25 July 2024
HICL Infrastructure
PLC
"HICL" or "the Company" and, together with its subsidiaries,
"the Group", the London-listed infrastructure investment company
managed by InfraRed Capital Partners Limited ("InfraRed" or "the
Investment Manager".)
Interim Update
Statement
The Board of HICL is issuing this
Interim Update Statement, which relates to the period from 1 April
2024 to 24 July 2024.
Mike Bane, Chair of HICL
said:
"HICL's diversified portfolio
continues to perform well, offering shareholders access to
attractive private infrastructure assets that support long-term
income and capital growth. The global need for infrastructure
investment remains historically elevated, creating significant
opportunities for private capital. Following the recent UK
election, we look forward to engaging further with the new
government to attract and support private sector investment into
critical UK infrastructure."
Key
Highlights
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Operational performance across the
portfolio in the period was in line with expectations,
demonstrating the resilient nature of the underlying
assets.
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·
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The Company is on track to deliver
its target dividend of 8.25p per share for the financial year to 31
March 2025, with increased cash generation in line with
expectations.
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·
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The Revolving Credit Facility
("RCF") was repaid in May 2024 and the Company commenced a £50m
buyback programme.
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·
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Ofwat's PR241 draft determination
received for Affinity Water, reflecting some positive movements as
well as some gaps between the determination and Affinity's
submitted business plan, as would be expected at this stage. The
draft determination aligns with HICL's expectation for Affinity to
resume equity distributions in AMP 8.
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·
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Highly disciplined capital
allocation approach, including the exploration of further strategic
asset disposals and highly selective acquisitions where these are
accretive and enhance the key portfolio metrics.
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1.
The Ofwat 2024 price review process that sets prices
for the period from April 2025 to March 2030.
Share Buyback Update
·
|
In accordance with the terms of the
Company's £50m share buyback programme announced on 28 February
2024, the Company began buying back shares in the market on 22 May
2024. As at 24 July 2024, 7,050,000 shares have been re-purchased
and are now being held in Company treasury. The total number of
shares with voting rights in HICL, excluding treasury shares, as at
24 July 2024 is 2,024,438,061.
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Portfolio Performance
·
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Overall, the portfolio performed in
line with expectations in the period, underpinned by its
high-quality, inflation linked cashflows and limited variable
interest rate exposure.
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·
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Ofwat published its draft
determination for PR24 (2025-2030) for Affinity Water in the
period:
- Overall,
the draft determination reflects several positive movements by
Ofwat. This suggests that, with some further discussion with Ofwat
between now and December, Affinity should ultimately receive a
balanced final determination that allows for the resumption of
dividends for Affinity over AMP8.
- The
allowed WACC of up to 3.72% (expressed in real terms) has increased
from Ofwat's 'early view' of 3.29% and the return on equity has
increased to 4.8% from 4.1%.
- Ofwat has
proposed a new intervention on gearing above 70%, which may impact
the level of yield over AMP8, if retained in the final
determination.
- As is
typical at this stage, there are differences in the draft
determination versus Affinity's proposal, particularly around
allowed expenditure, and these will be negotiated with Ofwat.
Affinity will submit its response in August 2024 and expects a
final determination in December 2024.
- Previous
disclosure that HICL would look to support Affinity's growth plan
for AMP8 with a c. £50m equity investment over the AMP, contingent
on a fair final determination, remains appropriate.
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·
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In relation to the Company's
investment in the A63 Motorway, in France, the Conseil d'Etat has
agreed that the Conseil Constitutionnel will review the legal
challenge against the new tax on long-distance transport
infrastructure with a decision expected in September
2024.
- If the
challenge fails the Company expects any increase in costs to be
compensated through higher tolls. Nonetheless, if the levy were to
be imposed without a flow through into tolling, the impact on
HICL's valuation would be immaterial.
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Financial Performance and Valuation
·
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The Company is on track to deliver
its target dividend of 8.25p per share for the financial year to 31
March 2025, with cash generation in the period in line with
expectations.
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·
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In the period, the proceeds from the
disposals of Hornsea II OFTO and the Northwest Parkway were
received and were used to re-pay the Company's RCF and fund HICL's
£50m share buyback programme.
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·
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Inflation for the six months to 30
September 2024 is expected to be broadly in line with the
assumptions used in the 31 March 2024 valuation.
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·
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The Investment Manager has not
observed any transaction evidence in recent months that would
support a change to the portfolio weighted average discount rate of
8.0% for the upcoming 30 September 2024 Valuation.
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Market and Outlook
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The Board and Investment Manager
remain focused on effective and prudent capital allocation in the
current macroeconomic environment. The full repayment of the
Company's RCF has provided HICL with a robust platform from which
to selectively assess opportunities for further disposals and
acquisitions.
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·
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The Board continues to approve all
capital allocation decisions, which are informed by the strong
return currently available through further share
buybacks.
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The broader market landscape remains
supportive for private investment in infrastructure. The Company
notes the clear election outcome in the UK and the new government's
stated aim to leverage private capital in support of delivering
much needed infrastructure investment.
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-Ends-
Enquiries
InfraRed Capital Partners Limited
+44
(0) 20 7484 1800 / info@hicl.com
Edward Hunt
Helen Price
Mohammed Zaheer
Brunswick
+44 (0) 20 7404 5959 / hicl@brunswickgroup.com
Sofie Brewis
Investec Bank plc
+44(0) 20 7597 4952
David Yovichic
RBC
Capital Markets
+44 (0) 20 7653 4000
Matthew Coakes
Elizabeth Evans
Aztec Financial Services (UK)
Limited
+44(0) 203 818 0246
Chris Copperwaite
Sarah Felmingham
HICL Infrastructure PLC
HICL Infrastructure PLC ("HICL") is
a long-term investor in infrastructure assets which are
predominantly operational and yielding steady returns. It was the
first infrastructure investment company to be listed on the London
Stock Exchange.
With a current portfolio of over 100
infrastructure investments, HICL is seeking further suitable
opportunities in core infrastructure, which are inherently
positioned at the lower end of the risk spectrum.
Further details can be found on the
HICL website www.hicl.com.
Investment Manager (InfraRed Capital
Partners)
The Investment Manager to HICL is
InfraRed Capital Partners Limited ("InfraRed") which has
successfully invested in infrastructure projects since 1997.
InfraRed is a leading international investment manager, operating
worldwide from offices in London, New York, Seoul, Madrid and
Sydney and managing equity capital in multiple private and listed
funds, primarily for institutional investors across the globe.
InfraRed is authorised and regulated by the Financial Conduct
Authority.
The infrastructure investment team
at InfraRed consists of over 100 investment professionals, all with
an infrastructure investment background and a broad range of
relevant skills, including private equity, structured finance,
construction, renewable energy and facilities
management.
InfraRed implements best-in-class
practices to underpin asset management and investment decisions,
promotes ethical behaviour and has established community engagement
initiatives to support good causes in the wider community. InfraRed
is a signatory of the Principles of Responsible
Investment.
Further details can be found on
InfraRed's website www.ircp.com.