK and, more
recently, was managing director Tech Learning Division of QA Limited, one of the
biggest tech and cyber skills providers in the UK.
Committee memberships
Audit Committee
Management Engagement Committee
Nomination Committee (Chair)
Principal external appointments
Post Office Ltd (Director)
BOARD OF DIRECTORS
Digital 9 Infrastructure plc
Page 84
Digital 9 Infrastructure plc
Page 85
Changes to the Board of Directors
Jack Waters and Monique O’Keefe have formally notified the Board of their intention to resign from their roles as
Directors of the Company. Therefore, Jack Waters and Monique O’Keefe will not be standing for re-election at the
Company’s AGM and their resignations will take effect immediately following the AGM.
Aaron Le Cornu will be been appointed as Non-executive Director on 1 April 2022 and Phil Jordan will be appointed as
Chair immediately following the AGM on 23 May 2022. Aaron and Phil will be appointed to the committees shown below
from their respective appointment dates. Aaron will replace Charlotte Valeur as a Chair of the Management Engagement
Committee and Charlotte Valeur will become Chair of the Risk Committee, following the resignation of Jack Waters.
Further information can be found on pages 97 to 98.
Aaron Le Cornu, Independent Non-executive Director
Appointed
To be appointed on 1 April 2022
Skills and experience
Aaron Le Cornu comes from a financial background. Having qualified as a
Chartered Accountant with Arthur Andersen in London, he worked for HSBC for
over 10 years. During his time with HSBC, he held several board positions for HSBC
subsidiaries, including as Deputy CEO for HSBC International and was also involved
in acquisitions such as the purchase of Marks & Spencer Money. He has since held
a number of senior executive roles including at Ogier (offshore legal and fiduciary
services provider), Elian (a fiduciary firm headquartered in Jersey) and, latterly, at
GLI Finance, an alternative finance provider and strategic investor in numerous
fintech platforms. Aaron is currently the Chairman of the Aberdeen Standard
Capital Offshore Strategy Fund Ltd. He also served as a non-executive director for
Jersey Electricity plc, having stepped down in 2021 after 10 years on the Board.
Committee memberships
Audit Committee
Management Engagement Committee (Chair)
Risk Committee
Principal external appointments
Aberdeen Standard Capital Offshore Strategy Fund Ltd (Chair)
A2Z Consulting Limited (Director)
Philip (Phil) Jordan, Independent Non-executive Director
Appointed
To be appointed on 23 May 2022, immediately following the Company’s 2022 AGM
Skills and experience
Phil Jordan has a successful track record in the digital infrastructure and technology
sectors, both in an executive and non-executive capacity. Phil’s executive career
includes country, regional and group Chief Information Officer roles, including
spending over 10 years at Vodafone, over seven years with Telefonica, where in
addition to the Group CIO role, he was CEO and then Chairman of Telefonica
Global Technology. He is currently Group CIO of Sainsbury’s, a role he has held for
over four years.
He has also acted as a non-executive industry adviser to HSBC and was a non-
executive director of Talk Talk Telecom Group PLC until it was taken private in 2021.
Committee memberships
Management Engagement Committee
Nomination Committee
Risk Committee
Principal external appointments
J Sainsbury plc (Group Chief Information Officer)
Digital 9 Infrastructure plc
Page 86
CORPORATE GOVERNANCE
Responsibilities
The Board is responsible for leading and controlling the Company and has oversight over the management and conduct
of the Company’s business, strategy and development. The Board determine the Investment Objective and Investment
Policy and reviews investment activity and performance, in addition to setting the risk appetite of the Company.
The Board is responsible for the control and supervision of the Investment Manager (also the Company’s AIFM) and for
compliance with the principles and recommendations of the AIC Code. The Board ensures the maintenance of a sound
system of internal controls and risk management (including financial, operational and compliance controls), and reviews
the overall effectiveness of systems in place. The Board is responsible for the approval of any changes to the capital,
corporate and/or management structure of the Company.
The Board’s main focus is to promote the long-term sustainable success of the Company, to deliver value for shareholders
and contribute to wider society. The Board does not routinely involve itself in day-to-day business decisions but there is
a formal schedule of matters that requires the Board’s specific approval, as well as decisions that can be delegated to the
Board Committees or the Investment Manager.
The key matters reserved to the Board, include but are not limited to:
•
Board membership and powers including the appointment and removal of Board members;
•
Review of the structure, size and composition of the Board, taking account of the recommendations of the
Nomination Committee;
•
Ensuring an adequate Board succession planning, taking into account the recommendations of the Nomination
Committee;
•
The appointment or removal of the Company’s alternative investment fund manager, reporting accountants,
financial advisers, auditor (following appropriate recommendation by the Audit Committee), brokers, company
secretary, registrar, receiving agent, depositary and legal counsel;
•
Undertaking of a formal and rigorous annual review of its own performance and that of Board committees and
individual Directors;
•
Managing conflict of interests of Directors;
•
Overall leadership of the Company and setting of its purpose, culture, values and standards;
•
Setting the Company’s investment/business strategy, including the ongoing review of the Company’s investment
objective and investment policy and recommending to Shareholders the approval of alterations thereto (if any);
•
Annual assessment of significant risks and effectiveness of internal controls following recommendations from the
Risk Committee;
•
Approval of contracts not in the ordinary course of business including entry into/variation/termination of
agreements with the Company’s alternative investment fund manager, company secretary/administrator, registrar,
depositary and any other material adviser/service provider;
•
Approval and issue of the half yearly results, half yearly report, annual results and annual report;
•
Ensuring the maintenance of a system of internal controls and risk management;
•
Review of the Company’s corporate governance arrangements and annual review of continuing compliance with
the AIC Code of Corporate Governance published by the AIC from time to time;
•
Periodic review and continued approval of the agreements of, or changes to, the Investment Manager and other
service providers; and
•
Material changes relating to the strategic capital structure of the Group.
Digital 9 Infrastructure plc
Page 87
Board Membership and Attendance
During the period to 31 December 2021, the number of meetings attended by each Director was as follows:
Director
Board*
Audit
Committee*
Risk
Committee*
Nomination
Committee*
Management
Engagement
Committee*
Justin Hubble**
2/2
–
–
–
–
James Cranmer**
2/2
–
–
–
–
Jack Waters
13/13
–
2/2
1/1
–
Keith Mansfield
13/13
2/2
–
–
0/0
Lisa Harrington
11/13
2/2
–
1/1
0/0
Charlotte Valeur
10/13
–
2/2
1/1
0/0
Monique O’Keefe
10/13
2/2
2/2
–
–
* Number of scheduled meetings attended/maximum number of meetings that the Director could have attended.
** Justin Hubble and James Cranmer served as directors prior to IPO. Both attended the two meetings they were eligible to attend and resigned as directors on
5 March 2021.
Of the 14 Board meetings held in the period, three were scheduled quarterly Board Meetings, the additional Board meetings
were convened to discuss various matters including, but not limited to, the IPO, additional fundraising, debt facility and
potential acquisitions.
Composition
The Company has a non-executive Chair and four other non-executive Directors, including a Senior Independent
Director, all of whom were considered independent on and since their appointment. All the Directors are independent of
the Investment Manager.
Jack Waters is the Chair of the Board and is responsible for the Board’s overall effectiveness in directing the Company.
The Chair, in conjunction with the Company Secretary, ensures that accurate, timely and clear information is circulated
to the Directors, and that sufficient time is given in meetings to consider and discuss all agenda items thoroughly. He
promotes a culture of openness and constructive debate to ensure the effective contribution of all Directors, facilitating
a co-operative environment between the Investment Manager and the Directors, and encourages Directors to critically
examine information and reports to constructively challenge the Investment Manager and hold third party service
providers to account where appropriate.
The Chair has put mechanisms in place to ensure effective communication between shareholders and the Board, to
ensure that their views, issues and concerns are considered as part of the decision-making process. Keith Mansfield is the
Senior Independent Director and, if required, will act as a sounding board and intermediary for the other Directors and
shareholders.
The Directors hold or have held senior positions in industry and commerce and contribute a wide range of skills,
experience and objective perspective to the Board. The Board committees allow the Directors to focus in greater detail
and depth on key matters such as management arrangements, governance, internal controls and risk management.
The Directors’ other principal commitments are listed on pages 83 to 84. During the year, the Board satisfied itself that
all Directors were and remain able to commit sufficient time to discharge their responsibilities effectively having given
due consideration to their other significant commitments. Changes in any Director’s commitments outside the Group are
required to be, and have been, disclosed and approved prior to the acceptance of any such appointment. No external
appointments accepted during the year were considered to be significant for the relevant directors, taking into account
the expected time commitment and nature of these roles.
Digital 9 Infrastructure plc
Page 88
Board Committees
The Board has established an Audit Committee, a Management Engagement Committee, a Nomination Committee and
a Risk Committee. Given that the Company has no executive Directors or other employees, the Board does not consider
it necessary to establish a separate remuneration committee and those functions are undertaken by the whole Board. The
functions and activities of each of the committees are described in their respective reports.
Board Meetings
The Board meets formally on, at least, a quarterly basis with additional meetings as required from time to time. The
Chair, in conjunction with the Company Secretary, sets the agenda for meetings and ensures that Directors receive
accurate, clear and timely information to help them to discharge their duties. The Board receives periodic reports from
the Investment Manager detailing the performance of the Group. The Meetings focus on discussing reports from the
Investment Manager, review of portfolio performance, pipeline and regulatory matters.
Discussions of the Board
During the period, the following were the key matters considered by the Board:
•
Approval of various matters in connection with the Company’s IPO;
•
Approval of various Company policies;
•
Approval of the Investment Management Agreement and other service provider agreements;
•
Pipeline review and monitoring;
•
Input into investment opportunities being reviewed by the Investment Manager in its role as the AIFM;
•
Review and approval of the annual expense budget;
•
Review of the Company’s risk appetite;
•
Declaration of the Company’s interim dividends; and
•
Approval of various matters in connection with the two additional fundraises carried out by the Company during
the period.
Performance Evaluation
The Directors recognise that an evaluation process is a significant opportunity to review the practices and performance
of the Board, its committees and its individual directors to implement action to improve the Board’s effectiveness and
contribute to the Company’s success.
The Board conducted its first evaluation process this year and has established a formal process to evaluate its
performance each year and, recognising the importance of this process, intends to conduct an externally facilitated
evaluation once every three years.
The Directors were asked to complete a questionnaire that considered amongst other areas, the Board and committees,
Board composition and diversity, leadership, efficiency of Board processes and stakeholder engagement.
Having conducted its performance evaluation, the Board believes that it has been effective in carrying out its objectives
and that each individual Director has been effective and demonstrated commitment to the role. The Board discussed the
challenges and opportunities identified through the evaluation and agreed appropriate development points on which
progress will be assessed in the next financial year. It was acknowledged that due to the short period since inception,
the review of the committees was limited, particularly the Management Engagement Committee, which did not meet in
the period.
CORPORATE GOVERNANCE
Digital 9 Infrastructure plc
Page 89
The Board discussed the key challenges and opportunities that were identified through the performance evaluation and
agreed appropriate development points on which progress will be assessed in the next financial period.
Challenges and Opportunities
2022 Development Points
Shareholder engagement
To put in place a shareholder engagement programme for the financial year ending
31 December 2022 and coordinate further opportunities for the Board to engage
with its shareholders directly and proactively.
Strategic review
To dedicate more time to considering and refreshing the Company’s strategy, in
particular taking into account developments in the external environment.
Training and development
To dedicate more time to enhance the professional development of the Directors to
continuously improve knowledge and skills.
Efficiency of process
To re-examine information flow and timing to allow for greater scrutiny.
Remuneration review
To regularly review Director remuneration to ensure that it is set at a level to retain
high calibre Directors with the skills and experience necessary for their role.
A full performance evaluation of the Board, its committees and the individual Directors will continue to be conducted
annually. The Chair will regularly consider an externally facilitated Board evaluation.
Conflicts of Interest
The Company operates a conflict of interest policy that has been approved by the Board and sets out the approach to be
adopted and procedures to be followed where an individual who is, or is to be appointed as, a Director of the Company and
such other persons to whom the Board has from time to time determined that this policy shall apply, or a person connected
with any such a person, has an interest which conflicts, or potentially may conflict, with the interests of the Company or his or
her duties in respect of the Company. It is the responsibility of each individual Director to avoid an unauthorised conflict of
interest situation arising. All Directors must inform the Board as soon as they become aware of the possibility of an interest
that conflicts with, or might possibly conflict, with the interests of the Company. A register of conflicts is maintained by the
Company Secretary and is reviewed at Board meetings to ensure that any authorised conflicts remain appropriate. The
Directors are required to confirm at these meetings whether there has been any change to their position.
The Company reserves the right to withhold information relating, or relevant, to a conflict matter from the Director
concerned and/or to exclude the Director from any Board information, discussions or decisions which may or will relate to
that conflict matter where the Chair or the Board considers that it would be inappropriate or prejudicial to the interests of
the Company for him or her to take part in such discussion or decision or receive such information. Procedures have been
established to monitor actual and potential conflicts of interest on a regular basis and the Board is satisfied that these
procedures are working effectively.
The Investment Manager maintains conflict of interest policies to avoid and manage any conflicts of interest that may arise
between themselves and the Group. The Investment Manager has established a clear and robust framework to ensure that
any conflicts of interest are appropriately managed.
Professional Development
The Directors received a comprehensive induction programme on joining the Board that covered the Group’s investment
activities, the role and responsibilities of a Director and guidance on corporate governance and the applicable regulatory
and legislative landscape. A similar induction process has and will be undertaken for the incoming Directors and future
Directors of the Board. The Directors’ training and development will ordinarily be considered as part of the annual Board
performance evaluation and, in any event, the Chair regularly reviews and discusses any development needs with each
Director. Each Director is aware that they should take responsibility for their own individual development needs and take
the necessary steps to ensure they are fully informed of regulatory and business developments.
During the period, the Directors received periodic guidance on regulatory and compliance changes at quarterly Board
meetings.
Digital 9 Infrastructure plc
Page 90
Shareholder Engagement
The Board seeks to attract long-term investors in the Company and acknowledges the importance of building and
maintaining strong relationships to achieve this. During the IPO process and in the following fundraises carried out by the
Company, the Investment Manager, the broker and the financial adviser were actively engaged with prospective investors
to understand shareholder sentiment. There were investor meetings held for the IPO and additional fundraises, some of
which were attended by members of the Board.
The Investment Manager and the Group’s financial advisers regularly speak to discuss, amongst other things, the views
of the Company’s shareholders. The Company’s broker speaks to shareholders regularly and ensures shareholder views
are clearly communicated to the Board. The Board take responsibility for, and have a direct involvement in, the content of
communications regarding major corporate matters.
The Company’s first Annual General Meeting will be held in May 2022. Shareholders are encouraged to attend and vote
at this meeting, along with any other shareholder meetings, so they can discuss governance and strategy and the Board
can enhance its understanding of shareholder views. The Board will attend the Company’s shareholder meetings to
answer any shareholder questions and the Chair will make himself available, as necessary, outside of these meetings to
speak to shareholders.
The Board is committed to providing investors with regular announcements of significant events affecting the Group.
In addition, the Board will also seek to communicate with shareholders regularly through the following: annual and
interim accounts; quarterly factsheets and investor presentations.
All investor documentation is available to download from the Company’s website https://www.d9infrastructure.com/
Whistleblowing
The Board has considered the AIC Code recommendations in respect of arrangements by which staff of the Investment
Manager or Administrator may, in confidence, raise concerns within their organisations about possible improprieties
in matters of financial reporting or other matters. It has concluded that adequate arrangements are in place for the
proportionate and independent investigation of such matters and, where necessary, for appropriate follow-up action to
be taken within their organisations.
AUDIT COMMITTEE REPORT
Digital 9 Infrastructure plc
Page 91
The following pages set out the Audit Committee’s report on how it has discharged its duties in accordance with the AIC
Code and its activities in respect of the period ended 31 December 2021.
The Audit Committee has been in operation throughout the period and operates within clearly defined terms of reference.
Responsibilities
The Audit Committee has the primary responsibility for reviewing the financial statements and the accounting principles
and practices underlying them, liaising with the external auditors and reviewing the effectiveness of internal controls.
The main role of the Audit Committee is to:
•
monitor the integrity of the financial statements of the Company and any formal announcements relating to the
financial performance and reviewing significant financial reporting judgements contained in them;
•
provide formal and transparent arrangements for considering how to apply the financial reporting and internal
control principles set out in the AIC Code and to maintain an appropriate relationship with the external auditors;
•
review the investment valuations and underlying assumptions and provide advice to the Board;
•
provide advice to the Board on whether the annual report and accounts, taken as a whole, is fair, balanced and
understandable and provides the information necessary for shareholders to assess the Group’s position and
performance, business model and strategy;
•
monitor the integrity of the financial statements of the Company and any formal announcements relating to the
financial performance and reviewing significant financial reporting judgements contained in them;
•
review the internal financial controls and the internal control and risk management systems of the Company;
•
review the adequacy of the Company’s arrangements as they relate to compliance, whistleblowing and fraud;
•
make recommendations to the Board to put to the shareholders for their approval in general meeting in relation
to the appointment, re-appointment and removal of the external auditor and to approve the remuneration and
terms of engagement of the external auditor;
•
review and monitor the external auditor’s independence and objectivity and the effectiveness of the audit
process, taking into consideration relevant UK professional and regulatory requirements;
•
develop and implement policy on the engagement of the external auditor to supply non-audit services, taking
into account relevant ethical guidance regarding the provision of non-audit services by the external audit firm;
•
report to the Board on significant issues relating to the financial statements and how they were addressed; its
assessment of the effectiveness of the audit process; any key matters raised by the external auditor and any other
issues on which the Board has requested the Committee’s opinion;
•
consider the need for the Company to establish an internal audit function; and
•
report to the Board on how it has discharged its responsibilities.
Committee Membership
The Audit Committee comprises Keith Mansfield, who chairs the Committee, Lisa Harrington and Monique O’Keefe.
The Board is satisfied that at least one member of the Audit Committee has recent and relevant financial experience.
Keith Mansfield is a Chartered Accountant by background and brings extensive accountancy experience, having worked
at PricewaterhouseCoopers LLP (“PwC”) for over 30 years, during which time he served as Chair of PwC in London
responsible for assurance, tax and advisory services. The Board is also satisfied that the committee as a whole has
competence relevant to the sector in which the Group operates.
Digital 9 Infrastructure plc
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Meeting Attendance
The Committee met twice in the 9 month period to 31 December 2022, and the meetings were attended by each
member as follows:
Director
Attendance
Keith Mansfield
2/2
Lisa Harrington
2/2
Monique O’Keefe
2/2
Activities
In a full financial year, the Audit Committee will meet three times a year to consider the annual report, interim report, any
other formal financial performance announcements and any other matters as specified under the committee’s terms of
reference and reports to the Board on how it discharged its responsibilities.
During the period, amongst other matters, the Committee reviewed and recommended to the Board for approval, the
interim report for the period ended 30 June 2021, reviewed the non-audit services policy, reviewed internal control
reports from key service providers, and met with PwC, the external auditors, to discuss and agree audit plans..
Performance Evaluation
Refer to the above Corporate Governance section on pages 88 to 89 detailing how the review of the Audit Committee’s
performance was conducted, and the results of such an evaluation.
Internal Control and Risk Management
The Company has put in place a process for identifying, evaluating and managing the principal and emerging risks faced
by the Company. From admission, the Board satisfied itself that the procedures for identifying the information needed to
monitor the business and manage risks were robust. The adequacy and effectiveness of the Company’s internal control
and risk management systems, and the implementation of such controls are monitored by the Audit Committee and the
Risk Committee. The Company has the following internal controls.
•
Internal control reports of the Investment Manager, Administrator and Depository are reviewed by the Audit
Committee;
•
There is an agreed and defined Investment Policy, with specified exposure limits; and
•
Compliance reporting is reviewed at each Board meeting.
Internal Audit
The Audit Committee has considered the appropriateness of establishing an internal audit function and, having regard to
the size and nature of the Company and concluded that the function is not necessary at a Company level at this time.
The Audit Committee are undertaking a review of the Group’s portfolio companies to establish if an internal audit
function would be appropriate to provide assurance that risk management, governance and internal control processes
are operating effectively.
The Audit Committee will review on an annual basis the need for this function and make appropriate recommendations
to the Board.
AUDIT COMMITTEE REPORT
Digital 9 Infrastructure plc
Page 93
Significant Issues considered by the Audit Committee
The following details the key areas of focus by the Audit Committee in relation to the financial statements for the period,
which were discussed and debated with the Investment Manager and PwC.
Adoption of Investment Entity Accounting Standard
Under IFRS 10, investment entities are required to hold subsidiaries at fair value through the Statement of
Comprehensive Income rather than consolidate them on a line-by-line basis. There are three key conditions to be met
by the Company for it to meet the definition of an investment entity. Further detail on this can be found in Note 2(b) to
the Financial Statements.
The Directors have reviewed the criteria and are satisfied that the Company meets the criteria of an Investment Entity
under IFRS 10. As explained in Note 2(b) to the financial statements, the Directors are of the opinion that the Company
meets the requirements of an “Investment Entity”. Assessing whether the Company and certain subsidiaries met the
criteria of Investment Entities, in accordance with the definition set out in IFRS 10 was seen as a key judgement.
The Audit Committee debated the appropriateness of adopting the standard with the Investment Manager and
independent auditor. The Audit Committee concluded that applying the investment entity exemption to IFRS 10 will
improve stakeholders’ understanding of the financial performance and position of the Company.
Valuation of Investments – Discount rates
The Fair value for investment is derived from the present value of the investments’ expected future cash flows, using
reasonable assumptions and forecasts, and an appropriate discount rate.
The main level 3 inputs used by the Group are derived and evaluated as follows:
•
The Investment Manager uses its judgement in arriving at the appropriate discount rate using a capital asset
pricing model to calculate a pre-tax rate that reflects current market assessment. This is based on its knowledge
of the market, considering intelligence gained from its bidding activities, discussions with financial advisers in the
appropriate subsectors and publicly available information on relevant transactions. The bottom-up analysis of the
discount rate and the appropriate beta is based on comparable listed companies. The applied discount rates range
from 9.2% to 13.1%.
•
Expected cash inflows are estimated based on terms of the contracts and the Company’s knowledge of the
business and how the current economic environment is likely to impact it taking into consideration growth rate
factors.
•
Risk free rate of 1.9%, reflecting the long-term rate for the US economy, with the US dollar being the base currency
for Aqua Comms and Verne Global.
•
Pre-tax cost of debt between 4.5% and 6.5%.
The Audit Committee and the Company’s auditors, PwC, have considered the value of investments and discount rates
applied and consider that the valuations derived are appropriate.
Going concern and viability statement
The Board is required to consider and report on the longer-term viability of the business as well as assess the
appropriateness of applying the going concern assumption.
The Audit Committee has taken account of the solvency and liquidity position of the Company from the financial
statements and the information provided by the Investment Manager on the forecasted cash flow for the Company
and expected pipeline. As a result, the Audit Committee consider that it is appropriate to adopt the going concern
basis of preparation of the financial statements.
Digital 9 Infrastructure plc
Page 94
AUDIT COMMITTEE REPORT
External Auditors, Audit Fees and Non-Audit Services
PwC were appointed as the external auditors of the Company on 5 March 2021 with Kevin Rollo as the audit partner. It is
the Audit Committee’s responsibility to monitor the performance, objectivity, and independence of the external auditors
and this will be assessed by the committee each year. In evaluating PwC’s performance, the Committee examines the
robustness of the audit process, independence and objectivity and the quality of delivery.
On an annual basis the Audit Committee will review the external auditors’ performance, objectivity, and independence.
During the period, it was identified that impermissible tax services (i.e. they were not one of the permissible services
under the FRC Ethical Standard) were provided by PwC to Aqua Comms that did not complete within the three month
transitional provisions of the FRC Ethical Standard. PwC have confirmed within their audit report that based on their
assessment of the breach, nature and scope of the service and the subsequent action taken, the provision of this service
has not compromised their professional judgement or integrity and as such believe that an objective, reasonable and
informed third party in possession of these facts would conclude that the integrity and objectivity of PwC has not been
impaired and accordingly PwC remain independent for the purposes of the audit.
The Audit Committee has approved a non-audit services policy that determines the services that PwC can provide
and the maximum fee that may be raised for non-audit services in comparison to the statutory audit fee. The Audit
Committee reviewed the policy during the period, and will continue to monitor the policy on a regular basis to ensure
that the external auditor remains objective and independent. The policy will also be reviewed annually to ensure it
continues to be in line with best practice. Any proposed changes to the policy are recommended to the Board for
approval.
Any arrangement with the auditor that includes contingent fee arrangements is not permitted. In addition, the total fees
for non-audit services provided by the auditor to the Group shall be limited to no more than 70% of the average of the
statutory audit fee for the Company, of its controlled undertakings and of the financial statements paid to the auditor in
the last three consecutive financial years Total fees paid to PwC during the period totalled £678,999, of which £258,145
was received for non-audit services, being 61.3% of the audit services fee. The nature of the non-audit services included:
•
Interim Review
•
Summary approved procedures
•
ESG assurance services
•
Tax compliance services
Keith Mansfield
Audit Committee Chair
Digital 9 Infrastructure plc
Page 95
Responsibilities
The main function of the Management Engagement Committee is to review and make recommendations on any
proposed amendment to the Investment Management Agreement and keep under review the performance of the
Investment Manager (which is the Company’s AIFM).
The Committee will regularly review the composition of the key executives performing the services on behalf of the
Investment Manager and monitor and evaluate the performance of other key service providers to the Company.
The Management Engagement Committee has been in operation throughout the period and operates within clearly
defined terms of reference.
Committee Membership
The Management Engagement Committee comprises Charlotte Valeur who chairs the Committee, Keith Mansfield and
Lisa Harrington.
The Management Engagement Committee did not hold a meeting during the period given the Company’s short period
of operation. The Nomination Committee will meet at least twice in the financial year ending 31 December 2022.
Performance Evaluation
Refer to the above Corporate Governance section on pages 88 to 89 detailing how the review of the Management
Engagement Committee’s performance was conducted, and the results of such an evaluation.
Management Arrangements
The Company operates as an externally managed alternative investment fund for the purposes of the AIFMD. In its role
as AIFM, the Investment Manager is responsible for the portfolio management and risk management of the Company
pursuant to the AIFMD subject to the overall control and supervision of the Board.
Under the Investment Management Agreement, the Investment Manager is entitled to receive an annual management
fee on the following basis:
Adjusted Net asset value
Annual Management Fee
(percentage of Net Asset Value)
On such part of the Adjusted Net Asset Value that is up to and including £500 million
1.0%
On such part of the Adjusted Net Asset Value that is above £500 million and up to and including
£1 billion
0.9%
On such part of the Adjusted Net Asset Value that exceeds £1 billion
0.8%
The annual fee paid to the Investment Manager under the Investment Management Agreement for the period ended
31 December 2021 was £2,952,159.
The Investment Management Agreement may be terminated by the Investment Manager or the Company by not less than
12 months’ written notice, with such notice not being served before the fourth anniversary of the date of Initial Admission.
On 16 March 2022, the Board approved a side letter to the Investment Management Agreement that clarified certain
provisions in connection with the calculation of the Annual Management Fee, principally to remove the potential for
double counting of deployed capital. The amendments do not result in any benefit to the Investment Manager and were
considered appropriate to remove ambiguity from the Investment Management Agreement.
MANAGEMENT ENGAGEMENT COMMITTEE REPORT
Digital 9 Infrastructure plc
Page 96
MANAGEMENT ENGAGEMENT COMMITTEE REPORT
Continuing Appointment of the Investment Manager
The Management Engagement Committee will meet during the next financial year to review the continuing appointment
of the Investment Manager and other key service providers, to ensure that their appointment remains in the best interests
of shareholders as a whole.
Charlotte Valeur
Management Engagement Committee Chair
Digital 9 Infrastructure plc
Page 97
Responsibilities
The Nomination Committee’s main function is to lead the process for appointments, ensuring plans are in place for
orderly succession to the Board, overseeing the development of a diverse pipeline for succession and any other matters
as specified under the committee’s terms of reference. This includes ensuring that any appointments and succession
plans are based on merit and objective criteria, and, within this context, promotes diversity of gender, social and ethnic
backgrounds, cognitive and personal strengths.
The Nomination Committee has been in operation throughout the period and operates within clearly defined terms of
reference.
Committee Membership
The Nomination Committee comprises Lisa Harrington, who chairs the Committee, Jack Waters and Charlotte Valeur.
The Nomination Committee held one meeting during the period, which was attended by all members.
Activities
The Nomination Committee met formally once in the year during which it discussed matters including but not limited
to: tenure policy, diversity policy, Board composition, time commitments and the talent management of the Investment
Manager and portfolio companies.
Appointment and replacement of Directors
On 5 March 2021, Justin Hubble and James Cranmer of TPIM resigned as directors and Jack Waters, Keith Mansfield,
Lisa Harrington, Monique O’Keefe and Charlotte Valeur were appointed in preparation for IPO.
As a result of having been offered the Chief Executive Officer role at a new, US based digital infrastructure operating
company, Jack Waters will not stand for re-election at the Company’s 2022 AGM. Similarly Monique O’Keefe will also
not stand for re-election at the Company’s 2022 AGM to pursue a senior executive role limiting her ability to hold non-
executive positions. The Board would like to thank both Jack and Monique for their valuable contributions and wish them
well in their new roles.
The Nomination Committee evaluated the skills and experience necessary to complement the existing Board
composition. The evaluation identified that the Board would benefit primarily from candidates with accounting
experience and industry knowledge. Following this, the Board identified a number of potential external recruitment
advisers to help facilitate the search and identified two suitable external recruitment advisers for the roles as set
out below. The Nomination Committee, in conjunction with the external recruitment advisers agreed a suitable job
specification for the preferred candidate giving due regard to the benefits of diversity on the Board, including diversity of
gender, social and ethnic backgrounds, cognitive and personal strengths.
Alma Mater Resourcing Ltd were engaged for Chair recruitment due to their extensive experience in the Digital
Infrastructure industry. As part of the search process they provided a long list of candidates, which in consultation with the
Nomination Committee was narrowed down to a shortlist of candidates which was reviewed identifying those candidates
who held the right skills and experience for the role, and complemented the skills and experience that would be lost
by virtue of Jack Waters stepping down as Chair. A series of interviews were conducted with the other Directors and
the Nomination Committee recommended Phil Jordan as the most suitable candidate as successor to Jack Waters as
Chair. This recommendation was subsequently approved by the Board as a whole. Phil Jordan will be appointed as Chair
immediately following the AGM on 23 May 2022, following an induction period and completion of the standard Jersey
regulatory confirmations. Alma Mater Resourcing Ltd has no other connection to the Company or individual Directors.
NOMINATION COMMITTEE REPORT
Digital 9 Infrastructure plc
Page 98
NOMINATION COMMITTEE REPORT
Additionally, Maven Partners were engaged for a recruitment search for a Jersey based Non-Executive Director due to
their extensive network of Jersey candidates. The same process as set out above was undertaken by the Nomination
Committee, focusing on candidates with accounting background and experience in ESG, identified by the Nomination
Committee as a potential area of improvement, which concluded with Aaron Le Cornu being recommended for
appointment as a Non-Executive Director with effect from 1 April 2022; this recommendation was subsequently
approved by the Board as a whole. Aaron will hold office until the Company’s 2022 AGM where he will be submitted for
election by shareholders. Maven Partners has no other connection to the Company or individual Directors.
Performance Evaluation
Refer to the above Corporate Governance section on pages 88 to 89 detailing how the review of the Nomination
Committee’s performance was conducted, and the results of such an evaluation.
Re-election of Directors
The Board considers that the performance of each Director continues to be effective and demonstrates the commitment
required to continue in their present roles, and that each Director’s contribution continues to be important to the
Company’s long-term sustainable success. This consideration is based on, amongst other things, the business skills and
industry experience of each of the Directors (refer to the biographical details of each Director as set out on pages 83 to
84), as well as their knowledge and understanding of the Company’s business model.
The Board has also considered the other contributions which individual Directors may make to the work of the Board,
with a view to ensuring that:
•
the Board maintains a diverse balance of skills, knowledge, backgrounds and capabilities leading to effective
decision-making;
•
each Director is able to commit the appropriate time necessary to fulfilling their roles; and
•
each Director provides constructive challenge, strategic guidance, offers specialist advice and holds third party
service providers to account.
All Directors will submit themselves for re-election on an annual basis. With the exception of Jack Waters and Monique
O’Keefe, all Directors in office as at the date of this report are to be proposed for re-election at the Company’s first AGM,
due to be held on 23 May 2022.
Tenure Policy
In accordance with best practice, the Board considers that the length of time each Director, including the Chair, serves on
the Board should be between six and nine years. To facilitate effective succession planning, this period can be extended
for a limited time if necessary.
Continuity, self-examination and ability to do the job are the relevant criteria on which the Board assesses a Director’s
independence. Length of service of current Directors, succession planning and independence will be reviewed each year
as part of the Board evaluation process.
Digital 9 Infrastructure plc
Page 99
Diversity Policy
The Board recognises the benefits of all types of diversity and supports the recommendations of the Hampton-
Alexander Review and the Parker Review. All Board appointments will be made on merit, and promote diversity of all
kinds, including: gender, social and ethnic backgrounds, cognitive and personal strengths. This will ensure that any such
appointment will develop and enhance the operation of the Board to best serve the Company’s strategy.
The Board recognises the importance of diversity in the boardroom which introduces different perspectives to the Board
debate and considers it to be in the interests of the Group and its shareholders to take into consideration diversity criteria
when appointing a new individual to the Board. When undertaking the appointment of a new Director, the Nomination
Committee will generally instruct an external search consultancy to undertake an open and transparent process that
includes potential candidates from a variety of backgrounds.
The Board has established a diversity policy within which is has committed to maintaining that the Board, as a whole, will
have at least 40% representation of either gender. Additionally, the Board has set a goal of having at least one Director of
non-white ethnic minority background as soon as practicable.
Members of the Board should collectively possess a diverse range of skills, expertise, industry and business knowledge.
The Board will continue to monitor diversity, taking such steps as it considers appropriate to maintain its position as a
meritocratic and diverse business.
At the period end, the Board comprised of Chair and four non-executive Directors; two male and three female.
External Search Consultancy
In identifying suitable candidates for an appointment to the Board, the Nomination Committee may use open advertising
or the services of external advisers to facilitate the search.
Alma Mater Resourcing Ltd were engaged for the recruitment of the Chair role due to their extensive experience in the
Digital Infrastructure industry. Maven Partners were appointed for the appointment of a Jersey-based Non-Executive
Director due to their extensive network of Jersey candidates.
Company’s Succession Plans
The Nomination Committee will give full consideration to the succession planning of the Board as part of the Board’s
formal annual evaluation to ensure progressive refreshing of the Board, taking into account the challenges and
opportunities facing the Board and the balance of skills and expertise that are required in the future.
Lisa Harrington
Nomination Committee Chair
Digital 9 Infrastructure plc
Page 100
RISK COMMITTEE REPORT
Responsibilities
The Risk Committee’s main function is to oversee and advise the Board on the current risk exposures of the Company and
future risk strategy, including identifying and monitoring the key risks that the Company faces, establish the Company’s
risk appetite and review performance against risk appetite and monitor key trends and concentrations; review the
Company’s procedures for managing and mitigating principal risks, reviewing the Company’s systems and controls for
the prevention and detection of fraud, bribery, tax evasion and anti-money laundering and any other matters as specified
under the committee’s terms of reference.
The Risk Committee has been in operation throughout the period and operates within clearly defined terms of reference.
Committee Membership
The Risk Committee comprises Jack Waters, who chairs the Committee, Monique O’Keefe and Charlotte Valeur.
Meeting Attendance
The Committee met twice in the financial year, and the meetings were attended by each member as follows:
Director
Attendance
Jack Waters
2/2
Charlotte Valeur
2/2
Monique O’Keefe
2/2
Performance Evaluation
Refer to the above Corporate Governance section on pages 88 to 89 detailing how the review of the Risk
Committee’s performance was conducted, and the results of such an evaluation.
Internal Control and Risk Management
The Company has put in place a process for identifying, evaluating and managing the principal and emerging risks faced
by the Company. The adequacy and effectiveness of the Company’s internal control and risk management systems, and
the implementation of such controls are monitored by the Audit Committee and the Risk Committee. The Company has
the following internal controls, which are monitored by the Risk Committee.
•
The risk appetite was agreed by the Risk Committee, which is designed to supplement the Investment
Objectives, Policy and restrictions; and
•
A risk register identifying risks and controls to mitigate their potential impact/likelihood was maintained by the
Investment Manager and reviewed by the Risk Committee.
On a bi-annual basis the Risk Committee is provided with an internal control report of its key service providers, including
the Investment Manager to review their effectiveness.
Activities
During the period the Risk Committee carried out the following activities:
•
Received reports from the Investment Manager on how the risk management process was being undertaken;
•
Established the Company’s risk appetite for risks including regulatory risk, concentration risk, reputational risk and
key personnel risk; and
•
Assessed the Company’s principal risks, which are outlined on pages 71 to 77.
Jack Waters
Risk Committee Chair
Digital 9 Infrastructure plc
Page 101
Annual Statement
Dear shareholder,
I present to you our first Directors’ Remuneration Report. It is set out in two sections in line with legislative reporting
regulations:
Directors’ Remuneration Policy – This sets out our Remuneration Policy for Directors of the Company for the future and
will be subject to a binding shareholder vote for the first time at our 2022 AGM.
Annual Report on Directors’ Remuneration – This sets out how our Directors were paid for the period ended
31 December 2021 and we intend to apply our Policy for the year ending 31 December 2022. There will be an advisory
shareholder vote on this section of the report at our 2022 AGM.
Prior to our IPO in March 2021, the Company introduced a remuneration framework to ensure that remuneration
was aligned with best market practice whilst attracting and securing the right non-executive directors to deliver our
investment objectives. The scale and structure of the Director’s remuneration was determined by the Company in
consultation with the sponsor and other advisers having been benchmarked against companies of a similar size in the
sector and having regard to the time commitment and expected contribution to the role.
The Group does not have any executive directors or employees, and, as a result, operates a simple and transparent
remuneration policy with no variable element, that reflects the Non-executive Directors’ duties, responsibilities and time
spent.
Following admission there have been no major decisions or changes related to the Directors’ remuneration during the
period.
Jack Waters
Chair
16 March 2022
DIRECTORS’ REMUNERATION REPORT
Digital 9 Infrastructure plc
Page 102
DIRECTORS’ REMUNERATION POLICY
Approval of Remuneration Policy
Under section 439A of the Companies Act 2006, with which the Company voluntarily complies, a resolution to approve
the Directors’ Remuneration Policy will be proposed at the Annual General Meeting of the Company to be held on
23 May 2022. If the resolution is passed, the provisions of the policy will apply until they are next put to shareholders for
renewal of that approval, which must be at intervals of not more than three years, or if the Remuneration Policy is varied,
in which event shareholder approval for the new remuneration policy will be sought.
The Remuneration Policy has been prepared in accordance with Schedule 8 of The Large and Medium-sized Companies
and Groups (Accounts and Reports) Regulations 2008. The policy applies to the non-executive directors; the Company
has no executive directors or employees. There are no planned changes to the policy in the upcoming financial year.
Remuneration Policy Overview
The Company’s objective is to have a simple and transparent remuneration structure, aligned with the strategy. The
Company aims to provide remuneration packages with no variable element which will retain non-executive directors with
the skills and experience necessary to maximise shareholder value on a long-term basis. The remuneration packages for
Non-executive Directors will be set with reference to the remuneration packages of comparable businesses.
The Board will assess the appropriateness of the Remuneration Policy on an annual basis and shareholder approval will
be sought in the event of any changes being proposed.
Policy Table
The Directors are entitled only to the fees as set out in the table below from the date of their appointment. No
element of Directors’ remuneration is subject to performance factors.
Component
How it Operates
Maximum Fee
Link to Strategy
Annual fee
Each Director received a basic fee
which is paid on a quarterly basis.
The Audit Committee Chair and
Risk Committee Chair is entitled
to a fee of £5,000 each in addition
their normal Director fee, reflecting
their additional duties and
responsibilities in those roles.
The total aggregate fees that can
be paid to the Directors is as set
out in the Company’s articles of
association.
The level of the annual fee has
been set to attract and retain high
calibre Directors with the skills and
experience necessary for the role.
The fee has been benchmarked
against companies of a similar size.
Additional fees
Where a Director performs services,
which in the opinion of the Board,
are outside the ordinary duties of a
Director, they will be entitled to an
additional fee.
A daily rate of £1,500 for attending
additional meetings or time spent
on the performance of other duties
which result in a Director spending
more than five days a month on
work for the Company. Any such
additional fees will be subject
to discussion and approval by
the Board.
The additional fee for services
outside the scope of ordinary duties
offers flexibilities for a Director to be
awarded additional remuneration to
adequately compensate a Director
where this is considered appropriate
for the effective functioning of, or in
furtherance of, the Company’s aims.
Other benefits
The Directors shall be entitled to
be repaid expenses.
All reasonable travelling, hotel and
other expenses properly incurred in
the performance of their duties as
Director.
In line with market practice, the
Company will reimburse the
Directors for expenses to ensure that
they are able to carry out their duties
effectively.
Digital 9 Infrastructure plc
Page 103
Service Contracts
The Directors are engaged under letters of appointment and do not have service contracts with the Company.
Directors’ Term of Office
Under the terms of the Directors’ letters of appointment, each directorship is terminable on three months’ written
notice by either the Director or the Company. Each Director will be subject to annual re-election by shareholders at the
Company’s Annual General Meeting in each financial year.
Policy on Payment for Loss of Office
Upon termination, a Director shall only be entitled to accrued fees as at the date of termination together with
reimbursement of any expenses properly incurred to that date.
Consideration of Shareholder Views
The Company is committed to establishing ongoing shareholder dialogue and takes an active interest in voting
outcomes. Where there are substantial votes against resolutions in relation to Directors’ remuneration, the Company will
seek the reasons for any such vote and will detail any resulting actions in the Directors’ Remuneration Report.
Digital 9 Infrastructure plc
Page 104
Consideration of Remuneration Matters
The Board does not consider it necessary to establish a separate remuneration committee as it has no executive
directors. The Board as a whole considers the remuneration of the Directors.
Directors’ Fees
The Directors are each paid an annual fee of £40,000 other than the Chair of the Audit Committee who is entitled to an
additional £5,000 and the Chair of the Company who is entitled to receive an annual fee of £50,000 and an additional
£5,000 for his role as Chair of the Risk Committee.
Directors are entitled to recover all reasonable expenses properly incurred in connection with performing their duties as a
Director.
Per the terms of the Directors’ appointment letters, Directors are entitled to receive a daily rate of £1,500 for attending
additional meetings or time spent on the performance of other duties which result in them spending more than five days
a month on work for the Company. During the period, no additional fees were incurred.
Single Total Figure (audited information)
The fees paid to Directors in respect of the period ended 31 December 2021 are shown below.
Paid in the Period to 31 December 2021
Fixed Remuneration
% change from
prior year
Discretionary
remuneration
% change from
prior year
Total remuneration
Justin Hubble (resigned 5 March 2021)
nil
n/a
nil
n/a
nil
James Cranmer (resigned 5 March 2021)
nil
n/a
nil
n/a
nil
Jack Waters (Chair)
£45,269
n/a
nil
n/a
£45,269
Keith Mansfield
£37,039
n/a
nil
n/a
£37,039
Lisa Harrington
£32,923
n/a
nil
n/a
£32,923
Charlotte Valeur
£32,923
n/a
nil
n/a
£32,923
Monique O’Keefe
£32,923
n/a
nil
n/a
£32,923
Total
£181,077
n/a
nil
n/a
£181,077
The Company does not provide bonuses, pension benefits, share options, long-term incentive schemes or other benefits
in respect of their services as Non-Executive Directors of the Company.
Information required on executive Directors and employees has been omitted because the Company has neither and
therefore it is not relevant.
ANNUAL REPORT ON DIRECTORS’ REMUNERATION
Digital 9 Infrastructure plc
Page 105
Statement of Directors’ Shareholding and Share Interests (Audited table)
Detailed in the table below are details of the Directors’ shareholdings as at 31 December 2021.
The Directors are not required to hold any shares of the Company by way of qualification. A Director who is not a
shareholder of the Company shall nevertheless be entitled to attend and speak at shareholders’ meetings.
There has not been any change to the Directors’ shareholdings from 31 December 2021 to the date of this report.
Ordinary shares of
£1 each held at
31 December 2021
% of issued ordinary
share capital
James Cranmer*
–
–
Justin Hubble*
48,935
0.0060%
Jack Waters
70,000
0.0097%
Keith Mansfield
58,604
0.0081%
Lisa Harrington
38,604
0.0053%
Monique O’Keefe
10,000
0.0014%
Charlotte Valeur
10,000
0.0014%
* James Cranmer and Justin Hubble resigned as Directors of the Company on 5 March 2021.
Total Shareholder Return
As required under regulation, the graph below illustrates the total shareholder return of the Company from Admission
to the end of the financial period. This is mapped against the total shareholder return on a hypothetical holding over
the same period in the FTSE All-Share Index. This index has been chosen as it is considered to be the most appropriate
benchmark against which to assess the relative performance of the Company as the FTSE All Share represents companies
of a similar capital size and is in line with our peer group.
90.00
95.00
100.00
105.00
110.00
115.00
120.00
125.00
31/03/2021
30/04/2021
31/05/2021
30/06/2021
31/07/2021
31/08/2021
30/09/2021
31/10/2021
30/11/2021
31/12/2021
Rebased to 100
DGI9 Total Return
FTSE All Share Total Return
Digital 9 Infrastructure plc
Page 106
Relative Importance of Spend on Pay
The table below shows the total spend on remuneration compared to the distributions to shareholders by way of
dividends, share buybacks and the management fees incurred by the Company. As the Group has no employees the
total spend on remuneration comprises only the Directors’ fees.
31 December 2021
Dividends paid
17,837,209
Share buybacks
0
Management fee
2,952,159
Directors’ emoluments
181,077
Consideration of Shareholder Views
The Company is committed to ongoing shareholder dialogue and takes an active interest in voting outcomes. Where
there are substantial votes against resolutions in relation to directors’ remuneration, the Company will seek the reasons
for any such vote and will detail any resulting actions in the Directors’ Remuneration Report.
The AGM to be held in 2022 will be the first opportunity for shareholders to vote on the Directors’ Remuneration Policy.
During the period the Group did not receive any communications from shareholders specifically regarding Directors’ pay.
On behalf of the Board:
Jack Waters
Chair
ANNUAL REPORT ON DIRECTORS’ REMUNERATION
Digital 9 Infrastructure plc
Page 107
The Directors are pleased to present the annual report, including the Company’s audited financial statements as at, and
for the period ended 31 December 2021. The information that fulfils the requirements of the Corporate Governance
statement in accordance with rule 7.2 of the DTR can be found in this Directors’ report and in the Governance section on
pages 81 to 111 all of which is incorporated into this Directors’ Report by reference.
Details of significant events since the balance sheet date are contained in Note 18 to the financial statements.
Principal Activity
The Company is a closed-ended UK investment company that invests in Digital Infrastructure assets. The Company is
domiciled in Jersey and is UK tax resident. The Directors do not anticipate any change in the principal activity of the
Company in the foreseeable future.
Its shares are listed on the Specialist Fund Segment of the Main Market of the London Stock Exchange. The Ordinary
Shares will trade under the ticker: DGI9 (ISIN: JE00BMDKH437).
Directors
The names of the Directors who served from IPO are set out in the Board of Directors section on pages 83 to 84,
together with their biographical details and principal external appointments. The biographical details of Directors
following this period are also set out on page 85.
Investment Trust Status
The Company has been approved as an Investment Trust Company (“ITC”) under sections 1158 and 1159 of the
Corporation Tax Act 2010. The Company had to meet relevant eligibility conditions to obtain approval as an ITC and
must adhere to ongoing requirements to maintain its ITC status, including, but not limited to, retaining no more than 15%
of its annual income.
During the period, the Company has continued to conduct its affairs to ensure it complies with these requirements. The
Board continues to monitor compliance with the ITC conditions.
Financial Results and Dividends
The financial results for the year can be found in the Company Statement of Comprehensive Income on page 126.
The Company declared the following interim dividends in respect of the period from 31 March 2021 to 31 December 2021
totalling 4.5 pence per share, in line with the Company’s annualised dividend target of 6.0 pence per share per annum.
Relevant period
Dividend per
share (p)
Ex-dividend date
Record date
Payment date
31 March to 30 June 2021
1.5
16 September 2021
17 September 2021
30 September 2021
1 July to 30 September 2021
1.5
9 December 2021
10 December 2021
23 December 2021
1 October to 31 December 2021
1.5
17 March 2022
18 March 2022
31 March 2022
DIRECTORS’ REPORT
Digital 9 Infrastructure plc
Page 108
DIRECTORS’ REPORT
Powers of the Directors
The powers given to the Directors are contained within the current articles of association of the Company (the “Articles”),
are subject to relevant legislation and, in certain circumstances (including in relation to the issuing or buying back by the
Company of its shares), are subject to the authority being given to the Directors by shareholders in general meetings.
The Articles govern the appointment and replacements of Directors.
Directors’ Indemnity
Subject to the provisions of any relevant legislation, the Company has agreed to indemnify each Director against all
liabilities which any Director may suffer or incur arising out of or in connection with any claim made, or proceedings taken
against him/her, or any application made by him/her, on the grounds of his/her negligence, default, breach of duty or
breach of trust in relation to the Company or any associated Company.
This policy remained in force during the financial period and also at the date of approval of the financial statements.
The Company maintains appropriate Directors’ and Officers’ liability insurance in respect of legal action against its
Directors on an ongoing basis.
Financial Instruments and Risk Management
The information relating to the Company’s financial instruments and risk management policies can be found in Notes 22
and 23 of the financial statements.
Post-Balance Sheet Events
Important events that have occurred since the end of the financial year can be found in Note 18 of the notes to the
financial statements.
Amendment to the Articles
The Articles may only be amended with shareholders’ approval in accordance with the relevant legislation.
Share Capital
At incorporation on 8 January 2021, the Company issued 2 Ordinary Shares of no par value. On admission to trading
on 31 March 2021, the Company issued 267,011,661 Ordinary Shares at a price of £1.00 per share (“Initial Issue”).
On 1 April 2021, the Company issued a further 32,988,339 Ordinary Shares at a price of £1.00 per share. On 10 June
2021, the Company issued a further 166,666,667 Ordinary Shares at a price of £1.05 per share. On 1 October 2021, the
Company issued a further 255,813,953 Ordinary Shares at a price of £1.075 per share. Following the period end, the
Company issued a further 88,148,880 Ordinary Shares at a price of £1.08 per share. All of the Ordinary Shares are fully
paid and carry one vote per share.
There are no restrictions on the transfer of securities in the Company other than certain restrictions which may be
impaired by law, for example, Market Abuse Regulations, and the Company’s Share Dealing Code. The Company is not
aware of any agreements between shareholders that restrict the transfer of Ordinary Shares.
The Directors are generally and unconditionally authorised, in accordance with the Articles and the Companies (Jersey)
Law 1991 (as amended), to exercise all powers of the Company to allot Ordinary Shares up to a maximum number of
800,000,000 with the authority expiring on 7 March 2026 in respect of the Initial Issue, and authority to allot Ordinary
Shares up to a maximum number of 5,000,000,000 in respect of any further share issuances with the authority expiring on
7 March 2026.
Digital 9 Infrastructure plc
Page 109
Purchase of Own Ordinary Shares
A special resolution was passed granting the Directors authority to repurchase up to 14.99% of the Company’s ordinary
share capital immediately following initial admission and expiring on the conclusion of the earlier of the Company’s first
annual general meeting and 6 June 2022.
The Company did not purchase any of its own shares during the period.
Major Shareholdings
In accordance with DTR 5, the Company was advised of the following significant direct and indirect interests in the issued
ordinary share capital of the Company as at 31 December 2021:
Number of Ordinary
shares held
% of voting rights
Schroders plc
96,734,374
13.39%
Rathbone Investment Management Ltd
72,817,875
10.08%
Jupiter Fund Management plc
14,350,000
4.78%
Insight Investment Management (Global) Ltd
29,315,482
4.06%
South Yorkshire Pensions Authority
10,000,000
3.75%
J M Finn & Co
26,471,050
3.66%
The Company has been informed of the following changes to notifiable interests between 31 December 2021 and the
date of this report:
Number of Ordinary
shares held
% of voting rights
Schroders plc
101,385,278
12.51%
Rathbone Investment Management Ltd
89,349,867
11.02%
Disclosure of Information to the Auditors
So far as the Directors are aware, there is no relevant audit information of which the auditor is unaware.
The Directors have taken all the steps that they ought to have taken as Directors to make themselves aware of any
relevant audit information and to establish that the auditor is aware of that information.
Related Party Transactions
Related Party transactions for the period to 31 December 2021 can be found in Note 17 of the financial statements.
Research and Development
No expenditure on research and development was made during the period.
Donations and Contributions
No political or charitable donations were made during the period.
Branches outside the UK
There are no branches of the business located outside the United Kingdom.
Annual General Meeting
The Annual General Meeting of the Company will be held on 23 May 2022 at 9am at the offices of Taylor Wessing LLP,
5 New Street Square, London EC4A 3TW.
Digital 9 Infrastructure plc
Page 110
DIRECTORS’ REPORT
Business Relationships
The Company has a set of corporate providers that ensure the smooth running of the Group’s activities. The Group’s key
service providers are listed on page 156 and the Management Engagement Committee annually reviews the effectiveness
and performance of these service providers, taking into account any feedback received. Due to the shorter initial period,
the first Management Engagement Committee took place following the period end. Each of these relationships is critical
to the long-term success of the business. Therefore, the Company and the Investment Manager maintain high standards
of business conduct by acting in a collaborative and responsible manner with all its business partners that protects the
reputation of the Group as a whole.
Significant Agreements
There are no significant agreements that take effect, alter or terminate on change of control of the Company following a
takeover. Additionally, there are no agreements with the Company or a subsidiary in which a Director is or was materially
interested or to which a controlling shareholder was a party.
Employees
The Company has no employees and accordingly there is no requirement to separately report on this area.
The Investment Manager is an equal opportunities employer who respects and seeks to empower each individual and
the diverse cultures, perspectives, skills and experiences within its workforce. The Investment Manager places great
importance on company culture and the wellbeing of its employees and considers various initiatives and events to ensure
a positive working environment.
Anti-Bribery Policy
The Company has a zero-tolerance policy towards bribery and is committed to carrying out its business fairly, honestly
and openly. The anti-bribery policies and procedures apply to all its officers and to those who represent the Company.
Human Rights Issues
The Company is not within the scope of the Modern Slavery Act 2015 because it has not exceeded the turnover
threshold and is therefore not obliged to make a slavery and human trafficking statement.
The majority of services supplied to or on behalf of Digital 9 Infrastructure plc are from the financial services and digital
infrastructure industries and other services associated with those industries.
Given what Digital 9 Infrastructure plc understands to be a low risk profile of anyone supplying it with services being
involved in slavery and/or human trafficking, the Board of Directors of the Company believes the Company’s current
procedures and ability to rely on regulatory oversight in relation to professional services are sufficient in this regard.
Information included in the strategic report
The information that fulfils the reporting requirements relating to the following matters can be found on the pages identified.
Subject Matter
Page Reference
Likely future developments
Pages 14 to 20
Greenhouse gas emissions
Pages 64 to 65
On behalf of the Board:
Jack Waters
Chair
16 March 2022
Digital 9 Infrastructure plc
Page 111
The Directors are responsible for keeping proper accounting records that disclose, with reasonable accuracy, at any time,
the financial position of the Company. The Directors are responsible for preparing the Annual Report in accordance with
applicable law and regulations.
Company law requires the Directors to prepare financial statements for each financial year. Under that law, the Directors
have elected to prepare the financial statements in accordance with applicable law and International Financial Reporting
Standards (IFRSs) as adopted by the European Union. The financial statements are required by law to give a true and fair
view of the state of affairs of the Company and of the profit or loss of the Company for that period. In preparing these
Financial Statements, the Directors are required to:
•
Select suitable accounting policies and then apply them consistently;
•
Make judgements and accounting estimates that are reasonable and prudent;
•
State whether applicable IFRS have been followed, subject to any material departures disclosed and explained in
the Financial Statements; and
•
Prepare the Financial Statements on the going concern basis unless it is inappropriate to presume that the
Company will continue in business.
The Directors are responsible for keeping proper accounting records that disclose with reasonable accuracy at any
time the financial position of the Company and enable them to ensure that the financial statements comply with the
Companies (Jersey) Law 1991. They are also responsible for safeguarding the assets of the Company and hence for
taking reasonable steps for the prevention and detection of fraud and other irregularities.
The Annual Report, taken as a whole, are fair and balanced and understandable and provide the information necessary
for Shareholders to assess the Company’s position, performance, business model and strategy. The Directors confirm that
they have complied with the above in preparing these financial statements..
The Company’s Financial Statements are published on the Company’s website https://www.d9infrastructure.com/
So far as the Directors are aware, there is no relevant audit information of which the Company’s auditors are unaware, and
each Director has taken all the steps that he or she ought to have taken as a director in order to make himself or herself
aware of any relevant audit information and to establish that the Company’s auditors are aware of that information.
To the best of our knowledge:
•
The Financial Statements, prepared in accordance with IFRSs as adopted by the EU, give a true and fair view of
the assets, liabilities, financial position and profit or loss of the Company; and
•
The Strategic Report includes a fair review of the development and performance of the business and the position
of the Company, together with a description of the principal risks and uncertainties that it faces.
Approval
This Directors’ responsibilities statement was approved by the Board of Directors and signed on its behalf by:
Jack Waters
Chair
DIRECTORS’
RESPONSIBILITIES STATEMENT
Digital 9 Infrastructure plc
Page 112
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF
DIGITAL 9 INFRASTRUCTURE PLC
Report on the audit of the financial statements
Opinion
In our opinion, Digital 9 Infrastructure plc’s financial statements:
•
give a true and fair view of the state of the company’s affairs as at 31 December 2021 and of its profit and cash
flows for the period from 8 January 2021 to 31 December 2021;
•
have been properly prepared in accordance with International Financial Reporting Standards as adopted in the
European Union; and
•
have been prepared in accordance with the requirements of the Companies (Jersey) Law 1991.
We have audited the financial statements, included within the Annual Report, which comprise: the Statement of Financial
Position as at 31 December 2021; the Statement of Comprehensive Income, the Statement of Cash Flows and the
Statement of Changes in Equity for the period then ended; and the notes to the financial statements, which include a
description of the significant accounting policies.
Our opinion is consistent with our reporting to the Audit Committee.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law.
Our responsibilities under ISAs (UK) are further described in the Auditors’ responsibilities for the audit of the financial
statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to
provide a basis for our opinion.
Independence
We remained independent of the company in accordance with the ethical requirements that are relevant to our audit of
the financial statements in the UK, which includes Financial Reporting Council’s (“FRC”) Ethical Standard, as applicable
to listed public interest entities in accordance with the requirements of the Crown Dependencies’ Audit Rules and
Guidance for market-traded companies, and we have fulfilled our other ethical responsibilities in accordance with these
requirements.
During the period, we identified that impermissible tax services were provided during the year that did not complete
within the three month transitional provisions of the FRC Ethical Standard. The tax service is not one of the permissible
services under the FRC Ethical Standard. We confirm that based on our assessment of the breach, nature and scope
of the service and the subsequent action taken, the provision of this service has not compromised our professional
judgement or integrity and as such believe that an objective, reasonable and informed third party in possession of these
facts would conclude that our integrity and objectivity has not been impaired and accordingly we remain independent for
the purposes of the audit.
Other than those disclosed in the Audit Committee Report, we have provided no non-audit services to the company or
its controlled undertakings in the period under audit.
Digital 9 Infrastructure plc
Page 113
Our audit approach
Context
Digital 9 Infrastructure plc is a listed company on the Main Market of the London Stock Exchange. The Company was
incorporated on 8 January 2021 and invests in a range of digital infrastructure assets.
Overview
Audit scope
•
The Company invests in digital infrastructure investments through its investment in its wholly-owned subsidiary,
Digital 9 Holdco Limited.
•
The Company is a closed-ended investment company and has appointed Triple Point Investment Management
LLP
(the “Investment Manager”) to manage its assets.
•
We conducted our audit of the financial statements using information from Triple Point Investment Management
LLP, and Ocorian Fund Services (Jersey) Limited (the “Administrator”) to whom the directors delegated the
provision of certain administrative functions.
•
We tailored the scope of our audit taking into account the types of investments within the Company, the
involvement of the third parties referred to above, the accounting processes and controls, and the industry in
which the Company operates.
Key audit matters
•
Valuation of investments held at fair value through profit or loss
Materiality
•
Overall materiality: £7,560,000
based on 1% of Net Assets.
•
Performance materiality: £5,670,000.
The scope of our audit
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial
statements.
Key audit matters
Key audit matters are those matters that, in the auditors’ professional judgement, were of most significance in the audit
of the financial statements of the current period and include the most significant assessed risks of material misstatement
(whether or not due to fraud) identified by the auditors, including those which had the greatest effect on: the overall
audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team. These matters,
and any comments we make on the results of our procedures thereon, were addressed in the context of our audit of the
financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these
matters.
Digital 9 Infrastructure plc
Page 114
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF
DIGITAL 9 INFRASTRUCTURE PLC
This is not a complete list of all risks identified by our audit.
Key audit matter
How our audit addressed the key audit matter
Valuation of investments held at fair value through
profit or loss
Refer to Report of the Audit and Risk Committee,
Note 2: Significant accounting policies, Note 4:
Significant accounting judgements, estimates
and assumptions and Note 8: Financial assets at
fair value through profit and loss. The Company
has £746m of investments held at fair through
profit or loss. The fair value of the Company’s
investments in Digital 9 Holdco Limited (“the
HoldCo”) is determined based on the net assets
of the HoldCo and, accordingly, the fair value of
the underlying investments within the Holdco, for
which there is no liquid market. The fair value of
the underlying investments has principally been
valued on a discounted cash flow basis, which
necessitates significant estimates in respect of the
forecasted cash flows and discount rates applied.
Determining the valuation methodology and
determining the inputs and assumptions within
the valuation is subjective and complex. This,
combined with the significance of the investments
balance in the statement of financial position,
meant that this was a key audit matter for our
current year audit.
We obtained and reviewed management’s key accounting papers
and assessed for compliance with IFRS, including the assumptions
therein.
• We obtained an understanding of the Company’s processes for
determining the fair value of level 3 investments. We documented
and assessed the design and implementation of the investment
valuation processes and controls.
• We planned our audit to critically assess management’s
assumptions and the investment valuation models in which they
are applied.
• We have assessed whether the valuation methodology adopted
for the underlying investments within the HoldCo was appropriate
and in line with accounting standards and industry guidelines.
• We tested the mathematical accuracy of the valuation models.
• We tested a sample of inputs into the fair value models to
supporting documentation and assessed the reasonableness of
the assumptions used in determining the fair value of investments;
• We used our internal valuation experts to provide audit support
in reviewing and concluding on the fair valuation of the underlying
investment portfolio. Our experts (a) reviewed the appropriateness
of the valuation methodology and approach and (b) reviewed
the computation of the discounted cash flow valuation models,
including comparing the discount rate against those used by
comparable market participants and other macroeconomic data,
where appropriate.
• We compared the investment valuations to the acquisition
costs. We also assessed the adequacy of the disclosures related
to investments held at fair value through profit and loss in the
financial statements.
No material issues were identified in our testing.
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the
financial statements as a whole, taking into account the structure of the company, the accounting processes and controls,
and the industry in which it operates.
The Company’s accounting is delegated to the Administrator who maintains the Company’s accounting records and who
has implemented controls over those accounting records.
Digital 9 Infrastructure plc
Page 115
We obtained our audit evidence from substantive tests. However, as part of our risk assessment, we understood and
assessed the internal controls in place at both the Investment Manager and the Administrator to the extent relevant to
our audit.
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial
statements. In particular, we looked at where the directors made subjective judgements, for example in respect of
significant accounting estimates that involved making assumptions and considering future events that are inherently
uncertain.
Materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for
materiality. These, together with qualitative considerations, helped us to determine the scope of our audit and the
nature, timing and extent of our audit procedures on the individual financial statement line items and disclosures and in
evaluating the effect of misstatements, both individually and in aggregate on the financial statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Overall company materiality
£7,560,000.
How we determined it
1% of Net Assets
Rationale for benchmark applied
We believe that Net Assets is the primary measure used by the shareholders in
assessing the performance of the entity, and is a generally accepted auditing
benchmark.
We use performance materiality to reduce to an appropriately low level the probability that the aggregate of uncorrected
and undetected misstatements exceeds overall materiality. Specifically, we use performance materiality in determining
the scope of our audit and the nature and extent of our testing of account balances, classes of transactions and
disclosures, for example in determining sample sizes. Our performance materiality was 75% of overall materiality,
amounting to £5,670,000 for the company financial statements.
In determining the performance materiality, we considered a number of factors - the history of misstatements, risk
assessment and aggregation risk and the effectiveness of controls - and concluded that an amount at the upper end of
our normal range was appropriate.
We agreed with the Audit Committee that we would report to them misstatements identified during our audit above
£377,500 as well as misstatements below that amount that, in our view, warranted reporting for qualitative reasons.
Conclusions relating to going concern
Our evaluation of the directors’ assessment of the company’s ability to continue to adopt the going concern basis of
accounting included:
•
We obtained management’s latest forecasts that support the Board’s assessment and conclusions with respect to
the going concern basis of preparation of the financial statements;
•
We checked the mathematical accuracy of management’s forecasts;
•
We corroborated management’s base case to appropriate supporting documentation;
•
We evaluated the directors’ assessment of potential operational impacts, considering their consistency with other
available information and our understanding of the business and assessed the potential impact on the financial
statements;
Digital 9 Infrastructure plc
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INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF
DIGITAL 9 INFRASTRUCTURE PLC
•
We evaluated management’s base case forecast and downside scenarios, challenging the underlying data and
adequacy and appropriateness of the underlying assumptions used to make the assessment. We evaluated the
directors’ plans for future actions in relation to their going concern assessment, should these be required; and
•
We reviewed the directors’ assessment of the Company’s financial position in the context of its ability to meet
future expected operating expenses.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions
that, individually or collectively, may cast significant doubt on the company’s ability to continue as a going concern for a
period of at least twelve months from when the financial statements are authorised for issue.
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting
in the preparation of the financial statements is appropriate.
However, because not all future events or conditions can be predicted, this conclusion is not a guarantee as to the
company’s ability to continue as a going concern.
In relation to the directors’ reporting on how they have applied the UK Corporate Governance Code, we have nothing
material to add or draw attention to in relation to the directors’ statement in the financial statements about whether the
directors considered it appropriate to adopt the going concern basis of accounting.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant
sections of this report.
Reporting on other information
The other information comprises all of the information in the Annual Report other than the financial statements and our
auditors’ report thereon. The directors are responsible for the other information. Our opinion on the financial statements
does not cover the other information and, accordingly, we do not express an audit opinion or, except to the extent
otherwise explicitly stated in this report, any form of assurance thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing
so, consider whether the other information is materially inconsistent with the financial statements or our knowledge
obtained in the audit, or otherwise appears to be materially misstated. If we identify an apparent material inconsistency
or material misstatement, we are required to perform procedures to conclude whether there is a material misstatement
of the financial statements or a material misstatement of the other information. If, based on the work we have performed,
we conclude that there is a material misstatement of this other information, we are required to report that fact. We have
nothing to report based on these responsibilities.
Corporate governance statement
The Listing Rules require us to review the directors’ statements in relation to going concern, longer-term viability and
that part of the corporate governance statement relating to the company’s compliance with the provisions of the UK
Corporate Governance Code specified for our review. Our additional responsibilities with respect to the corporate
governance statement as other information are described in the Reporting on other information section of this report.
Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the
corporate governance statement is materially consistent with the financial statements and our knowledge obtained
during the audit, and we have nothing material to add or draw attention to in relation to:
•
The directors’ confirmation that they have carried out a robust assessment of the emerging and principal risks;
•
The disclosures in the Annual Report that describe those principal risks, what procedures are in place to identify
emerging risks and an explanation of how these are being managed or mitigated;
Digital 9 Infrastructure plc
Page 117
•
The directors’ statement in the financial statements about whether they considered it appropriate to adopt the
going concern basis of accounting in preparing them, and their identification of any material uncertainties to the
company’s ability to continue to do so over a period of at least twelve months from the date of approval of the
financial statements;
•
The directors’ explanation as to their assessment of the company’s prospects, the period this assessment covers
and why the period is appropriate; and
•
The directors’ statement as to whether they have a reasonable expectation that the company will be able to
continue in operation and meet its liabilities as they fall due over the period of its assessment, including any
related disclosures drawing attention to any necessary qualifications or assumptions.
Our review of the directors’ statement regarding the longer-term viability of the group was substantially less in scope
than an audit and only consisted of making inquiries and considering the directors’ process supporting their statement;
checking that the statement is in alignment with the relevant provisions of the UK Corporate Governance Code; and
considering whether the statement is consistent with the financial statements and our knowledge and understanding of
the company and its environment obtained in the course of the audit.
In addition, based on the work undertaken as part of our audit, we have concluded that each of the following elements
of the corporate governance statement is materially consistent with the financial statements and our knowledge obtained
during the audit:
•
The directors’ statement that they consider the Annual Report, taken as a whole, is fair, balanced and
understandable, and provides the information necessary for the members to assess the company’s position,
performance, business model and strategy;
•
The section of the Annual Report that describes the review of effectiveness of risk management and internal
control systems; and
•
The section of the Annual Report describing the work of the Audit Committee.
We have nothing to report in respect of our responsibility to report when the directors’ statement relating to the
company’s compliance with the Code does not properly disclose a departure from a relevant provision of the Code
specified under the Listing Rules for review by the auditors.
Responsibilities for the financial statements and the audit
Responsibilities of the directors for the financial statements
As explained more fully in the Directors’ Responsibilities Statement, the directors are responsible for the preparation of
the financial statements in accordance with the applicable framework and for being satisfied that they give a true and fair
view. The directors are also responsible for such internal control as they determine is necessary to enable the preparation
of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the company’s ability to continue as
a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of
accounting unless the directors either intend to liquidate the company or to cease operations, or have no realistic
alternative but to do so.
Digital 9 Infrastructure plc
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INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF
DIGITAL 9 INFRASTRUCTURE PLC
Auditors’ responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with
ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of these financial statements.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line
with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The
extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below.
Based on our understanding of the company and industry, we identified that the principal risks of non-compliance with laws
and regulations related to breaches of section 1158 of the Corporation Tax Act 2010, and we considered the extent to which
non-compliance might have a material effect on the Financial Statements.
We also considered those laws and regulations
that have a direct impact on the Financial Statements such as the Companies (Jersey) Law. We evaluated management’s
incentives and opportunities for fraudulent manipulation of the financial statements (including the risk of override of controls),
and determined that the principal risks were related to posting inappropriate journals, and management bias in accounting
estimates and judgements applied by management in valuation of investments held at fair value through profit or loss, as
described in our key audit matter. Audit procedures performed by the engagement team included:
•
Discussions with management, risk and compliance, including consideration of known or suspected instances of
non-compliance with laws and regulations and fraud impacting the Company;
•
Reviewing relevant meeting minutes, including those of the Board of Directors and the Audit Committee;
•
Designing audit procedures to incorporate unpredictability around the nature, timing or extent of our testing;
•
Procedures relating to judgemental areas of accounting and significant estimation, including as described in the
related key audit matter; and
•
Identifying and testing journal entries, in particular any journal entries posted with unusual account combinations
and words.
There are inherent limitations in the audit procedures described above. We are less likely to become aware of instances
of non-compliance with laws and regulations that are not closely related to events and transactions reflected in the
financial statements. Also, the risk of not detecting a material misstatement due to fraud is higher than the risk of not
detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery or intentional
misrepresentations, or through collusion.
Our audit testing might include testing complete populations of certain transactions and balances, possibly using data
auditing techniques. However, it typically involves selecting a limited number of items for testing, rather than testing complete
populations. We will often seek to target particular items for testing based on their size or risk characteristics. In other cases,
we will use audit sampling to enable us to draw a conclusion about the population from which the sample is selected.
A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at:
www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditors’ report.
Use of this report
This report, including the opinions, has been prepared for and only for the company’s members as a body in accordance
with Article 113A of the Companies (Jersey) Law 1991 and for no other purpose. We do not, in giving these opinions,
accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose
hands it may come save where expressly agreed by our prior consent in writing.
Digital 9 Infrastructure plc
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OTHER REQUIRED REPORTING
Companies (Jersey) Law 1991 exception reporting
Under the Companies (Jersey) Law 1991 we are required to report to you if, in our opinion:
•
we have not obtained all the information and explanations we require for our audit; or
•
proper accounting records have not been kept by the company, or proper returns
for our audit have not been
received from branches not visited by us; or
•
the financial statements are not in agreement with the accounting records and returns.
We have no exceptions to report arising from this responsibility.
Appointment
Following the recommendation of the Audit Committee, we were appointed by the directors on 6 March 2021 to audit
the financial statements for the year ended 31 December 2021 and subsequent financial periods. This is therefore our
first year of uninterrupted engagement.
Other voluntary reporting
Directors’ remuneration
The company voluntarily prepares a Directors’ Remuneration Report in accordance with the provisions of the Companies
Act 2006. The directors requested that we audit the part of the Directors’ Remuneration Report specified by the
Companies Act 2006 to be audited as if the company were a quoted company.
In our opinion, the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance
with the Companies Act 2006.
Kevin Rollo
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Recognized Auditor
London
16 March 2022
Digital 9 Infrastructure plc
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INDEPENDENT LIMITED ASSURANCE REPORT TO THE DIRECTORS OF
DIGITAL 9 INFRASTRUCTURE PLC
(“the Company”) on selected key performance indicators (KPIs) included in the Company’s Annual Report for the
period ended 31st December 2021
The Board of Directors of Digital 9 Infrastructure plc engaged us to obtain limited assurance on the selected KPIs
(together the “Subject Matter Information”) as defined below and marked with the symbol
A
on pages 39, 62 and 64 in
the Company’s Annual Report for the year ended 31 December 2021 (the “Report”).
Our assurance conclusion does not extend to any other information included in, or linked from, the Report.
Our limited assurance conclusion
Based on the procedures we have performed, as described under the ‘Summary of work performed as the basis for our
assurance conclusion’ and the evidence we have obtained, nothing has come to our attention that causes us to believe
that the Subject Matter Information marked with the symbol
A
on pages 39, 62 and 64 in the Company’s Annual
Report for the period ended 31 December 2021, has not been prepared, in all material respects, in accordance with
the Reporting Criteria set out on in Annex 1 on pages 158 to 159 of the Report and referenced in the ‘Subject Matter
Information and Reporting Criteria’ section below.
Subject Matter Information and Reporting Criteria
The Subject Matter Information needs to be read and understood together with the Reporting Criteria, which the
Company is solely responsible for selecting and applying. The Subject Matter Information and the Reporting Criteria are
as set out in the table below:
Subject Matter Information
Reporting Criteria
Scope 1 emissions GHG Emissions
The Reporting Principles and Methodologies
as found in Annex 1 on pages 158 to 159 of
the Report.
Scope 2 emissions GHG Emissions (location-based)
Scope 2 emissions GHG Emissions (market-based)
Total GHG Emissions
Share of non renewable energy consumption and production
Unadjusted gender pay gap
Board gender diversity
Data Centre Power Usage Effectiveness
Growth in network capacity
Digital 9 Infrastructure plc
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Inherent limitations
The absence of a significant body of established practice on which to draw to evaluate and measure non-financial
information allows for different, but acceptable, evaluation and measurement techniques that can affect comparability
between entities and over time.
Non-financial performance information is subject to more inherent limitations than financial information, given the
characteristics of the underlying subject matter and the methods used for determining such information. The precision of
different measurement techniques may also vary.
Responsibilities of the Company’s directors
The Directors of the Company are responsible for:
•
determining appropriate reporting topics and selecting or establishing suitable criteria for measuring or evaluating the
underlying subject matter;
•
ensuring that those criteria are relevant and appropriate to the Company and the intended users of the Report;
•
the preparation of the Subject Matter Information in accordance with the Reporting Criteria including designing,
implementing and maintaining systems, processes and internal controls over information relevant to the evaluation
or measurement of the Subject Matter Information, which is free from material misstatement, whether due to fraud or
error, against the Reporting Criteria; and
•
producing the Report, including underlying information and a statement of Directors’ responsibility, which provides
an accurate, balanced reflection of the Company’s performance in this area and discloses, with supporting rationale,
matters relevant to the intended users of the Report.
Our responsibilities
We are responsible for:
•
planning and performing the engagement to obtain limited assurance about whether the Subject Matter Information
is free from material misstatement, whether due to fraud or error;
•
forming an independent conclusion, based on the procedures we have performed and the evidence we have
obtained; and
•
reporting our conclusion to the Directors of the Company.
Professional standards applied
We performed a limited assurance engagement in accordance with International Standard on Assurance Engagements
3000 (Revised) ‘Assurance Engagements other than Audits or Reviews of Historical Financial Information’ and, in respect
of the greenhouse gas emissions, in accordance with International Standard on Assurance Engagements 3410 ‘Assurance
engagements on greenhouse gas statements’, issued by the International Auditing and Assurance Standards Board.
Digital 9 Infrastructure plc
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INDEPENDENT LIMITED ASSURANCE REPORT TO THE DIRECTORS OF
DIGITAL 9 INFRASTRUCTURE PLC
(“the Company”) on selected key performance indicators (KPIs) included in the Company’s Annual Report for the period
ended 31st December 2021
Our independence and quality control
We have complied with the Institute of Chartered Accountants in England and Wales Code of Ethics, which includes
independence and other requirements founded on fundamental principles of integrity, objectivity, professional
competence and due care, confidentiality and professional behaviour, that are at least as demanding as the applicable
provisions of the International Ethics Standards Board for Accountants International Code of Ethics for Professional
Accountants (including International Independence Standards).
We apply International Standard on Quality Control (UK) 1 and accordingly maintain a comprehensive system of quality
control including documented policies and procedures regarding compliance with ethical requirements, professional
standards and applicable legal and regulatory requirements.
Summary of work performed as the basis for our assurance conclusion
In carrying out our limited assurance engagement we:
•
made enquiries of management at TriplePoint Investment Management Limited (the Investment Manager) and of the
subsidiary investments of the Company;
•
evaluated the design of the key structures, systems, processes and controls for managing, recording and reporting the
Selected Information;
•
performed substantive testing of the Selected Information to check that data had been appropriately measured,
recorded, collated and reported; and
•
considered the disclosure and presentation of the Selected Information.
Our procedures did not include evaluating the suitability of design or operating effectiveness of control activities, testing
the data on which the estimates are based or separately developing our own estimates against which to evaluate the
Company’s estimates.
The procedures performed in a limited assurance engagement vary in nature and timing from, and are less in extent
than for, a reasonable assurance engagement. Consequently, the level of assurance obtained in a limited assurance
engagement is substantially lower than the assurance that would have been obtained had a reasonable assurance
engagement been performed.
Other information
The other information comprises all of the information in the Report other than the Subject Matter Information and our
assurance report. The directors are responsible for the other information. As explained above, our assurance conclusion
does not extend to the other information and, accordingly, we do not express any form of assurance thereon. In
connection with our assurance of the Subject Matter Information, our responsibility is to read the other information and,
in doing so, consider whether the other information is materially inconsistent with the Subject Matter Information or our
knowledge obtained during the assurance engagement, or otherwise appears to contain a material misstatement of fact.
If we identify an apparent material inconsistency or material misstatement of fact, we are required to perform procedures
to conclude whether there is a material misstatement of the Subject Matter Information or a material misstatement of the
other information, and to take appropriate actions in the circumstances.
Digital 9 Infrastructure plc
Page 123
Use and distribution of our report
This report, including our conclusion, has been prepared solely for the Board of Directors of the company in accordance
with the agreement between us dated 22 February 2022 (the “agreement”). Our report must not be made available to
any other party save as set out in the agreement. To the fullest extent permitted by law, we do not accept or assume
responsibility or liability to anyone other than the Board of Directors and the company for our work or this report except
where terms are expressly agreed between us in writing.
PricewaterhouseCoopers LLP
Chartered Accountants
London
16 March 2022
Financial
Statements
Digital 9 Infrastructure plc
Page 126
STATEMENT OF COMPREHENSIVE INCOME
For the period from 8 January 2021 to 31 December 2021
Note
Revenue
£’000
Capital
£’000
Total
£’000
Income
Income from investments held at fair value
5
Gains on investments held at fair value
9
Interest income
Total income
Expenses
Acquisition expenses
9
(5,516 )
(5,516 )
Investment management fees
6
(2,214 )
(738 )
(2,952 )
Other operating expenses
7
(1,012 )
(648 )
(1,660 )
Total operating expenses
(3,226 )
(6,902 )
(10,128 )
Operating (loss)/profit
(289 )
Finance expense
(2 )
(2 )
(Loss)/profit on ordinary activities before taxation
(291 )
Taxation
8
(Loss)/profit and total comprehensive (expense)/income
attributable to shareholders
(291 )
(Loss)/earnings per ordinary share – basic and diluted (pence)
20
(0.07 p)
The total column of this statement is the Statement of Comprehensive Income of the Company prepared in accordance
with International Financial Reporting Standards as adopted by the European Union. The supplementary revenue return
and capital columns have been prepared in accordance with the Association of Investment Companies Statement of
Recommended Practice (AIC SORP).
All revenue and capital items in the above statement derive from continuing operations. The Company does not have
any other income or expenses that are not included in the net profit for the year. The net profit for the year disclosed
above represents the Company’s total comprehensive income.
This Statement of Comprehensive Income includes all recognised gains and losses.
The accompanying notes on pages 130 to 148 form part of these Financial Statements.
Digital 9 Infrastructure plc
Page 127
STATEMENT OF FINANCIAL POSITION
As at 31 December 2021
Note
31 December 2021
£’000
Non-current assets
Investments at fair value through profit or loss
9
Total non-current assets
Current assets
Trade and other receivables
10
Cash and cash equivalents
11
Total current assets
Total assets
Current liabilities
Trade and other payables
13
(1,912 )
Total current liabilities
(1,912 )
Total net assets
Equity attributable to equity holders
Stated capital
14
Capital reserve
Revenue reserve
(291 )
Total Equity
Net asset value per ordinary share – basic and diluted
21
The Financial Statements were approved and authorised for issue by the Board on 16 March 2022 and signed on its
behalf by:
Jack Waters
Chair
16 March 2022
The accompanying notes on pages 130 to 148 form part of these Financial Statements.
Digital 9 Infrastructure plc
Page 128
STATEMENT OF CHANGES IN EQUITY
For the period from 8 January 2021 to 31 December 2021
Period from 8 January 2021 to 31 December 2021
Note
Stated
Capital
£’000
Capital
Reserve
£’000
Revenue
Reserve
£’000
Total
Equity
£’000
Balance at 8 January 2021
Transactions with owners
Ordinary shares issued
14
Share issue costs
14
(14,616 )
(14,616 )
Dividends paid
15
(17,837 )
(17,837 )
Profit/(loss) and total comprehensive income/(expense) for the
period
(291 )
Balance at 31 December 2021
(291 )
The accompanying notes on pages 130 to 148 form part of these Financial Statements.
Digital 9 Infrastructure plc
Page 129
STATEMENT OF CASH FLOWS
For the period from 8 January 2021 to 31 December 2021
Note
8 January 2021
to 31 December 2021
£’000
Cash flows from operating activities
Profit on ordinary activities before taxation
Adjustments for:
Gains on investments held at fair value
9
(45,502 )
Cash flow used in operations
(7,193 )
Increase in trade and other receivables
(228 )
Increase in trade and other payables
Net cash outflow from operating activities
(5,523 )
Cash flows from investing activities
Purchase of investments at fair value through profit or loss
9,12
(667,739 )
Net cash flow used in investing activities
(667,739 )
Cash flows from financing activities
Proceeds from issue of Ordinary Shares
12
Dividends paid
15
(17,837 )
Cost of issue of shares
(14,602 )
Net cash flow generated from financing activities
Net increase in cash and cash equivalents
Reconciliation of net cash flow to movements in cash and cash equivalents
Cash and cash equivalents at 8 January 2021
Net increase in cash and cash equivalents
Cash and cash equivalents at 31 December 2021
11
The accompanying notes on pages 130 to 148 form part of these Financial Statements.
Digital 9 Infrastructure plc
Page 130
1.
CORPORATE INFORMATION
a Jersey registered alternative investment fund, and it is
regulated by the Jersey Financial Services Commission
as a “listed fund” under the Collective Investment Funds
(Jersey) Law 1988 (the “Funds Law”) and the Jersey Listed
Fund Guide published by the Jersey Financial Services
Commission. The Company is registered with number
133380 under the Companies (Jersey) Law 1991.
The Company is domiciled in Jersey
its registered office, which is also its principal place of
business, is 26 New Street, St Helier, Jersey, JE2 3RA .
The Company was incorporated on 8 January 2021 and is
a Public Company. The Company’s Ordinary Shares were
admitted to trading on the Specialist Fund Segment of
the Main Market of the London Stock Exchange under
the ticker DGI9 on 31 March 2021, following its IPO
which raised gross proceeds of £300 million. A further
£175 million and £275 million were raised following
the second and third equity raise on 10 June 2021 and
1 October 2021 respectively.
These financial statements comprise only the results
of the Company, as its investment in Digital 9 Holdco
Limited (“D9 Holdco”) is measured at fair value through
profit or loss as detailed in the significant accounting
policies below.
The Company has appointed Triple Point Investment
Management LLP (“Triple Point”) as its Investment
Manager (the “Investment Manager”) pursuant to the
Investment Management Agreement dated 8 March
2021. The Investment Manager is registered in England
and Wales under number OC321250 pursuant to the
UK Companies Act 2006. The Investment Manager is
regulated by the UK Financial Conduct Authority (the
“FCA”), number 456597.
These financial statements of the Company from the
period of incorporation, 8 January 2021 to 31 December
2021 were authorised for issue in accordance with a
resolution of the Directors on 16 March 2022.
2.
BASIS OF PREPARATION
The financial statements have been prepared on a
going concern basis in accordance with International
Financial Reporting Standards (“IFRS”) adopted pursuant
to Regulation (EC) No 1606/2002 as it applies in the
European Union. The financial statements have also
been prepared in accordance with IFRS as issued by
the International Accounting Standards Board (“IASB”)
and interpretations issued by the IFRS Interpretations
Committee (IFRS IC) to the extent that such standards
have been endorsed by the European Union.
The financial statements have been prepared on the
historical cost basis, except for certain financial assets
measured at fair value. Historical cost is generally based
on the fair value of the consideration given in exchange
for goods and services. The principal accounting policies
adopted are set out below.
These financial statements relate to the period from
incorporation on 8 January 2021 to 31 December 2021;
and as such there is no comparative information for this
period. The Company is required to nominate a functional
currency, being the currency in which the Company
predominantly operates. The functional and reporting
currency is pounds sterling, reflecting the primary
economic environment in which the Company operates.
Where presentational guidance set out in the Association
of Investment Companies Statement of Recommended
Practice (the “AIC SORP”) is consistent with the
requirements of IFRS the Directors have sought to
prepare the financial statements on a basis compliant
with the recommendations of the AIC SORP. In particular,
supplementary information which analyses the Statement
of Comprehensive Income between items of a revenue
and capital nature has been presented alongside the total
Statement of Comprehensive Income.
The preparation of the financial statements requires
management to make certain significant accounting
estimates. It also requires management to exercise
judgement in applying the Company’s accounting policies.
The areas where significant judgements and estimates
have been made in preparing these financial statements
and their effect are disclosed in Note 4.
The principal accounting policies to be adopted are set
out below and will be consistently applied, subject to
changes in accordance with any amendments in IFRS.
NOTES TO THE FINANCIAL STATEMENTS
For the period from 8 January 2021 to 31 December 2021
Digital 9 Infrastructure plc
Page 131
The financial statements incorporate the financial
statements of the Company only and are rounded to the
nearest thousand, unless otherwise stated.
(a)
Going concern
The Company was admitted to trading on the Specialist
Fund Segment of the Main Market of the London Stock
Exchange on 31 March 2021, which was a year after the UK
entered into its first lockdown in response to the Covid-19
pandemic. As a result, the Investment Manager and
Administrator had already implemented business continuity
plans to ensure business disruption was minimised and
had been operating effectively whilst working remotely.
All staff are able to continue to assume their day-to-day
responsibilities. To date, Covid-19 has not impacted the
Company’s ability to continue as a going concern. As a
result, the Directors believe that the Company is still well
placed to manage its financing and other business risks
and will remain viable, continuing to operate and meet its
liabilities as they fall due despite the risk of Covid-19.
As at 31 December 2021, the Company had cash balance
of £11.3 million and the remaining uninvested cash of
£237 million is held by its wholly owned subsidiary D9
Holdco for investment purpose. The major cash outflows
of the Company are the payment of fees and costs
relating to the acquisition of new assets, both of which
are discretionary.
The Directors have reviewed Company forecasts and
pipeline projections which cover a period of at least
12 months from the date of approval of this report,
considering foreseeable changes in investment and the
wider pipeline.
On the basis of this review, the Directors have a reasonable
expectation that the Company has adequate resources to
continue in operational existence for at least 12 months
from the date of approval of this report. Accordingly, the
going concern basis continues to be adopted in preparing
these financial statements.
(b) Investment entities
The sole objective of the Company and through its
subsidiary D9 Holdco is to acquire Digital Infrastructure
Projects, via individual corporate entities. D9 Holdco will
issue equity and loans to finance its investments in the
Digital Infrastructure Projects.
The Directors have concluded that in accordance
with IFRS
10, the Company meets the definition of an
investment entity having evaluated against the criteria
presented below that needs to be met. Under IFRS
10, investment entities are required to hold financial
investments at fair value through profit or loss rather than
consolidate them on a line-by-line basis. There are three
key conditions to be met by the Company for it to meet
the definition of an investment entity.
For each reporting period, the Directors will continue to
assess whether the Company continues to meet these
conditions:
1.
It obtains funds from one or more investors for the
purpose of providing these investors with professional
investment management services;
2. It commits to its investors that its business purpose is
to invest its funds solely for returns (including having an
exit strategy for investments) from capital appreciation,
investment income or both; and
3. It measures and evaluates the performance of
substantially all its investments on a fair value basis.
The Company satisfies the first criteria as it has multiple
investors and has obtained funds from a diverse group
of shareholders for the purpose of providing them with
investment opportunities to invest in a large pool of digital
infrastructure assets.
In satisfying the second criteria, the notion of an
investment time frame is critical. An investment entity
should not hold its investments indefinitely but should
have an exit strategy for their realisation. The intention
of the Company is to seek equity interests in digital
infrastructure projects that have an indefinite life; the
underlying assets that it invests in will have a medium to
long-term expected life. The exit strategy for each asset
will depend on the characteristics of the assets, transaction
structure, exit price potentially achievable, suitability
and availability of alternative investments, balance of the
portfolio and lot size of the assets as compared to the
value of the portfolio. Whilst the Company intends to
hold the investments on a medium to long-term basis,
the Company may also dispose the investments should
an appropriate opportunity arise where, in the Investment
Manager’s opinion, the value that could be realised from
such disposal would represent a satisfactory return on the
Digital 9 Infrastructure plc
Page 132
NOTES TO THE FINANCIAL STATEMENTS
For the period from 8 January 2021 to 31 December 2021
investment and enhance the value of the Company as
a whole.
The Company’s Investment Manager, and the Company’s
Board will regularly review the market and consider
whether any disposals should be made.
The Company satisfies the third criteria as it measures and
evaluates the performance of all of its investments on a
fair value basis which is the most relevant for investors in
the Company. Management use fair value information as a
primary measurement to evaluate the performance of all of
the investments and in decision making.
In assessing whether it meets the definition, the Company
shall also consider whether it has the following typical
characteristics of an investment entity:
a)
it has more than one investment
b)
it has more than one investor
c)
it has investors that are not related parties of the entity
d)
it has ownership interests in the form of equity or
similar interests.
As per IFRS 10 a parent investment entity is required
to consolidate subsidiaries that are not themselves
investment entities and whose main purpose is to provide
services relating to the entity’s investment activities.
The Directors have assessed whether D9 Holdco
satisfies those conditions set above by considering the
characteristics of the whole group structure, rather than
individual entities. The Directors have concluded that
the Company and D9 Holdco are formed in connection
with each other for business structure purposes. When
considered together, both entities display the typical
characteristics of an investment entity.
The Directors are of the opinion that the Company meets
the criteria and characteristics of an investment entity
and therefore, subsidiaries are measured at fair value
through profit or loss, in accordance with IFRS 13 “Fair
Value Measurement”, IFRS 10 “Consolidated Financial
Statements” and IFRS 9 “Financial Instruments”.
3.
SIGNIFICANT ACCOUNTING POLICIES
(a)
Financial Instruments
Financial assets and financial liabilities are recognised on
the Company’s Statement of Financial Position when the
Company becomes a party to the contractual provisions
of the instrument. Financial assets are to be derecognised
when the contractual rights to the cash flows from the
instrument expire or the asset is transferred, and the
transfer qualifies for de-recognition in accordance with
IFRS 9 Financial Instruments.
The Company did not use any derivative financial
instruments during the period.
(i)
Financial assets
The Company classifies its financial assets as either
investments at fair value through profit or loss or financial
assets at amortised cost (e.g. cash and cash equivalents
and trade and other receivables). The classification
depends on the purpose for which the financial assets are
acquired. Management determines the classification of its
financial assets at initial recognition.
(ii)
Financial asset at fair value through profit or
loss
At initial recognition, the Company measures its
investments in Digital Infrastructure Projects, through its
investment in D9 Holdco, at fair value through profit or loss
and any transaction costs are expensed to the Statement of
Comprehensive Income. The Company will subsequently
continue to measure all investments at fair value and any
changes in the fair value are to be recognised as gains or
losses through profit or loss within the capital column of the
Statement of Comprehensive Income.
IFRS 13 defines fair value as the price that would be
received to sell an asset or paid to transfer a liability in
an orderly transaction between market participants at
the measurement date (an exit price). When measuring
fair value, the Company takes into consideration the
characteristics of the asset or liability if market participants
would take those characteristics into account when pricing
the asset or liability at the measurement date, including
assumptions about risk.
Digital 9 Infrastructure plc
Page 133
(iii)
Financial liabilities and equity
Debt and equity instruments are measured at amortised
cost and are classified as either financial liabilities or
as equity in accordance with the substance of the
contractual arrangement.
All financial liabilities are classified as at amortised cost.
These liabilities are initially measured at fair value less
transaction costs and subsequently using the effective
interest method.
(iv)
Equity instruments
The Company’s Ordinary Shares are classified as equity
under stated capital and are not redeemable. Costs
associated or directly attributable to the issue of new
equity shares, including the costs incurred in relation to
the Company’s IPO on 31 March 2021 and its subsequent
equity raises, are recognised as a deduction in equity and
are charged against stated capital.
(b) Finance income
Finance income is recognised using the effective interest
method. This is calculated by applying the effective
interest rate to the gross carrying amount of a financial
asset unless the assets subsequently became credit
impaired. In the latter case, the effective interest rate
is applied to the amortised cost of the financial asset.
Finance income is recognised on an accrual basis.
(c)
Finance expenses
Borrowing costs are recognised in the Statement of
Comprehensive Income in the period to which they relate
on an accruals basis.
(d)
Fair value estimation for investments at fair
value
The fair value of financial investments at fair value through
profit or loss is based on the valuation models adjusted in
accordance with the IPEV (International Private Equity and
Venture Capital) valuation guidelines where appropriate to
comply with IFRS 13.
The Company records the fair value of D9 Holdco by
calculating and aggregating the fair value of each of the
individual investments in which the Company holds an
indirect investment. The total change in the fair value of
the investment in D9 Holdco is recorded through profit
and loss within the capital column of the Statement of
Comprehensive Income.
(e)
Cash and cash equivalents
Cash and cash equivalents comprise cash balances and
deposits held on call with banks. Deposits to be held
with original maturities of greater than three months are
included in other financial assets.
The Company have not identified material expected credit
losses in relation to cash and cash equivalents. The bank
institution has high credit ratings assigned by international
credit rating agencies.
(f)
Trade and other receivables
Trade and other receivables are measured at amortised
cost using the effective interest rate method, less any
impairment. They are included in current assets, except
where maturities are greater than 12 months after the
reporting date, in which case they are to be classified as
non-current assets.
The effective interest rate is the rate that exactly discounts
estimated future cash payments or receipts through the
expected life of the financial instrument to the relevant
asset’s carrying amount.
Impairment provisions for all receivables are recognised
based on a forward-looking expected credit loss model
using the simplified approach. The methodology used
to determine the amount of the provision is based on
whether there has been a significant increase in credit risk
since initial recognition of the financial asset. For those
where the credit risk has not increased significantly since
initial recognition of the financial asset, twelve month
expected credit losses along with gross interest income are
recognised. For those for which credit risk has increased
significantly, lifetime expected credit losses along with
the gross interest income are recognised. For those that
are determined to be credit impaired, lifetime expected
credit losses along with interest income on a net basis
are recognised.
Digital 9 Infrastructure plc
Page 134
NOTES TO THE FINANCIAL STATEMENTS
For the period from 8 January 2021 to 31 December 2021
(g)
Trade and other payables
Trade and other payables are classified as current liabilities
if payment is due within one year or less from the end of
the current accounting period. If not, they are presented
as non-current liabilities. Trade and other payables are
recognised initially at their fair value and subsequently
measured at amortised cost using the effective interest
rate method until settled.
(h)
Segmental reporting
The Chief Operating Decision Maker (the “CODM”) being
the Board of Directors, is of the opinion that the Company
is engaged in a single segment of business, being
investment in Digital Infrastructure Projects.
The Company has no single major customer. The internal
financial information to be used by the CODM on a
quarterly basis to allocate resources, assess performance
and manage the Company will present the business as a
single segment comprising the portfolio of investments in
digital infrastructure assets.
(i)
Foreign currency transactions and balances
Transactions in foreign currencies are translated at
the foreign exchange rate ruling at the date of the
transaction. Monetary assets and liabilities denominated
in foreign currencies at the reporting date are translated
at the foreign exchange rate ruling at that date. Foreign
exchange differences arising on translation are recognised
in the Statement of Comprehensive Income.
(j)
Revenue recognition
Gains and losses on fair value of investments in the
Statement of Comprehensive Income will represent gains
or losses that arise from the movement in the fair value of
the Company’s investment in D9 Holdco.
Investment income comprises dividend income received
from the Company’s subsidiary. Interest income is
recognised in the Statement of Comprehensive Income
using the effective interest rate method.
Dividend income receivable on equity shares is recognised
on the ex-dividend date. Dividend income on equity
shares where no ex-dividend date is quoted is brought
into account when the Company’s right to receive payment
is established.
(k)
Dividends
Dividends payable are recognised as distribution in the
financial statements in the period in which they are paid
or when the Company’s obligation to make payment has
been established.
(l)
Fund Expenses
Expenses are accounted for on an accruals basis. Share
issue expenses of the Company directly attributable
to the issue and listing of shares are charged to stated
capital. The Company’s investment management fee,
administration fees and all other expenses are charged
through the Statement of Comprehensive Income.
In order to better reflect the activities of an investment
trust company and in accordance with guidance issued by
the AIC SORP, supplementary information which analyses
the Statement of Comprehensive Income between items
of a revenue and a capital nature has been presented
alongside the Statement of Comprehensive Income.
Expenses have been charged wholly to the revenue
column of the Statement of Comprehensive Income,
except as follows:
•
expenses which are incidental to the acquisition or
disposal of an investment are treated as capital;
•
expenses are treated as capital where a connection
with the maintenance or enhancement of the value
of the investments can be demonstrated; and
•
the investment management fee has been allocated
75% to the revenue column and 25% to the capital
column of the Statement of Comprehensive Income
in line with the Board’s expected long-term split
of returns, in the form of income and capital gains
respectively, from the investment portfolio.
(m) Acquisition costs and disposals
In line with IFRS 9, acquisition costs and disposals
are expensed to the capital column of the Statement
of Comprehensive Income as they are incurred for
investments which are held at fair value through profit
or loss.
Digital 9 Infrastructure plc
Page 135
(n)
Foreign currency translation
The functional and reporting currency is sterling, reflecting
the primary economic environment in which the Company
operates. Transactions in foreign currencies are translated
into sterling at the rates of exchange ruling on the date
of the transaction. Foreign currency monetary assets
and liabilities are translated into sterling at the rates of
exchange ruling at the balance sheet date.
Foreign exchange differences arising on translation are
recognised in the Statement of Comprehensive Income
as a revenue or capital item depending on the income or
expense to which they relate.
(o)
Taxation
The tax expense represents the sum of the tax currently
payable and deferred tax. The tax currently payable is
based on the taxable profit for the year. Taxable profit
differs from net profit as reported in the Statement of
Comprehensive Income because it excludes items of
income or expenses that are taxable or deductible in
other years and it further excludes items that are never
taxable or deductible. The Company’s liability for current
tax is calculated using tax rates that were applicable at the
balance sheet date.
Where expenses are allocated between the capital and
revenue accounts, any tax relief in respect of expenses
is allocated between capital and revenue returns on the
marginal basis using the Company’s effective rate of
corporation tax for the accounting period.
Deferred taxation is recognised in respect of all temporary
differences that have originated but not reversed at the
financial reporting date, where transactions or events that
result in an obligation to pay more taxation in the future
or right to pay less taxation in the future have occurred
at the financial reporting date. This is subject to deferred
tax assets only being recognised if it is considered more
likely than not that there will be suitable profits from which
the future reversal of the temporary differences can be
deducted. Deferred tax is measured on a non-discounted
basis, at the average tax rates that are expected to
apply in the periods in which the timing differences are
expected to reverse based on tax rates and laws that have
been enacted or substantively enacted by the balance
sheet date.
(p)
Standards in issue not yet effective
Certain new accounting standards and interpretations have
been published, that are not yet effective for 31 December
2021 reporting periods and have not been early adopted
by the Company. These standards, listed below, are not
expected to have a material impact on the Company in
the current or future reporting periods and on foreseeable
future transactions.
(a)
Amendments to IAS 16 Property, Plant and Equipment:
Proceeds before Intended Use.
(b)
Amendments to IAS 37 Provisions, Contingent
Liabilities and Contingent Assets: Onerous Contracts –
Cost of Fulfilling a Contract.
(c)
Amendments to IFRS 3 Business Combinations:
Reference to the Conceptual Framework.
(d)
Annual Improvements to IFRS Standards 2018–2020.
New and revised standards effective for the
year
Their adoption has not had any material impact on
the disclosures or on the amounts reported in these
consolidated financial statements. The most significant of
these standards are set out below.
(a)
Covid-19-related Rent Concessions beyond
30 June 2021 (Amendment to IFRS 16) – Applicable
to annual reporting periods beginning on or after
1 April 2021.
(b)
Interest Rate Benchmark Reform – Phase 2
(Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and
IFRS 16) – Applicable to annual reporting periods
beginning on or after 1 January 2021.
(c)
Amendments to IFRS 4 Insurance Contracts – deferral
of IFRS 19.
Digital 9 Infrastructure plc
Page 136
NOTES TO THE FINANCIAL STATEMENTS
For the period from 8 January 2021 to 31 December 2021
4.
ACCOUNTING JUDGEMENTS,
ESTIMATES AND ASSUMPTIONS
In the application of the Company’s accounting policies,
which are described in Note 3, the Directors are required
to make judgements, estimates and assumptions that
affect the reported amounts of assets, liabilities, income
and expenses. It is possible that actual results may differ
from these estimates.
(a)
Significant accounting judgements
(i)
Investment entity
As discussed above in Note 2(b), in the judgement of
the Directors, the Company meets the definition of an
investment entity as defined in IFRS 10 and therefore its
subsidiary entities have not been consolidated in these
financial statements.
(b)
Key sources of estimation uncertainty
The estimates and underlying assumptions underpinning
our investments are reviewed on an ongoing basis by
both the Board and the Investment Manager. Revisions to
any accounting estimates are recognised in the period in
which the estimate is revised if the revision affects only that
period, or in the period of the revision and future periods if
the revision affects both current and future periods.
(i)
Fair value measurement of investments at fair
value through profit or loss
The fair value of investments in Digital Infrastructure
Projects is calculated by discounting at an appropriate
discount rate future cash flows expected to be generated
by the trading subsidiary companies and received by D9
Holdco, through dividend income and equity redemptions
and adjusted in accordance with the IPEV (International
Private Equity and Venture Capital) valuation guidelines
where appropriate to comply with IFRS 13 and IFRS 9.
Estimates such as the cash flows are believed to be
reasonable under the circumstances, the results of which
form the basis of making judgements about the fair value
of assets not readily available from other sources. Discount
rates used in the valuation represent the Investment
Manager’s and the Board’s assessment of the rate of return
in the market for assets with similar characteristics and
risk profile.
In the income approach, the discounted cash flow from
revenue forecasted over a
fifteen
-year period followed
by a terminal value based on a long-term growth rate.
The discounted cash flow comprises a bottom-up analysis
of the weighted average cost of capital over time, using
unobservable inputs; and calculation of the appropriate
beta based on comparable listed companies.
The following significant unobservable inputs were used in
the model:
•
Discount rates range from 9.2% to 13.1%.
•
Inflation rate of 3%.
•
Foreign exchange rates.
The Company has also carried out sensitivity analysis of
these unobservable inputs and the results are disclosed in
Note 8.
5.
INVESTMENT INCOME
8 January 2021
to 31 December
2021
£’000
UK dividends
2,923
2,923
6.
INVESTMENT MANAGEMENT FEES
8 January 2021
to 31 December
2021
Revenue
£’000
8 January 2021
to 31 December
2021
Capital
£’000
8 January 2021
to 31 December
2021
Total
£’000
Management fees
2,214
738
2,952
The Company and the Investment Manager entered into
an Investment Management Agreement on 8 March 2021.
The Company and Triple Point have entered into the
Investment Management Agreement pursuant to which
the Investment Manager has been given responsibility,
subject to the overall supervision of the Board, for active
discretionary investment management of the Company’s
Portfolio in accordance with the Company’s Investment
Objective and Policy.
As the entity appointed to be responsible for risk
management and portfolio management, the Investment
Digital 9 Infrastructure plc
Page 137
Manager is the Company’s AIFM. The Investment Manager
has full discretion under the Investment Management
Agreement to make investments in accordance with the
Company’s Investment Policy from time to time.
This discretion is, however, subject to: (i) the Board’s ability
to give instructions to the Investment Manager from time
to time; and (ii) the requirement of the Board to approve
certain investments where the Investment Manager has
a conflict of interest in accordance with the terms of the
Investment Management Agreement.
With effect from 31 March 2021, the date of admission
of the Ordinary Shares to trading on the Specialist
Fund Segment of the Main Market of the London Stock
Exchange, the Company shall pay the Investment Manager
a management fee (the “Annual Management Fee”)
calculated, invoiced and payable quarterly in arrears based
on the Adjusted Net Asset Value which is based on funds
deployed and committed at the relevant quarter date.
The total amount due to Triple Point at the year end was
£1.26 million.
The management fee is calculated at the rates set out
below:
Adjusted Net Asset Value
Annual
Management
Fee (% of
Adjusted Net
Asset Value)
Up to and including £500 million
1.0%
Above £500 million up to and including
£1 billion
0.9%
Exceeding £1 billion
0.8%
The management fee from 31 March 2021 to 30 June
2021 has been accrued at 1% based on total funds
deployed and committed from admission to 30 June 2021.
For the period from 1 July 2021, in the event that less than
75% of the net proceeds from the issue of shares have
been deployed, Adjusted Net Asset Value is the Current
Net Asset Value at the previous reporting date adjusted as
follows:
(a)
Deduction from the Current Net Asset Value for
undeployed and uncommitted cash balances
(b)
Addition to the Current Net Asset Value the amount
equal to the total funds (if any) deployed after the
Current Net Asset Value Date and before the end of
the relevant Quarter.
In the event that 75% or more of the net proceeds of
all relevant issues have been deployed there will be
no deduction from the Current Net Asset Value for any
undeployed cash balances.
7.
OTHER OPERATING EXPENSES
8 January 2021
to 31 December
2021
£’000
Allocated to Revenue:
Legal and professional fees
153
Auditors’ fees – audit services
13
180
Auditors’ fees – non-audit services
14
111
Directors’ fees
181
Administration and company secretarial fees
163
Other administrative expenses
224
1,012
Allocated to Capital:
Aborted deals costs
648
1,660
13 – Fees presented include VAT but exclude audit fees on the financial statements
of subsidiaries totalling £271,000.
14 – Fees for non-audit services relate to the review of interim financial statements
and assurance on environmental, social and corporate governance. Total fees
for non-audit services performed by the Company’s auditors for the subsidiary
companies was £166,000.
8.
TAXATION
The Company is registered in Jersey, Channel Islands but
resident in the United Kingdom for taxation. The standard
rate of corporate income tax currently applicable to the
Company is 19%.
The financial statements do not directly include the tax
charges for the Company’s intermediate holding company,
as D9 Holdco is held at fair value. D9 Holdco is subject to
taxation in the United Kingdom.
Digital 9 Infrastructure plc
Page 138
NOTES TO THE FINANCIAL STATEMENTS
For the period from 8 January 2021 to 31 December 2021
The tax charge for the period is less than the standard rate
of corporation tax in the UK of 19%. The differences are
explained below.
8 January 2021 to 31 December 2021
Revenue
£’000
Capital
£’000
Total
£’000
Net (loss)/profit before
tax
(291)
38,600
38,309
Tax at UK corporation
tax standard rate of 19%
(55)
7,334
7,279
Effects of:
Gain on financial assets
not taxable
–
(8,645)
(8,645)
Exempt UK dividend
income
(555)
–
(555)
Acquisition expenses
not allowable
–
1,048
1,048
Other disallowed
expenses
–
123
123
Excess of allowable
expenses
610
140
750
–
–
–
Investment companies which have been approved by
HM Revenue & Customs under section 1158 of the
Corporation Tax Act 2010 are exempt from tax on capital
gains. The Directors are of the opinion that the Company
has complied with the requirements for maintaining
investment trust status for the purposes of section 1158
of the Corporation Tax Act 2010. The Company has not
provided for deferred tax on any capital gains or losses
arising on the revaluation of investments.
The Company has unrelieved excess management
expenses of £750. It is unlikely that the Company will
generate sufficient taxable profits in the future to utilise
these expenses and therefore no deferred tax asset has
been recognised.
The unrecognised deferred tax asset calculated using a
tax rate of 25% amounts to £187.
The Finance Act 2021
received Royal Assent on 10 June 2021 and the rate of
Corporation Tax of 25% effective from 1 April 2023 has
been used to calculate the potential deferred tax asset.
9.
FINANCIAL ASSET AT FAIR VALUE
THROUGH PROFIT OR LOSS
As set out in Note 2, the Company designates its interest
in its wholly owned direct subsidiary as a financial asset at
fair value through profit or loss.
Summary of Company’s valuation:
31 December 2021
£’000
Opening balance on incorporation
–
Investments in D9 Holdco
700,727
Change in fair value of investments
45,502
As at 31 December 2021
746,229
Following the IPO, the Company acquired in its entirety
Aqua Comms Designated Activity Company (“Aqua
Comms DAC”) on 1 April 2021 for £170 million. On 30
June 2021, the Company transferred its investment in
Aqua Comms DAC to its 100% subsidiary, D9 Holdco in
return for equity.
During the year, the Company through its subsidiary
companies made further commitments and acquisitions as
follows:
Date
Entity
Acquisition and Investment
Value
7 Jul 2021
Digital 9
Subsea
Limited
EMIC-1 –
Development of
subsea and terrestrial
fibre assets between
Europe, the Middle-
East and India
£22m
4 Sep 2021
Digital 9
DC Limited
Verne Holdings
Limited – Data centre
operator in Iceland
£231m
2 Dec 2021
Digital 9
Seaedge
Limited
SeaEdge UK1 – Data
centre asset and
subsea fibre landing
station in Newcastle
£15m
Acquisition expenses totalling £5.5 million relating to
the acquisition of Aqua Comms DAC by the Company
have been expensed to the Statement of Comprehensive
Income in line with the accounting treatment under IFRS 9.
Digital 9 Infrastructure plc
Page 139
Valuation process
The Investment Manager includes a team that is
responsible for carrying out the fair valuation of financial
assets for financial reporting purposes, including level 3
fair valuations. This valuation is presented to the Board
for its approval and adoption. The valuation is carried out
on a six-monthly basis as at 30 June and 31 December
each year and is reported on to Shareholders in the annual
report and financial statements.
Valuation methodology
The Company owns 100% of its subsidiary D9 Holdco. The
Company meets the definition of an investment entity as
described by IFRS 10, as such the Company’s investment
in D9 Holdco is valued at fair value. D9 Holdco’s cash,
working capital balances and fair value of investments
are included in calculating fair value of D9 Holdco. The
Company acquires underlying investments in SPVs through
its investment in D9 Holdco.
The Investment Adviser has carried out fair market
valuations of the SPV investments as at 31 December
2021 and the Directors have satisfied themselves as
to the methodology used, the discount rates and
key assumptions applied, and the valuations. All SPV
investments are at fair value through profit or loss and
are valued using the IFRS 13 framework for fair value
measurement. The following economic assumptions were
used in the valuation of the SPVs.
The main level 3 inputs used by the group are derived and
evaluated as follows:
•
The Investment Manager uses its judgement in
arriving at the appropriate discount rate using a
capital asset pricing model to calculate a pre-tax
rate that reflects current market assessment. This is
based on its knowledge of the market, considering
intelligence gained from its bidding activities,
discussions with financial advisers in the appropriate
market and publicly available information on
relevant transactions. The bottom-up analysis of the
discount rate and the appropriate beta is based on
comparable listed companies. The applied discount
rates range from 9.2% to 13.1%.
•
Expected cash inflows are estimated based on terms
of the contracts and the Company’s knowledge
of the business and how the current economic
environment is likely to impact it taking into
consideration growth rate factors.
•
Inflation rate of 3%.
•
Foreign exchange rates of GBP against USD, EUR
and ISK.
Fair value measurements
As set out above, the Company accounts for its interest in
its wholly owned direct subsidiary as a financial asset at fair
value through profit or loss.
IFRS 13 requires disclosure of fair value measurement by
level. The level of fair value hierarchy within the financial
assets or financial liabilities is determined on the basis of
the lowest level input that is significant to the fair value
measurement. Financial assets and financial liabilities are
classified in their entirety into only one of the following
3 levels:
Level 1 – quoted prices (unadjusted) in active markets for
identical assets or liabilities;
Level 2 – inputs other than quoted prices included within
Level 1 that are observable for the assets or liabilities,
either directly (i.e. prices) or indirectly (i.e. derived from
prices); and
Level 3 – inputs for assets or liabilities that are not based
on observable market data (unobservable inputs).
The following table presents the Company’s financial assets and financial liabilities measured and recognised at fair value
at 31 December 2021:
Date of valuation
Total
£’000
Quoted prices
in active
markets
(Level 1)
£’000
Significant
observable
inputs
(Level 2)
£’000
Significant
unobservable
inputs
(Level 3)
£’000
Assets measured at fair value:
Investment in D9 Holdco
31 December 2021
746,229
–
–
746,229
Digital 9 Infrastructure plc
Page 140
NOTES TO THE FINANCIAL STATEMENTS
For the period from 8 January 2021 to 31 December 2021
There have been no transfers between Level 1 and Level 2 during the period, nor have there been any transfers between
Level 2 and Level 3 during the year.
The Company’s investments are reported as Level 3 in accordance with IFRS 13 where external inputs are “unobservable”
and value is the Directors’ best estimate, based upon advice from relevant knowledgeable experts.
Fair value measurements using significant unobservable inputs (Level 3)
As set out within the significant accounting estimates and judgements in Note 4(b), the valuation of the Company’s
financial asset is an estimation uncertainty. The sensitivity analysis was performed based on the current capital structure
and expected performance of the Company’s investment in D9 Holdco. For each of the sensitivities, it is assumed that
potential changes occur independently of each other with no effect on any other base case assumption, and that the
number of investments in the SPVs remains static throughout the modelled life. The following table summarises the
quantitative information about the significant unobservable inputs used in Level 3 fair value measurement and the
changes to the fair value of the financial asset if these inputs change upwards or downwards by 1%:
Unobservable inputs
*Valuation if
rate increases
by 1%
£’000
Movement in
valuation
£'000
*Valuation if
rate decreases
by 1%
£'000
Movement in
valuation
£'000
Discount rate
737,537
(8,692)
755,137
8,908
Inflation rate
743,501
(2,728)
749,058
2,829
Foreign exchange rates
742,426
(3,803)
750,186
3,957
* excludes cash balance at valuation date which is not subject to variance in unobservable inputs.
10. TRADE AND OTHER RECEIVABLES
31 December 2021
£’000
Amounts due from subsidiary
undertakings
209
Other receivables
19
228
The Directors consider that the carrying value of trade and
other receivables approximate their fair value.
11.
CASH AND CASH EQUIVALENTS
31 December 2021
£’000
Foreign currencies account
27
Cash at bank
11,284
11,311
Foreign currency accounts refer to funds held in USD and
Euro currencies. Foreign currency balances are subject to
foreign currency exchange risks, but the risk is considered
insignificant.
The Directors consider that the carrying value of cash and
cash equivalents approximate their fair value.
12. NON-CASH TRANSACTIONS
The Company had material non-cash transactions during
the period totalling £203 million. Aqua Ventures Limited
(“AVL”) and Black Forest Funding (Ireland) Designated
Activity Company (“Black Forest”) have been issued a
total of 32,988,339 Ordinary Shares, at an issue price of
100p per share, in part and full payment, respectively, of
the consideration payable to AVL and Black Forest for the
acquisition of Aqua Comms DAC. This has been deducted
from the proceeds from issue of Ordinary Shares.
On 30 June 2021, the Company transferred its investment
in Aqua Comms DAC totalling £170.1 million to its 100%
subsidiary, D9 Holdco in return for equity.
Digital 9 Infrastructure plc
Page 141
13. TRADE AND OTHER PAYABLES
31 December 2021
£’000
Accruals
1,912
1,912
The Directors consider that the carrying value of trade and
other payables approximate their fair value. All amounts
are unsecured and due for payment within one year from
the reporting date.
14. STATED CAPITAL
Ordinary shares of no par value
Allotted, issued and fully paid:
No of shares
Price
31 December
2021
£’000
Allotted following admission to
London Stock Exchange
31 March 2021
300,000,000 100.0p
300,000
10 June 2021
166,666,667 105.0p
175,000
1 October 2021
255,813,953 107.5p
275,000
Ordinary Shares at
31 December 2021
722,480,620
750,000
Dividends paid (Note 15)
(17,837)
Share issue costs
(14,616)
Stated capital at
31 December 2021
717,547
Shareholders are entitled to all dividends paid by the
Company and, on a winding up, provided the Company
has satisfied all its liabilities, the shareholders are entitled
to all of the residual assets of the Company.
On 28 January 2022, the Company raised gross proceeds
of £95.2 million via the Placing of new Ordinary Shares.
A further 88,148,880 Ordinary Shares were admitted to
trading on the London Stock Exchange.
15. DIVIDENDS
Dividend
per share
Total dividend
£’000
Dividend period 31 March 2021
to 30 June 2021
1.5 pence
7,000
Dividend period 1 July 2021 to
30 September 2021
1.5 pence
10,837
17,837
The Company announced a dividend of 1.5 pence per
share equivalent totalling £12.16 million with respect to
the period from 1 October 2021 to 31 December 2021 to
be paid on or around 31 March 2022 to shareholders on
the register on 18 March 2022.
Digital 9 Infrastructure plc
Page 142
NOTES TO THE FINANCIAL STATEMENTS
For the period from 8 January 2021 to 31 December 2021
16. SUBSIDIARIES
At the reporting date, the Company had one wholly owned subsidiary, being its 100% investment in Digital 9
Holdco Limited. The following table shows subsidiaries of the Company. As the Company is regarded as an Investment
Entity as referred to in Note 2, these subsidiaries have not been consolidated in the preparation of the interim
financial statements.
Name
Place of business
% Interest
Principal activity
Registered office
Digital 9 Holdco Limited
United Kingdom
100%
Holding company
1 King William Street,
London EC4N 7AF
The following companies are held by D9 Holdco Limited and its underlying subsidiaries:
Digital 9 Subsea Limited
United Kingdom
100%
Subsea fibre optic
network
1 King William Street,
London EC4N 7AF
Digital 9 DC Limited
United Kingdom
100%
Intermediate holding
company
1 King William Street,
London EC4N 7AF
Digital 9 Fibre Limited
United Kingdom
100%
Intermediate holding
company
1 King William Street,
London EC4N 7AF
Digital 9 Wireless Limited
United Kingdom
100%
Intermediate holding
company
1 King William Street,
London EC4N 7AF
Digital 9 Seaedge Limited
United Kingdom
+
100%
Leaseholding company
1 King William Street,
London EC4N 7AF
Aqua Comms Designated Activity Company
Ireland
100%
Holding company
The Exchange Building,
4 Foster Place,
Dublin 2
Aqua Comms Connect Limited
Ireland*
100%
Intermediate holding
company
The Exchange Building,
4 Foster Place,
Dublin 2
America Europe Connect 2 Limited
Ireland*
100%
Subsea fibre optic
network
The Exchange Building,
4 Foster Place,
Dublin 2
America Europe Connect 2 Denmark ApS
Denmark*
100%
Subsea fibre optic
network
c/o Bech-Bruun Langeline Alle
35, Copenhagen
North Sea Connect Denmark ApS
Denmark*
100%
Subsea fibre optic
network
c/o Bech-Bruun Langeline Alle
35, Copenhagen
Aqua Comms Management (UK) Limited
United Kingdom*
100%
Management company
85 Great Portland Street,
London W1W 7LT
Aqua Comms Denmark ApS
Denmark*
100%
Subsea fibre optic
network
c/o Bech-Bruun Langeline Alle
35, Copenhagen
Aqua Comms (Ireland) Limited
Ireland*
100%
Subsea fibre optic
network
The Exchange Building,
4 Foster Place,
Dublin 2
America Europe Connect Limited
Ireland*
100%
Subsea fibre optic
network
The Exchange Building,
4 Foster Place,
Dublin 2
Celtix Connect Limited
Ireland*
100%
Subsea fibre optic
network
The Exchange Building,
4 Foster Place,
Dublin 2
Digital 9 Infrastructure plc
Page 143
Name
Place of business
% Interest
Principal activity
Registered office
Aqua Comms Management Limited
Ireland*
100%
Management company
The Exchange Building,
4 Foster Place,
Dublin 2
Sea Fibre Networks Limited
Ireland*
100%
Subsea fibre optic
network
The Exchange Building,
4 Foster Place,
Dublin 2
Aqua Comms (IOM) Limited
Isle of Man*
100%
Subsea fibre optic
network
c/o PCS Limited, Ground Floor,
Murdoch
Chambers, South
Quay, Douglas, IOM IM1 5AS
Aqua Comms (UK) Limited
United Kingdom*
100%
Subsea fibre optic
network
85 Great Portland Street,
London W1W 7LT
Aqua Comms Services Limited
Ireland*
100%
Subsea fibre optic
network
The Exchange Building,
4 Foster Place,
Dublin 2
America Europe Connect (UK) Limited
United Kingdom*
100%
Subsea fibre optic
network
85 Great Portland Street,
London W1W 7LT
America Europe Connect 2 USA Inc
USA*
49%
Subsea fibre optic
network
251 Little Falls Drive,
Wilmington, Delaware,19808
USA
Aqua Comms (Americas) Inc
USA*
49%
Subsea fibre optic
network
3500 South Dupont Highway,
Dover, Delaware 19901 Kent,
United States
Verne Holdings Ltd
United Kingdom
+
100%
Holding company
Hays Galleria, 1 Hays Lane,
London SE1 2RD
Verne Global GmbH
Germany^
100%
Data centre solutions
Äußere Sulzbacher Straße 118,
90491 Nürnberg
Verne Global hf
Iceland^
100%
Data centre operation
Valhallarbraut 868, 262
Reykjanesbaer, iceland
Verne Global Ltd
United Kingdom^
100%
Data centre solutions
Hays Galleria, 1 Hays Lane,
London SE1 2RD
Verne Global Inc
USA^
100%
Data centre solutions
1825 Washington Street,
Canton MA 02021 USA
* – held by Aqua Comms Designed Activity Company.
+ – held by Digital 9 DC Limited.
^ – held by Verne Holdings Limited.
Digital 9 Infrastructure plc
Page 144
NOTES TO THE FINANCIAL STATEMENTS
For the period from 8 January 2021 to 31 December 2021
17. TRANSACTIONS WITH THE
INVESTMENT ADVISERS AND RELATED
PARTY DISCLOSURE
Directors
Directors are remunerated for their services at such rate
as the directors shall from time to time determine. The
Chair receives a director’s fee of £55,000 per annum, the
senior independent director receives a fee of £45,000 per
annum and the other directors of the Board receive a fee
of £40,000 per annum.
Director
Number of
Ordinary
Shares held
Dividends paid
Jack Waters
70,000
£1,800
Lisa Harrington
38,604
£879
Keith Mansfield
58,604
£1,479
Monique O’Keefe
10,000
£300
Charlotte Valeur
10,000
£300
Investment Manager
The Company considers Triple Point as the Investment
Manager as a key management personnel and therefore
a related party. Further details of the investment
management contract and transactions with the
Investment Manager are disclosed in Note 6.
18.
EVENTS AFTER THE REPORTING
PERIOD
Placing Results
The Company raised a further £95.2 million gross
proceeds via Placing of new Ordinary Shares after the
period end. On 28 January 2022, 88,148,880 new
Ordinary Shares were admitted to trading on the Specialist
Fund Segment of the Main Market of the
London Stock Exchange.
Investments
On 10 January 2022, the Company announced a further
$93 million follow-on investments by Digital 9 DC Limited
in Verne Global data centre platform over the next
12 months to fund the expansion of capacity by a further
20.7 MW. The expansion includes the completion of a new
8.2 MW data hall and a further 12.5 MW of repurposed
capacity for additional enterprise customer demand.
Dividends
The Company will pay a dividend after the period end as
detailed in Note 15.
The Directors have determined that there have been no
other significant events after the reporting date requiring
recognition or disclosure in these financial statements.
Revolving Credit Facility
In March 2022, the Company completed on a new
syndicated revolving credit facility (“RCF”) for £300 million,
led by Royal Bank of Scotland International, including
Den Norse Bank (UK), Royal Bank of Canada and Banco
Santander.
The RCF will be used by the Company to
finance acquisitions on a short term basis.
19.
ULTIMATE CONTROLLING PARTY
In the opinion of the Board, on the basis of the
shareholdings advised to them, the Company has no
ultimate controlling party.
Digital 9 Infrastructure plc
Page 145
20. EARNINGS PER SHARE
Earnings per share (“EPS”) amounts are calculated by dividing profit for the period attributable to ordinary equity holders
of the Company by the weighted average number of Ordinary Shares in issue during the period. As there are no dilutive
instruments outstanding, both basic and diluted earnings per share are the same.
The calculation of basic and diluted earnings per share is based on the following:
Calculation of Basic Earnings per share
Revenue
Capital
Total
Net profit attributable to ordinary shareholders (£’000)
(291)
38,600
38,309
Weighted average number of ordinary shares
392,462,432
392,462,432
392,462,432
Earnings per share – basic and diluted
(0.07p)
9.84p
9.77p
There is no difference between basic or diluted Loss per Ordinary Share as there are no convertible securities.
There is no difference between the weighted average Ordinary or diluted number of Shares.
Calculation of Weighted Average Number of Shares in Issue
08-Jan-21
31-Mar-21
10-Jun-21
01-Oct-21
31- Dec-2021
No. of days
358
276
205
92
358
Ordinary Shares
No. of shares
Opening Balance
–
2
300,000,000
466,666,667
–
New Issues
2
299,999,998
166,666,667
255,813,953
722,480,620
Closing Balance
2
300,000,000
466,666,667
722,480,620
722,480,620
Weighted Average
2
231,284,915
95,437,617
65,739,899
392,462,433
21. NET ASSET VALUE PER SHARE
Net Asset Value per share is calculated by dividing net
assets in the Statement of Financial Position attributable
to Ordinary equity holders of the parent by the number
of Ordinary Shares outstanding at the end of the period.
Although there are no dilutive instruments outstanding,
both basic and diluted NAV per share are disclosed below.
Net asset values have been calculated as follows:
31 December
2021
Net assets at end of period
755,855,727
Shares in issue at end of period
722,480,620
IFRS NAV per share – basic and dilutive
104.62p
22. FINANCIAL RISK MANAGEMENT
The Company is exposed to market risk, interest rate
risk, credit risk and liquidity risk in the current and future
periods. The Board oversees the management of these
risks. The Board’s policies for managing each of these risks
are summarised below.
Market Risk
The Company’s activities are exposed to a potential
reduction in demand for internet, data centre or cell
network service and competition for assets and services.
Whilst the Company seeks to invest in a diverse portfolio
of digital infrastructure, demand for the Company’s
digital infrastructure assets is dependent on demand for
internet, data, network or other telecom services and the
continued development of the internet. Furthermore, the
Digital 9 Infrastructure plc
Page 146
NOTES TO THE FINANCIAL STATEMENTS
For the period from 8 January 2021 to 31 December 2021
ongoing use of the infrastructure services D9 is providing
requires competitive prices which are cost-effective
to the end users. Some factors that could impact the
volume of demand or the ability to provide competitive
pricing includes:
•
continued development and expansion of the
internet as a secure communications medium and
marketplace for the distribution and consumption of
data and video;
•
continued growth in cloud hosted services as a
delivery platform;
•
ongoing growth in demand for access to high-
capacity broadband;
•
continued focus on technologies, assets and services
which can offer competitive pricing and high-quality
reliable services; and
•
continued partnership with suppliers and
hyperscalers to maintain and provide the most cost-
effective access.
Variations in any of the above factors can affect the
valuation of assets held by the Company and as a result
impact the financial performance of the Company.
Market risk arising from foreign currency risk
Foreign currency risk is the risk that the fair value or future
cash flows of a financial instrument translated into GBP will
fluctuate because of changes in foreign exchange rates.
The Company had the following foreign currency balances
and their GBP equivalents at the end of the reporting
period:
USD
$‘000
EUR
€‘000
GBP
£‘000
Bank balances
4
28
27
Investment at fair value
627,438
– 465,590
The Company is primarily exposed to changes in USD/
GBP exchange rates as its investments in Aqua Comms
DAC and Verne Holdings Limited held by D9 Holdco and
its subsidiary are primarily in USD. The sensitivity of profit
or loss to changes in the exchange rates arises mainly on
the fair value of investment. To demonstrate the impact
of foreign currency risk (in GBP), a 5% increase/decrease
in USD/GBP rate is measured as this is in line with the
relevant change in the rate during the last six months.
Impact on
post tax
profit
£‘000
Impact on
other
components
of equity
£‘000
USD/GBP exchange rate –
increase by 5%
(22,203)
(22,203)
USD/GBP exchange rate –
decrease by 5%
24,481
24,481
The above figures represent impacts of changes in USD/
GBP exchange rates. The Company’s exposure to other
foreign exchange movements is not material.
Interest rate risk
Interest rate risk is the risk that the fair value or future cash
flows of a financial instrument will fluctuate because of
changes in market interest rates.
The Company’s main interest rate risk arises in the
valuation of the financial asset where interest rate is one
of the key assumptions of the Weighted Average Cost of
Capital. Exposure to interest rate risk on the financial asset
valuation is included in Note 8 above.
The Company’s interest rate risk on interest bearing
financial assets is limited to interest earned on cash
deposit. Exposure to interest rate risk on the liquidity funds
is immaterial to the Company.
Credit risk
Credit risk is the risk that a counterparty of the Company
will be unable or unwilling to meet a commitment that
it has entered into with the Company. It is a key part of
the pre-investment due diligence. The credit standing
of the companies in which we intend to lend or invest
is reviewed, and the risk of default estimated for each
significant counterparty position. Monitoring is on-going
and period end positions are reported to the Board.
Credit risk also arises from cash and cash equivalents,
derivative financial instruments and deposits with banks
and financial institutions. The Company and its subsidiaries
may mitigate their risk on cash investments and derivative
transactions by only transacting with major international
financial institutions with high credit ratings assigned by
Digital 9 Infrastructure plc
Page 147
international credit rating agencies. The Company’s cash
and cash equivalents are all deposited with Barclays Bank
plc which has a Fitch rating of A+.
The Company had no derivatives during the period.
The carrying value of the investments, trade and other
receivables and cash represent the Company’s maximum
exposure to credit risk.
Liquidity risk
Liquidity risk is the risk that the Company may not be able
to meet its financial obligations as they fall due. Prudent
liquidity risk management implies maintaining sufficient
cash and marketable securities and the availability of
funding through an adequate amount of committed credit
facilities to meet obligations when due and to close out
market positions.
The Investment Manager and the Board continuously
monitor forecast and actual cash flows from operating,
financing, and investing activities to consider payment
of dividends, repayment of trade and other payables or
funding further investing activities. The Company ensures
it maintains adequate reserves and will put in place
banking facilities and it will continuously monitor forecast
and actual cash flows to seek to match the maturity
profiles of financial assets and liabilities.
Maturity of financial liabilities
Less than 6
months
6 – 12 months
Between 1
and 2 years
Between 2
and 5 years
Over 5 years Carrying amount
Period ended 31 December 2021
Accruals
1,912
–
–
–
–
1,912
23. FINANCIAL INSTRUMENTS
Cash at bank
balances at
amortised cost
£’000
Financial
assets at
amortised
cost
£’000
Financial
liabilities at
amortised
cost
£’000
Financial
assets at fair
value through
profit or loss
£’000
Total
value
£’000
Period ended 31 December 2021
Non-current assets:
Financial assets at fair value through profit or loss
–
–
–
746,229
746,229
Current assets:
Receivables
–
228
–
–
228
Cash and cash equivalents
11,311
–
–
–
11,311
Total Assets
11,311
228
–
746,229
757,768
Current liabilities:
Trade and other payables
–
–
(1,912)
–
(1,912)
Total liabilities
–
–
(1,912)
–
(1,912)
Net assets
11,311
228
(1,912)
746,229
755,856
Digital 9 Infrastructure plc
Page 148
24. CAPITAL MANAGEMENT
The Company’s objectives when managing capital are to
safeguard the Company’s ability to continue as a going
concern in order to provide returns for shareholders and to
maintain an optimal capital structure to minimise the cost
of capital.
In order to maintain or adjust the capital structure, the
Company may adjust the amount of dividends paid to
shareholders, return capital to shareholders or issue
new shares.
Until the Company is fully invested and pending
re-investment or distribution of cash receipts, the
Company will invest in cash equivalents, and money
market instruments.
25. CONTINGENT LIABILITIES
There were no contingent liabilities at 31 December 2021.
NOTES TO THE FINANCIAL STATEMENTS
For the period from 8 January 2021 to 31 December 2021
Digital 9 Infrastructure plc
Page 149
1.
ONGOING CHARGES RATIO
Period to
31 December 2021
£’000
Annualised to
31 December 2021
£’000
Management fee
2,952
4,209
Other operating expenses
1,012
1,253
Total management fee and other operating expenses
3,964 (a)
5,462
Average undiluted net assets*
(b)
524,904
Ongoing charges ratio % (c = a/b)(%)
(c)
1.04%
* Average undiluted net assets has been calculated as the average of net asset value at IPO of £294 million and net asset value as at 31 December 2021 of £756 million.
Annualised expenses are the estimate of the annual cost of management fee and other operating expenses based on the
quarterly cost in the period to 31 December 2021.
2.
TOTAL RETURN
31 December 2021
£’000
Closing NAV per share (pence)
104.62p
Add back dividends paid (pence)
3.00p
Adjusted closing NAV (pence)
107.62p
Adjusted NAV per share as at 31 December 2021 less NAV per share as at 31 March 2021
(a)
(107.62p – 98.00p)
Net asset value per share as at 31 March 2021
(b)
98.00p
Total return % (c = a/b)(%)
(c)
9.82%
The above return is for the period of 9 months to 31 December 2021, this equates to annualised total return of 13.09%.
3.
CASH DIVIDEND COVER
Period to
31 December 2021
£’000
Operating cash flows
11,882
Dividends paid and declared for the period
29,996
Dividends covered by operating cash flows
39.61%
Dividend cover is measured as total dividends paid and payable at 31 December 2021, as a percentage of total
operating cash flows for the Company and its subsidiaries.
UNAUDITED ALTERNATIVE PERFORMANCE MEASURES
For the period from 8 January 2021 to 31 December 2021
Digital 9 Infrastructure plc
Page 150
4.
MARKET CAPITALISATION
31 December 2021
£’000
Closing share price at 31 December 2021
(a)
113.8p
Number of shares in issue at 31 December 2021
(b)
722,480,620
Market capitalisation (c) = (a) x (b)
(c)
£822,182,945
5.
CAPITAL DEPLOYED
Deployment including committed fund
£’000
Aqua Comms DAC
£175,615
EMIC-1
£22,796
Verne Holdings Limited
£247,190
SeaEdge UK1
£16,292
Total deployment
£461,893
6.
TOTAL SHAREHOLDER RETURN
A measure of the return based upon share price movements over the period and assuming reinvestment of dividends.
31 December 2021
£’000
Closing share price (pence)
113.80
Add back effect of dividend reinvestment (pence)
3.14
Adjusted closing share price (pence)
(a)
116.94
Opening share price (pence)
(b)
100.00
Total shareholder return (c = ((a-b)/(b))(%)
(c)
16.94
The above return for the period of 9 months to 31 December 2021, this equates to annualised total return of 23.08%.
UNAUDITED ALTERNATIVE PERFORMANCE MEASURES
For the period from 8 January 2021 to 31 December 2021
The page has intentionally been left blank
FOR THE PERIOD FROM 8 JANUARY 2021 TO 31 DECEMBER 2021
Information
Digital 9 Infrastructure plc
Page 154
GLOSSARY AND DEFINITIONS
“Aqua Comms”
Aqua Comms Designation Activity Company, a private company limited by shares
incorporated and registered in Ireland;
“AIC Code”
AIC Code of Corporate Governance produced by the Association of Investment
Companies;
“AIC Guide”
AIC Corporate Governance Guide for Investment Companies produced by the Association
of Investment Companies;
“AIFM”
the alternative investment fund manager of the Company being Triple Point Investment
Management LLP;
“AIFMD”
the EU Alternative Investment Fund Managers Directive 2011/61/EU;
“Board”
the Directors of the Company from time to time;
“CAGR”
Compound annual growth rate;
“D9”
or
“Company”
Digital 9 Infrastructure plc, incorporated and registered in Jersey (company number
133380);
“Digital Infrastructure”
key services and technologies that enable methods, systems and processes for the
provision of reliable and resilient data storage and transfer;
“DTR”
the Disclosure Guidance and Transparency Rules sourcebook containing the Disclosure
Guidance, Transparency Rules, corporate governance rules and the rules relating to primary
information providers;
“EBITDA”
Earnings before interest, taxes, depreciation and amortisation;
“EPS”
Earnings per share;
“ESG”
Environmental, Social and Governance;
“FAANGs”
global content providers such as Facebook, Amazon, Apple, Netflix, Google;
“FTTH”
Fibre to the home;
“FTTP”
Fibre to the premises;
“GAV”
the gross assets of the Company in accordance with applicable accounting rules from time
to time;
“Group”
the Company and any other companies in the Company’s Group for the purposes of
Section 606 of the Corporation Tax Act 2010 from time to time but excluding Investee
Companies;
“Internet of Things”
or
“IoT”
the network of physical objects (things) that are embedded with technologies such as
sensors or software for the purpose of connecting and exchanging data with other devices
and systems via the internet;
“Investee Company”
a company or special purpose vehicle which owns and/or operates Digital Infrastructure
assets or projects in which the Group invests or acquires;
“Investment Manager”
Triple Point Investment Management LLP (partnership number OC321250);
Digital 9 Infrastructure plc
Page 155
“Investment Objective”
the Company’s investment objective as set out in the Prospectus dated 8 March 2021;
“Investment Policy”
the Company’s investment policy as set out in the Prospectus dated 8 March 2021;
“IPO”
the Company’s initial public offering launched on 8 March 2021 which resulted in the
admission of, in aggregate, 300 million Ordinary Shares to trading on the Specialist Fund
Segment of the Main Market on 31 March 2021;
“MRR”
Monthly recurring revenue;
“NAV”
Net Asset Value being, the net assets of the Company in accordance with applicable
accounting rules from time to time;
“Ongoing Charges Ratio”
a measure of all operating costs incurred in the reporting period, calculated as a percentage
of average net assets in that year. Operating costs exclude costs of buying and selling
investments, interest costs, taxation, non-recurring costs and the costs of buying back or
issuing ordinary shares;
“Ordinary Shares”
ordinary shares of no-par value in the capital of the Company;
“RCF”
Revolving Credit Facility;
“SDG9”
the UN’s Sustainable Development Goal 9;
“SASB”
Sustainability Accounting Standards Board;
“SDIA”
Sustainable Digital Infrastructure Alliance;
“TCFD”
Taskforce for Climate-related Financial Disclosures;
“Total Shareholder Return”
the increase in Net Asset Value in the period plus distributions paid in the period; and
“Verne Global”
Verne Holdings Limited, a private limited company incorporated in England and Wales.
Digital 9 Infrastructure plc
Page 156
SHAREHOLDER INFORMATION
Non-executive Directors
Jack Waters (Chair)
Keith Mansfield
Monique O’Keefe
Charlotte Valeu
Lisa Harrington
Registered Office
26 New Street
St Helier
Jersey
JE2 3RA
Investment Manager
Triple Point Investment
Management LLP
1 King William Street
London
EC4N 7AF
Financial Adviser
Akur Capital
66 St James’s Street
London
SW1A 1NE
Corporate Broker
J.P. Morgan Cazenove
25 Bank Street
Canary Wharf
London
E14 5JP
UK Legal Adviser
Taylor Wessing LLP
5 New Street Square
London
EC4A 3TW
Jersey Legal Adviser
Carey Olsen Jersey LLP
47 Esplanade
St Helier
Jersey
JE1 0BD
Tax Adviser
BDO LLP
55 Baker Street
London
W1U 6RH
Administrator
Ocorian Fund Services
(Jersey) Limited
26 New Street
St Helier
Jersey
JE2 3RA
Company Secretary
Ocorian Secretaries
(Jersey) Limited
26 New Street
St Helier
Jersey
JE2 3RA
Delegated Company Secretary
Hanway Advisory Limited
1 King William Street
London
EC4N 7AF
Registrar
Computershare Investor Services
(Jersey) Limited
13 Castle Street
St Helier
Jersey
JE1 1ES
Independent Auditors
PricewaterhouseCoopers LLP
7 More London Riverside
London
SE1 2RT
Depositary
Ocorian Depositary (UK) Limited
5th Floor
20 Fenchurch Street
London
EC3M 3BY
Banker
Barclays Bank plc
13 Library Place
St Helier
Jersey
JE4 8NE
Registered Number
133380 (Jersey)
Digital 9 Infrastructure plc
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FORWARD LOOKING STATEMENTS
The Front Section of this report (including but not limited to the Chair’s Statement, Strategic Report, Investment
Manager’s Review and Directors’ Report) has been prepared to provide additional information to Shareholders to assess
the Company’s strategies and the potential for those strategies to succeed. These should not be relied on by any other
party or for any other purpose.
The Review Section may include statements that are, or may be deemed to be, “forward looking statements”. These
forward-looking statements can be identified by the use of forward-looking terminology, including the terms “believes”,
“estimates”, “anticipates”, “expects”, “intends”, “may”, “will” or “should” or, in each case, their negative or other
variations or comparable terminology.
These forward-looking statements include all matters that are not historical facts. They appear in a number of places
throughout this document and include statements regarding the intentions, beliefs or current expectations of the
Directors and the Investment Manager concerning, amongst other things, the Investment Objectives and Investment
Policy, financing strategies, investment performance, results of operations, financial condition, liquidity, prospects, and
NAV total return and dividend targets of the Company and the markets in which it invests.
By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend
on circumstances that may or may not occur in the future. Forward-looking statements are not guarantees of future
performance. The Company’s actual investment performance, results of operations, financial condition, liquidity,
distribution policy and the development of its financing strategies may differ materially from the impression created by
the forward-looking statements contained in this document.
Subject to their legal and regulatory obligations, the Directors expressly disclaim any obligations to update or revise any
forward-looking statement contained herein to reflect any change in expectations with regard thereto or any change in
events, conditions or circumstances on which any statement is based.
In addition, the Review Section may include target figures for future financial periods. Any such figures are targets only
and are not forecasts. This Annual Report has been prepared for the Company as a whole and therefore gives greater
emphasis to those matters which are significant in respect of Digital 9 Infrastructure Plc.
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ANNEX 1 – REPORTING PRINCIPLES AND METHODOLOGIES
Energy and Carbon Emissions
Carbon emissions are calculated by multiplying energy consumption data by emissions factors. Emissions factors are
derived from various sources, according to geography and energy supply specifics. For each investee company within our
portfolio, our reporting methodology and boundaries follow the GHG Protocol’s Corporate Accounting and Reporting
Standard. Emissions are attributed to D9 using PCAF’s Global GHG Accounting and Reporting Standard for the Financial
Industry.
The main source of Scope 1 emissions within the portfolio is fuel used in on-site electricity generation. On-site generation
is required by data centres to guarantee up-time, and by subsea network operators to ensure the continuous running
of this critical infrastructure. The calculation methodology for these emissions differs by geography. In the UK, UK
Government GHG Factors were used to convert this data into emissions. In Iceland, factors provided by the Icelandic
Environmental Agency was used. Additional factors from these same sources were used to convert fuel use in litres to
kWh of energy use.
Market- and location-based emissions figures are presented for Scope 2, reported in line with the GHG Protocol’s Scope
2 guidance. To calculate market-based emissions, emissions factors supplied by the electricity company and derived
from contractual instruments are used in the first instance. In the absence of these specific factors, residual mix factors
are applied from Green-e in the United States and the Association of Issuing Bodies (AIB) in Europe, or location-based
emissions factors where these aren’t available. In all cases, the most recent available emissions factor is used.
Aggregated carbon intensity metrics are a weighted average based on the value of the investment within the portfolio, as
of 31 December 2021.
Verne Global Emissions
Verne Global has a higher carbon intensity than might be assumed, given its sourcing of 100% renewable energy. This
is due to the energy supplier, Landsvirkjun, including a broader scope of emissions in their calculations
16
than is typical
for energy providers in other markets such as the United Kingdom or United States. Carbon emissions from geothermal
energy, and biogenic carbon and methane emissions from hydropower reservoirs, are both included in scope.
SDG9 Alignment Data
Reporting Period
The data underlying these metrics is from the full 2021 reporting year.
Power Usage Effectiveness
Power usage effectiveness (PUE) is a measure of the energy efficiency of a data centre, with reference only to the
electricity usage onsite. It is a ratio of the total facility energy compared to the equipment used in the computing
equipment:
PUE =
Total Facility Energy
IT Equipment Energy
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IT Equipment Energy:
includes the energy associated with all of the IT equipment involved in computation, storage and
networking, as well as supplemental equipment such as switches.
Total Facility Energy:
includes all energy associated with IT equipment, plus everything that supports the IT equipment
energy usage, including power delivery components, cooling systems and other miscellaneous energy uses, such as data
centre lighting. A more detailed explanation can be found in the guidance from the Green Grid
17
.
Verne’s PUE is calculated based on the average daily metered load figures for Total Facility Energy and IT Equipment
Energy. The sum of these daily values is taken to calculate PUE for the reporting period.
Growth in Network Capacity
Capacity on the Aqua Comms network is provisioned to customers as blocks of a defined capacity (GB/s) between two
individual points of presence on the network. The sum of all of these blocks, as provisioned to customers, is taken for
31st March 2021 (the point of acquisition) and 31st December 2021 (the reporting year end).
SFDR-Aligned Indicators
Reporting principles and methodologies for the SFDR-aligned indicators are the same as those outlined in the principal
adverse sustainability impacts statement of the February 2021 SFDR RTS
18
, with any exceptions noted in footnotes.
Gender pay gap calculations are based on a snapshot of the data for the calendar month of December 2021. We have
followed UK Government guidance
19
in calculating the gender pay gap. This sample represents the pay that employees
would have seen on their pay slip for December, excluding overtime and bonus payments. This includes salary (or basic
pay and hours worked, for employees paid hourly), pay for leave, pay for being on call, car allowances, and pay for
recruitment and retention. Benefits in kind, such as healthcare and pension contributions have been excluded. Bonuses
were excluded as consistent bonus data for all employees was not available for the month of December.
Employees who started or terminated their employment during the month of December have been excluded from the
sample, as have those currently on parental leave. Salaried non-executive directors and chairpersons have also been
removed from the sample as their remuneration approach is not comparable to FTEs and their hours worked are less
well-defined. Including them in the calculations would skew the data. For salaried employees, we have assumed that
2,080 hours are worked across the year.
Employee data from Verne Global and Aqua Comms were consolidated into a single data set, and the overall gender
pay gap of this data set was calculated.
TCFD Indicators
All data reported is from the point of acquisition of the portfolio company by D9 up to 31 December 2021. Emissions
and energy data is attributed to D9 following PCAF’s Global GHG Accounting and Reporting Standard for the Financial
Industry.
ANNEX 2 – TCFD DISCLOSURE
Governance
Describe the Board’s oversight of climate-related risks and opportunities
Risks to the D9 strategy, including climate risks, are formally captured in the D9 Risk Register which is owned by the D9
Board. The Board are also kept informed of material climate risks and opportunities facing portfolio companies through
updates provided by the D9 investment team, and through updates provided by Triple Point’s Head of Sustainability.
A member of the Board is also a member of Chapter Zero, a group designed to facilitate engagement and collaboration
of non-executive directors to ensure best practice on climate risk management.
Describe management’s role in assessing and managing climate-related risks and opportunities
Assessment and management of climate-related risks and opportunities is shared across D9 and the wider Triple Point
business through the Risk Committee and Sustainable Investment Sub Group. Triple Point’s Sustainability Team and, in
particular, the Head of Sustainability, co-ordinate these processes.
Pre-investment: screening and due diligence
Triple Point’s central Sustainability Team works with the D9 deal team to identify any material climate risks when screening
potential investments. Key climate-related risks are presented in the materials provided to Triple Point’s D9 Investment
Committee as part of the standard process for assessing deals. These risks are discussed in the committee meetings to
assess the extent to which they affect the quality of the deal.
Triple Point has a central Sustainable Investment Sub Group, meeting every second month, which provides an additional
forum for the discussion of any potentially material ESG issues within potential investments, including climate risks
and opportunities. Senior investment team members and partners from all Triple Point investment strategies sit on this
Group, bringing their diverse experience and perspectives to a constructive discussion. Andre Karihaloo represents D9 in
this group.
Post-investment: monitoring and engagement
D9 acquires control provisions in all of its acquisitions, which enables thorough and constructive engagement with
portfolio companies. Each portfolio company has an assigned asset manager within the D9 team. This manager is
supported by Triple Point’s Sustainability Team in climate risk analysis for each portfolio company. Any material climate
risks identified through pre-investment due diligence, or later engagements, are highlighted to the Board of Directors of
the portfolio company, on which at least one member of the D9 investment team sits. The Board oversees any necessary
mitigation actions.
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Strategy
Describe the climate-related risks and opportunities the organisation has identified over the short,
medium, and long term
The time horizon over which the following risks are material are categorised as:
•
Short Term: next 5 years
•
Medium Term: next 15 years
•
Long Term: next 25 years
Time Horizon
Type
Risk
Potential Financial Impacts
Data Centres
Short term
Transitional
•
Low-carbon building regulations
for new buildings.
•
SDIA target for 90% of new data
centres to achieve nearly zero
energy building status by 2030.
Increased costs of expanding current
data centre operations to meet the
standards.
Medium term
Transitional
•
Requirements for hardware to be
recyclable.
•
SDIA target for 90% of hardware
to be recyclable by 2030.
Increased costs of new equipment to
meet these standards.
Long term
Physical
•
Increased frequency of extreme
heat events.
•
Increased temperatures will
decrease the thermal gradient
between equipment and fresh air.
•
Data centre ventilation
requirements will increase,
increasing energy requirements.
Increased operational expenditure due
to increasing energy requirements, also
leading to increased PUE.
Subsea Cables
Long term
Physical
Increasing sea levels could flood
subsea cable landing stations and other
low-lying infrastructure.
Increased capital expenditure to
build resilience or move the landing
station site.
Long term
Physical
Increased frequency of extreme
weather events could damage
supporting terrestrial infrastructure,
such as fibre and co-location facilities.
Increased capital expenditure of
terrestrial infrastructure providers used
to bolster climate resilience passed on
in the form of increased rental costs.
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Time Horizon
Type
Risk
Potential Financial Impacts
Terrestrial Cables
No portfolio companies
Wireless
No portfolio companies
Table 1: Climate related risks and opportunities over various time horizons. Please note, terrestrial cables and wireless risk
areas have not yet been assessed, as we do not currently have investments in these sub-sectors.
Describe the impact of climate-related risks and opportunities on the organisation’s businesses, strategy
and financial planning
The fund’s fundamental strategy is aligned with the connectivity and environmental sustainability aims of Sustainable
Development Goal 9. Given this focus on sustainability, combined with our internal ESG review process, we acquire
well-performing assets that are ahead of the regulatory regime and have lower transitional risks, or assets where
efficiency gains can be made within a reasonable time frame. Overall, we believe that the demand for sustainable
digital infrastructure will increase over time, presenting a major climate-related opportunity to the fund and fuelling
future growth. Physical risks do not pose a systemic or fundamental risk to the fund’s strategy. Climate-related risks are
integrated into the fund’s financial planning through the fund model. Risks are closely monitored, but a change of overall
strategy is not currently required.
Describe the resilience of the organisation’s strategy, taking into consideration different climate-related
scenarios, including a 2°C or lower scenario
Overall, given the fund’s climate risk analysis and mitigation processes, D9 management is of the belief that the fund’s
strategy is resilient to a range of future climate scenarios, including a 2°C or lower scenario. This belief is founded upon
the following key reasons:
•
Our digital infrastructure assets outperform the market average across a range of climate-relevant metrics
(renewable energy sourcing, power usage effectiveness, circularity), both globally and within their respective
markets, and are ahead of the regulatory regime.
•
Every investment undergoes analysis to determine its vulnerability to future climate change and the fund only
invests in assets with minimal, and manageable climate-related risks.
•
Wherever possible, the financial materiality of the climate change on the asset is assessed and integrated into
sensitivity of the financial fund model, to ensure that these effects do not pose a significant risk to the fund’s
performance.
•
Our controlling stake in portfolio companies allows for the implementation of mitigation measures to manage the
risks that we are exposed to.
•
Our Scope 1 carbon price exposure is relatively low.
ANNEX 2 – TCFD DISCLOSURE
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Risk Management
Describe the organisation’s processes for identifying and assessing climate-related risks
Triple Point’s Sustainability Team research and monitor the impacts of climate change to be able to ensure that risk
assessments performed on all assets managed are well-informed and credible. Triple Point is a signatory to the Principles
for Responsible Investment (PRI), and a member of the Sustainable Digital Infrastructure Alliance (SDIA). We receive cues
from these organisations on potential future risks and the likely future policy landscape. If necessary, we will also seek
external expertise to evolve our understanding and have previously engaged with the Carbon Trust.
The Sustainability Team and the D9 Team work closely to discuss existing and emerging climate risks for the assets during
the acquisition phase. We also plan to hold annual workshops to ensure the periodic review our risks to our assets and to
further map the climate management approach for the strategy.
Transitional risks
Given the nature of the investment trust and the narrow range of assets that it invests in, it is possible to maintain a
centralised register of potential transitional risks that may affect the asset types. When compiling this register of potential
risks, we are guided by the assumptions and pathways of:
•
International Energy Association (IEA): Net Zero Emissions by 2050 Scenario (from the IEA World Energy Outlook;
•
Principles for Responsible Investment (PRI): Inevitable Policy Forecast (from the Inevitable Policy Response;
•
Sustainable Digital Infrastructure Alliance (SDIA): Roadmap to Sustainable Digital Infrastructure by 2030;
•
Carbon Neutral Data Centre Pact Self-Regulatory Initiative (https://www.climateneutraldatacentre.net/self-
regulatory-initiative/)
Other relevant policy intentions are recorded in the central risk register as they are identified. Any such risks are discussed
by the Investment Manager’s investment and sustainability teams, both in routine catch-ups and through the teams’ close
day-to-day interaction.
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When assessing an individual investment, we consult the central risk register to assess any risks that can reasonably be
considered to transpire over the investment lifespan. A non-exhaustive extract of this register can be seen in
Table 2, below:
2025
2030
2035
2040
2045
2050
Net Zero Emissions by 2050
CO
2
prices for electricity
in advanced
economies ($/tCO
2
)
75
130
205
250
Share of zero carbon buildings –
retrofit (%)
<1
20
>85
Share of zero carbon buildings – new (%)
5
100
100
SDIA Roadmap
Share of nearly-zero emissions
buildings (%)
90
Share of hardware components that are
recyclable (%)
90
Inevitable Policy Forecast*
CO
2
prices in the EU ($/tCO
2
)
75
100% clean power by:
FR, CAN
UK, USA,
SA
GER, ITA,
JAP, SK,
VIE
Table 2: Transition risk policy register extract
Physical risks
To identify physical climate risks to potential assets, we use a worst-case, Business as Usual, scenario – IPCC RCP 8.5 – to
identify as much risk as possible. We use an externally developed climate model, which assesses an assets vulnerability to
a number of physical climate risks, to provide us with a high-level risk exposure value.
Where a risk is identified, the D9 team, in consultation with the Sustainability Team, will decide if a deeper analysis of the
risk is required, using external specialists.
As a deal progresses, we also identify any potential physical risks outside of the scope of this modelling process. For
example, an increase in cooling costs for data centres under increased temperatures.
This scoping process, for both transitional and physical risks, results in a list of potential climate risks for the investment,
which are captured in the deal screening documentation.
Portfolio-level opportunities
After an initial analysis, it was determined that climate-related opportunities were more applicable across the portfolio,
rather than specific to investments, and are tracked at this level as a result. Overall, the mandate of the fund means that
investment inflows into sustainable infrastructure provide a large opportunity for future growth. The overall strategy and
position of the fund is informed by these opportunities.
ANNEX 2 – TCFD DISCLOSURE
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Describe the organisation’s processes for managing climate-related risks
Many of the risks faced by the portfolio are not fundamental or particularly financially material, and are accepted.
Mitigation options are identified for any risks that are identified as material. Data that is relevant to the management of
these risks is included in the data requirements that form part of our initial engagement with newly acquired company,
allowing the likelihood and impact of this risk to be assessed and managed over the long term and mitigated against
as required.
Describe how processes for identifying, assessing, and managing climate related risks are
integrated into the organisation’s overall risk management
Digital 9 Infrastructure risk management
D9’s Investment Director, Thor Johnsen, has oversight of all climate-related risks. These risks are reported into the
strategy’s risk register. The D9 investment team are responsible for completing the D9 risk register, which is owned by
the D9 Board, and would include identified climate risk. This register is reviewed and discussed through the Portfolio
Risk Review meeting, involving members of the D9, the risk and the sustainability teams. The register is approved by
the Board.
Triple Point as investment manager risk management
For Triple Point as investment manager, risks identified within the D9 Risk Register are approved by Triple Point’s Risk
and Valuation Committee, a process overseen by Triple Point’s Head of Risk and may be raised to the Triple Point Risk
Register, should an issue be considered of critical concern, and this could include climate related risk. The Triple Point
Risk register is reviewed and discussed by the Triple Point Risk Committee, which is also led by Triple Point’s Head of Risk.
The Head of Sustainability also sits on the Risk Committee, and in particular will contribute to discussions relating to any
climate risks identified on the Triple Point Risk Register.
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METRICS AND TARGETS
Disclose the metrics used by the organisation to assess climate-related risks and opportunities in
line with its strategy and risk management process
As risks are identified through pre- and post-investment analysis, data requirements that will allow them to be monitored
and assessed are determined and included in our requests to the portfolio company. This process is completed on an
asset-by-asset basis, depending on the nature of the particular risk. Emissions and energy data is collected from all of our
portfolio companies.
Disclose Scope 1, Scope 2, and, if appropriate, Scope 3 greenhouse gas (GHG) emissions, and the
related risks
Verne Global
04/09/2021
Aqua Comms
01/04/2021
Total
Scope 1 (tCO
2
e)
10
2
12
Scope 2 (tCO
2
e) location-based
426
578
1,004
Scope 2 (tCO
2
e) market-based
134
411
545
Renewable energy consumption
(kWh)
40,556,417
648,487
41,204,904
Non-renewable energy consumption (kWh)
15,518
1,255,561
1,271,079
Table 3: GHG emissions disclosure. This data is based on fully owned portfolio companies excluding real estate assets.
All data reported is from the point of acquisition of the portfolio company by D9 up to 31 December 2021. Emissions
and energy data is attributed to D9 following PCAF’s Global GHG Accounting and Reporting Standard for the Financial
Industry.
Independent reasonable assurance has been provided only over 2021 data marked with this symbol. PwC’s assurance
statement can be found in this document. Triple Point’s Reporting Principles and Methodologies can be found in
Annex 2.
Describe the targets used by the organisation to manage climate-related risks and opportunities
and performance against targets.
•
We target a weighted average PUE of 1.3 across the portfolio of data centre assets. 1.3 is widely considered to
be industry best standard for data centres in cold air locations. We look to ensure across our portfolio we are in
line with the best practice. Where we acquire a data centre with a weaker PUE we engage to drive improvement.
•
We target a year-on-year reduction in GHG emissions intensity per portfolio company for fully owned companies.
Reporting against these targets will be in 2023.
ANNEX 2 – TCFD DISCLOSURE
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