THIS ANNOUNCEMENT AND THE
INFORMATION CONTAINED HEREIN IS NOT FOR RELEASE, PUBLICATION OR
DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN OR INTO, THE UNITED
STATES, AUSTRALIA, CANADA, JAPAN OR THE REPUBLIC OF SOUTH
AFRICA.
This announcement has been
determined to contain inside information for the purposes of the
market abuse regulation (EU) No.596/2014.
30 April 2024
HICL Infrastructure
PLC
"HICL" or the
"Company" and, together with its corporate
subsidiaries1, the "Group", the London-listed
infrastructure investment company managed by InfraRed Capital
Partners Limited ("InfraRed" or the "Investment
Manager").
Net Asset
Value
The Company's Annual Results are
scheduled for release on 22 May 2024.
The Board expects to announce a
decrease in the Company's unaudited Net Asset Value ("NAV") per
share of approximately 1.2 pence to 158.2 pence as at 31 March 2024
(30 September 2023: 159.4 pence). This statement explains the
Company's approach to determining the NAV as at 31 March
2024.
The expected NAV decrease is mainly
driven by the following macroeconomic factors:
· Actual
inflation for the year to March 2024 being lower than the
assumptions used in the portfolio valuation as at 30 September
2023;
· A
reduction in UK inflation assumptions for FY2025 and FY2026,
aligning with market consensus;
· A
reduction in deposit rate assumptions for all jurisdictions except
the USA, aligning with market consensus; and
· Adverse foreign exchange movements as sterling strengthened in
the period, net of hedging.
Operational performance of the
portfolio was broadly in line with expectations. During the second
half of its financial year, the Company disposed of its remaining
interest in the Northwest Parkway toll road project in the USA. The
proceeds received represented a premium to the Company's September
2023 valuation of 30% / 2.1 pence. The acquisition of a 3.1%
incremental interest in the A63 Motorway concession generated 0.7
pence as it was revalued to HICL's existing holding. These two
items partially offset the reduction caused by the macroeconomic
factors outlined above.
Breakdown of the movement in Net
Asset Value per share
Net Asset Value per share as at 30
September 2023 (unaudited)
|
|
159.4p
|
Portfolio return
|
|
|
Actual inflation
|
(2.0)
|
|
Other portfolio performance2
|
8.8
|
|
|
|
6.8
|
|
|
|
Discount rate
|
|
-
|
|
|
|
Macroeconomic assumptions
|
|
|
Forecast inflation
|
(1.3)
|
|
Interest rates
|
(0.5)
|
|
|
|
(1.8)
|
|
|
|
Fund and interest costs
|
|
(1.8)
|
Foreign exchange (net of
hedging)
|
|
(0.3)
|
Dividends paid
|
|
(4.1)
|
Net Asset Value per share as at 31
March 2024 (unaudited)
|
|
158.2p
|
Inflation
The portfolio's cashflows and
valuation are positively correlated to inflation. Over the past six
months, inflation in all regions has declined faster than the
Company's forecast, particularly in the UK where RPI reduced to
4.0% for the year ended 31 March 2024 (2023: 13.9%) against the
Company's forecast of 6.5%.
Other jurisdictions also saw
accelerated inflation reductions. French CPI was 2.3% (2023: 5.7%),
while in the USA CPI was 3.0% (2023: 5.0%). The impact of the
decrease in actual inflation versus forecast assumptions resulted
in a valuation downside of £(24.3)m in the six-month
period.
In the short to medium term, market
consensus is that UK inflation is expected to decline further; and
adjustments have now been made to the Company's short-term UK
inflation assumptions for FY2025 and FY2026 to reflect the steeper
decline in inflation than originally expected. No changes have been
made to UK inflation assumptions post-2026, nor to inflation
assumptions in other jurisdictions.
Discount rates
Long-term government bond yields
have reduced in all relevant jurisdictions since the Company's 30
September 2023 valuation. While discount rates used to value
investments do not follow bond yields exactly, the Investment
Manager considers the level of risk premium implied by movements in
bond yields, as well as evidence of asset pricing observed in
core infrastructure transactions across HICL's key geographies.
This includes the ten divestments made by HICL over the course of
the year.
Although there is increasing market
confidence that interest rates may have peaked in the UK, the
Investment Manager believes that the increase in discount rates,
recognised in the 30 September 2023 valuation, remains appropriate
for the 31 March 2024 valuation and continues to be in line with
external transaction data points. This assessment is underpinned by
the material level of transaction activity completed by the Company
over the last twelve months.
The weighted average discount rate
remains at 8.0%, the weighted average risk-free rate for the
portfolio is 4.1% (30 September 2023: 4.7%) and the weighted
average risk premium is 3.9% (30 September 2023: 3.3%).
InfraRed will continue to closely
monitor market activity and will provide a further update, as
appropriate, as part of HICL's Annual Results on 22 May
2024.
Foreign Exchange
The Company is exposed to movements
in the Canadian dollar, the Euro, the New Zealand dollar and the US
dollar; but with 61% of the Company's exposure to foreign currency
hedged as at 31 March 2024, there was only a small valuation loss
over the period.
Funding position
At 31 March 2024 the Group had net
debt of £303.9m (30 September 2023: £496.8m), comprising cash of c.
£33.3m, drawings on the Revolving Credit Facility ("RCF") of c.
£187.2m and the private placement of £150.0m. As at 31 March 2024,
the sales of Northwest Parkway and Hornsea II OFTO had signed but
not yet completed. Northwest Parkway completed on 18 April 2024 and
the Hornsea II OFTO is expected to complete in May 2024. Following
these, the pro forma
drawings on the RCF are expected to be nil and gearing is expected
to be 7%.
Macroeconomic assumptions used in
the valuation
Assumption
|
Jurisdiction
|
31 March 2024
|
30
September 2023
|
Discount rate (WADR)
|
|
8.0%
|
8.0%
|
Inflation
|
UK (RPI and RPIx)
|
3.00% to
31-Mar-25
2.75% to
31-Mar-26
3.25% to
31-Mar-30
2.50%
thereafter
|
6.50% to 31-Mar-24
3.50% to 31-Mar-25
3.25% to
31-Mar-30
2.50%
thereafter
|
|
UK (CPI/CPIH)
|
2.25% to
31-Mar-25
2.00% to
31-Mar-26
2.50%
thereafter
|
5.75% to 31-Mar-24
2.75% to 31-Mar-25
2.50%
thereafter
|
|
Eurozone (CPI)
|
2.25% to 31-Mar-25
2.00% thereafter
|
4.75% to 31-Mar-24
2.25% to 31-Mar-25
2.00% thereafter
|
|
Canada (CPI)
|
2.25% to 31-Mar-25
2.00% thereafter
|
3.00% to 31-Mar-24
2.25% to 31-Mar-25
2.00%
thereafter
|
|
US (CPI)
|
2.00% to 31-Mar-25
2.00% thereafter
|
3.00% to 31-Mar-24
2.00%
thereafter
|
|
New Zealand
|
2.75% to 31-Mar-25
2.25% thereafter
|
5.00% to 31-Mar-24
2.75% to 31-Mar-25
2.25% thereafter
|
Deposit rates
|
UK
|
4.50% to 31-Mar-25
3.25% thereafter
|
5.00% to 31-Mar-24
4.50% to 31-Mar-25,
3.50%
thereafter
|
|
Eurozone
|
3.00% to 31-Mar-25
2.00% thereafter
|
3.00% to 31-Mar-25,
2.25%
thereafter
|
|
Canada
|
3.75% to 31-Mar-25
3.00% thereafter
|
3.75% to 31-Mar-25
3.25%
thereafter
|
|
US
|
4.25% to 31-Mar-25
3.25% thereafter
|
4.25% to 31-Mar-25
3.25%
thereafter
|
|
New Zealand
|
4.25% to 31-Mar-25
4.00% thereafter
|
4.50% to 31-Mar-24
4.25% thereafter
|
Foreign exchange rates
|
USD
|
1.26
|
1.22
|
|
EUR
|
1.17
|
1.15
|
|
CAD
|
1.71
|
1.66
|
|
NZD
|
2.11
|
2.03
|
1.
The Corporate subsidiaries are Infrastructure
Investments Limited Partnership and HICL Infrastructure 2 s.a.r.l.,
as disclosed in HICL's Annual Report and Accounts
2023
2.
Performance comprises the unwinding of the
discount rate (value preservation), the Investment Manager's value
enhancement initiatives and accretive transaction
activity
-ends-
Enquiries
InfraRed Capital Partners Limited
+44 (0) 20 7484 1800 / info@hicl.com
Edward Hunt
Helen Price
Mohammed Zaheer
Brunswick Group Advisory
Ltd
+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.
This statement aims to give an indication of
material events and transactions that have taken place in the
period from 1 October 2023 to 31 March 2024 and their impact on the
financial position of HICL. These indications reflect the
Board's current view. They are subject to several risks and
uncertainties and could change. Factors which could cause or
contribute to such differences include, but are not limited to,
general economic and market conditions and specific factors
affecting the financial prospects or performance of individual
investments within the portfolio of HICL.
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.