TIDMHICL
RNS Number : 7417R
HICL Infrastructure PLC
03 March 2023
3 March 2023
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 October 2022 to 2 March
2023.
Mike Bane, Chair of HICL, said:
"HICL's portfolio continued to perform well in the period, with
positive inflation correlation underpinning further NAV growth.
Disciplined completion of transactions and successful integration
of recent acquisitions into the portfolio remain the key focus for
the Board and InfraRed."
Key Highlights
-- Updated NAV as at 31 December 2022 of 165.8p, a 1.5p increase
since 30 September 2022, and a weighted average discount rate of
7.2%. The 1.5p increase was predominantly driven by updates to
actual inflation and deposit rates.
-- Good progression of recently signed acquisitions, with
Fortysouth(1) successfully completed and consents well advanced on
Texas Nevada Transmission.
-- Exclusive pipeline of over GBP300m in high quality investment opportunities.
Net Asset Value
Given persisting macro-economic volatility, the Company is, by
exception to the normal valuation cycle, providing an unaudited Net
Asset Value per share as at 31 December 2022 of 165.8p , a 1.5
pence increase relative to 30 September 2022. The net increase is
comprised of the following portfolio-specific and macro-economic
factors:
-- Continued higher actual inflation than assumed at 30
September 2022 in all jurisdictions, prompting revised assumptions
with respect to near-term inflation. In particular, UK RPI and CPI
assumptions have been revised upwards to 12.5% and 9.75%
respectively for FY2023, delivering c. 2p of performance. The
Company's assumptions for FY2024 onwards remain unchanged;
-- Increases to deposit rate assumptions in all jurisdictions
due to higher prevailing interest rates; and
-- Asset-specific adjustments to discount rates. Overall the
portfolio's weighted average discount rate increased to 7.2% (30
September 2022: 7.1%), also reflecting the inclusion of
Fortysouth.
-- Operational performance of the portfolio was broadly in line with expectations;
Looking forward, the portfolio remains well positioned in a
higher inflationary environment due to its positive inflation
correlation. In the UK, RPI has continued to rise although there
are some signs of moderation in CPI. Transaction levels remain
muted and there is insufficient evidence to justify a movement in
the portfolio reference discount rates.
Investment Activity & Pipeline
-- Completion of the Company's investment in Fortysouth, on 1 November 2022.
-- Consents on Texas Nevada Transmission are well progressed,
and completion is expected before the 31 March financial year
end.
-- As previously announced, HICL has formally withdrawn from the
acquisition of ADTiM SAS due to certain conditions relating to the
transaction not being fulfilled.
-- As part of the preferred bidder consortium on the Hornsea II
OFTO, HICL has progressed due diligence and transaction
negotiations in coordination with Ofgem.
-- HICL remains in exclusive negotiations for a communications asset in Europe.
-- The Company continues to progress its advanced pipeline,
exercising strict investment discipline and cognisant of HICL's
available funding, as set out in the balance sheet section
below.
Portfolio Performance
-- The Company's PPP portfolio performed well, underpinned by
its availability-based and inflation-linked revenues. Traffic
across HICL's demand-based assets was also in line with
forecasts.
-- In the period, Ofwat announced the proposed methodology for
the WACC calculation in PR24, with the cost of both equity and debt
adjusted upwards to reflect the changing macro-economic conditions.
The estimated WACC allowance is higher than that assumed for
Affinity Water in the September 2022 valuation, and this will be
considered alongside other key PR24 assumptions such as Ofwat's
initial views on the operational and financial framework. In
combination, this had a small positive impact on the Affinity Water
valuation. Affinity Water will submit its business plan to Ofwat in
October 2023 with the Draft Determination expected in Spring
2024.
-- The Company's most recent investments, Cross London Trains
and Fortysouth, are performing in line with the Investment
Manager's expectations. In the case of Fortysouth, the carveout of
the business from Vodafone NZ is proceeding in line with plan.
Balance Sheet and Dividends
-- The Company remains on track to deliver its target dividend
of 8.25p per share for the financial year to 31 March 2023(2) , and
the Company delivered a cash cover of 1.03x in the quarter.
-- At 2 March 2023, the Company had net debt of GBP139m,
comprising cash of GBP82m and drawings on the RCF of GBP221m.
Including the investment commitments and letters of credit of
GBP289m, the Company has GBP362m of available liquidity.
Market and Outlook
-- We continue to see a low volume of core infrastructure
transactions in the market, however activity is increasing and we
note the commencement of a number of opportunities since the
beginning of the calendar year. Competition for high quality assets
remains robust and is expected to continue to support asset
pricing, notwithstanding higher risk-free rates observed across
HICL's core markets.
-- Inflation, interest rates and long-term government bond
yields remain elevated in all of HICL's core jurisdictions. HICL's
defensive positioning through its low beta and peer leading
inflation correlation, provides resilience and protects portfolio
value .
-- HICL's pipeline remains compelling. Beyond the Company's
exclusive opportunities (set out in 'Investment Activity &
Pipeline' above), InfraRed has developed an attractive pipeline of
core infrastructure opportunities for the Company. These span
traditional and modern economy sectors and are situated across the
UK, Europe and North America. In particular, the powerful secular
tailwinds of digitalisation and decarbonisation continue to drive
global infrastructure investment, and HICL is well positioned to
selectively pursue this significant investment opportunity.
1. Aotearoa Towers was re-branded to Fortysouth in December 2022
2. This is a target only and not a profit forecast. There can be
no assurance that this target will be met
-Ends-
Enquiries
InfraRed Capital Partners Limited +44 (0) 20 7484 1800 / info@hicl.com
Edward Hunt
Helen Price
Mohammed Zaheer
Teneo +44 (0) 20 7420 3169 / HICL@teneo.com
Haya Herbert-Burns
Matthew Thomlinson
Investec Bank plc +44(0) 20 7597 4952
David Yovichic
RBC Capital Markets +44 (0) 20 7653 4000
Matthew Coakes
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)
InfraRed Capital Partners is an international infrastructure
investment manager, with more than 180 professionals operating
worldwide from offices in London, New York, Sydney and Seoul. Over
the past 25 years, InfraRed has established itself as a highly
successful developer and custodian of infrastructure assets that
play a vital role in supporting communities. InfraRed manages
US$14bn+ of equity capital(1) for investors around the globe, in
listed and private funds across both income and capital gain
strategies.
A long-term sustainability-led mindset is integral to how
InfraRed operates as it aims to achieve lasting, positive impacts
and deliver on its vision of Creating Better Futures. InfraRed has
been a signatory of the Principles of Responsible Investment since
2011 and has achieved the highest possible PRI rating(2) for its
infrastructure business for seven consecutive assessments, having
secured a 5 stars rating for the 2021 period. It is also a member
of the Net Zero Asset Manager's Initiative and is a TCFD
supporter.
InfraRed is part of SLC Management, the institutional
alternatives and traditional asset management business of Sun Life.
InfraRed represents the infrastructure equity arm of SLC
Management, which also incorporates BentallGreenOak, a global real
estate investment management adviser, and Crescent Capital, a
global alternative credit investment asset manager.
www.ircp.com
1. Data as at Q3 2022. Equity Capital is calculated using a 5-year average FX rate
2. Principles for Responsible Investment ("PRI") ratings are
based on following a set of Principles, including incorporating ESG
issues into investment analysis, decision-making processes and
ownership policies. More information is available at
https://www.unpri.org/about-the-pri
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