HICL Infrastructure H2 2026 Earnings Report

HICL Infrastructure EPS Results

• Actual EPS: GBX 13.80
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

HICL Infrastructure Revenue Results

• Actual Revenue: $277.50 million
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

HICL Infrastructure Announcement Details

• Quarter: H2 2026
• Date: 5/27/2026
• Time: Before Market Opens
• Conference Call Date: Wednesday, May 27, 2026
• Conference Call Time: 7:00AM ET

HICL is a UK-listed infrastructure investment company. We invest in infrastructure for local communities and to support the delivery of essential services, working in partnership with the public and private sectors.

HICL Infrastructure H2 2026 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: HICL reported a strong annual performance, with 10.3% total NAV return, 13.1% total shareholder return, and NAV per share rising to £1.602.
• Positive Sentiment: The company exceeded its asset sale target, completing £536 million of accretive divestments at an average 11% premium to NAV, which management said validated the portfolio valuation and supported capital recycling.
• Positive Sentiment: Cash generation remained healthy, with FFO dividend cover of 1.59x and dividend cash cover of 1.1x, supporting new dividend guidance of 8.65 pence for FY2028.
• Positive Sentiment: HICL continued active portfolio management, including £103 million of share buybacks during the year and a new fee structure based entirely on market capitalization, which management said improves alignment with shareholders.
• Neutral Sentiment: Operationally, the portfolio performed well overall, but results were mixed across assets: Affinity Water and several digital/transport assets showed progress, while a provision was taken against Lewisham Hospital and some assets required ongoing CapEx-intensive investment.

Presentation

[Operator]

Good afternoon, and welcome to the HICL Infrastructure PLC annual results investor presentation. Throughout this recorded presentation, investors will be in listen-only mode. Questions are encouraged, and they can be submitted at any time using the Q&A tab situated on the right-hand corner of your screen. Just simply type in your questions and press send. Before we begin, I would like to submit the following poll. I would now like to hand you over to Edward Hunt, Head of Core Income Funds. Good afternoon to you.

[Edward Hunt, Head of Core Income Funds at InfraRed Capital Partners]

Thanks very much. Good afternoon, and a warm welcome to this set of annual results for HICL Infrastructure PLC. Starting on slide four of the presentation deck, an important restatement of HICL's proposition. HICL sources high-quality infrastructure assets in private markets and offers them to listed investors in a diversified and liquid vehicle. We focus on core infrastructure, essential assets differentiated by their long-term cash flows, inflation protection, barriers to entry, and growth potential. The portfolio is actively managed, ensuring each and every asset plays its role, with value crystallized at the right times through selective asset rotation, and all delivered via InfraRed's 25-year track record as a specialist infrastructure investor, leveraging its international capability across the infrastructure risk spectrum. With that as the anchor, slide five puts this into context. With HICL now having delivered for over 20 years for investors.

[Edward Hunt, Head of Core Income Funds at InfraRed Capital Partners]

HICL was originally listed in 2006 as the first infrastructure investment company on the main market of the London Stock Exchange. Since then, it's a story of resilience, of consistency, and of evolution. From its pure PPP portfolio in 2006, the decision to extend into broader core infrastructure in 2016, its roughly 50% allocation to those growth assets now in 2026. Over that 20 years, the company's delivered a NAV return of 8.5% per annum, encompassing almost GBP 1.50 of dividends and GBP 0.60 in NAV growth. That's through different market cycles and the full spectrum of macroeconomic and geopolitical shocks. These are strong numbers, and they differentiate HICL from its peer group.

[Edward Hunt, Head of Core Income Funds at InfraRed Capital Partners]

As well as marking the occasion, this slide reinforces what HICL has been designed to do: to provide exposure to resilient long-term infrastructure assets at attractive total returns through the cycle, enhanced by active management and, importantly, evolving with the underlying infrastructure market. These attributes are at the heart of HICL's annual result, as set out on the next slide six. This is a strong annual result, underpinned by pleasing operational performance, effective portfolio rotation, and enhanced cash generation. Moving left to right on the slide, first on the left, the slide shows a total NAV return of 10.3%, with NAV growth of GBP 0.071 in the period. The return from the underlying portfolio was 12.2%, materially ahead of expectations.

[Edward Hunt, Head of Core Income Funds at InfraRed Capital Partners]

That was driven by an excellent performance from the company's growth portfolio, with the EBITDA improving 9% year-on-year, as well as outperformance from accretive asset sales. This takes us to the middle column, with GBP 536 million of accretive asset sales achieved in the year, well in excess of the EUR 200 million target, and taking total divestments over the last three years to over EUR 1 billion, with a weighted average premium to NAV of 11%. This is almost half HICL's market capitalization, clearly evidencing the quality of the NAV, the importance of asset rotation as part of HICL's business model, and the manager's execution capability.

[Edward Hunt, Head of Core Income Funds at InfraRed Capital Partners]

In the year, this activity added GBP 0.022 To our performance before taking into consideration the effective use of that capital, including the GBP 103 million of share buybacks completed in the year, which takes the overall spend on buybacks to date to a sector-leading GBP 189 million. Finally, on cash generation, the dividend cash cover target was met with cash cover of 2.38x, including disposals, 1.10x excluding disposals.

[Edward Hunt, Head of Core Income Funds at InfraRed Capital Partners]

This was alongside a 1.59x funds from operations, or FFO, dividend cover, supporting today's new dividend guidance of GBP 0.0865 For FY 2028 and highlighting the healthy level of reinvestment in the underlying portfolio of assets. One point to reemphasize on this slide is that the company's payout and reinvestment settings now consistently support NAV growth. All things being equal, steady state portfolio earnings are now comfortably in excess of the level of the dividend, even before any outperformance.

[Edward Hunt, Head of Core Income Funds at InfraRed Capital Partners]

This underpins steady period-on-period NAV progression. We'll unpack this and other elements of the result as we step through the slides. The year in summary, selective rotation, strong operational performance, and cash flow that supports both continued dividend progression and NAV growth. On slide seven, we set out some further key metrics that illustrate the annual performance. Going clockwise from the top left, we've seen NAV growth of 4.6% in the year to GBP 1.602.

[Edward Hunt, Head of Core Income Funds at InfraRed Capital Partners]

Top right, a total shareholder return of 13.1% in the year, as a result of the share price appreciation, as well as HICL's strong dividend offering. Since period end, we've seen a further 8% price increase up to Friday, and some more this week, particularly today. Bottom right, we examine the expected future returns. The discount rate of 8.5% is the best guide to expected future returns at NAV.

[Edward Hunt, Head of Core Income Funds at InfraRed Capital Partners]

At Friday's discount to NAV, this translates to an expected net return after costs of 10% per annum, with a 6%+ down payment on that total return through the strong dividend yield alone. Finally, bottom left, this net return will only be improved by the continued downward trend in the expenses ratio. This declined to 1.03% in the year due to fee reductions taken last year, and on the basis of the further fee revision announced today, the move to a 100% market cap based fee, it now represents a peer leading pro forma expenses ratio of 90 basis points.

[Edward Hunt, Head of Core Income Funds at InfraRed Capital Partners]

Moving on now to strategic portfolio construction on slide eight. Slide eight revisits HICL's portfolio construction and the balance that we strike between the company's cash generating and growth-oriented assets, adjusting for the recent mix in portfolio composition. At a high level, the story is consistent.

[Edward Hunt, Head of Core Income Funds at InfraRed Capital Partners]

HICL seeks to complement its yielders, which are those cash generative, shorter duration assets with its growers, those earnings generative, longer duration assets, to provide an attractive total return proposition with a meaningful and progressive income component. The slide sets out the characteristics of each of these segments. The yielders are delivering a cash yield of around 11% long-term, while the growers delivered EBITDA growth of around 9% year-on-year, with an assumed longer-term growth profile of around 6%.

[Edward Hunt, Head of Core Income Funds at InfraRed Capital Partners]

The design here is straightforward. The yielders will continue to throw off significant cash as they approach maturity, while the growers will continue to compound through growth CapEx and operational delivery. As they mature, will increasingly contribute to the portfolio's cash generation.

[Edward Hunt, Head of Core Income Funds at InfraRed Capital Partners]

As active managers, our job is to continue to balance both sides of this equation through timely disposals and acquisitions to solve for a compelling total return for shareholders long-term. Importantly, this chart assumes that all cash is paid out. The reality is that dividend cash cover, that element above one times, will be reinvested, and that provides a valuable source of organic growth and an even stronger long-term portfolio valuation versus the line that we set out here on the page. That's a good point to pause. I will now hand over to Mark for the financial results.

[Mark Tiner, Managing Director and CFO at HICL Infrastructure PLC]

Thanks, Ed. Good morning, everyone. I'm pleased to present to you the review of HICL's financial performance for the year today. On slide 10, we present the NAV per share bridge for the year to 31st of March 2026. This year, we have split the movement into three sections to show the different types of return. The gray blocks totaling GBP 0.01 represent steady state NAV growth generated by HICL's portfolio. This comprises the unwind of the discount rates used to value the portfolio assets, less company expenses, and the dividends paid in the course of the year.

[Mark Tiner, Managing Director and CFO at HICL Infrastructure PLC]

Absent any outperformance or change in macroeconomic assumptions, investors can expect that the NAV should increase year-on-year as the discount rate unwind covers expenses and the payment of the dividend.

[Mark Tiner, Managing Director and CFO at HICL Infrastructure PLC]

Next, we have the results of active management by InfraRed and the board, adding GBP 0.053 Of NAV per share in the year. Share buybacks of GBP 103 million at an average discount to NAV of about 24%, added GBP 0.016 To the NAV per share. Value enhancement of GBP 0.037 Was driven by InfraRed's portfolio management and asset rotation activities, and GBP 0.022 Of this was the gain realized on the sale of the A63 Motorway, for a 21% premium to carrying value. Finally, the effect of changes to macroeconomic assumptions totaled GBP 0.008. There was no increase in reference discount rates used to value assets in the year. Risk-free rates did begin to increase towards the end of March, which placed upward pressure on HICL's discount rates.

[Mark Tiner, Managing Director and CFO at HICL Infrastructure PLC]

Offsetting this was the powerful evidence of asset transactions taking place in our market sector, especially the GBP 536 million of assets sold by HICL in the year at an average 11% premium. Modest net foreign exchange gain after hedging was GBP 0.008, leading us to the year-end NAV per share of GBP 1.602. On the right-hand side, some headline metrics. As Ed mentioned, the pro forma OER has reduced to 90 basis points on a go-forward basis.

[Mark Tiner, Managing Director and CFO at HICL Infrastructure PLC]

Fund level gearing was 7.1% at year-end, and net debt was GBP 62.3 million, reflecting the GBP 150 million private placement notes, less the cash balance of GBP 87.7 million. Liquidity available to HICL at the year-end was GBP 304 million, being top co cash of GBP 87.7 million and net disposal proceeds held down in the group GBP 333 million, less investment commitments of GBP 117 million. The RCF remains undrawn, with GBP 395 million available.

[Mark Tiner, Managing Director and CFO at HICL Infrastructure PLC]

Moving the lens to the company's portfolio during the year, page 11, and picking out some key movements. Acquisitions of GBP 51.8 million represent the commitment to acquire a further stake in Cross London Trains, which closed last week. Divestments of GBP 527.8 million comprised the sale of seven PPP assets to APG and the sale of the A63 French Motorway. Strong cash distributions from the portfolio of GBP 223 million led to the year's increase in dividend cash cover to 1.1x. Gross portfolio return of GBP 323.5 million was 12.2% of the weighted opening portfolio valuation, showing outperformance over the unwind of the weighted average discount rate. Finally, we add the net disposal proceeds to retained in the portfolio to get to a total portfolio fair value of GBP 3.1 billion or GBP 3.2 billion, including future commitments.

[Mark Tiner, Managing Director and CFO at HICL Infrastructure PLC]

I move now to analyze the underlying cash generation of the portfolio and how it supports the company's strategic objectives. As last year, we show here the cash generation of each part of the portfolio, the yielders, which represent 53% of portfolio values, and the growers, which represent 47%. On the left, the yielders, which largely comprise the PPP portfolio, generated GBP 164 million of cash after debt service, tax, and life cycle costs paid. On the right, we show the growth portfolio cash flows. EBITDA of GBP 272 million was a 9% increase on the prior year. Deducting debt service, tax, and maintenance CapEx, the growth assets generated GBP 139 million of cash before growth CapEx. Together, yielders and growers generated GBP 303 million of operational cash flow for the company. On slide 13, we take this and we present three perspectives on cash cover.

[Mark Tiner, Managing Director and CFO at HICL Infrastructure PLC]

Firstly, we introduce the funds from operations or FFO metric. This captures cash generation by the portfolio after payment of all obligations, but before capital allocation decisions. To calculate funds from operations, we deduct company expenses to get GBP 256 million available for capital allocation decisions. Portfolio FFO amply covers the dividend 1.59x. Next, we look at traditional dividend cash cover. To calculate this, we take FFO and deduct the growth CapEx deployed in the year, predominantly at Affinity Water, Fortysouth, Altitude, and TNT. This CapEx adds to the portfolio asset base, increasing the revenue that can be earned from it, and hence increasing EBITDA and ultimately yield. Deducting the year's growth CapEx of GBP 79 million gives distributable cash from the portfolio of GBP 177 million, which covers the annual dividend 1.1x Finally, we look at the company's earnings cover.

[Mark Tiner, Managing Director and CFO at HICL Infrastructure PLC]

The increase in portfolio value, partly driven by the deployment of growth CapEx in recent years, less company's expenses, results in earnings covering the dividend 1.66x. Taking just the discount rate unwind minus expenses shows that earnings cover of the dividend is positive at around 1.2x, indicating that we should expect the NAV to grow each year on a steady-state basis. Turning now to the divestments in the year. HICL's returns have been underpinned by the active rotation policy operated by the manager. Highly selective divestments based on rigorous disposal criteria have been made at an average premium to NAV of 11%, validating the company's portfolio valuation approach, earning GBP 0.022 of NAV outperformance, and creating GBP 536 million of proceeds for redeployment or capital returns.

[Mark Tiner, Managing Director and CFO at HICL Infrastructure PLC]

From a portfolio composition and risk perspective, divestments have achieved a couple of targets, reducing the company's exposure to healthcare assets and to life cycle risk, reducing political risk by selling an asset in France, and improving the portfolio's inflation correlation to 0.8x. Ross will speak in more detail about the disposal of the A63 Motorway shortly. Moving to slide 15. Here we take a closer look at the portfolio debt profile and a selection of portfolio sensitivities. On the left, all portfolio debt is non-recourse to the company, and as you can see from the donut, only 0.6% of the overall balance is due for refinancing in the next two years. Indeed, only 17% of the debt is due to be refinanced at all, as the remainder is fixed-term concession debt on the PPP portfolio.

[Mark Tiner, Managing Director and CFO at HICL Infrastructure PLC]

As a result of planned debt amortization in the PPP portfolio, gross gearing reduces from 65% today to under 50% in 2040. This effectively matches the average gearing of those assets which do have refinancing requirements, 46% at 31 March. The year has also seen debt refinancings successfully completed on Affinity Water, Texas Nevada Transmission, Altitude Infra, and Fortysouth on accretive terms. On the right, we present the key portfolio valuation sensitivities. Due to the nature of the long-term contracts in our portfolio, higher inflation has a positive correlation to NAV increased since the divestments, reflecting the portfolio's 0.8x inflation correlation and acting as an offset to any increases in the discount rate. The other sensitivity I would like to comment on here is the slightly positive correlation of interest rates, considering interest income on cash and interest payable on debt.

[Mark Tiner, Managing Director and CFO at HICL Infrastructure PLC]

This reflects the large interest-earning cash balances in the PPP portfolio especially, and the fact that practically all interest on the portfolio debt is fixed in nature. With that, I'll hand over to Ross to take you through the portfolio performance section.

[Ross Gurney-Read, Director of Fund Management at HICL Infrastructure PLC]

Thanks very much, Mark. A very good afternoon, everyone. As usual, I'll start with a reminder of HICL's core infrastructure framework on slide 17, which sets out the attributes that we're looking for when we make new investments, namely high-quality cash flows, defensive market positioning, and a strong social license to operate. Ed will come on and talk about our pipeline. When we're looking at new investment opportunities, we're guided by this framework, which applies across different sectors and return profiles.

[Ross Gurney-Read, Director of Fund Management at HICL Infrastructure PLC]

Turning to page 18, you can see the familiar snapshot of HICL's diversified portfolio. The charts have moved a little bit compared with last year as a result of transaction activity, but the geographic split hasn't changed too much, with the disposals in the U.K. and France broadly offsetting.

[Ross Gurney-Read, Director of Fund Management at HICL Infrastructure PLC]

The 10 largest assets are around 55% of the portfolio by value, and the weighted average asset life is now up at over 34 years. Let's dive into the portfolio performance. I'll run through the six largest assets, cover the PPPs as a whole, and then I'll come on and talk about the A63 Motorway disposal at the end. Starting with Affinity Water on the left-hand side of page 19.

[Ross Gurney-Read, Director of Fund Management at HICL Infrastructure PLC]

This is HICL's largest investment at 13.6% of portfolio value. Affinity continues to perform well financially, finishing the first year of its regulatory period with EBITDA slightly ahead of forecast. This solid in-year performance is underpinned by a stable and resilient capital structure, as well as continued growth in the regulatory capital value of the business, which is indexed to CPI inflation.

[Ross Gurney-Read, Director of Fund Management at HICL Infrastructure PLC]

To support the ambitious AMP8 investment plan, HICL executed its GBP 50 million incremental equity investment during the year. This also set the foundation for the resumption of distributions, with HICL receiving its first dividend from Affinity Water in over five years, in line with our forecast. This was another key milestone for the business, which, following PR24, is now delivering a stable mix of income and capital growth. To reflect the improved cash flow certainty, we reduced the discount rate by 10 basis points during the year, which contributed to another increase in valuation.

[Ross Gurney-Read, Director of Fund Management at HICL Infrastructure PLC]

Operational performance is still a key focus for the management team and will continue to be under the leadership of the incoming CEO, Mark Garth, who joins from United Utilities. It was pleasing to see Ofwat recognizing the company as a top performer in several areas during the year, albeit customer experience remains an area of focus.

[Ross Gurney-Read, Director of Fund Management at HICL Infrastructure PLC]

Affinity will draw on Mark's proven track record here at UU. More broadly, and notwithstanding the potential for political change in the U.K., we expect the Cunliffe Review and the subsequent White Paper to be broadly supportive. Recent transactions in the sector have also demonstrated that there is investor appetite for water companies in public and private markets, and particularly those that are well-performing water only companies with clean capital structures. Moving on to Texas Nevada Transmission, and as a reminder, this asset actually comprises two electricity transmission networks, which are co-owned and managed by LS Power. Cross Texas Transmission is a regulated utility. One Nevada Transmission has a long-term availability contract with NV Energy, an A-rated Berkshire Hathaway subsidiary. As you can see, both continue to perform very well operationally. In October 25, CTT conducted its regulatory settlement with the Public Utility Commission of Texas.

[Ross Gurney-Read, Director of Fund Management at HICL Infrastructure PLC]

This settlement is a slightly more straightforward exercise than we have in the U.K. The regulation operates under a cost-of-service delivery model, and therefore the key output is the allowed return on equity. This was confirmed at 9.6%, in line with our valuation forecast and demonstrating the need for the regulator to appropriately incentivize investment in the network. This need for investment is only going to get larger. There was the conclusion of a third-party study, which was included in the valuation. More broadly, the regulator is only just starting to come to terms with the expected need for power to fuel AI. In Texas, massive data centers now dominate the interconnection queue, making up over 70% of new requests.

[Ross Gurney-Read, Director of Fund Management at HICL Infrastructure PLC]

It is estimated that by 2028, the state could have 40 GW of data centers and that this could increase by up to 150 GW within the next five years. To put that in context, that is double the U.K.'s total energy generation capacity. For our investment in TNT, this means that the focus is likely to be on growth CapEx for the foreseeable future to support more interconnections and a more resilient network. On page 20, we provide some detail on HICL's two large transport assets. Starting with LSPH, international train path bookings grew by 4% year-over-year, and retail income outperformed our forecast by 9%. On the domestic side, revenues were still at the contractual underpin level, albeit the level of top up by the DfT is now minimal as Southeastern trains continued to add additional services during the year.

[Ross Gurney-Read, Director of Fund Management at HICL Infrastructure PLC]

In fact, from the May 26th timetable, which kicked in a couple of weeks ago, Southeastern are now back at the underpin. While this doesn't have a direct valuation impact, it is encouraging to see sustained and growing demand across the user base. This dynamic is important in the context of a second international operator, which is the number one priority to unlock HICL's value of this investment. Once again, there's been a lot of good progress in the year, most notably the ORR awarding depot capacity to Virgin Trains in October. This wasn't challenged by Eurostar and was supported by detail and credible operating plan. The ruling doesn't preclude other operators launching services. In fact, Trenitalia continues to progress its own plans using existing rolling stock and depots in France.

[Ross Gurney-Read, Director of Fund Management at HICL Infrastructure PLC]

Shortly after the period end, Virgin and LSP jointly applied to the regulator for approval of a framework track access agreement, which would provide Virgin with access rights to the line. This is conditional on ordering rolling stock within the coming months, and as I've always said, this will be the trigger for us to have another look at the valuation rate or forecast. We have slightly reduced the discount rate and incorporated the latest estimates for the significant station expansion works required at St. Pancras to accommodate a step up in international services.

[Ross Gurney-Read, Director of Fund Management at HICL Infrastructure PLC]

Moving on to Cross London Trains, which is now HICL's fifth largest asset if you include the 6.5% stake we acquired in March. Because that transaction completed on the 20th of May, which is after the year-end, the valuation of the new stake is just based on a commitment at the original acquisition cost of just over GBP 50 million. At the next reporting period, we intend to revalue that incremental investment in line with the approach taken for the existing stake. This is expected to result in a substantial uplift to NAV per share, adding over a penny and reflecting the off-market price achieved from minority stake and HICL's favorable rights as an existing shareholder. This is an asset we know well and has performed consistently since our first acquisition around four years ago.

[Ross Gurney-Read, Director of Fund Management at HICL Infrastructure PLC]

Cash flow visibility is particularly strong for the next decade, given the availability-based contract provided by the Secretary of State for Transport, and the fact that maintenance obligations sit with Siemens and are directly contracted with the operator. From 2036, the fleet will be relet on commercial terms. Our assumptions are based on a partial inflation catch-up and a useful life of 45 years, which we think is reasonable based on historic data and the unique nature of this fleet. Turning over to slide 21, we cover HICL's two digital assets. Starting with Fortysouth, where EBITDA grew by over 10% for the second consecutive year and slightly outperformed our valuation assumption. Most of this was driven by CapEx, although the long-term anchor tenancy contract also captured the benefit of higher than expected inflation.

[Ross Gurney-Read, Director of Fund Management at HICL Infrastructure PLC]

At the year-end, Fortysouth had delivered over 230 new towers since the business was carved out of One NZ, and this demonstrates the successful execution of the build-to-suit program, under which new towers are first developed to meet One NZ's specific 5G coverage requirements, and then capacity to accommodate additional tenants is increased over time. Building on this expanded capacity, Fortysouth signed 60 new colocation agreements during the financial year, around 3/4 of which were the New Zealand Emergency Services Network. In March, the management team also reached agreement with Spark on a structured 75-site colocation program to be rolled out over the next five years. Crucially, this deal significantly extends the contract duration and inflation protection of the collocations, which improves revenue quality and supports the long-term finance ability of the business.

[Ross Gurney-Read, Director of Fund Management at HICL Infrastructure PLC]

Moving on to Altitude Infra, where our valuation remained broadly stable over the year, despite EBITDA being behind our forecast assumption. This primarily reflected short-term softness in the business services segment, counterbalanced by supportive regulatory guidance which will enable an increase in access tariffs payable by ISPs. This really highlights the importance of investment discipline in a sector as diverse as fiber to the home. Altitude Infra benefits from France's attractive rural market framework, which is underpinned by national deployment targets. The company earns inflation-linked wholesale revenues from all the major ISPs under a regulated tariff structure. During the year, the company achieved the substantial completion of the rollout of the network, and as a result, the most important long-term valuation driver is increasing the take-up or penetration of fiber, regardless of internet service provider.

[Ross Gurney-Read, Director of Fund Management at HICL Infrastructure PLC]

This increased to 63% from 56% in the previous year, and this was in line with our forecast, and we expect this to continue to increase over the coming years as the copper network is decommissioned. Turning to slide 22, we cover the PPPs, which represent 57% of the portfolio by value. These assets benefit from availability-based contracted revenues, which tend to be linked to inflation and fixed rate long-term debt structures. From an operational perspective, the vast majority of HICL's PPPs performed in line with our expectations during the year, with aggregate availability above 99%. In a portfolio of this size, flare-ups do happen from time to time, and we did recognize a provision against Lewisham Hospital during the period to reflect an ongoing contractual dispute with the trust.

[Ross Gurney-Read, Director of Fund Management at HICL Infrastructure PLC]

More broadly, though, this demonstrates the importance of maintaining collaborative working relationships, particularly as assets approach the end of their concession lives. During the year, three assets were successfully returned to public sector ownership, two roads, and a police training center. This provides an excellent model as handbacks start to ramp up over the coming years. The clients received the assets in good condition, and HICL slightly outperformed its financial projections. As well as managing the assets themselves, InfraRed continues to manage the composition of the PPP portfolio through active rotation. During the year, HICL sold seven PPP assets for a combined GBP 225 million. As with previous disposals, these assets were targeted. The sale was accretive to key metrics such as inflation correlation and asset life and reduced exposure to U.K. healthcare.

[Ross Gurney-Read, Director of Fund Management at HICL Infrastructure PLC]

It also further reduced the PPP portfolio sensitivities, most notably to life cycle costs, as you can see on the right-hand side of the slide. It would be remiss of me not to mention the other significant disposal in the year. We have a case study on the A63 on page 23. This is an asset which HICL owned for nine years, but InfraRed has been involved with for 15. Between 2011 and 2016, InfraRed developed, built, stabilized, refinanced, and successfully exited the project, which gave us a unique vantage point to acquire a stake for HICL in 2017 as one of the first non-PPP assets in the portfolio. We subsequently took the opportunity to make further incremental investments, leveraging our shareholding position to achieve favorable terms, much like the CLT acquisition this year. Traffic has proven to be extremely resilient, even in the face of COVID-19.

[Ross Gurney-Read, Director of Fund Management at HICL Infrastructure PLC]

As you can see on the page, it's a steady 1.2% growth per year on average. When you layer on inflation-linked toll increases and value enhancement activities, this results in revenue growing by over 40% over HICL's ownership period. Much like the North West Parkway, this put us in a great position to exit to a strategic buyer, realizing a 14% IRR and GBP 0.022 of NAV outperformance for shareholders. These are really compelling numbers. Just to finish, I'll try and demonstrate the potential value which can be created by managing assets through their full lifespan. If HICL had bought its 24% stake back in 2011 on the same terms as InfraRed's unlisted fund, it would've paid EUR 49 million. Looking at the disposal price alone, that equates to a multiple of over 7x.

[Ross Gurney-Read, Director of Fund Management at HICL Infrastructure PLC]

When you include all the distributions we've received, that increases to over 10 times. On that note, I'll hand back to Ed, who will take you through the outlook.

[Edward Hunt, Head of Core Income Funds at InfraRed Capital Partners]

Thanks, Ross. Back to me to round off today's presentation, and I want to do that by providing a little bit of commentary on how we're seeing the infrastructure market today and how we see it developing going forward. As we've highlighted in many of these presentations, we're in the midst of an infrastructure super cycle, and the numbers speak for themselves here on the slide. Over GBP 100 trillion of global infrastructure investment is needed by 2040, spanning transport, energy, communications, social infrastructure, all sectors in which HICL has made investments. We're seeing this growth come through already in the results. We've talked a lot about the key megatrends driving infrastructure development, energy resilience, digitalization, demographic shifts.

[Edward Hunt, Head of Core Income Funds at InfraRed Capital Partners]

These drivers are only becoming more acute as energy security takes center stage, as AI transforms the way we live and work, and an aging and increasingly urban populace strains our infrastructure systems. This is not a one-cycle story. This is a multi-decade tailwind, and HICL is positioned to benefit substantially from it. Let's unpack this a little bit on slide 26. On slide 26, we're stepping back to frame what we see as an evolving infrastructure landscape, market that's changing in scale, shape, and return characteristics. There are four structural elements to highlight. First, the role of the private sector is increasing materially. This is beyond simply funding assets and extends to the increasing role of the private sector in sponsoring and procuring new infrastructure. We see this already in HICL through assets such as Fortysouth and Texas Nevada Transmission.

[Edward Hunt, Head of Core Income Funds at InfraRed Capital Partners]

This dynamic materially broadens the infrastructure sponsor landscape versus dealing with a handful of governments alone. Successful investors will be those that can match this across sectors and geographies with an international multi-strategy platform, with the networks, relationships, and expertise to originate across a much broader landscape. Second, infrastructure systems are becoming more interconnected as energy and digitalization are increasingly interdependent and permeate transport, utilities, and social infrastructure. The energy intensity of digitalization, the decarbonization of heat and transport, and the drive for efficiency across utilities are all playing into this. As these sectors become more intertwined, it reinforces the need for a diversified approach across sectors and systems to fully capture the benefit of the megatrends. Third, the number of investable assets is increasing markedly, with megatrends driving new sectors and asset types.

[Edward Hunt, Head of Core Income Funds at InfraRed Capital Partners]

As these sectors mature and de-risk, they cascade down the risk spectrum into HICL's investable universe. Managers with expertise across the full asset life cycle will be better positioned to have sharpened expertise in these new sectors and to position earlier for assets as they de-risk. Both play directly to HICL's construction experience, as well as InfraRed's long-term track record of delivery, both across core and higher risk infrastructure strategies. Fourth, dynamics within core infrastructure itself are changing. As mature assets are impacted by these megatrends, they're becoming more CapEx intensive, reducing near-term yields, but supporting stronger growth and more attractive longer-term returns. This increasing complexity demands a more active management approach, playing to HICL's active business model and InfraRed's high touch approach, supported by over 160 professionals globally and a large dedicated asset management team.

[Edward Hunt, Head of Core Income Funds at InfraRed Capital Partners]

Stepping back, these elements point to a broader, more interconnected, more dynamic, and more attractive market for infrastructure investment for those managers that have the attributes to capture it. These dynamics play firmly to HICL's and InfraRed's strengths, creating the opportunities to continue to improve HICL's growth profile and total return over time while preserving the portfolio's core attributes. On slide 27, we show really the practical expression of this positioning. We're seeing a large volume of opportunities in the market, but the key point here is around the discipline and selectivity within that. The funnel on the left of the slide sets that out. A broad universe of over 80 opportunities screened recently, narrowed through discipline filtering to a small number that we're actively progressing, and ultimately just the one executed Cross London Trains. Looking at what we're progressing, the composition here reflects the themes we've discussed.

[Edward Hunt, Head of Core Income Funds at InfraRed Capital Partners]

Across sectors with strength in utilities, transport, and digital, across geographies with a continued focus on markets that we know well. Returns that are accretive to HICL's portfolio on a risk-adjusted basis. That's an important consideration. We're not simply chasing return up the risk spectrum, but we're focusing on particular situations in high-quality assets where these offer attractive risk-adjusted returns and compare favorably to the ongoing share buyback program. In the current environment, where some dislocation remains in private markets, we are seeing opportunities that meet these criteria more readily, spanning both new investments and more proprietary opportunities, such as the Cross London Trains investment. Just to reiterate, this is about deploying capital highly selectively, where it enhances the portfolio while maintaining strong investment discipline set against alternative uses of that capital. Finally now, on slide 28, we bring that positioning together.

[Edward Hunt, Head of Core Income Funds at InfraRed Capital Partners]

HICL is designed to capture what we see as a long-term structural opportunity in infrastructure. Not tactically, but through a consistent and strategic approach. This approach is underpinned by HICL's portfolio construction, yielders and growers, as well as its approach to diversification across regions, sectors, and megatrends. The portfolio is positioned to grow with these megatrends, as the GBP 600 million of growth CapEx in the next five years illustrates, as well as the attractive pipeline of opportunities linked to these trends that we see in the market. Of course, disciplined capital allocation remains at the forefront through the continuation of selective asset recycling, a discerning approach to new investments, and the continuation of HICL's sector-leading buyback program, where it represents the best use of capital.

[Edward Hunt, Head of Core Income Funds at InfraRed Capital Partners]

Finally, supported by the platform itself, which provides the capability, the track record to execute and actively manage in a more complex and a more exciting market. On that note, also to plug that we're lining up a capital markets day for the company in early July, where we can spend more time on this market and HICL's strategy within it. With that concludes the formal presentation, and we're very happy now to take questions from those online. Thank you very much.

[Mohammed Zaheer, Managing Director and Head of Listed Investor Relations at HICL Infrastructure PLC]

Starting with a pre-submitted question, Mark, you're probably best placed for this one. That while we await to see the details, with the Chancellor seemingly intent on banning or taxing interest-generating investments in ISAs, if that comes to pass, will the company reconsider its dividend plus interest distribution policy?

[Mark Tiner, Managing Director and CFO at HICL Infrastructure PLC]

Thanks, Mo. If a policy like that was contemplated in the U.K., it is certainly something that we would have a look at to judge the impacts on shareholders and on HICL itself. HICL, being an investment trust, pays no tax on dividend income or capital gains, and it has the ability, as you know, to stream interest income down to shareholders directly. We disclose the interest streaming percentage every quarter. HICL, like all of its peers, makes use of loans to fund investments. Part of the reason for doing so, is the benefit of the tax deductibility of the interest on those loans down at portfolio level. That's why we have a bit of context as to why firms, funds like HICL use loans in order to fund investments.

[Mark Tiner, Managing Director and CFO at HICL Infrastructure PLC]

We would certainly be considering the benefits of using loans to fund investments against the impact of the interest streaming not being allowed into an ISA in that situation. That's something that we would certainly look at.

[Mohammed Zaheer, Managing Director and Head of Listed Investor Relations at HICL Infrastructure PLC]

Thanks, Mark. A couple of questions on the financials at Affinity. What contribution did Affinity Water make to the annual return, and what dividend did Affinity Water pay?

[Ross Gurney-Read, Director of Fund Management at HICL Infrastructure PLC]

Very happy to take the questions on Affinity. In terms of the contribution to return, Affinity slightly outperformed our expectations in the period, as I mentioned. There are two contributors to this. Firstly, just EBITDA being slightly ahead of expectations, but also, as I mentioned, we reduced the discount rate of the investment by 10 basis points in the period, reflecting the fact that dividends have commenced. Therefore, an element of the portfolio outperformance, which Mark spoke through, comes from Affinity Water. Then remind me, Mo, the second question was on

[Mohammed Zaheer, Managing Director and Head of Listed Investor Relations at HICL Infrastructure PLC]

What dividend did Affinity Water pay?

[Ross Gurney-Read, Director of Fund Management at HICL Infrastructure PLC]

Yeah. When we think about the distribution coming from Affinity Water, you don't get the kind of yield that you expect from, for example, a PPP asset. That's very much by design because there is still an element of the free cash generated by Affinity that's being recycled into the business to fund the investment in the regulatory capital value, and we very much like that. We want Affinity to be an asset that has a degree of income, but also a degree of capital growth. The distribution that we get from Affinity Water is a slightly more modest level of yield, around 4% to 5% of the investment value. For us, the important thing is that it's stable over time. The distribution that Affinity's now made, we expect to be recurring at a similar level for the rest of this control period.

[Mohammed Zaheer, Managing Director and Head of Listed Investor Relations at HICL Infrastructure PLC]

Thanks, Ross. We've had a few questions around the outlook, capital allocation, and strategy, Ed, that would appreciate your responses too. There are a couple of questions around the buyback hurdle rate and investment decisions and how you think about investments in the context of the return available from buybacks.

[Edward Hunt, Head of Core Income Funds at InfraRed Capital Partners]

Yeah. We use the buyback hurdle as a very clear discipline to judge the appropriate use of capital. We do that using the share price and the discount rate sensitivities to derive an effective return hurdle. We also need to consider risk in that, you're buying the portfolio versus a new investment. We use that rigorously and we discuss that a lot with the board. Ultimately, investment decisions do go to the board. In terms of capital allocation, more generally, we're looking at not just focusing on one of the levers available, buybacks or investments, but actually looking at all the levers in concert. Be that an increase in the dividend as we've shown today, be that continuation of the sector-leading buyback program that we've continued to deliver, or through accretive investments such as Cross London Trains, judged against the returns available from other uses.

[Edward Hunt, Head of Core Income Funds at InfraRed Capital Partners]

We think that by knitting those three elements together, we've got a stronger, not just tactical approach, but a strategic approach, through which to bring new investors in behind the company. That's ultimately what's going to help drive the discount towards the NAV. There is very strict investment discipline. There's a lot of board involvement. We're very mindful of that buyback hurdle as an input to investment decisions.

[Mohammed Zaheer, Managing Director and Head of Listed Investor Relations at HICL Infrastructure PLC]

Thanks, Ed. Just as you touched on the discount to NAV, there are a couple of questions on this topic. One, whether you believe that the failed merger with TRIG has had any impact on the discount level. Secondly, what the roadmap is to decreasing the discount and whether you have a target discount level for the HICL shares.

[Edward Hunt, Head of Core Income Funds at InfraRed Capital Partners]

Well, my target level is no discount. To be clear, that's been a target for some time now. In terms of the discount to NAV, the discounts across the sector have broadly been sector-wide. HICL has broadly traded in with its peer group over the last three years. We saw a little bit of bouncing around, as you might expect, with some turbulence around the strategic announcements, and that's settled down now. Over the year, we've seen the share price total shareholder return at 13.1%, so that's share price appreciation over the year, plus dividends on offer to shareholders. Since period end up to Friday, we saw another 8% of share price appreciation. Then yesterday and today we're looking at another 4%-5%.

[Edward Hunt, Head of Core Income Funds at InfraRed Capital Partners]

We think that the share price is responding to the great work that we're doing on the ground with HICL, both in terms of the operational performance of the assets, what we do over and above that with asset rotation and outperformance on particular investments, and more generally, the approach to capital allocation, which remains disciplined and effective. I think you'll see that the discount to NAV has come in quite substantially, and we're very focused on making sure that that trend continues and that we get back to share price. Also worth noting today that a new fee basis was announced, which means that the remuneration to the investment manager is based 100% on market capitalization of the company. Not only are we living and breathing the experience of shareholders through our own holdings in HICL, but now through the direct management fee to InfraRed.

[Edward Hunt, Head of Core Income Funds at InfraRed Capital Partners]

Hopefully that's another signal of the alignment and our laser focus on improving the share price rating.

[Mohammed Zaheer, Managing Director and Head of Listed Investor Relations at HICL Infrastructure PLC]

Thanks, Ed. Ross, another question on Affinity and what accounts for the increased exposure to Affinity Water, and although Affinity Water is a supply-only company, is there not the danger that the biggest investment being a water company simply puts off retail investors from investing in HICL, given the general dislike of water companies at the moment in the U.K.?

[Ross Gurney-Read, Director of Fund Management at HICL Infrastructure PLC]

Okay, a couple of components there. Just firstly, in terms of the exposure to HICL as an investment, you're right to say that this has increased over time. Our portfolio exposure to HICL at the moment is 13.6%. There are a couple of reasons why that steadily increased. Firstly, because of the divestment activity over the last three years or so. The fact that we've disposed over GBP 1 billion of investments in the last three years, and not fully recycled all of those proceeds into new investments, means that all of the remaining investments become slightly larger as a percentage of the portfolio value. There's a mechanical impact at play. Secondly, and equally importantly, is the fact that the valuation of Affinity Water over the last year or so has grown pretty substantially.

[Ross Gurney-Read, Director of Fund Management at HICL Infrastructure PLC]

Just unpacking that, some of that's to do with the fact that we've injected another GBP 50 million as a new investment into that business, to fund growth CapEx, as I mentioned. Also there's been genuine increase in the valuation following the good PR24 final outcome. Also the fact that the discount rate has reduced over the last couple of years, really chipping away at some of the premium we'd built in to account for some of the uncertainties around the regulatory process, and for example, the Cunliffe Review, the government white paper. Valuation's pretty substantial now as a percentage, and we're happy with where it sits.

[Ross Gurney-Read, Director of Fund Management at HICL Infrastructure PLC]

In terms of the perception of water companies, and noting the point that Affinity is a water-only company and has no sewerage exposure, we are clearly cognizant that it's a sector that's often in headlights that will continue to attract some news flow. I think I'd just draw your attention to the fact that the successful companies in this space have not struggled to attract investment opportunities. In fact, we've seen very recently GBP 800 million of new equity being raised by United Utilities. There is clear investor appetite for well-performing companies in the water sector. That differentiation between companies, I think, is only becoming more stark. For us, we have no issues with our position in this company. We think that the focus that the management team has on the operational performance will continue to be right and put us in good stead going forward.

[Mohammed Zaheer, Managing Director and Head of Listed Investor Relations at HICL Infrastructure PLC]

Thanks, Ross. A couple of final questions, Ed, on capital allocation. There's two questions on the dividend. The dividend growth has been below inflation. How does the board intend to address this outcome so that the dividend each year produces a total return that exceeds the eroding effects of inflation?

[Edward Hunt, Head of Core Income Funds at InfraRed Capital Partners]

Yes. The dividend's moved up by GBP 0.0015. The dividend policy is that it's a progressive policy, not that it's matched to inflation, and investors shouldn't expect it to go up with inflation. What I mentioned earlier in the presentation is that the payout and reinvestment settings were now appropriate such that the company's earnings were exceeding the level of the dividend, and that meant that investors could rely on, all things being equal, steady state NAV progression period on period. We make that judgment around getting the balance right between NAV growth and dividend growth. We think it's excellent that we can continue to offer a progressive dividend. The dividend yield is very strong, and that's reflected across the peer group. We also offer a genuine NAV growth story as part of an overall total return package, and that's what investors should expect from HICL.

[Mohammed Zaheer, Managing Director and Head of Listed Investor Relations at HICL Infrastructure PLC]

Thanks, Ed. Final question. Are you looking at Arqiva, which DGI9 is looking to divest?

[Edward Hunt, Head of Core Income Funds at InfraRed Capital Partners]

No, we are not looking at Arqiva.

[Mohammed Zaheer, Managing Director and Head of Listed Investor Relations at HICL Infrastructure PLC]

Brilliant. Look, that's all of the questions that have been submitted online. Thanks again for joining us. Any further questions, you can reach out to the investor relations team.

[Operator]

That's great. Thank you all very much indeed for updating investors today. Could I please ask investors not to close this session, as you'll now be automatically redirected to provide your feedback, which will help the company better understand your views and expectations. On behalf of the management team, we would like to thank you for attending today's presentation. Good afternoon to you all.

Participants

Executives

• Mark Tiner, Managing Director and CFO
• Mohammed Zaheer, Managing Director and Head of Listed Investor Relations
• Ross Gurney-Read, Director of Fund Management

Analysts

• Edward Hunt, Head of Core Income Funds at InfraRed Capital Partners