Business Model


The projects in which HICL invests are typically structured under a public-private sector, availability based infrastructure procurement model (called PFI/PF2 or PPP in the UK, and PPP or P3 elsewhere). For an equity investor such as HICL, the key attraction of this model is the credit quality and predictability of the underlying revenue stream once construction completion is achieved and the asset is operational. This revenue stream, which is normally inflation-linked, takes the form of a regular ‘Unitary Payment’ made by the public sector client to the project company and provides the investor with significant protection from economic cycles and competitive market dynamics.

As part of its Acquisition Strategy, HICL may make investments in demand based projects, where the underlying revenue stream varies according to the volume or usage demands of the end-user, as opposed to its availability. Naturally, the income streams are inherently less certain due to volatility in, for example, traffic volumes; however, rigorous research and modelling, together with trading history where available, should enable the income profile to be forecast with a reasonable degree of accuracy. In addition, these user-pay projects benefit HICL by offering diversification of counterparties.


Certainty of operating and capital costs associated with the project is also important to forecast infrastructure equity returns. In the case of social infrastructure, the costs associated with projects have pre-determined long-term contractual profiles, similar to the revenues, resulting in largely predictable investment cashflows for equity. Further, key service delivery risks are passed down to the relevant specialist subcontractor – generally the construction or operating (FM) partner – best placed to bear them.


Projects are typically leveraged with amortising debt (non-recourse to HICL or its subsidiaries), with a tenor to match the project’s concession life. The interest rate on the debt is either fixed rate or inflation-linked, such that changes in interest rates are largely mitigated. HICL has no structural debt itself, but it does utilise a revolving credit facility for investment purposes, repaid with fresh equity capital raises, for cash efficiency purposes.

Foreign Exchange 

To provide confidence in the Company's near-term yield, volatility from foreign exchange movements is managed by hedging the investment income from overseas projects through the forward sale of the respective foreign currency (up to 24 months). In addition, a balance sheet hedging policy is used which is currently designed to limit NAV per share sensitivity to no more than 2% for a 10% forex movement. The foreign exchange policy is reviewed by the Board regularly.

Further information relating to HICL’s business model and the broader infrastructure asset class is available in the Primer Papers provided below.

  • Characteristics and Structural Arrangements

    Learn more about the different subsets of the infrastructure asset class – social, economic and renewable energy projects – and their characteristics, as well as how the private sector’s involvement is organised and its investment is structured.

  • The Investment Case

    Read about the rationale for investment in each subset of the infrastructure asset class, as well as the inflation-protected return to equity and cashflow profile of a typical HICL investment.

  • Making an Investment

    Learn about how InfraRed’s infrastructure Strategy & Origination professionals progress investments on behalf of HICL, how these investments are sourced and financed, as well as aspects of the underwriting process.