HICL Infrastructure (HICL) Status update summary

Strategic evolution and market positioning

• The portfolio has evolved from a UK-centric, PPP-only base to a diversified international mix, with non-PPP and growth assets rising to nearly 50% by 2026, supporting long-term NAV stability and resilience.

• Introduction of 'enhancer' assets aims to selectively capture higher returns, targeting a 10%+ total return over the medium term, with enhancer allocation capped at 20% over four to six years.

• The strategy leverages InfraRed’s expertise in active management, asset rotation, and value creation across the asset lifecycle, with a focus on disciplined capital allocation and responsible investment.

• Diversification across geographies, sectors, and regulatory regimes is central to managing political and regulatory risk and maintaining portfolio resilience.

• Portfolio construction balances yielders, growers, and enhancers, with disciplined allocation to maintain income stability and long-term value.

Financial plan and capital allocation

• The plan is fully self-funded, utilizing surplus cash, disposal proceeds, and disciplined recycling to reinvest in higher-returning assets, with no new fund-level leverage or equity issuance assumed.

• NAV is projected to nearly double by 2050 under the evolved strategy, with a progressive dividend policy maintained and cover expected to remain at or above 1x as the strategy matures.

• Weighted average discount rate is expected to rise from 8.5% to 10% over four to six years, driving higher gross returns and capital growth.

• A self-funded £1.6bn five-year capital allocation framework supports dividends, new investments, and buybacks.

• Investment decisions are benchmarked against share buybacks to optimize returns and portfolio composition.

Operational highlights and value creation

• Outperformance since IPO has been driven by construction expertise, targeted expansion, operational efficiencies, and disciplined asset disposals, with active management delivering sustained NAV growth.

• Growth assets have outperformed expectations, delivering 10% average EBITDA growth over the last three years and a 1.7x multiple on invested capital.

• Selective disposals have achieved premiums to NAV, with over £1.5bn in proceeds and 12.1p NAV outperformance.

• Affinity Water delivered 20% revenue growth and 127% EBIT growth in FY 2026, with sector-leading credit ratings and resumed dividends.

• The portfolio’s resilience was demonstrated during COVID-19, with no additional financial support required for demand-based assets.