HICL Infrastructure Targets 10%+ Returns With Self-Funded Growth Strategy

Key Points

• HICL Infrastructure is targeting 10%+ medium-term total returns by shifting more of its portfolio toward growth assets while keeping its progressive dividend policy and low-risk infrastructure profile.
• The company’s new “enhancers” bucket will focus on higher-growth investments but be capped at 20% of the portfolio, with the rest remaining in traditional “yielders” and “growers” to preserve defensive characteristics.
• HICL also unveiled a self-funded capital plan with no new equity issuance or additional fund-level leverage, projecting stronger NAV per share and continued dividend coverage over the next several years.

HICL Infrastructure LON: HICL used a capital markets seminar to set out a strategy aimed at lifting medium-term total returns while maintaining its progressive dividend policy and core infrastructure risk profile.

Mike Bane, Chair of the Board of Directors, said the company is marking 20 years since its IPO as the first infrastructure investment company on the main market. He said HICL has delivered an 8.5% per annum NAV return, nearly GBP 1.50 in dividends and more than GBP 0.60 of NAV growth since listing.

Bane said the board has set “a clear strategic direction” for the next phase of the company’s development, focused on “a higher total return with an attractive and progressive yield” alongside the defensive positioning investors seek from infrastructure.

HICL Targets 10%+ Medium-Term Returns

Edward Hunt, Lead Manager of HICL Infrastructure, said the company is seeking to tilt the portfolio further toward growth and a “10%+ target return over the medium term.” He said the plan is intended to increase NAV returns and improve the company’s equity story.

Hunt said HICL’s strategy rests on four points: its active management track record, recent portfolio repositioning, a larger infrastructure opportunity set, and investor demand for higher returns in a higher-rate environment.

The strategy introduces a category of higher-growth investments HICL calls “enhancers,” which would be built up gradually and capped at 20% of the portfolio. Hunt said the remaining 80% or more would stay anchored in “yielders” and “growers,” preserving the company’s core infrastructure positioning.

Hunt said enhancers would be focused on hard assets, essential services, long-term cash flows and mature markets. In a Q&A session, he said HICL does not intend to use the category simply to take on more risk, adding that merchant interconnectors are “not on the menu.”

Infrastructure Market Shifts Toward Growth

Gianluca Minella, Head of Research at InfraRed Capital Partners, said the infrastructure market is being reshaped by geopolitical uncertainty, persistent inflation, higher interest rates, digitalization, energy security and electrification.

Minella said more than GBP 100 trillion of global infrastructure investment is projected through 2040 across transport, energy, social infrastructure and other sectors. He said investment is increasingly being driven by growth rather than maintenance or replacement alone.

He also highlighted the growing importance of the mid-market, which InfraRed defines as equity tickets in the GBP 100 million to GBP 300 million range. Minella said roughly three-quarters of infrastructure transactions are now occurring in the mid-market, where new sectors often become institutionalized and businesses have opportunities to scale.

Management Highlights Track Record of Active Ownership

Ross Gurney-Read, Director of Fund Management at InfraRed, said HICL’s 8.5% total NAV return since IPO has exceeded both its original upper target and the average portfolio discount rate over the period. He said active management has accounted for around two-thirds of HICL’s total NAV growth since IPO.

Gurney-Read identified four levers of value creation across an asset’s life cycle:

• Construct: delivering and de-risking greenfield infrastructure assets.
• Expand: investing incremental capital to grow asset bases and earnings.
• Operate: maintaining service delivery, cost discipline and downside protection.
• Divest: selling assets selectively at attractive prices.

He said HICL has delivered 18 construction assets across five countries and five sectors, overseeing approximately GBP 6.5 billion of construction capital expenditure. He cited the Blankenburg Tunnel in the Netherlands, which opened on schedule in 2024 and achieved more than 98% availability in its first full year.

Gurney-Read said HICL has also completed 35 asset sales since IPO, generating proceeds of more than GBP 1.5 billion and contributing more than GBP 0.12 of NAV outperformance. Examples included the A63, which generated a 14% holding-period IRR, and Queen Alexandra Hospital, which sold at a 38% premium to NAV.

Growth Assets Presented to Investors

Mark Tiner, CFO of HICL, said the company’s portfolio has evolved from being entirely public-private partnership assets at IPO to approximately 50% non-PPP by March 2026. He said growth assets have extended the life of the business, improved inflation linkage and supported stronger earnings coverage.

Executives from three portfolio companies then presented their businesses. Adam Stephens, CFO of Affinity Water, said Affinity is the largest water-only company in the U.K., serving around 4 million customers and producing about 1 billion liters of water a day. He said Affinity delivered FY 2026 revenue growth of 20% to GBP 438 million and EBIT growth of 127% to GBP 75 million, while capital investment reached GBP 209 million. Stephens said gearing had reduced to 69% and dividends had resumed, with GBP 34.5 million paid during the year.

Nick Clarke, CEO of Fortysouth, said the New Zealand mobile tower company has grown EBITDA by 10% year-on-year since its carve-out from Vodafone New Zealand. He said all revenue is inflation-indexed and 99% is subject to very long-term contracts. Clarke highlighted new tower development, co-location opportunities and digital tools that have reduced the time needed to assess new co-location requests.

Robert Sinclair, CEO of London St Pancras High Speed, said the high-speed rail line between St Pancras and the Channel Tunnel remains 50% empty, creating a major growth opportunity. He said Eurostar is targeting growth to 30 million passengers across its network by the early 2030s, while Virgin and FS Group are working toward launching cross-channel services. Sinclair said competition could drive modal shift from air travel to rail and noted plans to double capacity at St Pancras.

Self-Funded Capital Plan

Tiner said the strategy is designed to be entirely self-funded. Over five years, HICL expects GBP 1.6 billion of sources and uses, including GBP 1 billion of net portfolio cash generation, GBP 300 million of existing disposal proceeds on the balance sheet and GBP 300 million from further disposals of mature yield assets.

Uses include GBP 700 million for new investments or share buybacks, GBP 800 million for dividends and GBP 100 million retained in the company. Tiner said the revolving credit facility was undrawn and the plan assumes no new fund-level leverage and no new equity issuance.

Tiner said the Evolve strategy could lift the weighted average discount rate from 8.5% to 10% over four to six years. He said estimated NAV per share in eight to 12 years could reach GBP 2.12 under the strategy, compared with GBP 1.79 in the steady-state case. He also said the dividend policy remains progressive, with the dividend forecast to remain covered by at least 1.0 times throughout the plan.

In response to investor questions, Tiner said HICL is not assuming disposal premiums on enhancer assets and estimated average holding periods for enhancers at five to seven years. Hunt said HICL would continue to value diversification and would not seek a single large asset in the enhancer allocation.

About HICL Infrastructure LON: HICL

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.

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