Why Invest in HICL?

HICL’s investment proposition, underpinned by an Investment Policy that is unchanged since IPO, is to deliver long-term, stable income from a well-diversified portfolio of infrastructure investments positioned at the lower end of the risk spectrum.

Infrastructure is a class of physical assets that are, embedded in local communities (often with strategic national importance). Infrastructure by its nature is visible and impacts on the day-to-day lives of most of us. These public assets have multiple stakeholders who have an interest in whether infrastructure is delivering to meet the needs of the community.

The Board and the Investment Manager, InfraRed Capital Partners Limited (“InfraRed”), believe that HICL’s success is intrinsically linked to, and built upon, demonstrating responsible management of public assets for the benefit of all stakeholders.

In this section, unless the context requires otherwise, references to "HICL" or "the Company" refer: (i) in relation to the period prior to 1 April 2019, to HICL Infrastructure Company Limited; and (ii) in relation to the period from and including 1 April 2019, to HICL Infrastructure PLC. The text in this section has been approved as a financial promotion by InfraRed Capital Partners Limited for the purposes of section 21 of the Financial Services and Markets Act 2000.

What HICL Can Offer

1.     Long-term, stable income and inflation-correlated returns

HICL seeks to pay predictable and sustainable quarterly dividends to shareholders. Annual dividends paid have increased year-on-year since launch in 2006, with the Company having met or exceeded its dividend targets to date (see HICL’s track record section).

To fulfil this objective, new investment opportunities are evaluated to determine whether they improve a measurable set of portfolio metrics:

  • total return - long-term investment performance;
  • yield - to support the delivery of short-term dividend targets and, in the medium term, an annual distribution of at least that achieved in the prior year;
  • inflation correlation - returns that are higher than currently forecast if actual inflation is higher than HICL’s portfolio valuation assumption (see latest results), for investors that hold an investment in HICL for the long-term; and
  • cashflow longevity - long-term income, a fundamental characteristic of infrastructure investments. 

​​2.     A diverse and resilient portfolio at the lower end of the risk spectrum

HICL’s portfolio comprises over 100 investments, nearly all of which are operational, yielding assets with a proven track record. The portfolio has relatively low (by comparison to peers) single asset exposure with the largest investment comprising approximately 6% of the portfolio, by value, at 31 March 2020.

Diversification extends beyond the number of investments to having a wide variety of counterparties (public sector clients, regulators, lenders and contractors) across the portfolio.

The Board and the Investment Manager believe that diversification, which reduces concentration risk, builds resilience into portfolio performance. It helps to mitigate against the downside risk of adverse events impacting individual projects or groups of projects.

With oversight from HICL’s Risk Committee, the underlying robustness of the portfolio cashflows is regularly tested by the Investment Manager through stress testing (see latest results). It is also notable that the Company’s underlying assets typically have long-term, amortising debt and do not require refinancing to deliver future returns.

3.     A robust and sustainable business model

HICL’s business model (see business model section) supports delivery of the investment proposition and is centred around three pillars:

Value Preservation - delivering the “base case” through active management of the underlying investments in the portfolio;

  Value Enhancement - finding opportunities to outperform the investment base case to the benefit of all stakeholders; and

 Accretive Investment - acquiring or selectively disposing of investments to enhance the existing portfolio and support the delivery of HICL’s long-term proposition to shareholders.

The InfraRed infrastructure team’s organisation is aligned with these pillars and its ethos is to ensure that the activities of acquiring and managing new investments are undertaken responsibly to generate sustainable asset performance for all stakeholders.

4.     Delivered responsibly and transparently through a market-leading investment manager

HICL is a UK-incorporated investment trust that is listed on the London Stock Exchange. Being a public company, HICL publishes detailed trading and financial information at regular intervals, providing its stakeholders with timely and relevant information, which helps them understand the activities of the Group and how the portfolio is performing.

The Board and the Investment Manager take HICL’s responsibilities to its stakeholders seriously. InfraRed has been a signatory of the Principles for Responsible Investment (“PRI”) since 2011. PRI is an investor initiative in partnership with UNEP Finance Initiative and UN Global Compact. InfraRed’s infrastructure investment business, which has responsibility for day-to-day management of HICL, achieved an A+ rating, the highest attainable, for the fifth successive year in its 2019 PRI assessment.

InfraRed is authorised and regulated in the UK by the Financial Conduct Authority. Its investment and asset management teams have over 20 years of international experience, along with the strength and depth in key skills necessary to enhance returns and performance on a low-risk basis.

5.     Liquidity

With an average daily share trading volume of c. 3m shares1, HICL provides shareholders with the ability to easily access the infrastructure asset class where the underlying investments are typically illiquid.

[1] For the twelve months to 31 March 2020


Investment Risks

Whilst HICL makes investments at the lower end of the infrastructure equity risk spectrum, an investment in HICL carries a degree of risk. Principle risks are referred to below. For further information on risks associated with the investment, please refer to the section entitled “Risk Factors” at pages 16 to 34 of the Company’s 4 March 2019 Prospectus and in the Company’s latest annual report.

  • Political and regulatory risk: the nature of the businesses in which HICL invests and the strong public sector infrastructure service aspect they display exposes HICL to potential changes in policy and legal requirements. Further, the HICL portfolio includes five regulated assets, which operate in highly regulated industries within statutory legal frameworks. Unfavourable changes to such regulatory and legal frameworks could materially and adversely affect the performance of affected investments.
  • Counterparty risk: project companies in which HICL invests typically subcontract the provision of services to specialist providers (construction, operations or maintenance companies). The failure of a supply chain provider could negatively impact the project company’s ability to fulfil its contractual obligations with the client.
  • Operational risks:
    • Performance risk: the performance of HICL’s investments is dependent on contractual arrangements with an array of counterparties (for example lending institutions or facilities management subcontractors). Therefore, HICL is exposed to the risk that such contracts fail to provide the protection from poor performance or recourse anticipated by HICL.
    •  Revenue (demand) risk: some investments in the HICL portfolio are in project companies which have “demand-based” concessions. Returns from “demand-based” concessions are impacted in whole or part by revenues receivable from users and are thus exposed to levels of demand risk. There is a risk with such projects that demand and revenues fall below the current projections and this may result in a reduction in expected revenues for the relevant project company.
  • Financial and market risk:
    • Investment cash flows are typically correlated to inflation, and therefore portfolio-wide increases/ decreases to inflation at variance to HICL’s inflation expectations would impact on HICL’s cash flows;
    • Changes in market rates of interest could affect HICL’s investments in a variety of different ways including: (i) the discount rate used to value HICL’s future projected cash flows and valuation; (ii) debt finance; and (iii) interest receivable on cash balances; and
    • HICL holds part of its investments in entities in jurisdictions with currencies other than Sterling but will borrow corporate level debt, report its NAV and pay dividends in Sterling. Changes in the rates of foreign currency exchange may therefore impact on HICL’s cash flows and valuation.

With oversight from HICL’s Risk Committee, the underlying robustness of the portfolio cashflows is regularly tested by the Investment Manager through stress tests, which are published in the Company’s interim and annual results.


HICL’s Track Record

The charts below demonstrate HICL’s performance since IPO. Past performance is no indication of future returns.

Chart 1 shows how the current dividend guidance2 of the 8.25p per share for the year ending 31 March 2021 sits within a track record of dividend growth.

Chart 2 shows how the combination of dividend growth and the increase net assets has delivered a total return of 9.0% from IPO to 31 March 2020. 

Chart 3 shows how, since its launch in 2006, HICL has outperformed the FTSE All Share while offering a low beta3.

Chart 4 shows the historic long-term stability of HICL’s dividend yield4.

[2] This is a target only and not a profit forecast. There can be no assurance that this target will be met.

[3] 250 day rolling beta.

[4] Dividend yield calculated based on historic dividend paid (shown on the graph in purple) divided by prevailing share price (shown on the graph in red). 


HICL’s Business Model

In order to deliver its investment proposition (see investment proposition section) HICL relies on its business model, which is founded on three pillars: value preservation, value enhancement and accretive investment.

Responsible Investment (“RI”) principles and practices are also essential for HICL to deliver long-term investment performance. Taking account of environmental, social and governance (“ESG”) considerations, alongside economic factors, in the investment process and management of projects is key to a sustainable business.

HICL delegates the majority of day-to-day activities required to deliver the business model to InfraRed.


1.     HICL business model pillars

 Value Preservation

Active management of the underlying investments

InfraRed’s Asset Management and Portfolio Management teams work closely together, in partnership with the management teams in the Group’s portfolio companies, to deliver HICL’s investment proposition by preserving the value of the Group’s investments for shareholders and other stakeholders. The objective is to ensure portfolio companies perform in line with the relevant contractual obligations and / or regulatory framework; and ultimately deliver the forecast base case investment return.

 Value Enhancement

Outperforming the base case, delivering upside to shareholders

The Asset Management and Portfolio Management teams seek opportunities to deliver outperformance from the portfolio for all stakeholders through value enhancements. Financial upside is often shared between the Company’s shareholders and public sector clients for PPP projects, or with the customers of regulated assets through periodic regulatory price reviews.

 Accretive Investment

Purchasing assets that enhance the delivery of the investment proposition

The Company has a clearly defined Investment Policy. This sets the over-arching framework within which the Company aims to build a portfolio that delivers HICL’s investment proposition and is consistent with the Company’s overall risk appetite, which positions HICL’s investments at the lower end of the risk spectrum.

Working within delegated parameters approved by the HICL Board, InfraRed is responsible for the disciplined selection and pricing of new investments and, from time to time, disposals. This objective informs HICL’s Acquisition Strategy, which is a subset of the abovementioned Investment Policy, and reflects priorities and areas of acquisition focus. The Acquisition Strategy is periodically reviewed by the Board and agreed between the Board and InfraRed.


2.     HICL’s performance against its business model

The chart below5 sets out how each component of the business model contributed to an increase in NAV over HICL’s first ten years from IPO to March 20166.


Portfolio outperformance comes from a number of different sources. These include, but are not limited to:

  • Economies of scale across the portfolio;
  •  Accretive acquisitions (ie. at returns higher than market benchmarks); and
  •  Asset-level initiatives.

Many value enhancement initiatives produce benefits for both public sector stakeholders and shareholders. These include sharing gains from refinancings and insurance cost savings with PPP projects’ public sector clients; and sharing of outperformance for certain regulated assets with customers.

For further detail on value enhancement activities, please refer to HICL’s latest annual and interim reports.

[5] HICL Introductory Presentation, Spring 2019, p.25

[6] Past performance is not a reliable indicator of future performance.

Infrastructure as an Attractive Asset Class


The infrastructure asset class comprises real assets that support communities and essential public services, including:

  • Public-Private Partnerships: PPP concessions generally relate to infrastructure assets that are procured by the public sector in order to support the provision of services to the general public. The extent of the services provided varies from project to project, ranging from maintaining the infrastructure through to cleaning, security and providing meals. The typical revenue model is for a public sector Client to make availability payments linked to service performance and availability of the asset for use (e.g. by teachers and pupils at a school). Sectors in the PPP market segment include education, healthcare, prisons, court houses, other public sector buildings and transportation assets;
  • Regulated assets: regulated assets are generally existing monopolies that deliver an essential service, in many cases with little-to-no demand risk and low sensitivity of revenues and cash flows to the economic cycle. Examples include utilities (e.g. electricity/gas transmission and distribution, water and waste water utilities) and certain transportation assets (e.g. a limited number of airports and certain rail infrastructure). Revenues from regulated assets are typically outputs from a price control framework that is established by a regulator (usually government-appointed). The objective of a regulator is to protect the interests of consumers who are receiving an essential service from a monopoly asset owner, while ensuring safe and efficient operation of the regulated assets;
  • Demand-based assets: demand-based assets feature revenues that vary with underlying usage the infrastructure. This market segment can be further divided into those assets that are sensitive to changes in GDP growth (such as tolled road links, railways, airports and seaports), and those that are relatively insensitive to changes in GDP (such as student accommodation) but where demand is influenced by other factors. In common with PPP projects, demand-based assets are often structured as concessions and are typically procured by public sector Clients. Operational demand-based assets are at the lower end of the risk spectrum when accompanied by strong usage history or limited uncertainty in forecast demand. Typically, they are long-dated, add good inflation correlation and provide returns at a premium to PPP projects; and
  • Corporate assets: infrastructure assets may also be developed for the purpose of providing services, or access to essential assets, to corporate counterparties. Examples of these include railway rolling stock, mobile communication towers or energy generation assets (that are not in receipt of subsidies). Corporates may seek to procure infrastructure assets in this way for a variety of reasons: outright asset ownership may be regarded as an inefficient use of capital; or operation and maintenance of an asset may not be a core activity. The relationship between the infrastructure asset owner and the corporate counterparty is usually contractual, with prices set through a commercial negotiation or a market-clearing price.


Infrastructure investments, as a whole, have a variety of attractive features for investors:

  • They typically generate long-term, stable cash flows, which are often inflation-linked;
  • The assets have monopolistic features that can provide stability, protecting against potential volatility of financial markets;
  • There is an underlying market demand for private investment in infrastructure7, particularly given political and economic imperatives worldwide and public budget constraints; and
  • The valuation of infrastructure investments typically remains relatively stable, reflecting the inherent value of the underlying income streams of the asset.

[7] Bridging infrastructure gaps: Has the world made progress?, McKinsey Global Institute, October 2017