HICL INFRASTRUCTURE

Investment Process

HICL’s vision, it says, is to enrich lives through infrastructure. This will be achieved by developing strong social foundations; connecting communities; and supporting sustainable modern economies. The management team uses a core infrastructure framework to assess the quality of a project before investing. This includes Cashflow quality – stable, predictable revenues and costs and returns to equity protected by lower operational complexity; Market Positioning – limited competition, often due to structural protections or significant barriers to entry and Criticality; - how essential they are to society and the operation of public services. The managers look for mainly operational projects which have a high and predictable long-term cash flow of 20 to 30 years, with revenues pre-determined under legally binding public-private partnerships contracts such as hospitals generally payable by government entities. They also invest in demand and regulatory-based assets, including revenues and risks linked to toll roads and utilities. Acquisitions are typically funded via a £400million corporate debt facility, which is periodically repaid through equity fund raising. The trust buys projects in the secondary market, either through public auctions or in private off-market deals. A typical investment has predictable yields, solid creditworthy counterparties, project related risks including construction and operational transferred to subcontractors and debt term matched to concession length, mitigating refinancing risk. The team also seeks to achieve income through active management such as refinancing and portfolio synergies. The portfolio has most exposure to public-private partnership projects with its biggest sector bias being to transport, followed by health.