InfraRed’s Asset Management and Portfolio Management teams pursue opportunities to deliver outperformance from the existing portfolio through a systematic, strategic programme of value enhancement. This upside is often shared between HICL’s shareholders and public sector clients for PPP projects, or with the customers of regulated assets through periodic regulatory price reviews.

This is achieved through:

• Sponsoring the implementation of initiatives within portfolio companies to optimise asset business plans or capital structures (for example, refinancing existing senior debt facilities)
• Developing and implementing procurement efficiencies across HICL’s large and diverse portfolio, in particular by leveraging economies of scale (for example, management services and
  insurances for PPP projects)
• Exploring opportunities to add to or upgrade asset level facilities to improve stakeholder outcomes whilst supporting long-term shareholder returns (for example, undertaking contract variations on PPP projects that add to the scope of services)
• Driving efficient financial and treasury management of HICL, seeking opportunities to reduce ongoing charges
• Considering where value can be improved, or portfolio risk profile improved, through selective disposals

InfraRed’s Asset Management and Portfolio Management teams work closely together, in partnership with the management teams in HICL’s portfolio companies, to deliver HICL’s Investment Proposition by preserving the value of investments for shareholders and stakeholders. The objective is to ensure portfolio companies continue to operate with the endorsement of their key stakeholders, including through the delivery of contractual and regulatory requirements, in order to deliver the base-case investment return.

This is achieved through:

• Providing effective governance of portfolio companies, usually through board representation
• Building relationships with key portfolio company counterparties, in particular public sector clients/regulators
• Facilitating and/or driving resolution of operational issues, including disputes and critical issues
• Delivering HICL’s Sustainability strategy at the asset level by promoting greater awareness within portfolio company management teams and driving the pursuit of specific initiatives to comply with regulation and support sustainable, responsible business operations
• Oversight of financial performance of each investment against HICL forecasts
• Optimising cash efficiency by managing cash flow from HICL investments and minimising cash drag on returns
• Managing the process and analysis required for valuations of HICL’s portfolio
• Following prudent financial management practices (e.g. accounting and tax policies; treasury processes)

HICL has a clearly defined Investment Policy. This sets the over-arching framework within which HICL seeks to construct a resilient core infrastructure portfolio that delivers the Investment Proposition and is consistent with HICL’s overall risk appetite. Fundamentally it does this through:

• A structured asset quality evaluation framework focusing on cash flow quality, market positioning and criticality
• Careful and deliberate portfolio construction to limit exposure to any one factor and in so doing improve portfolio resilience
• An overarching focus on sustainability that is built into the investment process (See Sustainability page)
• An objective that acquisitions generally improve HICL’s measures for portfolio accretion

Working within investment parameters approved by the HICL Board, InfraRed is responsible for the selection and pricing of new investments and, from time-to-time, disposals. The Acquisition Strategy is periodically reviewed by the Board and agreed with InfraRed.

InfraRed’s Origination and Execution team, in coordination with the Fund Management team, uses a variety of channels to source accretive transactions for HICL. These include:

• Originating off-market transactions through relationships within InfraRed’s extensive network of investment partners and advisers;
• acquiring further equity interests from co-shareholders of existing portfolio companies;
• participating selectively in primary investment activity, as part of procurement processes sponsored by the public sector;
• participating in competitive auctions of investments in the secondary market; and;
• making selective disposals where these are accretive to the portfolio and optimise portfolio construction.