This document comprises a prospectus (the "Prospectus") for the purposes of Article 3 of the UK version of Regulation (EU) No 2017/1129 as amended by The Prospectus (Amendment etc.) (EU Exit) Regulations 2019, which is part of UK law by virtue of the European Union (Withdrawal) Act 2018 (the "UK Prospectus Regulation") as amended, relating to CK Infrastructure Holdings Limited (the "Company" or "CKI") prepared in accordance with the prospectus regulation rules (the "Prospectus Regulation Rules") of the Financial Conduct Authority (the "FCA") made under Section 73A of the Financial Services and Markets Act 2000, as amended (the "FSMA").
This Prospectus has been prepared solely in connection with the proposed admission of the entire issued share capital in CKI (the "Shares") to listing in the Equity Shares (International Commercial Companies Secondary Listing) ("ESICC") category of the official list (the "Official List") of the FCA and to trading on the main market for listed securities ("Main Market") of London Stock Exchange plc ("London Stock Exchange"). This Prospectus has been approved by the FCA (as competent authority under the UK Prospectus Regulation), and will be made available to the public and has been filed in accordance with the Prospectus Regulation Rules. The FCA only approves this Prospectus as meeting the standards of completeness, comprehensibility and consistency imposed by the UK Prospectus Regulation, and such approval should not be considered as an endorsement of the Company or the quality of the Shares. Investors should make their own assessment as to the suitability of investing in the Shares.
Application has been made to the FCA for all of the Shares to be admitted to listing in the ESICC category and to the London Stock Exchange for all of the Shares to be admitted to trading on the Main Market (together, "Admission"). It is expected that Admission will become effective, and that dealings in the Shares will commence, on 19 August 2024. The Shares are already admitted to listing and trading on the Main Board of The Stock Exchange of Hong Kong Limited (the "Hong Kong Stock Exchange") where they will continue to be listed following Admission. No application is currently intended to be made for the Shares to be admitted to listing or dealt with on any other exchange other than those of the London Stock Exchange and the Hong Kong Stock Exchange. This Prospectus is not an offer or invitation to the public to subscribe for or purchase Shares but is issued solely in connection with the Admission.
The Company has established arrangements to enable investors to settle interests in the Shares through the CREST system. Securities issued by non-UK companies, such as CKI, cannot be directly held in uncertificated form or transferred electronically in the CREST system. In order for the Shares to be traded on the London Stock Exchange, CREST depositary interests representing the underlying Shares will be issued by Computershare Investor Services PLC (in its capacity as the Depositary) (on a one-for-one basis) ("DIs" or "Depositary Interests") to persons who wish to transact in the Shares in electronic form within the CREST system. Any DIs issued will be independent securities constituted under English law, which may be held and transferred directly through the CREST system operated by Euroclear UK. DIs have the same ISIN as the underlying Shares and do not require a separate admission to trading on the London Stock Exchange. It should be noted that it is the DIs which will be settled through CREST, and not the Shares. In this Prospectus, references to Shares in the context of the admission to trading on the Main Market of the London Stock Exchange includes references to any DIs.
The Directors, whose names appear on page 27 of this Prospectus, and the Company accept responsibility for the information contained in this Prospectus. To the best of the knowledge of the Directors and the Company, the information contained in this Prospectus is in accordance with the facts and this Prospectus makes no omission likely to affect its import.
This Prospectus should be read in its entirety, including "Risk Factors", which contains a discussion of certain risks relating to the Group. The definitions in "Definitions and Glossary" apply throughout this Prospectus.
CK Infrastructure Holdings Limited
(Incorporated under the Companies Act of Bermuda)
Admission of Shares to the Equity Shares (International Commercial Companies Secondary Listing) category of the Official List of the FCA and to trading on the Main Market of the London Stock Exchange
Listing Agent
HSBC
Ordinary share capital immediately following Admission
Issued and fully paid | |
Number | Nominal Value |
2,519,610,945 | HK$1.00 |
HSBC Bank plc ("HSBC"), which is authorised by the Prudential Regulation Authority (the "PRA") and regulated in the United Kingdom by the PRA and the FCA, is acting exclusively for the Company and no one else in connection with the Admission and will not be responsible to anyone other than the Company for providing the protections afforded to its clients, for the contents of this document, or for providing any advice in relation to this document or the Admission. Apart from the responsibilities and liabilities, if any, which may be imposed on HSBC by the FSMA or by the regulatory regime established thereunder, neither HSBC nor any of its affiliates accept any responsibility whatsoever for the contents of this document including its accuracy, completeness or for any other statement made or purported to be made by or on behalf of HSBC or any of its affiliates in connection with the Company or the Shares. HSBC and each of its affiliates accordingly disclaim all and any liability whether arising in tort, contract or otherwise (save as referred to above) in respect of this document or any such statement(s) and no representation or warranty, express or implied, is made by HSBC or any of its affiliates as to the accuracy, completeness or sufficiency of the information set out in this document. The contents of this document should not be construed as legal, financial or tax advice. Each prospective investor should consult his, her or its own legal, financial or tax adviser for legal, financial or tax advice.
HSBC and its affiliates may have engaged in transactions with, and provided various investment banking, financial advisory and other services to the Company, for which they would have received customary fees. HSBC and its affiliates may provide such services to the Company and any of their affiliates in the future.
Any reproduction or distribution of this Prospectus, in whole or in part, and any disclosure of its contents or use of any information contained in this Prospectus for any purpose other than considering Admission is prohibited. No person has been authorised to give any information or make any representations other than those contained in this Prospectus and, if given or made, such information or representations must not be relied upon as having been authorised by the Company, HSBC or any other person.
Neither the delivery of this Prospectus nor Admission shall, under any circumstances, create any implication that there has been no change in the affairs of the Company since the date of this Prospectus or that the information in this Prospectus is correct as at any time subsequent to its date.
Without limitation, the contents of the website of the Company (or any other websites, including the content of any website accessible from hyperlinks on the websites of the Company) do not form part of this Prospectus.
TABLE OF CONTENTS | |||
Page | |||
PART 1 SUMMARY | 1 | ||
PART 2 RISK FACTORS | 7 | ||
PART 3 PRESENTATION OF FINANCIAL AND OTHER INFORMATION | 21 | ||
PART 4 DIRECTORS, SECRETARY, REGISTERED AND HEAD OFFICES, ADVISERS, AND | |||
TIMETABLE OF PRINCIPAL EVENTS | 27 | ||
PART 5 CONSEQUENCES OF AN ESICC LISTING | 29 | ||
PART 6 | BUSINESS | 31 | |
PART 7 | DIRECTORS, SENIOR MANAGERS AND CORPORATE GOVERNANCE | 60 | |
PART 8 | SELECTED FINANCIAL INFORMATION | 72 | |
PART 9 | OPERATING AND FINANCIAL REVIEW | 76 | |
PART 10 CAPITALISATION AND INDEBTEDNESS | 100 | ||
PART 11 AUDITED HISTORICAL FINANCIAL INFORMATION | 101 | ||
PART 12 | UNAUDITED INTERIM HISTORICAL FINANCIAL INFORMATION | 304 | |
PART 13 | ADMISSION, SETTLEMENT AND TRADING | 315 | |
PART 14 | ADDITIONAL INFORMATION | 320 | |
PART 15 | DEFINITIONS AND GLOSSARY | 347 |
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PART 1
SUMMARY
Section A-INTRODUCTION AND WARNINGS
1. Name and international securities identifier number (ISIN) of the securities
The Shares are the issued ordinary shares in the capital of CK Infrastructure Holdings Limited (the "Company" or "CKI") with a nominal value of HK$1.00 each (the "Shares"). When admitted to trading, the Shares will be registered with ISIN number BMG2178K1009 and SEDOL number BRXDBN4 and trade under the symbol "CKI".
2. Identity and contact details of the issuer, including its Legal Entity Identifier
The Company's registered office is at Clarendon House, Church Street, Hamilton HM11, Bermuda, and principal place of business is at 12th Floor, Cheung Kong Center, 2 Queen's Road Central, Hong Kong. Its legal entity identifier ("LEI") number is 5299005U11RQ1C27MR12.
3. Identity and contact details of the competent authority approving the prospectus
This Prospectus has been approved by the Financial Conduct Authority ("FCA"), as competent authority under the UK Prospectus Regulation, with its head office at 12 Endeavour Square, London E20 1JN, and telephone number: +44 (0)20 7066 1000.
4. Date of approval of the prospectus
This Prospectus was approved on 14 August 2024.
5. Warning
This summary has been prepared in accordance with Article 7 of the of the UK version of Regulation (EU) No 2017/1129 as amended by The Prospectus (Amendment etc.) (EU Exit) Regulations 2019, which is part of UK law by virtue of the European Union (Withdrawal) Act 2018 (the "UK Prospectus Regulation"), and should be read as an introduction to the prospectus (the "Prospectus"). Any decision to invest in the Shares should be based on a consideration of the Prospectus as a whole by the investor. Investors could lose all or part of their invested capital. Civil liability attaches only to those persons who are responsible for the summary including any translation thereof, but only if the summary is misleading, inaccurate or inconsistent when read together with the other parts of the prospectus or it does not provide, when read together with the other parts of the prospectus, key information in order to aid investors when considering whether to invest in such securities.
Section B-KEY INFORMATION ON THE ISSUER
6. Who is the issuer of the securities?
Domicile, legal form, LEI, jurisdiction of incorporation, the law under which it operates and country of operation
The Company is the issuer of the Shares. The Company is an exempted company limited by shares incorporated in Bermuda on 28 May 1996 with registration number 21980, with its Shares listed on the Main Board of The Stock Exchange of Hong Kong Limited (the "Hong Kong Stock Exchange") under stock code 1038. The Shares will remain listed on the Hong Kong Stock Exchange following Admission. The Company's principal place of business is in Hong Kong.
The Company's registered office is situated in Bermuda, and the principal legislation under which the Company operates is the Companies Act 1981 of Bermuda, as amended (the "Bermuda Companies Act"). The Company's LEI number is 5299005U11RQ1C27MR12. The liability of the Company's shareholders is limited.
Principal activities
CKI is one of the world's largest global infrastructure companies. The Company aims to make the world a better place through a variety of infrastructure investments and developments in different parts of the world. The Group has diversified investments in energy infrastructure, transportation infrastructure, water infrastructure, waste management, waste-to-energy, household infrastructure and other infrastructure-related
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businesses. The Group's businesses primarily span the United Kingdom, Australia, New Zealand, Continental Europe, Canada, Hong Kong, and Mainland China.
Major shareholders
In so far as is known to the Directors, the only person or entity with an interest (within the meaning of Part 22 of the Companies Act 2006, as amended (the "UK Companies Act")) which represents, or will represent, directly or indirectly, 3% or more of the total issued share capital of the Company immediately prior to listing in the Equity Shares (International Commercial Companies Secondary Listing) ("ESICC") category of the official list (the "Official List") of the FCA and to trading on the main market for listed securities ("Main Market") of London Stock Exchange plc ("London Stock Exchange") (together, "Admission") is Hutchison Infrastructure Holdings Limited ("HIHL"), which is 100% owned by CK Hutchison Holdings Limited ("CK Hutchison"). Immediately prior to Admission, CK Hutchison, through HIHL, will have an interest in 1,906,681,945 Shares, representing 75.67% of the issued ordinary share capital of the Company.
The Shares owned by HIHL rank pari passu with the other Shares in all respects.
There are no applicable notification requirements regarding interests in the Company's capital or voting rights under Bermuda law, being the law of the Company's jurisdiction of incorporation.
Directors
The Directors of the Company are: Li Tzar Kuoi, Victor (Chairman and Executive Director), Kam Hing Lam (Group Managing Director and Executive Director), Ip Tak Chuen, Edmond (Deputy Chairman and Executive Director), Fok Kin Ning, Canning (Deputy Chairman and Executive Director), Frank John Sixt (Executive Director), Andrew John Hunter (Deputy Managing Director and Executive Director), Chan Loi Shun (Chief Financial Officer and Executive Director), Chen Tsien Hua (Executive Director), Cheong Ying Chew, Henry (Independent Non-executiveDirector), Kwok Eva Lee (Independent Non-executiveDirector), Sng Sow-mei alias Poon Sow Mei (Independent Non-executiveDirector), Lan Hong Tsung, David (Independent Non- executive Director), Paul Joseph Tighe (Independent Non-executiveDirector), Lee Pui Ling, Angelina (Non- executive Director), and George Colin Magnus (Non-executiveDirector). Man Ka Keung, Simon and Eirene Yeung are Alternate Directors for Ip Tak Chuen, Edmond and Kam Hing Lam, respectively.
Statutory auditors
The Group's statutory auditors for the period covered by the historical financial information set out in this Prospectus are Deloitte Touche Tohmatsu whose registered address is at 35/F One Pacific Place, 88 Queensway, Hong Kong.
7. What is the key financial information regarding the issuer?
The tables below set out the Group's summary financial information for the periods indicated, as reported in accordance with Hong Kong Financial Reporting Standards ("HKFRS"). There are no qualifications to the auditor's report on the historical financial information. The historical financial information for the Group as of and for each of the years ended 31 December 2023, 2022 and 2021, as well as the unaudited consolidated financial information for the six months ended 30 June 2024 and 2023, has been extracted without material adjustment from the Group's financial statements.
As HKFRS was converged with International Financial Reporting Standards ("IFRS") from the annual reporting periods commencing from 1 January 2005, HKFRS contains wording identical to the equivalent IFRS except for the transitional provisions that were converged initially with effect from 1 January 2005.
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Selected Consolidated Income Statement Data
Six months ended | Year ended | |||||
30 June | 31 December | |||||
In HK$ million | 2024 | 2023 | 2023 | 2022 | 2021 | |
(unaudited) | (unaudited) | (audited) | (audited) | (audited) | ||
Turnover | 19,090 | 19,534 | 38,582 | 39,236 | 40,730 | |
Sales and interest income from | ||||||
infrastructure investments . . . . | 2,478 | 3,180 | 5,990 | 6,615 | 7,048 | |
Other income | 347 | 387 | 784 | 925 | 412 | |
Operating costs | (1,918) | (2,107) | (4,257) | (4,364) | (4,627) | |
Finance costs | (415) | (370) | (769) | (519) | (383) | |
Exchange gain | 108 | 133 | 572 | 111 | 189 | |
Share of results of associates | 1,351 | 1,239 | 2,571 | 2,442 | 2,590 | |
Share of results of joint ventures . . | 2,626 | 2,047 | 3,687 | 3,084 | 2,886 | |
Profit before taxation | 4,577 | 4,509 | 8,578 | 8,294 | 8,115 | |
Taxation | (53) | (50) | (119) | (121) | (161) | |
Profit for the period | 4,524 | 4,459 | 8,459 | 8,173 | 7,954 | |
Attributable to: | ||||||
Shareholders of the Company | 4,311 | 4,239 | 8,027 | 7,748 | 7,515 | |
Owners of perpetual capital | ||||||
securities | 219 | 219 | 438 | 438 | 434 | |
Non-controlling interests | (6) | 1 | (6) | (13) | 5 | |
4,524 | 4,459 | 8,459 | 8,173 | 7,954 | ||
Selected Consolidated Statement of Financial Position Data | ||||||
As of 30 June | As of 31 December | |||||
In HK$ million | 2024 | 2023 | 2023 | 2022 | 2021 | |
(unaudited) | (unaudited) | (audited) | (audited) | (audited) | ||
Total non-current assets | . . 151,181 | 152,543 | 151,286 | 146,342 | 152,744 | |
Total current assets | . . 10,814 | 13,325 | 14,587 | 19,525 | 10,255 | |
Total current liabilities | . . 19,213 | 8,991 | 16,099 | 12,268 | 16,663 | |
Total non-current liabilities | . . 11,428 | 23,957 | 16,503 | 24,217 | 20,489 | |
Net assets | . . 131,354 | 132,920 | 133,271 | 129,382 | 125,847 | |
Total equity | . . 131,354 | 132,920 | 133,271 | 129,382 | 125,847 | |
Selected Consolidated Statement of Cash Flows Data | ||||||
Six months ended 30 June | Year ended 31 December | |||||
In HK$ million | 2024 | 2023 | 2023 | 2022 | 2021 | |
(unaudited) | (unaudited) | (audited) | (audited) | (audited) | ||
Net cash from operating activities . . | 641 | 1,686 | 3,845 | 1,717 | 3,055 | |
Net cash from investing activities . . | 443 | 38 | 2,406 | 14,868 | 4,311 | |
Net cash utilised in financing | ||||||
activities | (4,981) | (7,716) | (11,219) | (6,625) | (12,758) | |
Net (decrease)/increase in cash and | (3,897) | (5,992) | (4,968) | 9,960 | (5,392) | |
cash equivalents | ||||||
Cash and cash equivalents at | ||||||
1 January | 13,077 | 18,045 | 18,045 | 8,085 | 13,477 | |
Cash and cash equivalents at the | ||||||
end of the period | 9,180 | 12,053 | 13,077 | 18,045 | 8,085 |
8. What are the key risks that are specific to the issuer?
- The infrastructure market is highly regulated and the operations and financial position of the Group's businesses may be significantly impacted by decisions of regulators
- The Group may be impacted by local, national and international legal and regulatory changes
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- The Group's businesses may be affected by supply and labour disruptions
- Potential and actual breaches of, or changes in, environmental or health and safety laws or regulations could expose the Group's businesses to adverse regulatory consequences as well as cause reputational damage
- Environmental regulations may impact the Group's operations
- The Group is subject to risks associated with extreme weather events or natural disasters, climate change and other environmental impacts
- The Group may be impacted by any unfavourable global economic, business or political conditions, particularly conditions in the countries where the Group's businesses operate
- The Group may be impacted by fluctuations in interest rates and inflation
- The Group's businesses may be affected by energy prices
- Currency fluctuations may impact the Group's financial performance
Section C-KEY INFORMATION ON THE SECURITIES
9. What are the main features of the Shares?
Type, class and ISIN
The Shares that will be admitted to trading are the issued ordinary shares of the Company with a nominal value of HK$1.00 each. When admitted to trading, the Shares will be registered with ISIN number BMG2178K1009 and SEDOL number BRXDBN4, and trade on the Main Market of the London Stock Exchange under the ticker symbol CKI. The Shares are currently listed and traded on the Main Board of the Hong Kong Stock Exchange under stock code 1038.
The Shares, as securities issued by CKI, a non-UK company, cannot be directly held in uncertificated form or transferred electronically in the CREST system. However, to enable investors to hold and transfer such securities, and settle the trades in the Shares placed on the London Stock Exchange through the CREST system, a depositary or custodian can hold the relevant securities and issue de-materialized depositary interests ("Depositary Interests" or "DIs") representing the underlying securities which are held on trust for the holders of the Depositary Interests. The Shares will not themselves be admitted to CREST. Any DIs issued will be independent securities constituted under English law and held and transferred directly through the CREST system. DIs have the same ISIN as the underlying Shares and do not require a separate admission to trading on the London Stock Exchange.
Currency, denomination, par value, number of securities issued and duration
The Shares are quoted and traded in Hong Kong dollars ("HK$") on the Hong Kong Stock Exchange and, following Admission, will be quoted and traded in GBP on the London Stock Exchange. As of the date of this Prospectus, the issued and outstanding Shares of the Company are, and upon Admission will be, 2,519,610,945 Shares (all of which are fully paid).
Rights attaching to the Shares
The rights attaching to the Shares will be uniform in all respects and they will form a single class for all purposes, including with respect to voting and for all dividends and other distributions declared, made or paid on the ordinary share capital of the Company. The Company has only one class of ordinary shares, each carrying one vote. Except as provided by the rights and restrictions attached to any class of shares, shareholders will under the Company's bye-laws (the "Bye-laws") or general law be entitled to participate in any surplus assets in a winding up in proportion to their shareholdings.
Rank of securities in the issuer's capital structure in the event of insolvency
Under Bermuda law, in the event of insolvency, shareholders are the last to receive payment after the settlement of all other debts and liabilities. In general, secured creditors are paid first, followed by preferential creditors (such as unpaid wages and taxes), then unsecured creditors, then subordinated debt, with shareholders receiving payments last.
The Company has certain outstanding secured charges and senior debts and unsecured perpetual capital certificates granted in favour of third parties, each of which will rank prior to the Shares in the event of insolvency.
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According to the Bye-laws, the liquidators may, with the authority of a special resolution passed by the shareholders of the Company, distribute the Company's assets among the shareholders either in their original form or in kind. As the Company has only one class of ordinary shares in issue, all shareholders will have equal rights, ranking pari passu with each other.
Restrictions on free transferability of the Shares
There are no restrictions on the free transferability of the Shares.
Dividend or payout policy
The Board is committed to maintaining an optimal capital structure and investment grade credit ratings. This is pursued to deliver returns to shareholders and ensure that adequate capital resources are available for business growth and investment opportunities. Subject to business conditions, market opportunities and maintenance of the Company's strong investment grade credit ratings, the Board aims to deliver a sustainable dividend that is in line with the earnings improvements and long-term growth of the Company.
10. Where will the securities be traded?
Application has been made to the FCA for all of the issued Shares to be admitted to listing in the ESICC category of the Official List of the FCA and to the London Stock Exchange for all of the Shares to be admitted to trading on the London Stock Exchange's Main Market. The Shares are currently listed and traded on the Main Board of the Hong Kong Stock Exchange under stock code 1038.
11. What are the key risks that are specific to the securities?
- An active trading market may not develop or be sustained in the future
- Volatility in the value and the market price for the Shares
- Substantial future sales of the Shares, or the perception that such sales might occur, or offerings of the Shares, could depress the market price of the Shares
- Future issues of the Shares could be dilutive
- Dual listing on the Hong Kong Stock Exchange and the London Stock Exchange may lead to an inefficient market in the Shares
Section D-KEY INFORMATION ON THE LISTING OF SECURITIES AND THE ADMISSION TO
TRADING ON A REGULATED MARKET
12. Under which conditions and timetable can I invest in this security?
This Prospectus does not constitute an offer or invitation to any person to subscribe for or purchase any Shares. It is expected that Admission will become effective, and that dealings in the Shares will commence on the London Stock Exchange, at 8.00 a.m. (London time) on 19 August 2024.
The Company is not offering any Shares for cash and therefore will not receive any proceeds as a result of Admission. The estimated transaction costs in connection with Admission are £6.5 million.
In order to support the public trading of the Shares on the London Stock Exchange from the date of Admission, the Company intends to enter into customary arrangements with market makers on the London Stock Exchange to facilitate liquidity. In addition, and based on engagement the Company has had with its controlling shareholder, CK Hutchison, with regards to ongoing liquidity, there is a possibility that the Company's controlling shareholder could make available some Shares to facilitate initial trading in Shares on the London Stock Exchange following Admission in order to accommodate market demand.
13. Why is this prospectus being produced?
This document has been prepared solely in connection with the application to the FCA for all of the Shares to be admitted to listing in the ESICC category of the Official List of the FCA and to the London Stock Exchange for such Shares to be admitted to trading on the London Stock Exchange's Main Market for listed securities.
The Company believes that a listing in London, in addition to the Company's listing on the Hong Kong Stock Exchange, will benefit its geographically diverse shareholder base and will assist in building the Company's profile and provide a greater market for trading in the Shares. In terms of geographical presence, the UK is the Group's largest market, accounting for 35.7%, 35.2% (or 31.3% excluding the one-off gain from the Group's
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sale of part of the stake in Northumbrian Water in 2022) and 29.1% of its profit attributable to shareholders of the Company (before unallocated items) in 2023, 2022 and 2021, respectively.
14. Material conflicts of interest
There are no conflicting interests which are material in connection with the Admission.
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PART 2
RISK FACTORS
The risks referred to below are those risks the Company and the Directors consider to be the material risks relating to the Group. However, there may be additional risks that the Company and the Directors do not currently consider to be material or of which the Company and the Directors are not currently aware that may adversely affect the Group's business, financial condition, results of operations or prospects. If any of these risks occur, the Group's reputation, business, financial condition, results of operations and prospects may be materially and adversely affected.
1. Risks Related to the Group and its Businesses
The infrastructure market is highly regulated and the operations and financial position of the Group's businesses may be significantly impacted by decisions of regulators
The Group has historically focused, and continues to focus, its portfolio on regulated businesses in the power and infrastructure sectors, specifically electricity, gas and water. For the year ended 31 December 2023, 51.3% of the Group's total profit attributable to shareholders of the Company before unallocated items was attributable to the Group's portfolio businesses in the Regulated Utilities segment, which consists of portfolio businesses that operate under regulatory price controls under defined tariff mechanisms that are established, and periodically renewed, by the relevant authorities. Such price controls are regularly reviewed by regulators and are subject to change as the regulators consider a number of factors including, for example, regulatory assumptions concerning expenditures or allowed costs of capital. A number of the Group's regulated businesses, including UK Power Networks, Australian Gas Networks and Multinet Gas Networks, have recently undergone challenging regulatory resets with lower permitted returns. In addition, restrictions have been imposed, or are being proposed, on shareholders' distributions under certain circumstances. For example, the Water Services Regulation Authority ("Ofwat"), the regulator of the water and sewerage sectors in England and Wales, has proposed that in the next reset period of 2025 to 2030, water companies in England and Wales might face restrictions on dividend payments to shareholders if the respective company's debt exceeds a proposed limit. Similarly, the Office of Gas and Electricity Markets ("Ofgem"), the regulator for the electricity and downstream natural gas markets in Great Britain, is considering similar debt limits for energy companies for the next reset period of 2026 to 2031. These potential new rules are still under review and subject to final decisions by the regulators, as well as possible appeals by the affected companies. If implemented, such measures may restrict the amount of distributions the Group may receive from its portfolio companies, which could, in turn, have a material adverse impact on the Group's business, financial condition, results of operations or growth prospects.
In addition, many factors may affect the returns of the Group's regulated businesses, including prevailing interest rates, inflation, energy costs, any energy windfall tax, any cap on energy retail prices in certain markets as well as policy changes adopted by regulators, which may affect the performance of the regulated businesses and impact the actual returns of these businesses. For example, in the UK, the current electricity distribution price control known as RIIO-ED2 has established more challenging performance and incentive targets and a lower allowable rate of return compared to the previous regulatory period. The Group's portfolio businesses in the Contracted Infrastructure segment, which accounted for 21.3% of the Group's total profit attributable to shareholders of the Company before unallocated items for the year ended 31 December 2023, may also be impacted by regulatory reforms that could alter market dynamics.
More generally, the regulated businesses of the Group are required to comply with licence requirements, codes and guidelines established by the relevant regulators from time to time. Failure to comply with these requirements may lead to penalties, or, in extreme circumstances, amendment, suspension or cancellation of the relevant licences by the authorities. In certain jurisdictions, such as the UK and Australia, regulators also have the power to modify a licence without the consent of the relevant regulated company, albeit with such regulated companies retaining the ability to challenge the decision, and any such licence modifications could have a negative impact on the financial condition and prospects of the relevant regulated company. Further, any operational practices that are significantly out of step with community expectations can lead to concerns with regulators or local or national governments, and may ultimately lead to more stringent regulatory resets, regulatory oversight as well as negative publicity that could also have a reputational impact.
The Group may be impacted by local, national and international legal and regulatory changes
The local business risks in different countries and territories in which the Group operates could have a material impact on the Group's business, financial condition, results of operations or growth prospects. The Group's
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