VALUE PRESERVATION VALUE ENHANCEMENT ACCRETIVE INVESTMENT
  • Our business model
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HICL Business Model

HICL’s strategy to deliver the Investment Proposition is through successful execution of its Business Model, which is founded on three pillars: value preservation, value enhancement and accretive investment. HICL delegates the majority of day-to-day activities required to deliver the business model to InfraRed.

Click the hexagons to find out how the Investment Manager delivers on each key pillar.

Portfolio outperformance

April 2006 to March 2020

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18% Accretive share issuance 15% Lifecycle 14% Disposals 11% 9% Insurance 8% Distribution efficiency 8% Tax structuring 8% Other SPV savings 6% Fund scale efficiency 2% Demand outperformance 1% Other initiatives
  • Accretive share issuance

    When new shares in the Company are issued to investors (to finance acquisitions) at a price higher than the prevailing NAV

  • Lifecycle

    Efficient management of assets and procurement on the major maintenance of PPP assets to create cost savings, including the reprofiling (in conjunction with technical advisers) of future, long-term expenditure

  • Disposals

    When assets are sold at a premium to their carrying value (i.e. a higher price than the Company’s most recent valuation)

  • Construction projects delivered

    When construction work on a project is successfully completed, the project is partially de-risked and an uplift in value can be realised

  • Insurance

    Savings made on insurance premia payable by individual project companies, often through bundling policies together at the HICL group level

  • Distribution efficiency

    Increasing distribution frequency, bringing forward distributions or releasing trapped cash through agreements with lenders

  • Tax efficiency

    Utilising available tax allowances and claims such as the intra-group surrendering of tax losses

  • Other SPV savings

    Usually a reduction in fees payable to companies that provide management services to PPP projects

  • Fund scale efficiency

    As the portfolio grows larger, group overhead costs (including the Investment Manager’s fee) increase at a slower rate

  • Demand outperformance

    Actual traffic and revenue levels in excess of forecasts

  • Other initiatives

Since IPO in 2006, InfraRed (which acts as Investment Manager to HICL and Operator of the portfolio) has consistently outperformed HICL’s base case by delivering additional value enhancements for shareholders. The chart to the left shows the main contributors to portfolio outperformance since IPO1 and March 2020. These include initiatives at both the portfolio company level (such as lifecycle cost improvements) and the fund level (such as accretive share issuances and benefits of scale). Over this period, portfolio outperformance has contributed 42.3p per share to the Company’s Net Asset Value (NAV), which represents over 25% of the total NAV as at March 2020.

Many of the value enhancement initiatives undertaken by InfraRed for HICL also produce significant benefits for public sector stakeholders, such as when insurance cost savings are shared with PPP projects’ public sector clients or when regulated asset outperformance is shared with customers. For further detail on value enhancement activities, please refer to HICL’s latest Annual and Interim Reports.

1 Refers to HICL Infrastructure Company Limited prior to 31 March 2019, HICL Infrastructure PLC from 1 April 2019 onwards