TIDMHICL
RNS Number : 8139L
HICL Infrastructure Company Ld
24 July 2017
24 July 2017
HICL Infrastructure Company Limited
Interim Update Statement
The Board of HICL Infrastructure Company Limited ("HICL" or "the
Company" or, together with its subsidiaries, "the Group"), the
listed infrastructure investment company advised by InfraRed
Capital Partners Limited ("InfraRed"), is issuing this Interim
Update Statement, which relates to the period from 1 April 2017 to
21 July 2017.
Ian Russell, Chairman of HICL Infrastructure Company Limited,
said:
"The Company has made steady progress, with portfolio
performance and cash generation in line with expectations since the
financial year end.
"We were pleased to announce the investment in Affinity Water
and also a commitment to invest in HS1. Subsequently, GBP25m of the
Affinity Water investment was sold down at completion, which
represented an important step for HICL as it builds strategic
relationships with aligned long-term co-investors. These
partnerships create opportunities to work on larger investments and
we intend to develop further this strategy on the HS1
investment.
"The Company's principal objective is to deliver long-term,
stable returns to shareholders and to preserve the capital value of
the portfolio, with the potential for capital growth over the long
term. In an environment that remains competitive, the Investment
Adviser continues to prioritise pricing discipline whilst
evaluating a number of attractive opportunities across HICL's
target segments and geographies.
"The inflation correlation of returns from the Group's portfolio
has increased to 0.8. This stands the Company in good stead as we
expect to continue to see relatively elevated near-term inflation
in the UK. However, we believe that the assumption for UK inflation
carried in the Group's valuation of its portfolio remains
appropriate.
"On behalf of the Board, I am pleased to re-affirm the dividend
guidance of a target 7.85 pence for the financial year to 31 March
2018 and a target 8.05 pence for the financial year to 31 March
2019. This reflects our continued confidence in the future cash
flow generation from the portfolio and the overall performance of
the Company."
Investment Activity and Portfolio Performance
-- Since 1 April 2017:
--
-- The Group acquired a 36.6% equity interest in Affinity Water for GBP269m, representing a premium to
regulatory capital value of 1.39x1, which completed on 22 May 2017. This investment has increased the
weighted average asset life of the portfolio to approximately 32 years and increased its positive
inflation correlation to 0.82.
--
-- The Group subsequently sold down a GBP25m portion of the Affinity Water investment to a small group of
co-investors, exemplifying the Group's strategy of building key relationships with aligned co-investors to
enable HICL to manage its portfolio exposure to larger investment opportunities. This targeted sell-down
completed in June 2017 and leaves HICL with a 33.2% equity interest in Affinity Water.
-- The Group announced on 14 July 2017 that it had signed an agreement to acquire a 35% equity interest in
the High Speed 1 project ("HS1") for a consideration of up to GBP320m. Completion will occur following
satisfaction of provisions in the HS1 concession agreement relating to a change of control of HS1.
Following completion, HICL intends to bring in minority co-investors managed by InfraRed, representing up
to GBP120m of its commitment.
-- The Group now has a portfolio of 116 investments located in the UK, France, Ireland, the Netherlands, Canada, the
USA and Australia.
-- The Board takes safety matters, including the fire safety of the buildings in the HICL portfolio, very seriously.
We are taking appropriate steps to review the use of cladding across the Group's portfolio. This is a complex
issue, which is impacted by a number of factors including the type of cladding used, the method of installation
and the other active and passive fire protection systems in place within the buildings. We continue to work
closely with our project companies to prioritise fire safety.
-- The portfolio continues to perform in line with expectations with no material issues affecting investment
performance.
-- On 1 June 2017, construction was completed on Ecole Centrale Supélec, a PPP project to finance, construct,
and maintain a new facility for the Ecole Centrale Supélec on Plateau de Saclay, near Paris, France.
Following completion, and in line with the business plan, the Group injected EUR3.4m of shareholder loans into
the project.
Dividends and Financing
-- The Company announced a fourth quarterly interim dividend for the financial year ended 31 March 2017 of 1.92
pence per Ordinary Share (the "Q4 Dividend") on 18 May 2017. The shares went ex-dividend on 25 May 2017 and the
Q4 Dividend was paid on 30 June 2017. The aggregate interim dividends declared in the year were 7.65 pence per
Ordinary Share, in line with guidance.
-- The take-up of the scrip dividend was approximately 2.91% of the Ordinary Shares in issue.
-- The Company announced a first quarterly interim dividend for the financial year ending 31 March 2018 of 1.96
pence per Ordinary Share on 18 July 2017.
-- The Board re-affirms the dividend guidance of a target 7.85 pence per Ordinary Share for the financial year to 31
March 2018 and a target 8.05 pence per Ordinary Share for the financial year to 31 March 2019.
-- The Company undertook a materially oversubscribed tap issue, which closed on 5 June 2017, following the
acquisition of an interest in Affinity Water in May 2017. In light of the Group's investment pipeline, the size
of the Issue was increased from its initial target size of GBP205m to the maximum available to the Company, which
was GBP267.7m.
-- Following completion in the coming months of the acquisition of the equity interest in HS1, and on the basis of
bringing in co-investment of up to GBP120 million of its equity interest, the Company will have a net funding
requirement of approximately GBP140m.
-- The Group increased its revolving credit facility from GBP300m to GBP400m on 2 May 2017. The terms of the
facility remain the same, with a margin of 1.70% over LIBOR and expiry in May 2019. The banks providing the
facility have expanded, with Santander joining National Australia Bank, Lloyds Bank, Royal Bank of Scotland,
Sumitomo Mitsui Banking Corporation, ING and HSBC in the banking group.
-- As highlighted in the Company's Annual Results, the Board is considering amending the Group's hedging policy.
Currently the policy targets a movement of no more than 1% in NAV per Ordinary Share for a 10% movement in
foreign exchange rates. The Board and the Investment Adviser are analysing whether it would be preferable from a
cost-benefit perspective to target a movement of no more than 2% in NAV per Ordinary Share for a 10% movement in
foreign exchange rates. The outcome of this review will be communicated in November 2017 when the Company's
Interim Results are announced.
Company and Governance
-- The Company's Annual Report and Financial Statements for the year ended 31 March 2017 were published on 12 June
2017, and copies were posted to those shareholders who have elected to receive a printed copy. This document
contains case studies on the Company's performance in the period 2006-2016, new investments in toll roads,
foreign exchange risk and responsible investment.
-- An updated Company Factsheet was published on the Company's website on 9 June 2017.
-- The Company held its Annual General Meeting ("AGM") on 17 July 2017. All resolutions were passed with a
substantial majority.
-- Following the renewal of shareholder approval at the AGM of the Board's authority to issue up to 10% of
outstanding shares on a non pre-emptive basis during the next 12 months, and the recent update to the EU
Prospectus Regulation, the Company's current tap capacity is now approximately 178.6m shares (limited by the AGM
authority).
Outlook
-- The next valuation of the HICL Group's portfolio will be at 30 September 2017, and will be published as part of
the Company's Interim Results. In preparing this fair market valuation, consideration will be given to each of
the assumptions in the light of expected economic conditions and market pricing of infrastructure projects.
-- The Company's NAV as at 30 September 2017 will reflect changes in the value of the Group's portfolio (based on
changes to assumptions and new investments made in the period) and accretive tap issues that occur in the
period.
-- As anticipated, on 11 July 2017 Ofwat published a consultation document outlining the proposed approach to
setting price control methodology for the 2019 price review. Alongside our co-shareholders, we are supporting
Affinity Water as it participates in the ongoing consultation process. Ofwat is scheduled to make a further
announcement in December in relation to the outcome of the consultation.
-- The Investment Adviser continues to seek appropriate opportunities across the key market segments identified in
the Company's Acquisition Strategy. These are: PPP projects (social and transportation projects); regulated
assets (e.g. gas and electricity transmission and distribution; water utilities; district heating) and
demand-based assets (e.g. student accommodation and operational toll road concessions).
-- Geographically, the Group remains focused on the UK, select European markets, North America and Australia / New
Zealand.
-- The current pipeline includes potential new investments in all three target market segments and the geographies
noted above. Whilst some are at an early stage of evaluation, the Investment Adviser is confident that in due
course further suitable, accretive investments can be sourced for the Group, while maintaining focus on pricing
discipline.
(1) Calculated on the basis of information available at the time
of acquisition, including regulatory capital value per
www.ofwat.gov.uk
(2) Portfolio information as at 30 June 2017
Ends
Enquiries
InfraRed Capital Partners Limited +44 (0) 20 7484 1800
Harry Seekings
Keith Pickard
Tony Roper
Tulchan Communications +44 (0) 20 7353 4200
David Allchurch
Latika Shah
Canaccord Genuity Limited +44 (0) 20 7523 8000
David Yovichic
HICL Infrastructure Company Limited
HICL Infrastructure Company Limited ("HICL" or "the Company",
and together with its subsidiaries, "the Group") is a long-term
investor in infrastructure projects which are predominantly in
their operating phase and yielding steady returns. It was the first
infrastructure investment company to be listed on the London Stock
Exchange. With a current portfolio of 116 social and transportation
infrastructure investments in projects with predominantly
availability-based income streams, it is seeking further suitable
investment opportunities which fit its stated Investment
Strategy.
Further details can be found on the HICL website,
www.hicl.com.
Investment Adviser
The Investment Adviser to HICL is InfraRed Capital Partners
Limited ("InfraRed") which has successfully invested in over 200
infrastructure projects since 1997. InfraRed is a leading
international investment manager focused on infrastructure and real
estate. It operates worldwide from offices in London, Hong Kong,
New York, Seoul and Sydney. With over 120 professionals it manages
in excess of USD 9bn of 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 60
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.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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