Enriching
lives through
infrastructure
HICL Annual
Report 2024
Contents
HICL Annual Report 2024
2024 Highlights 2
Chair’s Statement 3
HICL at a glance 6
The Infrastructure Market 10
HICL’s Business Model 14
Key Performance and 18
Quality Indicators
Investment Manager’s Report 20
Top 10 Assets 26
Sustainability 36
Financial Review 40
Valuation of the Portfolio 46
Risk and Risk Management 53
Viability Statement 62
Strategic Report Disclosures 63
TCFD 65
Strategic Report
For definitions of our financial terms used throughout this report, please see our Glossary on pages 162 to 163
1
FinancialsGovernanceStrategic ReportHICL Annual Report 2024
1
Governance Financials
KPMG LLP’s Independent Auditor’s Report 100
Income statement 112
Statement of financial position 113
Statement of changes in shareholders’ equity 114
Cash flow statement 115
Notes to the financial statements 116
Appendix 1: SFDR Disclosures 148
Appendix 2: Valuation Policy 160
Appendix 3: Infrastructure Market – Sources 161
Glossary 162
Directors and Advisers 164
Board and Governance 72
Board of Directors 74
The Investment Manager 76
Corporate Governance Statement 77
Management Engagement 81
Committee (MEC)
Market Disclosure Committee 81
Nomination Committee 82
Risk Committee Report 83
Audit Committee Report 85
Directors’ Remuneration Report 91
Report of the Directors 95
Statement of Directors’
Responsibilities 98
HICL Annual Report 2024
2
2024 Highlights
118
12
19
25
32
39
46
53
60
68
75
83
91
100
108
116
124
98
6
120
107 107
110
113
116
123
135
140
147
148
155
150 150
161
163
IPO
Cumulative Dividends (p)
FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23
NAV per share (p)
FY24
133
156
Delivering sustainable income and capital growth
from a diversified core infrastructure portfolio
158.2p 8.35p 8.7% p.a.
NAV
1
per share
2023: 164.9p
New Dividend Guidance
2
for 2026
Reaffirmed Dividend Guidance
8.25p for 2025
Total Shareholder
Return since IPO
3
0.7x £736m 1.37x/1.05x
Inflation correlation
4
2023: 0.8x
Transactions announced
inthe year
Dividend cash cover including/excluding
profits on disposal
5
2023: 1.31x / 1.03x
Total return of 8.7% p.a. since IPO
The chart below shows how the combination of dividend and Net Asset Value (NAV)
growth has delivered a total return of 8.7% p.a. from IPO to 31 March 2024.
References are made throughout to Alternative Performance Measures ‘APMs’. These APMs, which include the Investment Basis, are provided alongside IFRS accounting measures to provide
additional information to shareholders.
A full reconciliation of the APMs used is disclosed on page 43
1 Net Asset Value, including the dividend of 2.07p declared on 15 May 2024
2 Expressed in pence per Ordinary Share for the financial year ending 31 March. This is a target only and not a profit forecast. There can be no assurance that this target will be met
3 Based on interim dividends paid plus change in NAV per share in the year
4 If outturn inflation was 1% p.a. higher than the valuation assumption in each and every forecast period, the expected return from the portfolio (before Corporate Group expenses)
would increase by 0.7%
5 Stated on an Investment Basis, including profits on disposal versus original acquisition cost of £53.4m (2023: £45.5m). Excluding this, dividend cash cover is 1.05x
HICL Annual Report 2024 Strategic Report Governance Financials
3
With the uncertain macroeconomic backdrop persisting,
the Board and Investment Manager prioritised balance
sheet management and disciplined capital allocation in
the year. The acceleration of HICL’s (HICL Infrastructure
PLC and its subsidiaries, defined as “HICL” or “the
Group”)
1
strategic asset disposal programme, generating
over £500m of proceeds, will enable the complete
repayment of HICL’s Revolving Credit Facility (“RCF”)
and the launch of a £50m share buyback. These are
responsible, long-term decisions which have created
value and demonstrate theBoard’s approach to capital
allocation.
HICL’s diversified portfolio of high-quality core
infrastructure assets is, by design, substantially
insulated from market volatility and performed in line
with expectations during the period. Despite this,
the Company’s
2
shares have traded at a significant
discount to their Net Asset Value (“NAV”). The Board
and Investment Manager have been aligned in their
view that sustained transaction activity is fundamental
to demonstrating the robustness of the Company’s
valuation. With this in mind, HICL disposed of nine
assets, all at or above carrying value and representing
13.5% of the opening investment portfolio by value. The
most recent was Northwest Parkway in February 2024
at a 30% premium to its most recent valuation. These
transactions reinforce the Board’s conviction that the
Company’s stock remains materially undervalued.
The share price at 31 March 2024 implies a long-term
expected return from the portfolio of 8.9% p.a. net of
costs, representing a 4.8% implied equity risk premium
which has widened by 60bps since the Company’s
interim results at 30 September 2023
3
. The Board
believes this represents compelling risk-adjusted value,
as demonstrated by its commitment to undertake up to
£50m in share buybacks over a 12-month period.
Financial performance
HICL’s NAV per share at 31 March 2024 was 158.2p
(March 2023: 164.9p). This resilient result was
underpinned by the underlying return from the portfolio
of 9.0% (March 2023: 10.2%), which exceeded HICL’s
weighted average discount rate of 7.2% as at 31 March
2023. This outperformance was offset by the effects of
macroeconomic assumptions, particularly increased
discount rates, which resulted in earnings per share for
the year of 1.5p (March 2023: earnings of 9.9p). Total
Shareholder Return (“TSR”) was 1.0%
4
(March 2023: 6.3%).
1 HICL Infrastructure PLC and its subsidiaries is defined as either HICL or the Group throughout the Report
2 HICL Infrastructure PLC, the Company only, is defined as the Company throughout the Report
3 Based on discount rate, less Ongoing Charges Ratio, adjusted to reflect the share price discount to the NAV using published discount rate sensitivities
4 Based on interim dividends paid plus change in NAV per share in the year
Chair’s Statement
I am pleased to present resilient
annual results for HICL. The
significant level of transactions
completed over the year has
materially reduced gearing
and enabled a share buyback
programme, whilst enhanced cash
flow generation and improved
prospects for longer-term earnings
support a return to sustainable
dividend growth.
HICL invests in assets with strong
social foundations such as healthcare and
education, assets that connect communities
from rail and road to communications;
and assets that support the transition to
a low-carbon modern economy.
HICL Annual Report 2024
4
158.2p
NAV per share
at 31 March 2024
8.35pps
New dividend
guidance
for FY 2026
£736m
of transactions
announced
The primary driver of the decrease in NAV per share in
the year was an 80bps increase in the weighted average
discount rate used to value the portfolio, reflecting
increased long-term government bond yields in HICL’s
key markets. This was materially offset by higher
near-term forecast inflation rates as well as profitable
transaction activity in the year.
A more detailed explanation of the portfolio’s valuation
and discount rate movements over the year is given in the
Valuation of the Portfolio section, starting on page 46.
Business model in action
Accretive asset rotation has long been a key component
of HICL’s differentiated strategy, with 26 disposals
contributing over 10.1p to NAV per share since its IPO
in 2006. During the year, the Board and Investment
Manager accelerated HICL’s disposal programme across
a range of sectors and geographies generating over
£500m in cash proceeds. This decisive action enabled
HICL to self-fund portfolio evolution, repay the RCF and
launch a £50m buyback programme.
The combined £736m of transactions announced during
the year have contributed c.3.3p to HICL’s NAV per share,
improved portfolio composition and contributed positively
to key portfolio metrics.
More information on these transactions can be found in
the Investment Manager’s Report starting on page 20.
Portfolio evolution
HICL’s strategic approach to portfolio construction
underpins its ability to deliver an attractive investment
proposition for decades to come. Careful and considered
transaction activity in recent years has deliberately
extended HICL’s revenue streams, introducing assets
positioned to capture real growth and to balance the
increasing maturity of the Group’s PPP concessions.
This strategic evolution is now reflected in HICL’s asset
base: mature shorter-life assets providing a strong yield
(“Yielders”), complemented by assets with longer asset
life, stronger inflation correlation and greater growth
potential (“Growers”). HICL’s Yielders deliver a forecast
10-year cash yield of c.10% against a weighted average
life of 14 years, contrasted with HICL’s Growers which are
forecast to deliver a 10-year growth rate of 7% p.a. and
benefit from a weighted average asset life of 48 years.
The combination of these two asset groups provides a
robust and enduring earnings platform from which the
Company expects to deliver dividend and NAV growth for
shareholders over the long term.
Return to dividend growth
The Board reconfirms the dividend guidance of 8.25pps
for the year to 31 March 2025, and is pleased to issue
new dividend guidance of 8.35pps for the year to 31
March 2026, signifying a return to sustainable, long-term
dividend growth
1
.
The Board recognises the important role played by the
Company’s dividend in delivering its compelling total
return proposition, and remains focused on providing
investors with an attractive income stream alongside
a growing earnings base. This approach requires
appropriate balance, over the long term, between
distributions to shareholders and reinvestment for future
growth.
The impact of high inflation over the past 18 months is
increasingly flowing through into higher cash receipts
across the portfolio, and is supported by real growth
in HICL’s demand-based assets, all of which are now
making regular distributions. In addition, the asset
rotation undertaken in the year has improved the
portfolio’s yield profile. Together this provides the Board
with the confidence that dividend cash cover will continue
to improve in the coming years and that a growing
dividend will be appropriately supported both by cash
and earnings over the long term.
The Board will continue to assess the ability for further
dividend growth over the coming year, as Affinity Water
progresses through its regulatory review.
Chair’s Statement continued
1 This is a target only and not a profit forecast. There can be no assurance
that this target will be met
The Board is pleased to issue
new dividend guidance of 8.35pps
for the year to 31 March 2026,
signifying a return to sustainable,
long-term dividend growth.
Race Bank OFTO
HICL Annual Report 2024 Strategic Report Governance Financials
5
Sustainability progress
HICL’s critical infrastructure investments form the
foundations of societies, economies and local
communities. The Group’s assets respond to
fundamental socioeconomic needs and provide critical
services. Over 35 million people worldwide use HICL’s
assets in their daily lives, with the underlying assets
employing over 2,300 people directly and thousands
more through their supply chains. The Board recognises
that positive outcomes for HICL shareholders are
intrinsically linked to positive outcomes for the
communities served by HICL’s assets.
The Board’s strategy is to improve both the impact
and disclosure of HICL’s sustainability approach.
Improvements this year have included an investor survey,
led by a third party, on HICL’s sustainability approach.
HICL received an average rating of 7.8 out of 10 for its
ESG disclosures and 7.6 out of 10 for its ESG metrics and
targets. The survey also provided valuable perspectives
on the evolving landscape of ESG reporting frameworks,
and the metrics most commonly used by investors.
This information will enable the Company to continue
to meet sustainability reporting expectations and offer
accountability to investors.
Further information on this shareholder survey, as well as
an in-depth review of HICL’s and Investment Manager’s
sustainability performance and ambitions, can be found
in HICL’s standalone Sustainability Report, available on
the Company’s website under Reports & Publications,
the highlights of which are on page 36 of this report.
Capital allocation
The Board maintains a strong focus on capital allocation.
This was evidenced during the year by the acceleration
of HICL’s strategic asset disposal programme,
the prioritisation of reducing RCF drawings, the
announcement of a share buyback programme and the
execution of highly selective accretive investments.
Going forward, the Board will continue to apply a highly-
disciplined approach to capital allocation, with a suitably
high bar for new acquisitions, guided by the relative
attraction of further share buybacks.
Outlook
The Board and Investment Manager’s disciplined
approach to balance sheet management has provided a
platform from which HICL can execute its strategy with
flexibility and enhanced financial firepower.
The growth potential in the infrastructure sector,
particularly in those areas that support the modern
economy, is considered vast. Alongside HICL’s resilient
concession-based portfolio, more recent growth-oriented
investments enhance the Company’s long-term earnings
drivers and provide greater potential for outperformance
through active management. I invite you to look at the
increased disclosure on the key growth drivers for these
assets which are included in the Top 10 assets section
starting on page 26.
Driven by the Manager’s proven ability to consistently
realise investments at attractive valuations, the Company
expects to continue to progress strategic and accretive
asset rotation. Prevailing market dislocation is anticipated
to provide opportunities to further enhance portfolio
construction and generate shareholder value through
selective investments, without recourse to equity markets.
HICL’s diversified portfolio of over 100 high-quality,
inflation-linked assets reflects the evolution of the core
infrastructure market – offering shareholders attractive
risk-adjusted value for today, with exposure to the
powerful infrastructure megatrends driving the returns
of tomorrow.
Mike Bane
Chair
21 May 2024
8.7%
p.a.
Total return
since IPO in
2006
0.7x
Inflation
correlation
29.4
years
Weighted
average
assetlife
£50m
Announced
share buyback
programme
The Board recognises that
positive outcomes for HICL
shareholders are intrinsically
linked to positive outcomes
for the communities served by
HICL’s assets.
Lewisham School
Download the
HICL Sustainability
Report online
www.HICL.com
HICL Annual Report 2024
6
HICL at a glance
Our purpose is to be a pre-eminent
investorinessential core infrastructure
inour chosen markets
Our vision is to enrich lives through infrastructure
Strong social
foundations
Connecting
communities
Sustainable modern
economies
45% 37% 18%
of portfolio of portfolio of portfolio
Assets that constitute the
foundation of our societies,
such as:
– Health
– Education
– Fire, Law and Order
– Accommodation
Assets that link people to
the economy and each other,
suchas:
– Availability or toll roads
– Rail and rolling stock
– Fibre networks
– Mobile towers
Assets supporting the energy
transition and continued
resource security, such as:
– Water
– OFTOs
– Electricity transmission
A commitment to sustainability
As a prominent long-term investor
incore infrastructure, HICL has a
rolein society that extends beyond
itsshareholders.
As a trusted steward of
essential infrastructure that
sits at the heart of communities,
sustainability and a focus on
creating positive societal impacts
are firmly embedded in HICL’s
business model.
Mike Bane
Chair of the Board of Directors
Read more about our Top 10 investments on page 26
Read more about HICL’s sustainability highlights on page 36
HICL Annual Report 2024 Strategic Report Governance Financials
7
InfraRed is the Investment Manager, operating
for the investment portfolio and responsible for
delivering HICL’s purposeand vision
A strong investment
proposition
Read more on page 14
HICL’s Investment Proposition is
to deliver sustainable income and
capital growth from a diversified
portfolio of investments in core
infrastructure.
Diversification Sustainability Total return
We provide shareholders
withimmediate access to
a portfolio of
We invest in assets that sit
at the heart of communities.
35 million people have access
to our infrastructure
Since IPO we have delivered
a Total Shareholder Return of
100+ 35m 8.7% p.a.
assets people
Yield Inflation correlation Asset life
We deliver a
sustainable dividend
We deliver a return
that correlates to
long-term inflation
We offer cash flow
visibility from long-life
infrastructure assets
8.25p 0.7x 29.4 yr
per share 2024 weighted average asset life
US$13bn+
Equity under
management
1
230+
Investments
100+
Infrastructure
professionals
Read more at www.ircp.com
25+ yr
Track record
160+
Employees in five
international offices
Geography
1
2
3
4
Sector
1
2
3
4
5
6
7
1
2
8
9
10
49.5%
1
2
3
4
5
6
7
8
9
10
R
e
m
a
i
n
i
n
g
I
n
v
e
s
t
m
e
n
t
s
HICL at a glance continued
A diverse portfolio
with over 100 assets
1
Read more about out Top 10 investments on page 26
A diverse portfolio of over 100 assets
1 By value, at 31 March 2024, using Directors’ Valuation
1 UK 64%
2
EU 22%
3
North America 7%
4
Australia/New Zealand 7%
1 Accommodation 9%
2
Education 10%
3
Electricity & Water 18%
4
Health 22%
5
Fire, Law & Order 5%
6
Transport 27%
7
Communications 9%
1
Affinity Water
Sector: Electricity & Water
Location: UK
% of portfolio: 8.3%
HICL holding: 33.2%
5
High Speed 1
Sector: Transport
Location: UK
% of portfolio: 4.6%
HICL holding: 21.8%
8
Pinderfields &
Pontefract Hospitals
Sector: Health
Location: UK
% of portfolio: 3.5%
HICL holding: 100.0%
HICL Annual Report 2024
8
4
Texas Nevada
Transmission
Sector: Electricity & Water
Location: USA
% of portfolio: 5.6%
HICL holding: 45.8%
7
Royal School of
Military Engineering
Sector: Accommodation
Location: UK
% of portfolio: 3.5%
HICL holding: 100.0%
3
Fortysouth
Sector: Communications
Location: New Zealand
% of portfolio: 6.5%
HICL holding: 40.0%
2
A63 Motorway
Sector: Transport
Location: France
% of portfolio: 7.9%
HICL holding: 24.0%
9
Home Office
Sector: Accommodation
Location: UK
% of portfolio: 3.0%
HICL holding: 100.0%
10
Cross London
Trains
Sector: Transport
Location: UK
% of portfolio: 2.7%
HICL holding: 6.5%
6
Southmead
Hospital
Sector: Health
Location: UK
% of portfolio: 3.9%
HICL holding: 62.5%
HICL Annual Report 2024 Strategic Report Governance Financials
9
HICL Annual Report 2024
10
The infrastructure market
HICL’s market directly connects with its vision,
to develop strong social foundations, connect
communities and support sustainable modern
economies.
The scale of the investment challenge
McKinsey estimates that
an average of $3.7 trillion
per year of infrastructure
investment is required
globally by 2035, just to
keep pace with economic
growth.
The World Bank estimates
that roughly $2.6 trillion is
required annually until 2030
in sustainability-related
infrastructure spending
alone, to meet the UN
SDGs and stay on a path to
a net zero society by 2050.
The G20 Global
Infrastructure Outlook
estimates that the world
needs to invest $94 trillion
in infrastructure by 2040
to meet global economic
growth and development
goals.
Underpinning each of these three themes
is a fundamental need for infrastructure
investment across the world, driven
bydemographic shifts, increasing
urbanisation, technological advancement
and climate change.
HICL invests in core infrastructure, the segment of the infrastructure
market at the lower end of the risk spectrum, and informed
by HICL’s core infrastructure framework (see page 14). Core
infrastructure captures those critical assets that underpin the
functioning of economies and societies, and therefore represents
the most pressing investment need.
In the OECD, the core infrastructure sectorsin need of investment
include transport, healthcare, electricity grid infrastructure and
digitalisation. Investment decisions in infrastructure, which
are inherently long term, will increasingly be viewed through
asustainability lens as developed economies look to harness
technology to combat climate change andgrow economies.
Driven by the fundamental trends set out in this section,
thescale of investment required across HICL’s target
sectors and geographies is significant. As a result, the
Company expects to benefit from attractive opportunities
toinvest in a range of core infrastructure assets.
$94
trillion
investment needed to meet
global economic growth
$2.6
trillion
required annually in sustainability-
related infrastructure spending
to meet the UN SDGs
$3.7
trillion
per year of infrastructure
investment is required globally
by 2035
Sources: Please see Appendix 3 on page 161
HICL Annual Report 2024 Strategic Report Governance Financials
11
Exploring the PPP model
Strong social
foundations
PPPs benefit from availability-based
revenues, underpinned by long-term
inflation-linked contracts with public
sector clients. For HICL, these high-
quality revenues play an important role
in supporting yield. For the community,
these critical assets deliver a range of
benefits to key stakeholders:
Facility condition
The consequences of ageing social
infrastructure is increasingly apparent.
Various public reports in the year detailed
widespread and serious issues with UK
public sector facility condition, affecting
schools, hospitals and prisons leading in
some cases to evacuation of the facilities.
The issues relate to outdated construction
materials and methods, in particular
aerated concrete (RAAC) and asbestos.
In response, InfraRed surveyed HICL’s
entire portfolio and did not identify
RAAC in any PPP-procured facilities.
This reflects the modern construction
techniques employed for PPPs, as
well as the high standard of facility
maintenance delivered through the PPP
contractual framework, requiring whole-
of-life capex optimisation and clear
performance regimes.
Flexibility
Collaborative partnership under the
PPP model enables facilities and
services to evolve with public sector
needs, including responding to complex
requests from clients in a timely and
cooperative manner.
Recent examples of such
‘variations’include:
– The recent conversion of
administrative areas into clinical
accommodation to provide 30
additional patient beds at Southmead
Hospital (see page 32)
– The completion of bespoke contract
variations across 24 hospitals in
response to the Covid-19 pandemic,
predominantly to increase capacity
In these cases, the Company has
prioritised the delivery of augmented
works, with the formal contractual
variations being agreed subsequently
withthe relevant clients.
Meeting community demand
Harnessing private capital has proved
a valuable enabler of the delivery of
much-needed critical social infrastructure.
Between 1999-2014, c.100 new hospital
facilities were delivered in the UK under
the PPP model. Since the UK reduced its
adoption of the PPP model, only nine new
hospitals were built between 2015-2024
1
InfraRed is a leading player
in the PPP space
HICL’s Investment Manager, InfraRed,
has over 25 years of experience
developing and managing social
infrastructure assets around the world
under PPP frameworks. During the
year, InfraRed, alongside peers, formed
The Association of Infrastructure
Investors in Public Private Partnerships
(AIIP) to provide a co-ordinated voice
on industry issues with stakeholders
including the UK Government. In
addition, InfraRed is a member of
the IPA’s PPP steering committee, as
well as its specialised working groups
focused on handback and net zero.
From schools and hospitals to police and
firestations, social infrastructure assets
are critical to the functioning of communities
and play a crucial role in the global economy.
Asnew technologies emerge, existing assets
decay and the needs of societies shift over
time, upgrading and building new social
infrastructure is critical to people’s quality
oflife.
In response, investment is required to both adequately replace
ageing infrastructure, and to adapt infrastructure, old and new,
to changing patterns of service delivery, urbanisation and
demographic shifts, including rapidly ageing populations across
developed markets.
For over 30 years, governments across developed markets have
utilised the Public Private Partnership (“PPP”) procurement model
to deliver social infrastructure assets, working collaboratively with
long-term private investors, such as HICL. Although use of the
PPP framework is now more limited in the UK, it continues to be
employed across Europe, North America and Australasia.
Key policy and market developments in the year:
– c.£24.7bn of PPP transactions across the EU, North America,
Australia and New Zealand over FY24.
– In the UK, sporadic adoption of PPP for small scale projects,
noting more recent adoption in growth areas such as district
heating; no clear national successor framework to PFI/PF2,
abolished in 2018.
– The Welsh government committed to deliver £1bn of
infrastructure through a new Mutual Investment Model (“MIM”),
reaching financial close in April 2024 on the first facility, a £180m
hospital in Cardiff.
– In November 2023, the UK’s Shadow Chancellor Rachel Reeves
convened a new British Infrastructure Council that will work to
unlock private investment for national infrastructure projects.
1 As at 21 February 2024
AccommodationFire, Law and OrderEducationHealth
Relevant sectors include:
HICL Annual Report 2024
12
The infrastructure market continued
Growth sector case study: Data centres
Connecting
communities
What is a data centre?
A data centre is a building and
its adjoining utilities, designed to
provide a highly secure environment
to host customer servers at scale.
The growing role
ofdatacentres
– The amount of digital data created
worldwide in 2017 32 zettabytes;
isexpected to reach 291 zettabytes
by 2027
1
– The need to store these increasing
amounts of data has accelerated
demand for data centres
– In 2022, Savills estimated that Europe’s
pipeline of data centres would need to
more than double by 2025
The investment case
fordatacentres
– Alongside the rapid growth in the
sector, pockets of the market are now
mature and represent derisked and
yielding core infrastructure investment
opportunities. Mature “hyperscale”
data centres house critical computing
and network infrastructure for big
data-producing companies, who
lease dedicated space to manage
their cloud computing, big data
analytics and storage requirements. In
Europe, the most mature hyperscale
datacentres are found in Frankfurt,
London, Amsterdam, and Paris
InfraRed has been actively involved
in the data centre market for several
years, and believes that within
the next one to three years, the
sector will increasingly exhibit core
infrastructure characteristics:
– Long term leases are agreed with
investment grade counterparties and
often benefit from a degree of inflation
linkage
– Sticky customer base due to high
switching costs and barriers to entry
– Risks related to energy consumption
and server equipment often sit with
the end user
– Critical infrastructure supporting and
enabling core digital services
Infrastructure that connects communities,
such as roads, bridges and digital
communication networks, plays a vital
role in driving development, connecting
people to employment and education and
isfundamental to our social wellbeing.
Investment in transport infrastructure is essential to meet the growing
demand for mobility, inter-regional connectivity, and decarbonisation.
The trends of ageing infrastructure, urbanisation and decarbonisation
continue to drive further investment in this space. Physical
connectivity is complemented by the rapidly growing adoption of
digital connectivity, with material increases in data consumption
driving investment across fibre, mobile and data centres.
Digital infrastructure remains in various stages of maturity, with a
wide range of market structures available. For example, in certain
mature geographies, such as the UK and Germany, the fibre
industry remains in development and presents higher risk versus
mature, regulated and wholesale fibre markets such as France,
where HICL has an investment in Altitude fibre. InfraRed’s deep
experience across the digital space is crucial to evaluate and
navigate market and asset risks in the sector.
Key policy and market developments in the year:
– Over €9.1bn of European transport concessions launched in
2023, a 75% increase from 2022.
– In December 2023, the UK government announced a new
target to grow rail freight by at least 75% by 2050, reinforcing
its commitment to modal shift to cut congestion and
carbonemissions.
– In April 2024, the European Council adopted the Gigabit
Infrastructure Act which aims to simplify and accelerate the
roll-out of high-speed networks including fibre and 5G.
– As at September 2023, there were over 18,500 5G
deploymentsin place in the UK across c.81,000 sites,
upfromc.12,000 deployments reported in 2022.
Typical data centre layout:
The portfolio company would
own and be responsible for
all items excluding computing
and server equipment
TowersFibreTransport
Relevant sectors include:
Data centres
1 IDC intelligence
HICL Annual Report 2024 Strategic Report Governance Financials
13
Growth sector case study: District heating
Sustainable modern
economies
What are district
heatingnetworks?
District heating networks distribute
heat from centralised sources to
customers via underground pipes,
more efficiently delivering heat
versus traditional in-house boilers.
The growing role
of district heating
– In the UK, heating represents 37% of
total greenhouse gas emissions
– District heating networks can harness
various low-carbon energy sources
such as biomass and geothermal
– The UK government has committed to
growing the proportion of its heat from
these networks to 20% by 2050, up
from less than 3% in 2022
– Many European countries are
pursuing district heating within their
decarbonisation strategies (see chart
above for projected district heating
market shares in 2050 relative to 2020
positions). In recent years, district
heating has accounted for over 50%
of heat delivered across certain
Nordiccountries
The investment case
fordistrictheating
InfraRed has been tracking the
district heating market for several
years, and believes that within
the next one to three years, the
sector will increasingly exhibit core
infrastructure characteristics:
– Revenues underpinned by availability-
based payments and consumption
charges
– Pass-through pricing mechanisms
mitigate underlying commodity price
exposure
– High barriers to entry and sticky
customer base
– High quality counterparties
e.g.universities, hospitals, supported
by local authorities
In the face of a changing climate, sustainable
modern economies need to increasingly
manage essential resource scarcity
(e.g.water) and the transition to a low-carbon
economy. Significant investment in the
generation, transmission, distribution and
storage of clean energy is essential to deliver
net zero by 2050.
Energy planning continues to be driven by the three concerns of
decarbonisation, security and affordability – together the ‘energy
trilemma’. Over the year, focus on security and affordability has been
heightened due to enduring geopolitical volatility and cost of living
stress, respectively. These considerations are expected to continue
to drive significant investment in energy infrastructure across the
electricity system value chain (generation, transmission, distribution).
Addressing this trilemma requires new sources of green
electricitysupply, substantial shifts in electricity demand due to the
decarbonisation of heat and transport, and substantially evolved
gridinfrastructure to accommodate these material shifts in both.
Key policy and market developments in the year:
– A 2024 GB Electricity System Operator (ESO) report proposes
a£58 billion investment in the electricity grid to meet the growing
and decarbonising demand for electricity in Great Britain by 2035.
– Annual spending on electricity transmission grids across EUmember
states is currently c.€63bn, exceeding the EuropeanCommission’s
€58.4bn estimate for annual grid investment until 2030.
– A US consultancy Grid Strategies 2023 forecast of US electricity
demand growth over the next five years rose from 2.6% in 2022
to4.7%.
– The UK government has allocated £65m to supporting
five district heating networks that will use waste heat from
data centres to provide heating and hot water to more than
10,000homes.
– The UK government, alongside Ofgem, published Connections
Action Plan setting out its intention to improve access to the
electricity grid.
80
53
55
Austria
2020
Belgium Germany France Luxemburg Netherlands
2050
75
70
15
32
15
29
26
75
80
75
1 A district heating area is defined as an area within a region where a district heating system partially or fully supplies heat to the buildings
District heating market shares in district heating areas
1
within the EU
TransmissionOFTOsWater
Relevant sectors include:
District heating
HICL Annual Report 2024
14
Business model
How we create value
1.
Core infrastructure
characteristics we look for…
InfraRed evaluates the infrastructure
marketsystematically using
HICL’s coreinfrastructure framework:
Developed by the Board and
Investment Manager to ensure we
deliver on our Investment Proposition
2.
to deliver on
our strategy…
Cash flow quality
– Low volatility in a range
of macro environments
– Suitable / diverse counterparties
– Inflation protection
– High capital cost
– Low operational complexity
Market positioning
– Monopolistic characteristics
– Regulated in some circumstances
– Capital intensive business model
– Structural protections
Criticality
– Strong social licence and public benefit
– Real assets supporting essential
services or facilitating important
social function
Deliver a sustainabledividend
An annual distribution of at least that
achieved in the prior year, fully cash
coveredand supported by long-term
portfolio earnings.
Grow Net Asset Value
Preserve and grow the capital value
of the investment portfolio over the
long term.
Build a diversified portfolio
tomanage risk
Spanning high-quality assets across
the core infrastructure market.
Provide a compelling
cost proposition
Evidenced through a competitive
Ongoing Charges Ratio.
Accretive
Investment
Value
Preservation
Value
Enhancement
HICL Annual Report 2024 Strategic Report Governance Financials
15
See next page for more detail on the three
pillars of HICL’s business model
3.
through our sustainable
approach to value creation…
4.
for the benefit of
our key stakeholders
Our communities
and end-users
We invest in essential assets which have
a social purpose and will have a beneficial
impact on the quality of life for the
communities where they are located.
8m+ 500km+
people with
direct access
to healthcare
facilities
of road and
high-speed
railways
120,000
student places
across schools,
colleges and
university facilities
Our clients
We work together with corporate partners
and public sector clients, including the
UK’s National Health Service (NHS), local
councils, National Highways, and various
government departments.
19
NHS Trusts in
the portfolio
Our shareholders
A long-term sustainable mindset is
imperative to achieve outperformance
for shareholders. We offer long-term real
returns from core infrastructure assets.
8.7% p.a. 158.2p
Total Shareholder
Return since IPO
NAV per share
HICL Annual Report 2024
16
3
2
1
The three pillars of
our business model
1
Accretive
Investment
HICL has a clearly defined Investment
Policy. This sets the overarching
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 HICL’s 2024 Sustainability Report)
– An objective that acquisitions are
generally accretive to key portfolio
metrics
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 Investments team, in
coordination with the Fund Management
team, uses a variety of channels to source
accretive transactions for HICL.
The following summarises
HICL’s Acquisition Strategy:
Geography
Located in mature infrastructure markets
Segmentation
Core infrastructure market positioning
Asset quality
Defined by:
– Cash flow quality
– Market positioning
– Criticality
Value-add
Accretive to HICL’s
Investment Proposition
2
Value
Enhancement
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.
Fundamentally it does this through:
– Sponsoring the implementation of
initiatives within portfolio companies to
optimise asset business plans, pursue
growth initiatives or enhance 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 costs
– Considering where value can be
improved, or portfolio risk profile
improved, through selective disposals
3
Value
Preservation
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.
Fundamentally it does this 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
against HICL’s 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 Annual Report 2024 Strategic Report Governance Financials
17
Engaging with
our stakeholders
As a responsible owner of essential public assets,
HICL’s ability to deliver its Investment Proposition over the
long term is inextricably linked to the delivery of positive
stakeholder outcomes for the broader community.
Stakeholder expectations Our approach and touchpoints
Our communities and the end-users of our assets
We invest in infrastructure projects that provide
essential services to local communities. In
some instances, we deliver those services
directly, such as the provision of clean energy
or water, and in other instances these services
are performed by our public sector clients
such as healthcare services.
Communities expect seamless
access to essential services like
water, transport, and energy.
– We support community engagement
initiatives at the company level
– At the portfolio level, we facilitate the sharing
of best practice for engagement and design
of scalable solutions
– At the Manager level, InfraRed forms
dedicated groups to drive key initiatives
Our clients
We work together with corporate partners
and public sector clients, including the UK’s
NHS, local councils, National Highways,
and various international government
departments to deliver many of our essential
infrastructure services.
Infrastructure assets are built and
maintained in line with contractual
requirements, so that clients can offer
critical services to their communities.
– Direct and proactive client engagement at
the portfolio company level
– Client surveys to understand the needs of
our clients and their communities.
– This is a fundamental driver of InfraRed’s
Portfolio Impact Strategy
– We engage in public-private working
groups to identify solutions to industry
challenges such as net zero and handback
requirements
Our people
HICL portfolio companies employ over 2,300
people, and thousands more through each
asset’s supply chain. InfraRed has a talented,
diverse team of over 160 people worldwide
which comprises over 20 nationalities
speaking 20 different languages.
Make a positive impact on the
environment and society whilst
growing personally and professionally.
– Through our governance rights, we ensure
portfolio companies who employ staff
directly have current and appropriate
policies in place such as diversity and
inclusion and modern slavery
– At the Manager level, InfraRed implements
initiatives around the principles of attracting,
retaining and cultivating diverse talent and
empowering its employees
Our delivery and other partners
To enable high-quality infrastructure assets,
we partner with many specialist organisations
which include management service
providers, construction companies, facilities
management companies, financiers,
co-shareholders and advisers.
Collaborate with each company to
fulfil their own business objectives
whilst enabling the sustainable
delivery of high-quality services to
infrastructure assets.
– Targeted engagement with business
partners at the asset and portfolio levels
– Quarterly and annual monitoring
– Manager-led semi-annual ESG summits with
all portfolio companies
Our shareholders
We invest in infrastructure assets using
the capital provided by our investors. Our
shareholders range from individuals to
substantial international institutions, and
pension funds which have a long-term
investment horizon.
Maximise long-term sustainable
financial returns for a given level of risk.
Accessible and transparent reporting
on the Company and portfolio.
– Investor presentations targeted at both
institutional and retail investors
– Responding to investor information requests
– Transparent ESG reporting
AGM
2:00pm Wednesday,
17 July 2024
Brewers Hall, Aldermanbury Square,
Barbican, London EC2V 7HR
HICL Annual Report 2024
18
Key Performance
and Quality Indicators
The Board has identified metrics to measure
HICL’sperformance against its strategic objectives.
The results for the year ended 31 March 2024
aresetout below.
Key Performance Indicators
Dividends
8.25p
2023: 8.25p
Measure
Aggregate interim dividends declared
pershare for the year.
Objective
An annual distribution of at least that
achieved in the prior year.
Performance
2022 8.25p
2023 8.25p
2024 8.25p
Link to strategy
Positive Inflation Correlation
0.7x
2023: 0.8x
Measure
Changes in the expected portfolio return
for 1% p.a. inflation change for each and
every future period.
Objective
Maintain positive correlation with a
correlation of at least 0.5x.
Performance
2022 0.8x
2023 0.8x
2024 0.7x
Link to strategy
Total Shareholder Return
1
8.7% p.a.
2023: 8.9% p.a.
Measure
NAV growth and dividends paid per
share since IPO.
Objective
A long-term IRR target of 7% to 8%
asset out at IPO
2
.
Performance
2022 9.0%
2023 8.9%
2024 8.7%
Link to strategy
Competitive Cost Proposition
1.14%
2023: 1.09%
Measure
Annualised ongoing charges/average
undiluted NAV
6
.
Objective
Efficient gross (portfolio level) to net
(investor level) returns, with the intention
to reduce ongoing charges where
possible. Maintain within the range for
FTSE 250 listed infrastructure peers.
Performance
2022 1.06%
2023 1.09%
2024 1.14%
Link to strategy
Cash-covered Dividends
3
1.37x / 1.05x
4
Including / excluding
profits on disposal
2023: 1.31x / 1.03x
4
Measure
Operational cash flow/dividends paid to
shareholders.
Objective
Dividend payments are covered by cash
received from the portfolio.
Performance
2022 1.05x
2023 1.31x
2024 1.37x
Link to strategy
1 Return based on NAV growth and dividends paid per share
since IPO
2 Set by reference to the issue price of 100p/share, at the
time of HICL’s IPO in February 2006
3 Further details on this APM are provided in the Financial
review on page 43
4 Including profits on disposals versus original acquisition
cost of £53.4m (2023: £45.5m). Excluding this, dividend
cash cover would have been 1.05x (2023: 1.03x)
5 Including profits on disposals versus original acquisition
cost of £45.5m. Excluding this, dividend cash cover would
have been 1.03x
6 Calculated in accordance with Association of Investment
Companies guidelines. Ongoing charges excluding
non-recurring items such as acquisition costs
HICL Annual Report 2024 Strategic Report Governance Financials
19
Key Quality Indicators
Investment Concentration Risk
49.5%
1
, 8.3%
2
2023: 49%, 7.3%
Measure
Percentage of portfolio value represented
by the ten largest investments
3
.
Percentage of portfolio value represented
by the single largest investment
3
.
Objective
Maintain a diversified portfolio of
investments (thereby mitigating
concentration risk) and, at all times,
remain compliant with HICL’s Investment
Policy. Single asset concentration < 15%.
Performance
2022 48%
2023 49%
2024 49%
Link to strategy
Refinancing Risk
2.5%
5
2023: 0.6%
5
Measure
Investments with refinancing risk within
24 months as a percentage ofportfolio
value
6
.
Objective
Manage exposure to refinancing risk
to20% of portfolio value.
Performance
2022 0.0%
2023 0.6%
2024 2.5%
Link to strategy
Risk/Reward Characteristics
17.1%
2023: 21.8%
Measure
Percentage of portfolio value represented
by the aggregate value of projects with
construction and/or demand-based risk
4
.
Objective
Compliance with HICL’s Investment
Policy, to be lower than the aggregate
limit of 35% for such investment.
Performance
2022 25%
2023 22%
2024 17%
Link to strategy
Sustainability Stewardship
98%
2023: 97%
Measure
Percentage of the portfolio that is rated
‘high’ for ESG performance
7
.
Objective
> 75% of the portfolio rated high in ESG
performance.
Performance
2022 98%
2023 97%
2024 98%
Link to strategy
Weighted Average Asset Life
29.4 years
2023: 32.2 years
Measure
Portfolio’s weighted average unexpired
concession length.
Objective
Seek where possible investments
that maintain or extend the portfolio
concession life such that it remains
above 20 years.
Performance
2022 29.8 yrs
2023 32.2 yrs
2024 29.4 yrs
Link to strategy
1 49.5% is the sum of the Top 10 assets in HICL’s portfolio
by value
2 8.3% is the size of the largest asset in HICL’s portfolio,
Affinity Water, by value
3 HICL’s Investment Policy stipulates that any single
investment (being, for this purpose, the sum of all
incremental interests acquired by HICL in the same project)
must be less than 20% (by value) of the gross assets of
HICL, such assessment to be made immediately post-
acquisition of any interest in a project
4 More diverse infrastructure investments which are made
with the intention ‘to enhance returns for shareholders’ as
permitted under the terms of HICL’s Investment Policy –
namely pre-operational projects, demand-based assets
and/or other vehicles making infrastructure investments.
Further details are set out in the Investment Policy,
available from HICL’s website
5 Refinancing required on Texas Nevada Transmission and
Affinity Water
6 Calculated as required asset refinancings within 24
months: lower of: (i) HICL’s share of debt to be refinanced;
and (ii) the valuation of HICL’s equity investment; divided by
HICL’s total Directors’ Valuation at 31 March
7 ‘High’ rating in ESG performance means scoring 4/5 stars
in the HICL Sustainability Survey or subsequent metrics as
ESG reporting evolves
Link to strategy
Deliver a
sustainabledividend
Grow Net Asset Value
Build a diversified
portfolioto manage risk
Provide a compelling
cost proposition
HICL Annual Report 2024
20
These achievements were underpinned by the
acceleration of the Group’s asset rotation strategy,
resulting in over £700m of transactions, including over
£500m of accretive disposals and complemented with
highly targeted acquisitions. This activity improved key
portfolio metrics, strengthened HICL’s balance sheet
andsupported the valuations of the Group’s portfolio.
This active management of the portfolio, supported
by inflation pass-through and real growth in HICL’s
demand-based assets, continues to bolster actual
and expected growth in distributable cash, enabling
the recommencement of sustainable dividend growth
from FY26.
With a robust balance sheet, keen investment discipline
and a rapidly growing addressable market, HICL is in a
strong position to deliver value for shareholders through
both income and capital growth over the long term.
Operational highlights
The underlying return from the portfolio was solid for
the year ended 31 March 2024, delivering an underlying
return of 9.0% (10.2% at 31 March 2023), ahead of the
expected return of 7.2% for the year (as at 31 March
2023) before the impact of changes to reference discount
rates and macroeconomic assumptions.
This portfolio outperformance was primarily driven by
accretive transaction activity and value enhancement
at the asset level, partially offset by lower than forecast
inflation in the second half of the year and increased
lifecycle costs in the UK PPP sector.
Further details can be found in the Valuation section
ofthis report starting on page 46.
HICL has performed well operationally in theyear, with the portfolio
well insulated from rising interest rates and benefitting from strong
inflation correlation. This solid foundationwas supported by the
enhancement of the Group’s balance sheet and the continued
strategic evolution of the portfolio during the year.
Right:
Edward Hunt
Head of Core
Infrastructure
Funds,
InfraRed
Edward leads the
InfraRed team that
manages HICL
Left:
Helen Price
CFO, InfraRed
Helen is responsible
for managing the
financial activities
carried out by
InfraRed for HICL
Investment Manager’s Report
– Development and execution of HICL’s strategy
– Stewardship of portfolio assets through
proactive asset and portfolio management,
andthe resolution of critical issues
– Stakeholder engagement across both public
andprivate sectors
– Investment origination, due diligence
and execution
– Capital raising, investor relations and
preparation of key external communications
InfraRed acts as the Investment
Manager to HICL with day-to-day
responsibility for the following activities:
– Chris Gill (Chair of Investment Committees)
– Jack Paris (CEO)
– Helen Price (CFO)
– Edward Hunt (Head of Core Infrastructure Funds)
– Stewart Orrell (Head of Asset Management)
HICL’s Investment Committee is the principal
executive decision-making body for HICL within
InfraRed and comprises:
HICL Annual Report 2024 Strategic Report Governance Financials
21
Operational performance overview
HICL’s diversified portfolio of high-quality core
infrastructure assets performed in line with the
Investment Manager’s expectations over the year.
The Group’s more recently acquired modern economy
assets – Fortysouth, Texas Nevada Transmission (“TNT”),
Hornsea II OFTO and Altitude Infra – are now fully
integrated into the portfolio and are performing broadly in
line with their respective business plans.
Affinity Water submitted its business plan to Ofwat
in September 2023 as part of the 2024 periodic
price review (“PR24”) and is due to receive a draft
determination over the summer months. As a water
only company, Affinity Water has no direct exposure to
sewerage services. Financially, Affinity Water goes into
PR24 with a robust capital structure, owing to proactive
balance sheet management. This has enabled the
company to submit a business plan which envisages
32% growth in its regulatory capital value over the next
regulatory period of five years, whilst maintaining the
lowest bill increases in the sector. Importantly, Affinity
Water continues to be well placed to resume shareholder
distributions in FY26, further supporting the Group’s cash
generation and dividend cover forecast.
High Speed 1 (“HS1”) recommenced shareholder
distributions in the year, driven by the continuing
recovery in international train travel following the Covid-19
pandemic. During the second half of the year, three
potential new operators announced their intention to
utilise HS1 from 2026 to provide competing services to
avariety of European destinations.
The possibility of additional international operators was a
key attraction of the investment at the time of acquisition;
and InfraRed will continue to work closely with the
HS1 management team to support greater utilisation of
the line. The introduction of one or more new international
operators would be expected to result in an increase in
revenues, benefitting HS1’s valuation.
Enhanced disclosure on the operational performance
ofeach of HICL’s Top 10 assets is set out starting on
page 26.
Highlights
9.0%
Underlying
portfolio
return
in FY24
8.3%
Largest
single asset
concentration
(Affinity Water)
HICL’s business model
deliveringvalue
The proactive management of the Company’s balance
sheet and portfolio composition is central to HICL’s
business model.
Investment activity
Consistently improving portfolio composition through
accretive asset rotation has been a core part of the
differentiated approach since IPO. In that time, the
Investment Manager has made over £1bn of strategic
asset disposals. This gives HICL a more extensive
track record of asset rotation than any of its core
infrastructure peers.
In the year, HICL’s focus was on disposal activity, which
enabled accretive rotation into highly attractive new
assets, alongside repayment of the Group’s RCF and the
announcement of a £50m sharebuyback programme.
£509m of asset disposals were made during the year,
with all realisations made either at or above carrying
value. This first-hand transaction experience reinforces
the Investment Manager’s view that HICL’s portfolio
remains fundamentally undervalued by public markets
given that high-quality, inflation-linked core infrastructure
assets continue to attract strong valuations in private
markets. Disposals announced during the year:
– A portfolio sale comprising four UK PPP projects,
namely; Queens (Romford) Hospital, Oxford John
Radcliffe Hospital, Priority Schools North East Batch
and South Ayrshire Schools, in addition to half of the
Group’s investment in the Hornsea II OFTO, for an
aggregate c.£204m, at a modest premium to their
combined carrying value;
– Northwest Parkway (US) a partial disposal of a toll-road
in Colorado for $86m, in line with its carrying value;
– Bradford BSF Phase 1 & 2 (UK), the combined sale
oftwo PPP schools for c.£37m at an 8% premium to
its carrying value;
– University of Sheffield Accommodation (UK), the sale
ofa concession with demand-based revenues for
£18m, in line with its carrying value; and
– Northwest Parkway (US), the disposal of HICL’s
remaining stake in the project, with the net proceeds
of $232m representing a 30% premium to its carrying
value. In combination with the partial disposal
completed earlier in the year, the sale of Northwest
Parkway crystallised a 13.0% holding period IRR and
2.2x multiple on invested capital since HICL’s initial
investment in December 2016.
Northwest Parkway
HICL Annual Report 2024
22
Investment Manager’s Report
continued
Highlights
£509m
across ten
disposals
completed or
announced in
the year (or
post-year end)
£227m
across three
acquisitions
announced in
the year (or
post-year end)
2.2x
Multiple on cash
invested achieved
from Northwest
Parkway
realisation
HICL also signed and completed three targeted
investments in the year totalling £227m:
– Altitude Infra (France), the largest independent
wholesale fibre network in rural France (3% of the
Directors’ Valuation);
– Hornsea II OFTO (UK), the offshore transmission
assets associated with the world’s largest installed
windfarm (2% of the Directors’ Valuation); and
– An incremental investment in A63 Motorway (France),
a high-performing toll road the Investment Manager
knows well, having initially developed the asset through
another InfraRed-managed fund (now 7.9% of the
Directors’ Valuation).
In combination, the significant transaction activity
completed during the year improved the portfolio’s
yield profile, and was a contributing factor to the
Board’s decision to guide a return to dividend growth
for the Company for the year ending 31 March 2026.
This demonstrates the value that can be generated for
shareholders through active asset management.
Buyback programme
In March 2024 the Company announced a £50m share
buyback programme. The Investment Manager believes
that buying back HICL’s shares when the share price is at
a significant discount to NAV has economic merit, serves
as a sign of confidence in the Company, and illustrates
the range of levers available to the Board and Manager to
enhance shareholder value.
The risk and return proposition available to the Company
through buying back its shares will continue to be a key
benchmark for future capital allocation decisions.
Specialist asset management
The consistent delivery of investment performance
throughout the entire investment lifecycle is only possible
through InfraRed’s dedicated team of over 30 specialist
asset managers, situated across London, New York and
Sydney and supported by specialist operating partners
in certain sectors and markets. This asset management
capability continues to evolve with the investment
activities across InfraRed’s wider platform, spanning both
core and value-add strategies.
Since HICL’s IPO, the Investment Manager has
successfully delivered 18 construction assets, generating
over 5.0p of NAV outperformance. This specialisation
was demonstrated again in the year at Blankenburg
Tunnel, where final major construction milestones were
achieved. InfraRed’s strong track record in greenfield,
construction stage investments, positions HICL to
pursue suitable opportunities in the space as and when
they arise.
As long-standing responsible investors in critical
infrastructure, InfraRed’s active asset management
approach is predicated on maintaining appropriate
quality, safety and service levels for HICL’s clients
and end-users. In cases where remediation works
are required to address construction-related defects,
InfraRed is overseeing delivery of appropriate capital
works programmes alongside responsible construction
contractors, where relevant. In these cases, it is only by
working proactively with our partners to ensure continuity
of service for the community, that shareholder value can
be protected.
Additional information on asset management initiatives
which help to preserve and enhance value across HICL’s
largest investments is set out starting on page 26.
Altitude Infra
HICL Annual Report 2024 Strategic Report Governance Financials
23
Highlights
68%
Portfolio
company gearing
£150m
Private Placement
issued May 2023
Financial highlights
HICL’s NAV per share decreased by 6.7p over the year
to 158.2p at 31 March 2024 (31 March 2023: 164.9p).
This reflected an increase in the portfolio’s weighted
average discount rate from 7.2% to 8.0%, partially offset
by higher forecast inflation, higher interest on cash
deposits, and positive underlying portfolio performance.
Further detail on the approach to valuation can be found
in the Valuation section of this report starting on page 46.
The Group issued long-term debt in the year via a
£150m Private Placement, diversifying HICL’s capital
base. The instrument, with 10- and 12-year maturities
and an all-in effective interest rate of 5.75%, was sought
to responsibly manage a portion of the Group’s floating
rate exposure at a lower long-term rate, manage
the refinancing risk and strategically align the term
repayment with expected capital redemptions from the
PPP portfolio.
Proceeds from the disposals announced in the year have
enabled the Group’s RCF to be substantially repaid post-
year end, down from £494m at its peak in April 2023,
reducing HICL’s pro-forma fund borrowing ratio to 7%
(31 March 2024: 16%).
Following the completion of the Northwest Parkway sale,
the Group’s RCF was reduced from £650m to £400m,
recognising that its requirements had reduced in this
higher interest rate environment. The RCF’s expiry date
remains 30 June 2026.
Further information on HICL’s financial performance can
be found in the Financial Review section starting on
page 40.
Governance
As part of the Investment Manager’s succession
plan, Jack Paris officially took over from Werner von
Guionneau as InfraRed CEO in July 2023. At the HICL
Investment Committee level, Jack replaced Werner, with
Chris Gill taking over as Chair of the Committee.
Sustainability
Sustainability is embedded throughout HICL’s business
model, focused on four key areas where HICL’s
investments can generate the strongest outcomes:
Environment, Communities, People and Governance.
InfraRed recognises that providing HICL’s shareholders
with sustainable, long-term income is intrinsically linked
to the delivery of favourable outcomes, across these four
pillars, to the communities served by its assets.
HICL has now released its second ‘live’ year of
emissions data, which covers 100% of the portfolio and
serves to benchmark progress towards the Group’s
goal of achieving a carbon-neutral portfolio by 2050
1
.
InfraRed has developed an action plan which envisages
the proportion of HICL’s investments anticipated to be
aligning, aligned to or at net zero increasing from 25%
today to 45% in 2027.
Beyond the portfolio’s inherent social contribution
through the delivery of essential services, HICL’s
assets are a source of direct employment for over
2,300 individuals and indirectly support thousands
more through the supply chain. To further integrate a
sustainability-first mindset into this supply chain, InfraRed
has introduced diversity, equity, and inclusion guidelines
across portfolio companies, with compliance monitored
via the annual ESG survey. In a move towards greater
accountability, key Group service providers are now
also asked to endorse a code of conduct in addition to
self-assessments, enabling more formal oversight of
adherence to policies and standards.
Sustainability highlights are provided on pages 36
to 39. Full details are set out in the Company’s 2024
Sustainability Report, available on the HICL website.
Download the
HICL Sustainability
Report online
www.HICL.com
Pinderfields & Pontefract Hospitals
1 HICL outlines in detail its transition plan and targets towards a carbon
neutral and, therefore, net zero portfolio by 2050 on pages 15 to 19 of its
2024 Sustainability Report
HICL Annual Report 2024
24
Investment Manager’s Report
continued
Highlights
35m
people worldwide
use and depend
on HICL-owned
infrastructure in
their day-to-day
lives
>2,300
people employed
directly by HICL’s
underlying assets
Risk management
HICL’s risk appetite statement, approach to risk
management and governance structure are set out in
Risk and Risk Management, starting on page 53.
Commentary relating to the Group’s key risks is set
out below.
Political and regulatory risk
Geopolitics
Geopolitical risk remained elevated, noting the continued
unrest in Ukraine and the Middle-East. The Company’s
portfolio is not directly exposed to these regions.
Secondary impacts, including supply chain disruption
and inflation, have had a limited impact on a subset of
projects during the period, with risks to equity mitigated
through contractual pass-through mechanisms.
UK elections
National elections will take place in the UK during the
coming financial year, with the inherent potential to shift
the policy framework around infrastructure ownership,
handback and future procurement.
InfraRed observes broad political consensus on the
significant levels of investment needed to upgrade the
UK’s ageing or outdated infrastructure. This bipartisan
support, combined with stretched public sector
balance sheets, is expected to provide a framework
for constructive discussions between the public and
private sectors on the important role that private capital
can continue to play in delivering much-needed critical
public infrastructure. InfraRed actively contributes
to this discussion through its various industry and
trade organisation memberships and through direct
engagement with both major political parties.
Regulatory determinations
HICL’s primary exposure to regulatory risk is through
Affinity Water, which expects to receive its PR24 draft
determination in June 2024. Recognising that there is
uncertainty around the outcome of PR24, InfraRed has
collaborated closely with the Affinity Water management
team and Ofwat throughout the process and is confident
that HICL’s valuation of the asset reasonably weighs the
risks and opportunities associated with the price review.
The Investment Manager also notes the heightened
political and regulatory scrutiny of the water sector more
broadly, including reports of financial issues affecting
certain water and sewerage companies. Affinity Water
benefits from a stable capital structure withvery
little holdco debt, no refinancing requirement until
AMP8 (which starts 1 April 2025), and no exposure to
sewerage services.
More broadly, InfraRed mitigates this risk by managing
regulatory exposures across jurisdictions and regulators.
TNT and Altitude Infra both benefit from stable regulatory
frameworks which differ considerably from the UK’s
incentive-based framework.
PFI handback
The acceleration of PPP projects returning to public
control is increasingly a key issue for both public and
private sectors. InfraRed is a key voice on this issue,
actively contributing to the Infrastructure and Projects
Authority’s (IPA) industry working group focused on
this transition, as well as its industry steering group.
InfraRed has initiated a systematic programme to
review its preparedness for all future project handbacks
within HICL’s portfolio. HICL has 33 projects scheduled
for transfer within the next ten years, which account
for 13% of the Directors’ Valuation at 31 March 2024.
This preparatory work, supported by a specialist third-
party adviser, is shaping InfraRed’s strategic planning
and asset management approach to effectively mitigate
this transition risk.
The proactive management of lifecycle spending is
an important factor as projects approach handback.
PPP projects make up 58% of HICL’s portfolio, and
lifecycle risk and reward is borne by the project on 59%
of these assets. In these cases, InfraRed continues
to closely monitor the appropriateness of the lifecycle
forecast reflected in each asset’s valuation. For the
remaining 41% of the PPP portfolio, lifecycle risk is
passed down to the facilities management contractor,
which is an important part of InfraRed’s risk management
strategy in relation to handback.
Fortysouth
HICL Annual Report 2024 Strategic Report Governance Financials
25
Highlights
0.7x
Inflation
correlation
100%
of the portfolio
covered in
newly published
emissions data
Client relationships
Long-term partnership frameworks inherently carry
certain risks, which are heightened by the broader
operational and financial challenges facing the UK
public sector. In certain sectors, such as healthcare,
this pressure can translate into behaviour by specific
clients, and their advisers, that could prove adverse
to the interests of the PFI, including with respect to
service delivery. While these isolated instances have
not had a material impact on the overall portfolio to
date, these practices increase the risk of dispute, and in
extreme cases could lead to reduced or non-payment
of contracted revenues, presenting a risk to the Group’s
cash flow stability.
Macroeconomic risk
The macroeconomic climate continues to weigh on
listed market valuations for real assets, including for
HICL. Notwithstanding, InfraRed remains confident in
the valuation of the portfolio, and has demonstrated the
validity of HICL’s NAV through multiple disposals in the
year across sectors and geographies.
The persistence of the high interest rate environment
is likely to limit HICL’s opportunities to raise new equity
capital in the near future. However, acquisition and
disposal activity undertaken during the year has clearly
demonstrated InfraRed’s ability to progress HICL’s
strategic objectives without reliance on equity capital
markets. If equity markets remain inaccessible for a
protracted period, the Investment Manager is confident
in its ability to continue to rotate assets to enhance HICL’s
portfolio and investment proposition.
If inflation continues to fall faster than the Group’s
projections, there is the risk of downward pressure on
cash generation and dividend cover. However, HICL’s
valuation forecasts remain conservative relative to long-
term market expectations, and the impact of short-term
variations in inflation on dividend cover is not expected
to be material. As part of the process undertaken to
recommend a return to dividend growth, the proposed
dividend increase has undergone rigorous stress testing
against various macroeconomic scenarios, including a
rapid return to a low inflation environment.
Market and outlook
HICL has continued to prove its resilience in an uncertain
macro environment, underpinned by carefully considered
portfolio construction, robust balance sheet management
and disciplined transaction activity. Active management
during the year has provided HICL with the financial
strength and flexibility to continue to execute its strategy
and deliver an attractive investment proposition for HICL
shareholders over the long term.
InfraRed continues to observe attractive opportunities
for HICL to pursue. Conditions across the market
for infrastructure assets remain variable and favour
experienced investors with deep networks and flexible
balance sheets, such as HICL. These attributes enable
the Group to identify special situations with favourable
competitive dynamics and with outsized returns. In this
way, the Group’s approach remains highly selective within
its core sectors (see the Infrastructure Market section on
pages 10-13).
The marginal return threshold for assessing new
investments remains high, with the benchmark for
new opportunities informed by potential NAV accretion
available through additional share repurchases, as
well as the contribution to HICL’s key portfolio metrics.
Funding for such investments will continue to be
supported by selective disposals, as appropriate, and
where these divestments align with long-term portfolio
composition objectives.
HICL’s portfolio has been structured to perform in a
variety of macroeconomic environments; it has resilient
inflation-linked cash flows, largely insulated from higher
interest rates and with long-term growth potential.
These attributes underpin the Group’s long-term earnings
base and ensure HICL is well positioned to generate
shareholder value through both sustainable income and
long-term capital growth.
Texas Nevada Transmission
Clean
water
HICL Annual Report 2024
26
Top 10 assets –
operational highlights
Investing in
infrastructure:
20%
leakage reduction
by 2025
Enriching lives:
950m
litres
clean water daily
providing on average 950 million litres
of clean water each day to a population
of more than 3.9 million people
Clean
water
HICL Annual Report 2024 Strategic Report Governance Financials
27
1. Affinity Water
Affinity Water provides on average 950 million litres
of clean water each day to a population of more than
3.9 million people in Southern and Eastern England.
On 28 September 2023, Affinity Water submitted its PR24
1
business plan to Ofwat. The plan sets out the company’s
operational approach and the £2.1bn capital investment
it is expecting to make over the five-year period to March
2030, representing a 19% increase from the previous five
years. The significant investment envisaged under the plan
is expected to result in the company’s RCV growing by over
32% in real terms between April 2025 and March 2030.
Affinity Water’s plan is fully funded, and HICL will consider
financing a portion of the growth outlined in the plan with
equity during AMP8, contingent on receiving a fair final
determination from Ofwat in December 2024, including the
resumption of shareholder distributions.
The company’s operational performance over the year was
broadly in line with expectations. In September 2023, Ofwat
published its latest Water Company Performance Report
showing the company’s leakage reduction performance to
be sector leading
2
. As at 31 March 2024, Affinity Water’s
three-year average leakage reduction remained ahead
of target at 19% with the company also exceeding its
commitments in limiting supply interruptions and mains
bursts. Although Affinity Water did incur a penalty in relation to
per-capita consumption, this was in line with previous periods
and will be recalibrated for PR24 to account for changes in
water usage patterns post-Covid-19.
HICL’s valuation benefitted from the application of Ofwat’s
PR24 methodology in certain areas, including RCV
adjustments that are due to be made at the start of AMP8.
This was offset by increases to the discount rate to reflect
increased government bond yields as well as sector-wide
uncertainty around the outcome of PR24.
As a result of proactive balance sheet management, Affinity
Water’s performance is underpinned by a resilient capital
structure. The company’s investment grade credit ratings
remain two notches above Ofwat’s required thresholds
notwithstanding the volatile macroeconomic environment,
and there is no refinancing requirement until the next
regulatory period, at which point the impact of increased
interest rates is expected to be mitigated through the
regulatory mechanism.
In January 2024, Affinity Water’s Chair Ian Tyler confirmed
his intention to step down from his role once the PR24
process has concluded. InfraRed will work closely with the
Affinity Water board throughout the recruitment process
and continue to support CEO Keith Haslett as he leads the
business into the next regulatory period.
Sector: Electricity & Water
Location: UK
% of portfolio: 8.3% (March 2023: 7.3%)
HICL holding: 33.2%
Concession life remaining: Indefinite
Status: Operational
Valuation sensitivity
RCV multiple -/+0.05x
Change in NAV in pence per share
(1.5) 1.5
1 The Ofwat 2024 price review process that sets prices for the period from April 2025
to March 2030
2 www.ofwat.gov.uk/publication/water-company-performance-report-2022-23/
28
HICL Annual Report 2024
2. A63 motorway
HICL’s investment relates to a 105km
stretch of the A63 Autoroute in France,
which connects Bordeaux to the Spanish
border. As such, the road is an important
trans-European transport corridor for
both freight and leisure travel, enabling
journeys from the Iberian Peninsula and
Southwestern France to the whole of
Northern Europe.
As set out in the Investment Manager’s
report, the Company acquired a further
3.1% interest in the asset in January 2024 on
highly accretive terms. This enhanced HICL’s
governance position through the appointment
of an additional director to the project
company board.
Over the financial year, light vehicle traffic
continued to grow due to healthy leisure
demand, with heavy vehicle traffic broadly flat.
Despite this robust underlying performance,
revenue over the period was slightly behind
HICL’s valuation assumption due to a traffic
accident in August 2023 that required toll
collection to be paused for approximately two
weeks. As at 31 March 2024, 60% of the toll
plaza repair costs and the lost revenue has
been recovered through insurance, with the
remainder expected to be recovered in due
course. Industrial action observed throughout
France in January 2024 had a negligible
impact on the road’s performance, reinforcing
the benefit of its strategic positioning.
Amidst sustained high inflation, effective cost
control has enabled the asset to achieve
savings against budget for both operating
and capital expenditures, which has driven a
modest valuation uplift relative to 31 March
2023. The asset’s financial performance was
further supported by inflation-linked tariff
increases of c.2.6% on average across heavy
and light vehicles which were enacted on
1 February 2024. The project’s fixed-rate,
long-term financing allows it to continue to
fully benefit from the impact of higher interest
rates on cash deposits.
The levy on revenues earned by companies
operating long-distance transport
infrastructure in France was enacted as
part of the 2024 Finance Law. The portfolio
company, along with several other large
concessionaires, has challenged the law with
the constitutional court, and it remains HICL’s
expectation that compensation will be due
through higher tolls in the event that the legal
challenge is unsuccessful. However, even if
the levy were to be imposed in full with no
compensation, the impact on HICL’s valuation
is not anticipated to be material given the
relatively small amount of revenue above the
€120m threshold.
Sector: Transport
Location: France
% of portfolio: 7.9% (March 2023: 6.5%)
HICL holding: 24.0%
Concession life remaining: 27 years
Status: Operational
Top 10 assets –
operational highlights
Investing in
infrastructure:
105km
dual carriageway
Enriching lives:
21m journeys in FY24
Driving
ambition
connecting Bordeaux to the Spanish
border via the A63 Autoroute
Valuation sensitivity
Traffic growth rate -/+0.5%
Change in NAV in pence per share
Valuation assumption: 1.4% CAGR
(1.1) 0.7
Fortysouth is a leading independent mobile tower
operator in New Zealand. With over 1,500 wholly owned
towers covering 98% of New Zealand’s population,
Fortysouth enables mobile network operators, fixed
wireless providers, and critical communications operators
to deliver communications services that connect New
Zealanders to each other and the world.
Following HICL’s acquisition in 2022, the ‘carve-out’ of the passive
infrastructure from One NZ has been completed and Fortysouth
now operates as a standalone entity. This process was supported
by the close working relationship held between Fortysouth and
InfraRed’s local asset management team.
A key priority of Fortysouth’s management team has been to
secure incremental co-location opportunities under long-term
contractual arrangements to enhance the company’s revenue
visibility. Although the number of new co-locations secured was
below expectations, the impact was mitigated by an agreement
reached with the New Zealand emergency services network
operator that will see public safety equipment installed on some
of Fortysouth’s towers. The company also progressed contract
renewals with its current co-location customers, with the aim of
increasing long-term visibility of this incremental revenue stream.
Fortysouth’s proactive approach to site management also saw
over 100 ground lease renewals executed in the year, which is a
key risk mitigant for the business.
Fortysouth’s financial performance was broadly aligned with
HICL’s valuation assumption, with revenues underpinned by its
availability-based, inflation-linked anchor tenancy contract with
One NZ. The company also benefitted from maintenance cost
savings and higher than expected ground rent revenue over the
year, partially offset by one-off transition costs.
Tower upgrades budgeted for the financial year were completed
ahead of schedule, highlighting the management team’s effective
collaboration with One NZ and the role Fortysouth expects to play
in supporting New Zealand’s longer-term 5G rollout ambitions.
New tower deployments were broadly as budgeted, keeping
the company on track to deliver over 290 new towers by March
2027. Potential measures to enhance the efficiency of capital
expenditure associated with these activities are being explored.
Shareholder distributions were slightly higher than expected
over the year and Fortysouth has no refinancing requirement
before 2027.
3. Fortysouth
Sector: Communications
Location: New Zealand
% of portfolio: 6.5% (March 2023: 5.8%)
HICL holding: 40.0%
Concession life remaining: Indefinite
Status: Operational
HICL Annual Report 2024 Strategic Report Governance Financials
29
Valuation sensitivity
Tenancy Ratio -/+0.05x
New tower roll-out -/+10%
Change in NAV in pence per share
(0.6) 0.6
(0.3) 0.3
4. Texas Nevada Transmission
Texas Nevada Transmission (“TNT”)
comprises two distinct electricity
transmission systems: Cross Texas
Transmission (“CTT”) and One Nevada
Transmission (“ON Line”). Together,
the networks consist of over 800km
of high-voltage transmission lines, as
well as a number ofswitching stations
and substations, which have been fully
operational since 2014.
Since completing the acquisition of this asset
in April 2023, InfraRed has fostered a strong
working relationship with co-shareholder and
operator LS Power, a highly reputable owner,
operator and developer of transmission assets
in North America. Operational performance
was in line with expectations over the year,
as evidenced by CTT and ON Line achieving
average availabilities of 99.99%% and
100% respectively, with facility inspections
carried out at both systems identifying no
significant issues despite record high summer
temperatures in Texas.
Both CTT and ON Line benefit from
predominantly fixed borrowing costs,
however, partial exposure to floating rates
resulted in interest expenses being higher than
forecast. This was partially mitigated by an
improved interest rate hedging contract, and
active treasury management coupled with the
asset’s robust operational performance
ensured that shareholder distributions were
in line with expectations. CTT is expected
to issue new debt in 2024 but the impact
of higher interest rates is expected to be
mitigated through the regulatory mechanism.
LS Power also finalised its Annual Planning
Assessment for CTT early in the period.
This involved an evaluation of future system
performance and the results indicated that
the network’s transmission facilities met
or exceeded standards set by the North
American Electric Reliability Corporation and
the Electric Reliability Council of Texas, while
also meeting CTT’s own planning criteria.
With InfraRed’s support, TNT’s management
team is working to drive growth by connecting
new power generation to the transmission
systems and has identified interconnection
opportunities that would represent over
3GW of additional capacity by 2030 (of
which c.90% would come from renewable
energy generation and the remainder from
battery energy storage systems). To deliver
this additional capacity, higher capital
expenditure would be required, which could
reduce TNT’s short-term yield but enhance its
long-term earnings profile. These incremental
interconnection opportunities reflect the
asset’s strategic positioning and the important
role it plays in bringing power from Texas’s
rural, energy-generating regions toitsmain
population centres.
Sector: Electricity & Water
Location: USA
% of portfolio: 5.6% (March 2023: 5.5%)
HICL holding: 45.8%
Concession life remaining: Indefinite
Status: Operational
Valuation sensitivity
Regulated ROE -/+1.0%
Capex -/+10%
Change in NAV in pence per share
(1.2) 1.1
(0.3) 0.3
HICL Annual Report 2024
30
5. High Speed 1
High Speed 1 (“HS1”) is the UK’s only
high-speed rail line, linking London
St Pancras with the Channel Tunnel.
It is a vital component of the UK’s
green gateway to Continental Europe,
and also enables fast and frequent
domestic rail services between Kent
andGreater London.
In the year to 31 March 2024, international
train path bookings were 89% of pre-Covid
levels on average. This was marginally above
HICL’s valuation assumption, reflecting
strong demand from leisure travellers and
contributing to a 28% increase in international
train path revenue relative to FY23.
Eurostar has also pre-booked train paths
between June and December 2024 equivalent
to 94% of pre-Covid levels. This strong
operational performance, alongside higher-
than-expected retail sales, enabled HS1 to
resume shareholder distributions in the year.
HS1 suffered flooding in its Thames tunnel,
resulting in the cancellation of most services
on 30 December 2023. A full investigation is
ongoing, but HS1 currently expects to be able
to pass down the costs of any rectification
works and the loss of train path revenue to
its subcontractors.
It was announced in the year that a new
international rail operator, Evolyn, was looking
to purchase 12 high-speed trains to launch a
service between London and Paris in 2025,
and that the Dutch start-up Huero plans
to introduce high-speed services between
London and Amsterdam within the next
five years. Enabling greater competition on
the line has been a key priority for HS1’s
board and management team since the time
of acquisition, and InfraRed will continue
to support the company as discussions
progress. HICL’s valuation of HS1 takes a
probability-weighted view of the likely impact
of any new international operator.
Border congestion in London and Paris
continues to restrict growth in international
services, and the EU’s ETIAS scheme, which
is expected to be implemented in late 2024,
may result in further increases in passenger
processing times. HS1 is working with
Eurostar to ensure it is equipped to manage
the changes and has included a budget in its
latest business plan for the capital expenditure
that may be required to do so. HICL’s valuation
assumption that bookings return to pre-Covid
levels in March 2025 remains unchanged.
Domestic services remain under UK
government control and HS1 continues to
benefit from the contractual underpin from the
Department for Transport, guaranteeing 96%
of pre-Covid domestic track access revenues.
Despite a modest increase in service levels
during the year, HICL’s forecast continues to
assume that domestic train path bookings
will remain below pre-Covid levels until March
2028. HS1’s fixed-rate borrowings, which are
termed to match the concession length, also
insulate HICL’s investment from the impact of
higher interest rates on debt costs.
Robert Sinclair, formerly CEO of London City
Airport, joined as CEO of HS1 on 4 March
2024. He replaced Dyan Perry (née Crowther)
OBE, who retired at the end of 2023. Robert’s
vast and relevant experience in the European
short-haul transport sector makes him ideally
placed to lead the company into the next
phase of its growth journey.
Sector: Transport
Location: UK
% of portfolio: 4.6% (March 2023: 4.3%)
HICL holding: 21.8%
Concession life remaining: 17 years
Status: Operational
Investing in
infrastructure:
300kph
top speed of
trains on HS1
Enriching lives:
100%
renewable electricity
used to power trains
the UK’s rail link with
Continental Europe
Green
gateway
31
FinancialsGovernanceStrategic ReportHICL Annual Report 2024
Valuation sensitivity
International train path
growth rate -/+0.5%
Change in NAV in pence per share
Valuation assumption: 2.1% CAGR
(0.8) 0.8
HICL Annual Report 2024
32
6. Southmead Hospital
Sector: Health
Location: UK
% of portfolio: 3.9% (March 2023: 3.6%)
HICL holding: 62.5%
Concession life remaining: 22 years
Status: Operational
Southmead Hospital is a major 996-bed acute hospital,
providing accident and emergency and specialist medical
services to a population of almost one million people in
Bristol, South Gloucestershire, and North Somerset.
Following the previously agreed commercial settlement, InfraRed,
alongside the client and other project stakeholders, continued to
progress the suite of works relating to the contractual obligations
of Carillion Plc, the original construction contractor for the hospital
which was liquidated in 2018. This included agreeing the core
remedial works programme and the construction of temporary
theatres needed to facilitate this. As much of the remaining works
require access to critical areas such as operating theatres, they
are planned to be phased over several years, and InfraRed’s latest
view on the complexity of the works programme is reflected in the
discount rate and lifecycle cost forecast used to value the asset.
The project’s average availability during the financial year was
over 99.9%, allowing shareholder distributions to be received in
line with expectations.
In the year, InfraRed also oversaw the completion of works
to convert administrative areas into clinical accommodation,
which provided 30 additional patient beds in time to relieve
winter pressures. This was well received by the NHS Trust, and
reflected the ability of InfraRed, the portfolio company and its
subcontractors to work flexibly and efficiently to expedite complex
requests from its public sector clients. The project’s strong
operational performance was reflected in Southmead Hospital
being shortlisted for Best Operational Project – Healthcare at the
HSJ Partnership Awards in the year.
HICL Annual Report 2024 Strategic Report Governance Financials
33
7. Royal School of Military Engineering
HICL’s investment covers over 50 buildings and
five training facilities used by the Royal School
of Military Engineering (“RSME”) Group, which
provides a wide range of training to the British
Army and defence forces.
The project continued to operate well, with an average
availability during the financial year of over 99.9%.
As a result, the project continued to make regular
distributions to HICL in line with forecast. RSME’s
robust performance continues to underpin its strong
contribution to HICL’s short-term yield profile.
During the year, InfraRed engaged external consultants
to assist with reviewing options to enhance the asset’s
lifecycle cost efficiency and an action plan based on that
review is in development. Upgrades were also made to
fire-stopping structures in refurbished accommodation
blocks to facilitate new kitchen units for military staff and
students. The portfolio company has also developed a
strong working relationship with its new client contact
at RSME following the introduction of the school’s new
commandant in the year.
Sector: Accommodation
Location: UK
% of portfolio: 3.5% (March 2023: 3.6%)
HICL holding: 100.0%
Concession life remaining: 14 years
Status: Operational
8. Pinderfields and Pontefract Hospitals
Pinderfields and Pontefract Hospitals provide
acute hospital services to more than half a million
people living in the Wakefield and North Kirklees
districts of West Yorkshire. Pinderfields Hospital
is a designated major trauma centre and is home
to two specialist regional services in burns and
spinal injuries for the North of England.
InfraRed and other key stakeholders progressed a
major programme of capital works scheduled to take
place over the next six years, including ventilation
upgrades as well as improvements to intensive care
units and haematology wards. To facilitate these works,
the portfolio company’s construction partner has been
building a large temporary ward, which holds over 40
beds and spans 1,400m
2
of floor space. This facility
was completed shortly after the year end and has
now been handed over to the NHS Trust, which will
gradually begin to use it to accommodate patients whilst
various components of the main hospital are being
upgraded. InfraRed has continued to work closely with
its construction partner to progress the remediation
of fire-related defects, and good progress was made
during the year.
Operationally, the project performed in line with
expectations despite heightened pressure on the NHS
over the winter months. This enabled distributions for
the year to remain broadly aligned with expectations.
Responsibility for lifecycle costs rests with the portfolio
company, and HICL’s valuation as at 31 March 2024
continues to acknowledge the potential risk of short-
term cost increases. A lifecycle adequacy review
was carried out by the management service provider
in the year which confirmed the appropriateness of
HICL’s assumptions.
Sector: Health
Location: UK
% of portfolio: 3.5% (March 2023: 3.4%)
HICL holding: 100.0%
Concession life remaining: 18 years
Status: Operational
In late 2023, volunteers from HICL’s portfolio company
and the facilities management provider partnered with the
NHS Trust to plant 1,000 trees at the Pinderfields Hospital
grounds in celebration of National Tree Week and to support
the site’s biodiversity (see HICL’s 2024 Sustainability Report).
The portfolio company continues to work closely with the
NHS Trust to support its wider sustainability plan.
HICL Annual Report 2024
34
HICL’s investment relates to the state-of-the-art
headquarters of the Home Office and the Department
for Environment, Food & Rural Affairs in central London.
The award-winning building has a number of energy-
saving features and has been designed to enhance the
experience of its 3,450 users.
Operationally, the project continued to perform well, achieving
99.9% availability over the financial year despite day-to-day
occupancy of the building remaining well below maximum levels
due to changes in working patterns. The portfolio company
continues to work closely with its facilities management partner
to ensure the building remains available and that the internal
environment is adapted to the number of users.
With seven years of concession length remaining, expiry planning
discussions with relevant stakeholders have commenced,
covering topics such as asset condition and forward maintenance
requirements. Drawing on its wider handback strategy as set out
in the Investment Manager’s Report, InfraRed worked closely
with the portfolio company and its contractors to ensure that
preparations progressed in a timely fashion, liaising with the client
and IPA where appropriate.
In its first full year of operating with energy-efficient LED lighting,
the project’s electricity consumption and carbon emissions were
reduced by 7% and 4% respectively relative to the prior year.
InfraRed and the facilities management contractor continue to
work closely with the client to deliver against its decarbonisation
objectives and prepare the building for longer-term usage beyond
the life of the PPP concession.
9. Home Office
Sector: Accommodation
Location: UK
% of portfolio: 3.0% (March 2023: 2.9%)
HICL holding: 100%
Concession life remaining: 7 years
Status: Operational
35
HICL Annual Report 2024 FinancialsGovernanceStrategic Report
10. Cross London Trains (“XLT”)
HICL’s investment covers a fleet of
electric rolling stock operating on the
Thameslink passenger rail route, a North
-South London commuter rail corridor
that serves both Luton and Gatwick
airports. The project benefits from
a 20-year availability contract which
commenced in 2016 and provides a
guaranteed revenue stream fully backed
by the UK Department for Transport.
Since acquisition in 2022, the fleet of 115
Siemens Desiro City Class 700 trains has
performed in line with expectations, with
miles per casualty remaining above the
minimum acceptable level stipulated in
the availability contract and shareholder
distributions received in line with HICL’s
acquisition assumption. XLT’s long-term
maintenance obligations remain with the
fleet manufacturer, Siemens, under a
direct contractual arrangement with Govia
Thameslink Railway and therefore continue
to sit outside of the portfolio company’s
delivery responsibilities. During the year,
the project reached the key milestone of
fleet acceptance on all 115 units, which will
enable the XLT management team to focus
on delivering operational performance
improvements and plan for mid-life
enhancement works.
After the 20-year availability contract term,
XLT will retain full ownership of the fleet
and have the option to re-lease it. HICL’s
valuation assumes a useful life of 40
years in line with market practice, which
is underpinned by the Class 700’s unique
positioning as a large, homogenous fleet of
bi-mode electric trains, built specifically for
the Thameslink corridor.
Sector: Transport
Location: UK
% of portfolio: 2.7% (March 2023: 2.8%)
HICL holding: 6.5%
Assumed asset life remaining
: 32 years
Status: Operational
Our sustainability strategy
Preserve the natural environment and mitigate
the impacts of climate change by investing
in the energy transition, delivering climate
resilient infrastructure and working to reduce
carbon emissions from HICL’s portfolio.
Positively impact the communities in
which HICL’s assets are located by actively
addressing the needs of clients, end users
and other key stakeholders.
Environment Communities
FY24 Sustainability Highlights
– Creation of a detailed net zero
transition plan for HICL’s portfolio,
including specific asset transition
plans for the next three years
– InfraRed contributed to the IPA Guidance
Document on Operational Decarbonisation
at PFIs
FY24 key stats
89,559
tCO
2
Total Attributable
GHG Emissions across
HICL’s portfolio
88%
Portfolio companies
with Water Reduction
Initiatives
FY24 key stats
94%
Portfolio companies
gave voluntary charity
contributions to
environmental or social
initiatives over the year
200+
Community initiatives
implemented across
the portfolio during
the period
FY24 Sustainability Highlights
– InfraRed Portfolio Impact initiatives
were rolled out across several HICL
assets to address client challenges
raised in InfraRed’s latest Client
Insights Survey
– Seven HICL projects obtained a ‘gold
standard’ award in InfraRed’s annual
CreatingBetter Futures awards
F
Y
2
4
o
b
j
e
c
t
i
v
e
F
Y
2
4
o
b
j
e
c
t
i
v
e
Decarbonisation planning
at M17/M18 Road
Tablet donations: West Middlesex Hospital
HICL Annual Report 2024
36
Promote fair and safe conditions as well
asdiverse and inclusive workplaces within
HICL’s portfolio companies and across the
supply chain.
Ensure that HICL maintains high standards
of ethics and integrity through the rigorous
implementation of policies andthe provision
oftransparent and balanced disclosure.
People Governance
FY24 key stats
23%
Gender diversity
at portfolio
company boards
0.28
RIDDORs
per project
FY24 key stats
97%
Portfolio companies
conduct modern
slavery training
100%
Portfolio companies
have Anti-bribery and
Corruption policies
FY24 Sustainability Highlights
– Code of conduct forms were introduced for
completion by HICL’s main service providers,
allowing the Company to formally monitor
compliance withkey policies and standards
– Developed, implemented and
rolled out DEI guidance for portfolio
companies that directly employ staff
andmonitored performance against
this via the annual ESG survey
FY24 Sustainability Highlights
– Disclosed HICL’s first set of
year-on-year comparisons of
SFDR Principal Adverse Impact “PAI”
Disclosures andGHG emissions
– ESG-specific investor perception
surveycarried out with c.25% of
HICL’sshareholderregister
– Case studies demonstrating InfraRed’s
investment framework in practice
F
Y
2
4
o
b
j
e
c
t
i
v
e
F
Y
2
4
o
b
j
e
c
t
i
v
e
Hornsea II OFTO
Healthcare 2023 Staff Excellence Awards
HICL Annual Report 2024 Strategic Report Governance Financials
37
HICL Annual Report 2024
38
3: Good health and well-being 22%
4: Quality education 10%
6: Clean water and sanitation 8%
7: Affordable and clean energy 10%
9: Industry, innovation and infrastructure 18%
11: Sustainable cities and communities 28%
16: Peace, justice and strong institutions 4%
Our impact
SDG
Ensure healthy lives and
promote well-being for all
at all ages
Ensure inclusive and equitable
quality education and promote
lifelong learning opportunities
for all
Ensure availability and
sustainable management of
water and sanitation for all
Ensure access to affordable,
reliable, sustainable and modern
energy for all
Build resilient infrastructure,
promote inclusive and
sustainable industrialisation
and foster innovation
Make cities and human
settlements inclusive, safe,
resilient and sustainable
Promote peaceful and inclusive
societies for sustainable
development, provide access to
justice for all and build effective,
accountable and inclusive
institutions at all levels
This page demonstrates the reach of HICL’s
portfolio. By facilitating access to essential
services in a socially responsible manner,
our projects contribute to many of the UN
Sustainable Development Goals (“SDGs”)
and deliver an inherent social good. However,
both the Board and the Investment Manager
acknowledge that making a genuine social
contribution involves going above and beyond
the reliable provision of infrastructure.
The nature of HICL’s investment proposition
means the Company contributes most to the
following two SDGs:
Aligning HICL’s portfolio and SDGs
% byvaluation as at March 2024
HICL Annual Report 2024 Strategic Report Governance Financials
39
8.7m
People with access to
HICL’s healthcare facilities
120k
Student places across school,
college and university facilities
3.9m
People served with clean
water by Affinity Water
3.1m
Homes connected to renewable
electricity by HICL’s OFTOs
>5m
Homes connected to high-speed
internet by Altitude Infra
35,000
Accommodation places
2.3m
People served by HICL’s
courts, fire stations and
police stations
>5m
Unique users of HICL’s
roads and railways
How we support
HICL invests in 32 assets that directly promote
good health and wellbeing including hospitals,
primary care centres andfire stations.
HICL invests in 42 educational assets
including schools, colleges, libraries, training
facilities and universities that facilitate the
provison of essential learning outcomes.
Affinity Water is one of the UK’s largest
water-only companies, owning and managing
water projects and networks in an area
approximately 4,500km
2
across three supply
regions in the southeast of England.
HICL invests in six electricity transmission
assets with a total capacity of 4,500 MW
which support the provision of clean energy.
HICL invests in six assets supporting
industry innovation and infrastructure
across fibre, telecommunications towers
and accommodation. These assets provide
essential services required to support the
functioning of modern eco.
HICL invests in 17 assets supporting
sustainable cities and communities including
roads, railways and rolling stock. These assets
contribute to affordable and sustainable
transport systems.
HICL invests in eight assets promoting peace,
justice and strong institutions including
prisons, police stations, judicial courts, and
custodial centres.
HICL Annual Report 2024
40
Financial Review
HICL prepares its financial statements in accordance with UK-
adopted International Financial Reporting Standards (“IFRS”).
Consistent with the 2023 Annual Report, the Company’s financial
performance is reported under the non-UK-adopted international
accounting standards Investment Basis which consolidates the
results of the Company, together with HICL Infrastructure 2 S.a.r.l.
(“Luxco”) and Infrastructure Investments Limited Partnership (“IILP”),
referred to as the “Corporate Group” throughout the Financial
Review. As noted in the Chair’s statement, Group is defined as the
HICL Infrastructure PLC group of companies, which includes all of
its subsidiaries.
Total return, which is defined as total comprehensive income for
the year, net assets or NAV, and EPS, are the same under IFRS
and the Investment Basis. The Board and the Investment Manager
manage the Company on an Investment Basis, which is an APM
and is reconciled on page 43. Reconciliation of the Investment Basis
financial information to the IFRS statements is provided from page 44.
Summary income statement
Investment Basis
£m
For the
year ended
31 March 2024
For the
year ended
31 March 2023
Dividend income 207.2 191.1
Interest income 134.6 122.1
Fair value movement (237.4) (94.2)
Foreign exchange movement on
investments (37.3) 39.4
Gain/(loss) on foreign exchange
derivatives 27.5 (13.1)
Other income 10.8 8.9
Total Investment Income 105.4 254.2
Expenses and finance costs (74.8) (55.7)
Profit before tax 30.6 198.5
Tax (0.1) (0.1)
Total Return 30.5 198.4
Earnings per share 1.5 9.9
Total investment income decreased by 59% to £105.4m
(2023: £254.2m). The decrease in total investment income is
principally due to a reduction in the fair value of investments by
£237.4m (2023: loss of £94.2m) which was driven by the 0.8%
increase (2023: 0.6% increase) in the weighted average discount
rate to 8.0% (2023: 7.2%). This was partially offset by the positive
impact of actual and forecast inflation on the investment valuations.
Dividend income increased to £207.2m (2023: £191.1m) primarily due
to the receipt of £115.9m in dividends following the multiple disposals
in the year (2023: £85.0m dividend from the sale of Queen Alexandra
Hospital (“QAH”)). Further detail on the valuation movements is given
in the Valuation of the Portfolio section starting on page 46.
The table below shows the breakdown of Other income:
Investment Basis
£m
For the
year ended
31 March 2024
For the
year ended
31 March 2023
Project directors’ fees 6.5 5.5
Interest on bank deposits 0.6 0.1
Early repayment fees 3.7 3.3
Other income 10.8 8.9
Other income principally represents project directors’ fees charged
to project companies, which are recognised in other income when
invoiced, and loan early repayment fees.
The Group’s hedging policy targets NAV per share volatility of no
more than 2% for a 10% movement in foreign exchange rates.
During the year, the net impact of foreign exchange movements was a
£9.8m loss (2023: £26.3m gain), which represents 0.3% of the closing
NAV (2023: 0.8%). This follows a 2.3% movement in weighted average
FX rates in the year (2023: 7.9%).
The below table shows the impact of hedging on non-sterling assets:
Foreign exchange
hedging
£m
Rate as at
31 March
2024
Non-UK
assets
1
FX hedge
FX hedge
as % of
non-UK
assets %
1%
sensitivity to
movement
in FX rates
2
Euro 1.17 644 439 68% 2.0
USA 1.26 187 107 57% 0.8
Canada 1.71 48 18 37% 0.3
New Zealand 2.11 214 105 49% 1.1
Total 1,093 669 61% 4.2
1 US hedging is for TNT only. The proceeds from Northwest Parkway are fully hedged
2 Sensitivity impact is net of derivatives
Expenses and finance costs
Investment Basis
£m
For the
year ended
31 March 2024
For the
year ended
31 March 2023
Finance costs 36.2 16.1
Investment Manager fees 33.9 32.7
Directors’ fees and expenses 0.5 0.5
Acquisition bid costs (0.2) 1.9
Professional fees 4.4 4.5
Expenses and finance costs 74.8 55.7
Finance costs increased to £36.2m (2023: £16.1m), principally due to
higher absolute borrowing levels and interest rates. The average total
borrowing in the year was £478.4m (2023: £111.3m), while the average
all-in interest rate was 6.4% (2023: 2.8%).
The Investment Manager fees were £33.9m (2023: £32.7m).
The increase was due to the higher average Directors’ Valuation of
£3,793.7m during the period (2023: £3,621.6), calculated in line with
the Investment Manager fee agreement as detailed on page 76.
HICL Annual Report 2024 Strategic Report Governance Financials
41
Tax
Tax charged to the Income Statement under the Investment Basis
relates to HICL’s immediate subsidiary, Luxco. As HICL Infrastructure
PLC has Investment Trust Company (“ITC”) status, it is exempt
from tax on certain items on the basis that tax is already paid at the
operating company level, thus protecting shareholders from suffering
double taxation. The Directors monitor compliance with the ITC rules
through reporting prepared by the Investment Manager and are of the
opinion that the Company has complied with its obligations as an ITC
for the year.
Ongoing Charges Ratio (“OCR”)
Investment Basis
£m
For the
year ended
31 March 2024
For the
year ended
31 March 2023
Investment Manager 33.9 32.7
Auditor fee for the Corporate Group 0.4 0.4
Non-audit fee paid to the Auditor:
Interim review 0.1 0.1
Directors’ fees and expenses 0.5 0.5
Other ongoing expenses 2.4 2.0
Total expenses 37.3 35.7
Average NAV 3,267.6 3,282.3
Ongoing charges 1.14% 1.09%
The OCR is calculated in line with the Association of Investment
Companies’ (“AIC”) guidance. It is defined as the annualised ongoing
charges (which excludes acquisition costs and other non-recurring
items) divided by the average published undiluted Net Asset Value of
£3,267.6m for the year (2023: £3,282.3m).
The OCR for the period is 1.14% (2023: 1.09%). The increase in the
OCR is principally due to the higher management fee, which is in
turn driven by the higher Gross Asset Value in the year. As the Group
has been selling assets to repay the RCF, the management fee is
expected to reduce in FY2025 with a corresponding reduction in
the OCR.
Summary balance sheet and NAV
Investment Basis
£m 31 March 2024 31 March 2023
Investments at fair value 3,268.9 3,498.6
Net other assets / (liabilities) 248.0 (1.0)
Net debt (303.9) (147.6)
Net assets 3,213.0 3,350.0
NAV per share (before dividend) 158.2p 164.9p
NAV per share (post-dividend) 156.1p 162.8p
Investments at fair value decreased by 7% to £3,268.9m
(2023: £3,498.6m), mainly due to the net acquisition and disposal
activity in the period. During the year, the Group completed £274.2m
and announced a further £234.5m of disposals, and increased
the weighted average discount rate by 0.8% to 8.0% (31 March
2023: 7.2%). These two items were offset by acquisitions of £226.9m
and updates to forecast interest rate and inflation assumptions.
Further detail on the movement in Investments at fair value, which are
net of commitments and therefore not in the Directors’ Valuation, is
given on pages 46-52, Valuation of the Portfolio.
Net other assets increased to £248.0m (31 March 2023: £1.0m
liabilities), due to the expected proceeds of £233.2m from the
disposals of Northwest Parkway and Hornsea II OFTO, in addition to
the fair value of FX forwards.
An analysis of the movements in net debt is shown in the Summary
cash flow on the following page. The increase relative to 31 March
2023 is principally driven by the issuance in May 2023 of £150m of
Private Placement loan notes in the Company’s Corporate Subsidiary,
IILP. The notes were issued in two tranches: £100m expiring in 2033
and £50m expiring in 2035. The weighted average interest rate is
5.80% (5.75% after hedging). In June 2023, IILP purchased a £200m
SONIA interest rate cap at 6.5% to mitigate against the risk of rising
interest rates.
NAV per share was 158.2p (2023: 164.9p) before the 2.07p fourth
quarterly distribution. The 6.7p decrease in NAV per share was
primarily due to earnings per share of 1.5p, net of 8.3p distributions,
for the year ending 31 March 2024. NAV per share and earnings per
share are the same under the Investment Basis and the IFRS Basis.
Key accounting estimates and judgements
In preparing these accounts, the key accounting estimate is the
carrying value of the Group’s investments, which are stated at fair
value. Given the importance of the valuation of investments, the
Board’s Audit Committee has oversight of the Investment Manager’s
valuation process and challenges the Valuation Policy, process and
application to individual investments on a semi-annual basis. A third
party is also appointed to carry out an independent review of the
Investment Manager’s valuation. Despite the above, asset valuations
for unquoted investments are inherently subjective, as they are based
on assumptions which may not prove to be accurate.
The Group’s investments are predominantly unquoted and are
therefore valued using a discounted cash flow analysis of the forecast
investment cash flows from each project. The exception to this is the
listed senior debt in the A13 Road project.
A key judgement is the assessment of whether the Company meets
the definition of an investment entity. IFRS 10 requires the Group’s
intermediate holding companies to be presented at fair value, which
reduces the transparency of the underlying investment performance.
As a result, the Group presents limited financial information on the
Investment Basis to ensure that the commentary in the Strategic
Report remains fair, balanced and understandable. The reconciliation
of the Investment Basis to IFRS is shown on pages 44 and 45.
HICL Annual Report 2024
42
Financial Review continued
Summary cash flow
Investment Basis
£m 31 March 2024 31 March 2023
Cash from investments 244.4 222.7
Operating costs (39.8) (43.8)
Finance costs (29.0) (7.9)
Net cash inflow before capital
movements 175.6 171.0
Cost of new investments (435.1) (339.1)
Investment disposal proceeds 269.4 96.8
Share capital raised, net of costs – 158.0
Net cash flow from derivatives 6.8 (15.9)
Debt arrangement fees paid (2.5) (6.7)
Short-term intercompany borrowings (0.3) –
Dividends paid (167.6) (165.5)
Movement in the year (153.7) (101.4)
Net (debt) at start of year (147.6) (46.2)
Foreign exchange on cash (2.6) –
Net debt at end of year (303.9) (147.6)
The Corporate Group ended the year with net debt of £303.9m
(31 March 2023: £147.6m net debt). This is made up of drawings
on the RCF of £187.2m (31 March 2023: £219.4m) and the Private
Placement of £150.0m (31 March 2023: £nil) net of cash of £33.3m
(31 March 2023: £71.8m).
The debt arrangement fees decreased to £2.5m (2023: £6.7m) as
prior year fees reflected the costs of renegotiating the Corporate
Group’s £650m RCF.
Dividends paid in the year were £167.6m (2023: £165.5m).
Dividend cash cover excluding disposals increased marginally to
1.05x (2023: 1.03x). Including profit versus original cost on disposals
of £53.4m, the dividend cash cover is 1.37x (2023: including profit
versus original cost on disposals of £45.5m, cash cover was 1.31x).
Debt and gearing levels
The Corporate Group’s debt and borrowing facilities are held by IILP.
As at 31 March 2024, IILP had drawn £187.2m on its RCF (31 March
2023: £219.4m) and £6.0m by way of letters of credit (31 March
2023: £15.7m). In addition, IILP had drawn €109.6m on its LCF facility
of (31 March 2023: €67.3m), with the increase due to the acquisition of
the Hornsea II OFTO. In May 2023 IILP issued loan notes of £150.0m
via a Private Placement. Overall, the Corporate Group had £490.1m
of liquidity as at 31 March 2024, comprising £456.8m headroom on
its RCF and £33.3m of cash. After the year end, the Corporate Group
reduced the capacity in the RCF from £650m to £400m, reflecting a
reduced forecast utilisation profile until expiry on 30 June 2026.
HICL makes prudent use of its available leverage. Under the Articles,
the Corporate Group’s outstanding borrowings, including any
financial guarantees to support outstanding subscription obligations
but excluding internal company borrowings of the Corporate Group’s
underlying investments, are limited to 50% of the Adjusted Gross
Asset Value, being the Directors’ Valuation plus cash balances of the
Company and Luxco and IILP (together the “Corporate Subsidiaries”).
The ratio of debt to Adjusted Gross Asset Value at the end of the year
was as follows:
31 March 2024
£m
31 March 2023
£m
Outstanding drawings
Bank borrowings 187.2 219.4
Letter of credit facility 99.7 74.8
Private Placement 150.0 –
436.9 294.2
Adjusted Gross Asset Value
Directors’ Valuation 3,333.4 3,772.8
Announced disposals 233.2 –
Cash and cash equivalents 33.3 71.8
3,599.9 3,844.6
Borrowing ratio 12.1% 7.7%
Capital management
From time to time the Company issues its own shares to the market;
the timing of these issuances depends on market prices.
Should the Ordinary Shares continue to trade at a discount to the
Net Asset Value and there are sufficient funds to transact, at the sole
discretion of the Directors, the Company may:
– make market purchases of up to 14.99% per annum of its issued
Ordinary Shares; and
– make tender offers for the Ordinary Shares.
As noted above, in May 2023, IILP issued £150.0m of Private
Placement loan notes, which diversified the Company’s long-term
capital. During the period the Group has also used disposal proceeds
to repay the RCF which is expected to be fully paid off once expected
proceeds are received. The Group also announced a share buyback
programme of up to £50m, funded using disposal proceeds.
The borrowing ratio is expected to decline to 7.0%
1
once the
proceeds are received from Northwest Parkway and Hornsea II and
the RCF is repaid.
1 Adjusted gearing ratio includes cancellation of 50% of the current Hornsea II LC
HICL Annual Report 2024 Strategic Report Governance Financials
43
Alternative Performance Measures (“APMs”)
The Directors assess the Group’s performance using a variety of APMs that are not specifically defined under IFRS, which provide additional
information to investors as to how the Company is managed and assessed. The APMs may not be directly comparable with those used
by other companies and therefore the Directors wish to draw users’ attention to GAAP measures in the financial statements from page 112
onwards. The Directors’ Investment Basis is itself an APM. The explanation and rationale for the Investment Basis is shown on page 40 and
itsreconciliation to IFRS is shown from page 44. The table below defines the Group’s APMs.
APM Purpose
2024 Investment
Basis Calculation Reconciliation to IFRS
Annualised
return from
the portfolio
A measure of underlying
portfolio performance within a
given year
9.0%
£285.5m rebased return divided
by £3,180.5m rebased valuation as
shown on the Valuation Report on
page 46 compounded for a year
The calculation uses figures which are
reconciled to the Investment Basis on page
44 which, in turn, is reconciled to IFRS in the
Reconciliation of Investment Basis to IFRS
section below
The calculation is not an APM under IFRS
Directors’
Valuation
A measure of the size of the
investment portfolio including
the value of further contracted
future investments committed
by HICL
£3,333.4m
£3,268.9m investments at fair
value plus £64.5m contracted
commitments
The calculation uses portfolio assets shown
in the reconciliation in the ‘Reconciliation of
Investment Basis to IFRS’ section below
The IFRS valuation is £3,212.5m as at 31
March 2024
Distributable
cash
A measure of cash received
from underlying projects in the
year
£229.0m
Calculated as net cash inflow before
capital movements of £175.6m
shown in the ‘Investment Basis
Summary Cash Flow’ plus £53.4m
profit versus original cost on disposal
of Northwest Parkway, Bradford
Schools Phase 1 & Phase 2,
Queens (Romford) Hospital, Oxford
John Radcliffe Hospital, Priority
Schools NE Batch, South Ayrshire
Schools and Sheffield Student
Accommodation
The calculation uses distributions received
from investments plus profit ondisposal
This is not applicable under IFRS as dividend
income is that paid by Luxco to service the
dividend by HICL Infrastructure PLC
Dividend
cash cover
A measure of cash received
from underlying projects in the
period enabling distributions to
shareholders
1.37x
1
£175.6m distributable cash received
in addition to £53.4m profit on
disposals of Northwest Parkway,
Bradford Schools Phase 1 & Phase
2, Queens (Romford) Hospital,
Oxford John Radcliffe Hospital,
Priority Schools NE Batch, South
Ayrshire Schools and Sheffield
Student Accommodation divided by
£167.6m dividend for the year
The calculation uses the dividend paid in the
‘Statement of Changes in Equity’ divided by
distributable cash
The calculation uses cashflows in the
corporate subsidiaries and therefore does
nothave a like-for-like IFRS equivalent
Cash
investments
Identifying new opportunities
in which to invest capital is a
driver of HICL’s ability to deliver
attractive returns
£435.1m
£435.1m Investment Basis cash paid
to acquire investments in the year
The equivalent balance under IFRS is
shownin the ‘Reconciliation of Statement
ofCash Flows’
There were no cash investments and
therefore there is no like-for-like IFRS
equivalent
Cash
proceeds
Cash proceeds from our
investments support our
returns to shareholders, as well
as our ability to invest in new
opportunities
£269.4m
£269.4m cash received into IILP,
directly or indirectly, from the
disposal of investments in the year
The equivalent balance under IFRS is
shown in the ‘Reconciliation of Statement
ofCashFlows’
There were no cash proceeds received by
the Company
Net cash/
(debt)
A measure of the available liquid
cash to invest in the business
offset by the Corporate Group’s
borrowings. This is an indicator
of the financial risk in the
Group’s Statement of Financial
Position
£(303.9)m
£33.3m cash and cash equivalents,
less £337.2m of loans and
borrowings
The equivalent balance under IFRS and
the reconciliation to the Investment Basis is
shown in the Reconciliation of Statement of
Financial Position
Net cash is £1.1m under IFRS as at 31 March
2024, being the working capital held by
theCompany
1 The calculation includes total profit versus original cost on disposal of £53.4m. Excluding this, dividend cash cover is 1.05x
HICL Annual Report 2024
44
Financial Review continued
APM Purpose
2024 Investment
Basis Calculation Reconciliation to IFRS
Borrowing
ratio
A measure of debt as a
percentage of gross assets of
the Corporate Group
12.1%
£436.9m debt (including letters of
credit) divided by adjusted Gross
Asset Value of £3,599.9m. Adjusted
Gross Asset Value is the Directors’
Valuation plus announced disposals
plus cash and cash equivalents
The equivalent balance under IFRS and the
reconciliation to the Investment Basis is shown
in the Reconciliation of Statement of Financial
Position. Noting that the calculation includes
letters of credit (£99.7m) and commitments
(£64.5m) which are not included in the IFRS
Statement of Financial Position
The Company holds no debt, therefore the
borrowing ratio is nil under IFRS
Reconciliation of Investment Basis to IFRS
Reconciliation of Statement of Comprehensive Income
£m
For the year ended 31 March 2024 For the year ended 31 March 2023
Investment
Basis
Consolidation
adjustments
IFRS
Basis
Investment
Basis
Consolidation
adjustments
IFRS
Basis
Dividends received 207.2 (9.2) 198.0 191.1 (39.6) 151.5
Interest received 134.6 (134.6) – 122.1 (104.6) 17.5
Net (loss)/gain on revaluation of investments (237.4) 74.6 (162.8) (94.2) 127.5 33.3
Foreign exchange movement on investments (37.3) 37.3 – 39.4 (39.4) –
Profit/(Loss) on foreign exchange derivatives 27.5 (27.5) – (13.1) 13.1 –
Other income 10.8 (10.8) – 8.9 (8.9) –
Total investment income
1
105.4 (70.2) 35.2 254.2 (51.9) 202.3
Management fee (33.9) 33.9 – (32.7) 32.7 –
Finance costs (36.2) 36.2 – (16.1) 16.1 –
Other fund expenses
2
(4.7) – (4.7) (6.9) 3.0 (3.9)
Total expenses (74.8) 70.1 (4.7) (55.7) 51.8 (3.9)
Profit before tax 30.6 (0.1) 30.5 198.5 (0.1) 198.4
Tax (0.1) 0.1 – (0.1) 0.1 –
Earnings 30.5 – 30.5 198.4 – 198.4
Earnings per share 1.5p – 1.5p 9.9p – 9.9p
Notes:
1 Total income shown in the IFRS accounts relates only to HICL Infrastructure PLC and not the portfolio companies that are held through investment entity subsidiaries. The consolidation
adjustments relate to the results recorded in the Corporate Subsidiaries
2 Other fund expenses comprise audit, valuation and other professional fees
HICL Annual Report 2024 Strategic Report Governance Financials
45
Reconciliation of Statement of Financial Position
£m
For the year ended 31 March 2024 For the year ended 31 March 2023
Investment
Basis
Consolidation
adjustments
IFRS
Basis
Investment
Basis
Consolidation
adjustments
IFRS
Basis
Investments at fair value 3,268.9 (56.4) 3,212.5 3,498.6 (148.9) 3,349.7
Trade and other receivables 237.7 (237.4) 0.3 18.7 (18.3) 0.4
Other financial assets 25.9 (25.9) – 8.5 (8.5) –
Trade and other payables (15.0) 14.1 (0.9) (22.3) 21.2 (1.1)
Other current financial liabilities (0.6) 0.6 – (5.9) 5.9 –
Cash and cash equivalents 33.3 (32.2) 1.1 71.8 (70.8) 1.0
Loans and borrowings (337.2) 337.2 – (219.4) 219.4 –
Net assets attributable to Ordinary Shares 3,213.0 – 3,213.0 3,350.0 – 3.350.0
NAV per share (before dividend) 158.2p – 158.2p 164.9p – 164.9p
NAV per share (post-dividend) 156.1p – 156.1p 162.8p – 162.8p
Note:
The Investment Basis financial information is prepared for performance measurement and therefore reserves are not analysed separately
Reconciliation of Statement of Cash Flows
£m
For the year ended 31 March 2024 For the year ended 31 March 2023
Investment
Basis
Consolidation
adjustments
IFRS
Basis
Investment
Basis
Consolidation
adjustments
IFRS
Basis
Investment income received 244.4 (72.0) 172.4 222.7 (53.7) 169.0
Operating expenses paid (39.8) 35.1 (4.7) (43.8) 40.0 (3.8)
Finance costs paid (29.0) 29.0 – (7.9) 7.9 –
Net cash inflow before capital movements 175.6 (7.9) 167.7 171.0 (5.8) 165.2
Purchase of investments (435.1) 435.1 – (339.1) 181.2 (157.9)
Proceeds from investments 269.4 (269.4) – 96.8 (96.8) –
Share capital raised net of costs – – – 158.0 – 158.0
Net cash flow from derivatives 6.8 (6.8) – (15.9) 15.9 –
Debt arrangement fees paid (2.5) 2.5 – (6.7) 6.7 –
Intercompany borrowings (0.3) 0.3 – – – –
Dividends paid (167.6) – (167.6) (165.5) – (165.5)
Movement in the year (153.7) 153.8 0.1 (101.4) 101.2 (0.2)
Net cash/(debt) at start of year (147.6) 148.6 1.0 (46.2) 47.4 1.2
Foreign exchange on cash (2.6) 2.6 – – – –
Net cash/(debt) at end of year (303.9) 305.0 1.1 (147.6) 148.6 1.0
Note:
There is a difference between the change in cash and cash equivalents of the Investment Basis and the IFRS financial statements due to the cash balances held in the Corporate Subsidiaries
Cash held within the Corporate Subsidiaries is not shown in the IFRS statements but is shown in the Investment Basis financial information
Movement in the Directors’ Valuation in the year ended 31 March 2024:
Future commitments
9.0%
(8.8)%
3.8%
(1.2)%
Income Statement Revenue
31 March
2023
Valuation
(508.7)
(244.3)
285.5
(280.3)
120.5
(1.7)
3,246.7
226.9
3,333.4
3,268.9
3,498.6
3,180.5
31 March
2024
Valuation
3
Acquisitions Divestments Cash
distributions
Return
1
Change in
discount rate
Change in
economic
assumptions
Change in
FX on net
valuation
2
Change in
FX on equity
commitments
Rebased
Valuation
3,772.8
(37.3)
HICL Annual Report 2024
46
Valuation methodology and approach overview
InfraRed is responsible for preparing the valuation of HICL’s
investment portfolio for the Directors’ approval. This investment
valuation is called the Directors’ Valuation. It is an Alternative
Performance Measure (“APM”)
4
and comprises the investment
portfolio and future commitments adjusted for disposals committed
to by the Group at the reporting period end.
The Directors’ Valuation is the Group’s preferred valuation measure
because it better represents the Group’s total value at risk at the
balance sheet date. The valuation methodology and policy
5
are
unchanged from previous reporting periods.
The valuation is carried out on a six-monthly basis as at 31 March and
30 September each year. The Group’s investments are predominantly
unquoted and are mainly valued using a discounted cash flow
analysis of forecast investment cash flows
6
.
There is a secondary market for infrastructure investments and,
where appropriate and publicly available, external data points are
considered. The Directors’ Valuation is a sum-of-the-parts valuation,
hence no further adjustment is made to reflect the size, scarcity, and
diversification of the overall portfolio.
The key external (macroeconomic and fiscal) factors affecting the
forecast of each portfolio company’s cash flows in local currency
are inflation rates, interest rates, GDP growth rates and applicable
tax rates. The Investment Manager makes forecast assumptions
for each of these external metrics using market data and economic
forecasts. The Investment Manager also exercises its judgement to
assess the expected future cash flows from each investment based
on the detailed financial models produced by each portfolio company.
The data in these models are adjusted to reflect specific operating
assumptions and to replace metrics used by portfolio companies with
those used by the Group where they are different.
The fair value for each investment is then derived from the application
of an appropriate market discount rate and year-end currency
exchange rate. The discount rate takes into account risks associated
with the financing of the investment (e.g. liquidity, currency risks,
market appetite) and its earnings quality (e.g. predictability and
covenant of the revenues and service delivery challenges). These are
generally differentiated by the phase of the investment’s life (e.g.
in construction or in operation).
More information on the Valuation Policy can be found on page 160.
The Directors’ Valuation is the key component in determining HICL’s
Net Asset Value (“NAV”) and so the Audit Committee receives and
challenges an independent report and opinion on the Investment
Manager’s valuation from a third-party valuation expert.
Directors’ Valuation at 31 March 2024
The Directors’ Valuation of the portfolio at 31 March 2024 was
£3,333.4m, a decrease of 11.6% (31 March 2023: £3,772.8m)
versus prior year. The FY2024 Directors’ Valuation includes £64.5m
of outstanding equity commitments (31 March 2023: £274.5m) in
respect of two projects: the Blankenburg Tunnel (Netherlands) and
the B247 Road (Germany).
A breakdown of the movement in the Directors’ Valuation is shown in
the chart below.
Valuation of the Portfolio
1 ‘Return’ comprises the unwinding of the discount rate and project outperformance, including actual inflation
2 FX movement net of hedging is a loss of £9.7m
3 £3,333.4m reconciles, on an Investment Basis, to £3,268.9m investments at fair value (IFRS) together with £64.5m of future commitments
4 Further detail on the Group’s APMs, including a reconciliation to the IFRS financial statements, is shown on page 43
5 Refer to Appendix 2 on page 160 for further details on the valuation policy
6 The exception to this is the listed senior debt in the A13 Road project which is valued using the quoted market price of the bonds
HICL Annual Report 2024 Strategic Report Governance Financials
47
Acquisitions
The acquisitions in the year include the Hornsea II OFTO, Altitude Infra
(France), TNT (US) and an additional 3.1% interest in A63 Motorway
(France). As at 31 March 2024, the commitments have reduced to
£64.5m (31 March 2023: £274.2m) due to the completion of the
TNT acquisition.
Divestments
During the year, the Group entered into agreements to divest its
total equity interest in eight assets (Northwest Parkway
1
, Bradford
Schools Phase 1 & Phase 2, Queens (Romford) Hospital, Oxford John
Radcliffe Hospital, Priority Schools NE Batch, South Ayrshire Schools
and Sheffield Student Accommodation).
The Group also agreed to dispose of 50% of its investment in
Hornsea II OFTO, retaining a 37.5% stake in the project. The total
consideration of all these divestments is £508.7m.
Rebased net valuation
The three valuations shown in the chart have been split between
investments at fair value
2
and future commitments. The percentage
movements have been calculated on the rebased valuation of
£3,180.5m to reflect the returns generated on the capital employed in
the year.
The rebased portfolio delivered Income Statement revenue of 2.8%
in the year (2023: 8.0%). The reduction in income return when
compared to 2023 was principally due to the increase in discount
rates in 2024 for all jurisdictions, recognised in September 2023.
Return from the portfolio
The return from the underlying portfolio of £285.5m (2023: £331.2m)
represents a 9.0% (2023: 10.2%) increase in the rebased valuation,
versus the discount rate, or expected annualised return, of 7.2% at
the start of the year. The outperformance was principally generated
from sale premiums on the assets sold, together with a revaluation
uplift on the incremental investment in the A63 Motorway (France).
This was partially offset by lower than expected actual inflation and,
in the UK PPP sector, increased lifecycle costs and costs of pursuing
third parties for defect rectifications.
Inflation
The portfolio is highly correlated to inflation, and since 2021 it has
benefitted from heightened levels of inflation across all jurisdictions.
Over the past six months, inflation in all regions has declined faster
than the Group’s forecast assumptions had expected, particularly
in the UK, where RPI reduced to 4.0% for the year ended 31 March
2024 (2023: 13.5%).
Other jurisdictions also saw a lower reduction in inflation.
In France, CPI was 2.3% (2023: 5.7%) and, in the USA, 3.0%
(2023: 5.0%). The impact of the decrease in actual inflation versus
forecast assumptions resulted in a reduction in NAV of £24.3m
(2023: £136.4m upside).
In the short to medium term, inflation forecasts are expected to
decline further and this has been reflected in the Company’s short-
term UK inflation assumptions for 2024 and 2025. No changes to
assumptions have been made in other jurisdictions.
Demand assets
Following the sale of Northwest Parkway, HICL has five demand-
based assets in the portfolio, representing 14% of the portfolio
by value at 31 March 2024 (31 March 2023: 19%). Four of these
demand-based assets, namely HS1, the A63 Motorway, RMG Roads
and M1-A1, are sensitive to GDP. Over the past year, demand on
the A63 was in line with the forecast. HS1 saw an increase in train
paths due to greater demand on international routes. In addition,
HS1 continues to benefit from the contractual underpin in relation to
domestic track access revenues.
For further information on these assets, refer to the Top 10 assets –
operational highlights on pages 26 to 35.
1 A 10% equity stake in Northwest Parkway sold in April 2023 with the remaining 23.3% sold as part of the 100% disposal, announced in February 2024
2 On an IFRS Basis
1 Nine assets disposed, while ten instances of disposals occurred where a 10% equity stake in Northwest Parkway sold in May 2023 with the remaining 23.3% sold
as part of the 100% disposal
HICL Annual Report 2024
48
Discount rates
The discount rate is determined based on the Investment Manager’s
knowledge of the market, which includes data points across the
Company’s target markets and in other sectors and geographies
it operates in, government bond yields and the implied equity
risk premium.
Although there is increasing market confidence that interest rates
may have peaked across HICL’s jurisdictions, the Investment
Manager believes that the increase in discount rates, recognised in
the September 2023 valuation, remains appropriate for the 31 March
2024 valuation and continues to be in line with external transaction
data points. This assessment is underpinned by the material level of
transaction activity the Group has completed over the last 12 months.
Throughout FY2024, the Group has sold and purchased assets worth
over £700m. In particular, the Group has carried out ten
1
disposals
across sectors and geographies to multiple buyers, generating
proceeds of over £500m. The assets sold, which total 13.5% of the
31 March 2023 portfolio value, were all realised at or above carrying
value. This level of investment activity shows that the market for high-
quality core infrastructure assets remains in good health and that a
range of investor types have capital to invest. Going forward, demand
for high-quality assets is expected to remain strong and should
present both acquisition and divestment opportunities for HICL.
In addition to the transaction data, the Investment Manager continues
to apply a greater weight to the level of equity risk premium implied
by current government bond yields when reviewing and setting the
discount rate. In the six months to 30 September 2023, the average
20–30-year UK government bond yields increased by 120 basis
points to 4.9% at 30 September 2023 before a small reduction in
the second half of the year to 4.4% at 31 March 2024. Overall, the
UK discount rate has increased by 100 basis points since 31 March
2023. This results in a UK weighted average discount rate of 8.3% at
31 March 2024 (31 March 2023: 7.3%) and a risk premium of 3.9%
(31 March 2023: 3.4%). The Investment Manager believes that the risk
premium is appropriate for HICL’s core infrastructure UK assets.
In New Zealand, North America and the Eurozone, there have been
increases in long-term government bond yields but to a lesser degree
than those observed in the UK.
For the portfolio as a whole, the overall weighted average discount
rate has increased by 80 basis points to 8.0% (2023: 7.2%) and the
risk premium has increased to 3.9% (2023: 3.5%).
There were two projects in construction at 31 March 2024, both
of which are located in the Eurozone (31 March 2023: two).
An investment in a project under construction can offer a higher
overall return (i.e. require a higher discount rate) compared to buying
an investment in an operational project, but it does not usually yield
during the construction period and there is the risk that delays or cost
increases in construction affect the investment value.
Changes in economic assumptions
Changes in economic assumptions resulted in a positive impact of
£120.5m (2023: £72.0m). The increase was principally due to changes
in forecast inflation assumptions in all jurisdictions as well as various
changes in interest rate assumptions outlined in the assumptions on
page 49.
Forex
GBP strengthened against the Euro and the USD in the period
resulting in a negative impact of £(37.3)m pre-hedging. Net of
hedging, the impact was £(9.7)m.
Valuation of the Portfolio continued
HICL Annual Report 2024 Strategic Report Governance Financials
49
Valuation assumptions
Apart from the discount rates, the other key economic assumptions used in determining the Directors’ Valuation of the portfolio are as follows:
31 March 2024 31 March 2023
Inflation rates
UK (RPI and RPIx)
1
3.00% to March 2025
2.75% to March 2026
3.25% to March 2030
2.50% thereafter
5.0% year ending March 2024,
2.75% p.a. to March 2030,
2.0% thereafter
UK (CPI/CPIH )
2
2.25% to March 2025
2.00% to March 2026
2.50% thereafter
4.25% year ending March 2024,
2.0% thereafter
Eurozone (CPI) 2.25% to March 2025
2.00% thereafter
5.0% year ending March 2024,
2.0% p.a. thereafter
Canada (CPI) 2.25% to March 2025
2.00% thereafter
3.0% year ending March 2024,
2.0% p.a. thereafter
USA (CPI) 2.00% to March 2025
2.00% thereafter
3.0% year ending March 2024,
2.0% p.a. thereafter
New Zealand (CPI) 2.75% to March 2025
2.25% thereafter
5.0% to 31 March 2024,
2.50% to 31 March 2025,
2.25% thereafter
Interest rates
UK 4.50% p.a. to March 2025, 3.25% p.a. thereafter 3.25% p.a. to March 2025, 2.50% p.a. thereafter
Eurozone 3.00% p.a. to March 2025, 2.00% p.a. thereafter 2.25% p.a. to March 2025, 2.00% p.a. thereafter
Canada 3.75% p.a. to March 2025, 3.00% p.a. thereafter 3.50% p.a. to March 2025, 3.00% p.a. thereafter
USA 4.25% p.a. to March 2025, 3.25% p.a. thereafter 4.00% p.a. to March 2025, 3.00% p.a. thereafter
New Zealand 4.25% p.a. to March 2025, 4.00% p.a. thereafter 4.00% p.a. to March 2024, 4.25% p.a. thereafter
Foreign
exchange
rates
GBP / EUR 1.17 1.14
GBP / CAD 1.71 1.67
GBP / USD 1.26 1.23
GBP / NZD 2.11 1.97
Tax rates
UK 25% 25%
Eurozone Ireland 12.5%
France 25%
Netherlands 25.8%
Ireland 12.5%
France 25%
Netherlands 25.8%
Canada 23% and 27% 23% and 27%
USA 21% Federal and 4.6% Colorado State 21% Federal and 4.6% Colorado State
New Zealand 28% 28%
GDP growth
UK 2.0% p.a. 2.0% p.a.
Eurozone 1.8% p.a. 1.8% p.a.
USA 2.5% p.a. 2.5% p.a.
1 Retail Price Index and Retail Price Index excluding Mortgage Interest Payments
2 Consumer Prices Index including owner-occupiers’ housing costs; used in the valuation of Affinity Water
(6.8)
(7.8)
(4.2)
(2.7)
(2.2)
(1.6)
(1.4) 1.3
(1.0) 1.0
1.5
2.2
1.9
4.2
-12p -10p -8p -6p -2p 0p 2p 4p 6p 8p 10p
-4p
12p
7.8
8.6
Negative correlation Positive correlation
Change in NAV in pence per share
HICL Annual Report 2024
50
Valuation of the Portfolio continued
1 NAV per share based on 2,031 million Ordinary Shares as at 31 March 2024
2 Sensitivities for inflation, interest rates, tax rates and lifecycle are based on the 35 largest investments extrapolated for the whole portfolio
3 Foreign exchange rate sensitivity is net of Group hedging as at 31 March 2024
Valuation sensitivities
The portfolio’s valuation is sensitive to each of the macroeconomic assumptions listed above. An explanation of the reason for the sensitivity
and an analysis of how each variable in isolation (i.e. while keeping the other assumptions constant) impacts the valuation as follows below
1,2,3
.
The sensitivities are also contained in Note 14 to the financial statements
Discount Rate +/- 0.5%
Inflation -/+ 0.5%
Tax Rate +/- 5%
GDP -/+ 0.5%
Cash Deposit Rate -/+ 1%
Lifecycle +/- 5%
Debt Interest Rate +/- 1%
FX Rates -/+ 5%
Valuation sensitivities – impact in pence per share
HICL Annual Report 2024 Strategic Report Governance Financials
51
Discount rate sensitivity
Whilst not a macroeconomic assumption, the discount rate that
is applied to each portfolio company’s forecast cash flows, for
the purposes of valuing the portfolio, is the single most important
judgement and variable. The impact of a 0.5% change in the discount
rate on the Directors’ Valuation and the NAV per share is shown
above. This sensitivity to a movement in discount rates is of a linear
relationship meaning that for a 1.0% movement in discount rates
the impact would be broadly twice as large as shown for a 0.5%
movement. Following the sale of Northwest Parkway, the portfolio has
become less sensitive to discount rate movements.
Inflation rate sensitivity
PPP projects in the portfolio have contractual income streams derived
from public sector clients, which are rebased every year for inflation.
For the demand-based assets, the concession agreement usually
prescribes how user fees are set, which is generally reset annually
for inflation. For Affinity Water, revenues are regulated by Ofwat in
a five-yearly cycle with the pricing of water bills set with the aim of
providing an agreed return for equity that is constant in real terms for
the five-year period by reference to RPI currently and CPIH in the next
regulatory period.
The chart shows that the Directors’ Valuation and NAV per share
are both positively correlated to inflation. The portfolio’s inflation
correlation at 31 March 2024 was 0.7x (31 March 2023: 0.8x) such
that should inflation be 1.0% p.a. higher than the valuation assumption
for all future periods the expected return from the portfolio would
increase from 8.0% to 8.7%. The portfolio’s inflation correlation
has declined due to the disposal of Northwest Parkway, where the
inflation correlation was above the portfolio average correlation.
The portfolio valuation assumes UK inflation of 3.0% for the year
ending March 2025, 2.75% to March 2026, 3.25% to March 2030 and
2.5% thereafter. The March 2024 forecasts for RPI out to December
2024 range from 1.2% to 4.6% from 22 independent forecasters as
compiled by HM Treasury, with an average forecast of 3.3%.
Gross Domestic Product (“GDP”) sensitivity
Following the sale of Northwest Parkway, the proportion of the
portfolio considered sensitive to GDP has reduced to 14% (18% at
31 March 2023). At 31 March 2024, the portfolio had four assets
sensitive to GDP, namely the A63, M1-A1 Road, RMG Roads and
HS1. These assets are classified as GDP-sensitive because at times
of higher economic activity there will be greater traffic volumes using
them, generating increased revenues for the projects compared to
periods of lower economic activity.
If outturn GDP growth was 0.5% p.a. lower for all future periods than
those in the valuation assumptions set out on page 49, expected
return from the portfolio (before Group expenses) would decrease
0.2% from 8.0% to 7.8% (31 March 2023: 7.0%).
Interest rate sensitivity
The majority of HICL’s portfolio company’s interest costs are at fixed
rates, either through fixed-rate bonds, bank debt which is hedged
with an interest rate swap or linked to inflation through index-
linked bonds. However, there are five investments – Affinity Water,
Fortysouth (NZ), TNT (USA), Altitude Infra (France), and XLT – which
have refinancing requirements, exposing these investments to
interest rate risk. The average gearing of the assets is 50% (31 March
2023: 45%), which is lower than the portfolio gearing at 68%
(31 March 2023: 66%). As set out on page 50, were interest rates
to be 1.0% higher in all future valuation periods, the expected return
from the portfolio would decrease by 0.04% as a result of higher
financing costs, before accounting for the offsetting positive impact of
higher interest rates on cash balances.
In the case of other investments, sensitivity to interest rates
predominantly relates to the cash deposits which the portfolio
company is required to maintain as part of its senior debt funding.
For example, most PPP projects would have a debt service reserve
account in which six months of debt service payments are held.
At 31 March 2024, cash deposits for the portfolio were earning
interest at a rate of 4.9% per annum on average (31 March
2023: 3.0%).
Lifecycle expenditure sensitivity
Lifecycle (also called asset renewal or major maintenance) concerns
the replacement of material parts of the asset to maintain it over the
concession life. It involves larger items that are not covered by routine
maintenance and for a building will include items like the replacement
of boilers, chillers, carpets and doors when they reach the end of their
useful economic lives.
The lifecycle obligation, together with the budget and the risk, is
either taken by the project company (and hence the investor) or
is subcontracted to the FM contractor. Of the 112 investments,
PPPs make up 58% of the overall portfolio by value. For 59% of
these PPP investments, the risk and reward is borne by the project
company while for the remaining 41%, the risk is borne by the facilities
management contractor.
Corporation tax rate sensitivity
The profits of each portfolio company are subject to corporation tax
in the country where the project is located. The sensitivity considers a
5% movement in tax rates in all jurisdictions.
The UK corporation tax assumption for the portfolio valuation is 25%
(2023: 25%).
Foreign exchange rate sensitivity
36% of the portfolio by Directors’ Valuation, has exposure to foreign
exchange rates. The sensitivity shows, post-hedging, the impact of
GBP appreciating or depreciating against these currencies by +/- 5%.
Ten Largest Exposures – Counterparty
FM counterparty
March 2024
1 Bouygues 13%
2 In-house 9%
3 Equans 9%
4 EGIS 8%
Vodafone NZ 6%
Siemens 5%
7 Network Rail 5%
8 Babcock 3%
9 Mitie 3%
10 Sodexo 3%
11 Other 36%
5
6
1
2
3
4
5
6
7
8
9
11
10
1 Within 1 year 3%
2 1-2 years 8%
3 2-5 years 3%
4 5-10 years 4%
10+ years 3%
Latent defects
limitation/Warranty
period expired
54%
7 Assets subject to
regulatory regimes
2
25%
5
6
1
2
3
4
5
6
7
Ten Largest Exposures – Counterparty
Latent defect warranty periods
March 2024
1 Colas 8%
2 Balfour Beatty 4%
3 Siemens 3%
4 DEME 3%
Strabag 2%
Bouygues 1%
7 Fluor 1%
8 Laing O'Rourke 0%
9 Vinci 0%
10 Other contractors 0%
11 Latent defects
limitation/Warranty
period expired
54%
12 Assets subject to
regulatory regimes
2
25%
5
6
1
2
3
4
11
12
Ten Largest Exposures – Counterparty
Construction counterparty
March 2024
6
5
8
9
10
7
HICL Annual Report 2024
52
Valuation of the Portfolio continued
1 By value, at 31 March 2024, using Directors’ Valuation excluding A13 senior bonds. Where a project has more than one operations contractor in a joint and several contract, the better credit
counterparty has been selected (based on analysis by the Investment Manager). Where a project has more than one operations contractor, not in a joint and several contract, the exposure
is split equally among the contractors, so the sum of the pie segments equals the Directors’ Valuation
2 Assets subject to regulatory regimes that help mitigate the potential impact of defects on equity
Market intelligence
Third-party advisers
Risk assessment and reporting
Oversight and feedback
Board
Risk Committee
Investment Committee
Fund Management team
Asset
Management
team
Portfolio
Management
team
Investments
team
Central
Support
functions
InfraRed Capital Partners Limited
HICL Infrastructure PLC
Project / Business Management teams
This schematic sets out the Company’s risk management framework:
HICL Annual Report 2024 Strategic Report Governance Financials
53
Risk and Risk Management
Risk management framework
HICL’s risk management framework covers all aspects of its
business. The Board monitors, challenges and evaluates InfraRed’s
management of risk through the consideration of scenarios that
could materially impact the performance of HICL were they to
occur. Having considered and analysed key risks, mitigating action
may be undertaken to reduce the likelihood and impact of each
risk manifesting.
The Board has ultimate responsibility for setting HICL’s risk policy and
risk appetite. It has convened a Risk Committee to assist the Board
by assessing the Group’s overall risk profile, recommending a risk
appetite, and ensuring its framework is appropriately designed and
effective. The terms of reference for the Risk Committee can be found
on HICL’s website.
Day-to-day monitoring, evaluation and management of risk
is undertaken by InfraRed as HICL’s Investment Manager.
Working closely with portfolio company management teams,
InfraRed’s Asset Management Team ensures the timely reporting of
project-specific risks to the HICL Fund Management Team as and
when they arise; the HICL Investment Committee also undertakes
a formal review of project-specific risks on a quarterly basis.
The Investment Manager is monitored and challenged by the Risk
Committee, which reports to the Board.
The Investment Manager uses its experience, insight from
investments within the Group’s portfolio and the wider infrastructure
market to consider future risks and develop appropriate mitigation
strategies. The Investment Manager oversees the deployment of
these strategies and directs portfolio company management teams
as required. Relevant systems, policies, oversight and third-party
assurance are utilised to ensure effective risk management.
The Board’s Management Engagement Committee reviews the
performance of the Investment Manager (as well as all key service
providers) at least annually. The Risk Committee reviews the
Investment Manager’s internal controls and their effectiveness on
a quarterly basis, and the Audit Committee also reviews InfraRed’s
financial control environment. No material issues were identified
by any committee during the year. The Investment Manager also
undertakes an annual assessment of the Company’s other key
service providers, which requires each supplier to sign a code
of conduct and fill in a questionnaire confirming compliance with
relevant laws and regulations. The Management Engagement
Committee reviews the results of this assessment, and any actual or
potential issues which could result in a material risk to the Group are
shared with the Risk Committee and Board.
The Investment Manager’s Risk team has developed a detailed
self-assessment internal control report, and this is reviewed on a
quarterly basis by the Risk Committee alongside similar control
reports from the Administrator and Company Secretary as well as
HICL’s Depositary.
HICL Annual Report 2024
54
Risk classes
Risk is evaluated across seven primary risk classes. These are
set out in the table below along with the Investment Manager’s
assessment of:
– The potential financial impact of plausible 12-month downside
scenarios, which are developed by the Investment Manager and
reviewed by the Risk Committee. They represent the estimated
impact of severe but plausible scenarios, meaning they are not
worst case. Each scenario is presented before (inherent) and after
(residual) the effect of mitigation strategies is considered; and
– A residual risk rating
1
based on the likelihood and mitigated impact
of the prudent downside scenario for each risk class.
If any one of the plausible 12-month downside scenarios described
above were to materialise, the NAV / share impact would be impacted
immediately, but the effect on cash flow may extend beyond the
current year, with a consequential impact on dividend cash cover.
The Risk Committee therefore focuses on the five-year cash flow
impact of each scenario.
The Investment Manager regularly presents stress scenarios and
associated mitigation strategies to the Risk Committee to assist its
assessment of more severe but lower-probability downside scenarios.
Although the residual risk from portfolio performance is still
considered to be high, the Investment Manager achieved several
key milestones which successfully mitigated the impact on the
Group. Notably, the risk of underperformance across HICL’s
demand-based assets reduced further during the year, with HS1
resuming distributions, A63 performing ahead of expectations and
overall demand exposure being reduced following the disposal
of Northwest Parkway. The remediation of construction-related
defects remains a priority, with works progressing well across
several projects. InfraRed successfully mitigated the risk of adverse
behaviour from public sector clients through active engagement,
including participation in UK Infrastructure and Projects Authority
(IPA) handback and net zero working groups and forming The
Association of Infrastructure Investors in Public Private Partnerships
(AIIP) to provide a co-ordinated voice on industry issues with
stakeholders including the UK government. However, there remains
a risk that high inflation places heightened financial pressure on
public sector counterparties. However, supply chain disruption and
cost inflation had a limited impact on a subset of projects during the
period, with the wider risk to HICL mitigated by contractual pass-
through mechanisms.
HICL’s investments in Altitude Infra and Hornsea II OFTO helped to
mitigate portfolio performance risks by improving diversification by
sector, geography, revenue type and counterparty. These assets have
been successfully integrated into the portfolio and are performing
well operationally. Targeted disposals in the period also reduced risk,
notably through reducing the Company’s exposure to the historical
obligations of Carillion plc through the sale of the Oxford John
Radcliffe Hospital.
Despite short-term liquidity risk being materially mitigated through
asset disposals and proactive management of the Company’s
balance sheet by the Investment Manager, the residual risk rating
for the Financial / Market Risk class was changed from Medium to
High in the year. This is due to the higher interest rate environment
increasing HICL’s cost of debt and impacting its share price, which
has been at a material discount to NAV since February 2023. HICL’s
strong positive inflation correlation worked as expected to partially
offset the NAV reduction arising from the increase to the portfolio’s
weighted average discount rate from 7.2% to 8.0%. HICL also
evidenced the robustness of its NAV with the completion of over
£500m of asset disposals in the year at or above carrying values.
The residual risk rating for the political risk class continues to be
assessed as medium. Political and regulatory risk is an inherent
feature of the infrastructure asset class which can evolve at relatively
short notice. Affinity Water’s PR24 business plan was submitted
in September 2023, with Ofwat expected to publish its Draft
Determination in June 2024. The risks associated with an uncertain
outcome from PR24 have been appropriately reflected in Affinity
Water’s discount rate. The Company’s primary political and regulatory
risk mitigation is through its diverse portfolio, which is exposed to a
wide range of clients, sectors, regulatory regimes and geographies.
Principal risks
The tables on the following pages summarise the principal risks which
are regularly reviewed by the Risk Committee and have the potential
to reduce the Company’s ability to achieve its strategic objectives
and materially impact HICL’s financial performance and reputation.
They are not an exhaustive list of risks and uncertainties faced by the
group. Further information on the principal risks and uncertainties
facing HICL can be found in HICL’s March 2019 Prospectus which is
available on the Company’s website at www.hicl.com.
The Directors have carried out a robust assessment of the
Company’s emerging and principal risks. The movement in risk status
for each principal risk, when compared with the previous financial
year, is set out in the tables below. The Investment Manager’s Report
(starting on page 20) provides additional commentary on how the risk
landscape faced by the Group has evolved during the year.
The risks posed by climate change, whilst not expected to be material
to the Group, are an integral part of the Investment Manager’s risk
management framework. Further information on the assessment and
management of climate-related risks can be found in the Task Force
on Climate-related Financial Disclosures, starting on page 65.
Risk and Risk Management continued
1 There are five residual risk ratings: the lowest being ‘Very Low’, then ‘Low’, ‘Medium’, ‘High’ and ‘Very High’
HICL Annual Report 2024 Strategic Report Governance Financials
55
Link to strategy
Deliver a
sustainabledividend
Grow Net Asset Value
Build a diversified
portfolioto manage risk
Provide a compelling
cost proposition
Change in risk level
No change
Decreased risk Increased risk
Portfolio performance risk
Principal risk
Adjustments to contracted orregulatedrevenues
Movement in risk
status in FY2024
Potential impact
– Reduced income from PPP
projects due to availability
deductions because of poor
operational performance or a
disputed approach to contract
management by clients
and advisers
– Under certain regulated
regimes, failure to meet
specified delivery outcomes can
result in penalties being earned,
reducing income
– Projects may be prevented from
making distributions by lenders
or in severe cases, default on
financing arrangements
– Adverse reputational impacts
from loss of revenue linked to
acute operational issues
Risk mitigation
– Contractual pass-through of
deductions to subcontractors,
which can be terminated and
replaced if performance is poor
for an extended period of time
– Collaborative and proactive
agreement with public sector
clients where disagreements
arise over performance
– Diversity of regulatory
mechanisms and
performance regimes
– For most regulated
assets, management
team compensation linked
to performance against
regulatory outcomes
FY24 outcome
– Low overall level of deductions
across the PPP portfolio,
with the vast majority passed
down to subcontractors
– Formation of the AIIP to share
expertise on best approaches
to managing PPP projects
and provide a co-ordinated
voice on industry issues with
key stakeholders including the
UK government
– No issues with contractual
inflation pass-through
mechanisms across the
PPP portfolio
– Restructuring plan launched
in response to ongoing
dispute with client at
Tameside Hospital
– Relatively low level of penalties
incurred by Affinity Water, in
line with expectations
– Revenues at Fortysouth
(largely contracted) and TNT
(regulated and contracted) in
line with expectations
Link to strategic
objectives
Primary risk classes
Residual
risk rating
Change
in year
NAV/share impact
Inherent vs Residual
Five-year cash flow impact
Inherent vs Residual
Portfolio performance risk High
Financial / market risk High
25 0 25
Political risk Medium
Operational risk – execution Low
0 25 0 25
Operational risk – portfolio and asset
management
Very Low
0 25 0 25
HICL central management risk Very Low
0 25 0 25
Operational risk – regulation and compliance Very Low
0 25 0 25
ResidualInherent
HICL Annual Report 2024
56
Risk and Risk Management continued
Portfolio performance risk (continued)
Principal risk
Revenue variability
Movement in risk
status in FY2024
Potential impact
– Actual usage of demand-
based assets below
valuation assumptions
– Potential default of financing
arrangements in the case of
significant underperformance
– Uncertain and unpredictable
impact on usage from long-term
behavioural changes, such as
increased home working
– Take up or adoption of new
communications technology
slower or less than expected
Risk mitigation
– Detailed analysis of demand risk
as part of due diligence process
at acquisition
– Use of independent third-
party traffic forecasts
where appropriate
– Assessment of risk of long-term
behavioural changes as part of
the Directors’ Valuation
– Strategic and critical nature
of the Group’s demand-
based assets
– Communications assets benefit
from monopolistic wholesale
market positioning or long-
term contracts
FY24 outcome
– HS1 resumed shareholder
distributions. The Group’s
demand-based assets are all
making regular distributions
– Reduced short-term risk from
Covid-19 related restrictions
of movement and behavioural
changes, with demand-based
assets experiencing year-on-
year growth in usage
– Reduced demand exposure
through the Northwest
Parkway sale
– Take-up of fibre behind
expectations for Altitude Infra
partially due to connection
backlogs for the internet
service providers; network
roll-out ahead of schedule
Link to strategic
objectives
Principal risk
Construction defects
Movement in risk
status in FY2024
Potential impact
– Disputes with the
subcontractor on the scope of
remediation required
– Increased cost to the
portfolio company where the
construction contractor is no
longer solvent or the statutory
limitations period has expired
– Lenders preventing the
project from distributing or
in severe cases, default on
financing arrangements
– Availability deductions may be
levied depending on the extent
of the defects and the works
required for remediation
– Adverse reputational impact
from material defect issues
Risk mitigation
– Legal rights of portfolio
companies to make claims
against construction
subcontractors for identified
defects during the statutory
limitations period
– Construction defects identified
through targeted surveys as
well as a regular programme of
operations and maintenance
– Adjudication or court
process used where
disputes arise and cannot be
commercially resolved
– Lifecycle budget to offset some
costs following the expiry of the
statutory limitations period
FY24 outcome
– Construction of a temporary
ward at Pinderfields and
Pontefract Hospitals was
completed post year end,
enabling improvement
works to begin in the main
hospital building
– Reduced exposure to
the historical obligations
of Carillion plc through
the sale of Oxford John
Radcliffe Hospital
– Across the portfolio more
broadly, proactive leadership
and control of the delivery
of remediation works
by responsible parties
where necessary
Link to strategic
objectives
HICL Annual Report 2024 Strategic Report Governance Financials
57
Link to strategy
Deliver a
sustainabledividend
Grow Net Asset Value
Build a diversified
portfolioto manage risk
Provide a compelling
cost proposition
Change in risk level
No change
Decreased risk Increased risk
Principal risk
Construction, operations and maintenance counterparties
Movement in risk
status in FY2024
Potential impact
– Operational underperformance
reducing a portfolio company’s
ability to fulfil its contractual
obligations, potentially leading
to revenue adjustments
(see above)
– Failure of a counterparty,
which is likely to lead to
lenders preventing projects
from distributing until the
counterparty is replaced
Risk mitigation
– Well-diversified portfolio,
mitigating concentration risk
– Counterparty credit risk
assessed on a regular basis
by InfraRed’s internal credit
risk team
– Continuous review of
contingency plans for a scenario
in which a key subcontractor
enters administration
or liquidation
– A number of potential
replacement service providers
from InfraRed’s wide network
FY24 outcome
– Counterparty diversification
improved by the acquisitions
of Hornsea II OFTO and
Altitude Infra alongside
asset disposals
– No material deterioration in
any counterparty rating
– Construction of Blankenburg
Tunnel largely completed
during the year, reducing
HICL’s overall construction
risk exposure
Link to strategic
objectives
Principal risk
Operational costs
Movement in risk
status in FY2024
Potential impact
– Budgets for management
services contracts, lifecycle
costs and insurance premia
prove to be insufficient
– For certain regulated assets,
overspend against allowances
may reduce returns
– Overspends can also occur
where portfolio company
management teams are
responsible for operational
service delivery
Risk mitigation
– Risk for several types of
operational cost generally
passed down through
fixed price contracts to
industry specialists
– Regular assessment of lifecycle
budget adequacy
– For regulated businesses,
set stretching but achievable
expenditure allowances
– For some assets, management
team compensation linked to
performance business plan
– For 41% of HICL’s PPP portfolio
(58 projects), lifecycle obligations
sit with facilities management
contractors as opposed to
HICL’s project companies
FY24 outcome
– Supply chain pressures
continuing to affect
lifecycle costs in the
UK PPP sector, with
particular focus on lifecycle
adequacy for those projects
approaching handback
– Operational costs at Affinity
Water in line with budget
Link to strategic
objectives
HICL Annual Report 2024
58
Risk and Risk Management continued
Financial and market risk
Principal risk
Investor sentiment
Movement in risk
status in FY2024
Potential impact
– Prolonged periods where
the share price trades below
HICL’s prevailing NAV, inhibiting
HICL’s ability to issue new
equity capital
– Inability to capitalise
on attractive
investment opportunities
Risk mitigation
– Ability to refinance HICL’s
Revolving Credit Facility (“RCF”)
to extend maturity and size (if
deemed appropriate)
– Use of HICL’s Letter of Credit
Facility (“LCF”) for longer-term
drawings for construction
assets, where equity
commitments are deferred for
a number of years, to release
RCF capacity
– Strategic disposal to generate
cash to pay down drawings
under the RCF and facilitate
opportunistic acquisitions
without substantially increasing
HICL’s gearing
– Issue of Private Placement
which diversifies sources of
capital, extends the maturity
of debt to a longer tenor at a
fixed rate
Outcome during the year
– HICL’s share price has traded
below the prevailing NAV
since February 2023 as a
result of the higher interest
rate environment
– Floating rate debt exposure
reduced by completing a
£150m Private Placement and
purchasing an option to cap
£200m of its SONIA exposure
to 6.5% for three years
– Proceeds from the ten
disposals announced in the
period both help to prove the
investment valuations and will
be used to fully pay down the
Company’s RCF and launch a
share buyback programme for
up to £50m
Link to strategic
objectives
Principal risk
Inflation
Movement in risk
status in FY2024
Potential impact
– Adverse impact on portfolio
valuation and distributable cash
flows if inflation levels below
HICL’s long-term assumptions
– Potential defaults under loan
arrangements in sustained
periods of deflation
– Sustained high inflation may
lead to increases in interest
rates and therefore discount
rates (see below)
– In some cases, inflation may
impact costs to a greater extent
than revenues
Risk mitigation
– HICL’s inflation assumptions are
carefully considered as part of
the Directors’ Valuation, drawing
from a wide range of forecasts
– Lower inflation usually coincides
with lower interest rates,
elements which materially
offset each other in the
portfolio valuation
– Negative impact of discount
rate increases should be largely
offset by positive impact of
inflation (see below)
– In many cases, both costs
and revenues are contractually
linked to the same inflation index
Outcome during the year
– Actual inflation ahead of
expectations for H1, offset by
lower than expected inflation
in H2. Portfolio valuation
saw an overall benefit from
changes to inflation forecasts
during the year
– In the medium and long
term, HICL’s inflation
forecasts remain well below
market expectations
– Valuation assumptions
assume a modest decrease in
inflation over the coming year
Link to strategic
objectives
HICL Annual Report 2024 Strategic Report Governance Financials
59
Link to strategy
Deliver a
sustainabledividend
Grow Net Asset Value
Build a diversified
portfolioto manage risk
Provide a compelling
cost proposition
Change in risk level
No change
Decreased risk Increased risk
Principal risk
Discount and interest rates
Movement in risk
status in FY2024
Potential impact
– Increases in interest rates may
lead to increases in long-term
government bond yields, which
in turn may lead to increases
in the discount rate used for
comparable market transactions
– All other things being equal,
higher discount rates would
result in a reduction in the
portfolio valuation
Risk mitigation
– Higher interest rates usually
coincide with higher inflation,
elements which materially
offset each other in the
portfolio valuation
– Higher deposit interest income
when interest rates increase
partly mitigates the value
reduction arising from increased
discount rates
– Low overall sensitivity to the
impact of increased interest
rates on financing costs at
portfolio level
– Adequate and reasonable risk
premium added to risk-free
reference rate (long-dated
government bonds) used
to corroborate reference
discount rates
FY24 outcome
– Impact of increased discount
rates during the year partially
offset by the portfolio’s
positive correlation to inflation
and deposit rates
– Discount rates used in
the Directors’ Valuation
corroborated by market
transactions and the Board’s
third-party expert opinion on
the valuation
– Increase in risk premium
during the year as a result
of increased discount rates
in H1, followed by reduced
government bond yields in H2
– Market expectation is
that interest rates have
now peaked across
HICL’s geographies
Link to strategic
objectives
Political risk
Principal risk
Policy changes
Movement in risk
status in FY2024
Potential impact
– Clients of HICL’s portfolio
companies or national
governments may choose to
terminate contracts
– Heightened public sector activity
around the prospect of PPP
‘handback’ and the mobilisation
of public sector resources for
the transition of UK PPP facilities
back to the public sector at
their expiry
– Governments may consider
taking certain assets back into
public ownership
Risk mitigation
– PPPs generally have a
contractual right to receive
compensation in the event
of counterparties voluntarily
terminating a PPP contract
– InfraRed’s active involvement in
various industry bodies which,
on behalf of the infrastructure
sector, engage with politicians,
civil servants, other policy
shapers, and regulators
– InfraRed’s direct interaction with
stakeholders of the portfolio’s
projects to extol the value that
the private sector brings to the
delivery of public infrastructure
Outcome during the year
– Although the Labour Party in
the UK has announced plans
to nationalise train operating
companies if elected, this is
not expected to impact HICL’s
investments in HS1 or XLT
– The broader need for
infrastructure procurement
and the role of private
capital in providing essential
infrastructure enjoys bipartisan
political support
– Heightened political scrutiny
of UK water companies as
a result of sewage overflow
events and broader concerns
around financial management;
negative sentiment may
indirectly impact Affinity
Water despite it having no
sewerage exposure
Link to strategic
objectives
HICL Annual Report 2024
60
Risk and Risk Management continued
Political risk (continued)
Principal risk
Legal or regulatory changes
Movement in risk
status in FY2024
Potential impact
– Exposure to higher contractual
costs or obligations due to legal
and regulatory changes
– Adverse impact on the assets
that are subject to regular price
control reviews in the event of
failure to deliver the specified
levels of service or investment
Risk mitigation
– Continuous monitoring of
potential and actual changes to
regulations by the Investment
Manager and its advisers
to ensure both the Group
and its service providers
remain compliant
– Protection in relation to
changes in legislation is
provided by most social
and transport infrastructure
concessions through their
contractual structures
– InfraRed’s participation in
relevant consultation processes
to ensure that the legislature
and regulators hear the
concerns and views of HICL,
in its capacity as a private
sector investor
– Well-diversified portfolio across
clients, sectors and countries
Outcome during the year
– Affinity Water was rated
as an ‘average’ performer
(in line with the highest
awarded grade) in Ofwat’s
most recent Water Company
Performance Report
– Affinity Water submitted its
PR24 business plan to Ofwat
in September 2023; Ofwat’s
draft determination of the
company’s price control
package is due in June 2024
– Exposure to regulatory
regimes further diversified
through the acquisition of
Altitude Infra, which operates
under a pricing framework
which is regulated by French
telecoms regulator ARCEP
– HS1 has limited direct
exposure to regulatory
price control
Link to strategic
objectives
Principal risk
Taxation changes
Movement in risk
status in FY2024
Potential impact
– Adverse impact on the Group
and portfolio value due to
taxation legislation or treaty
changes, such as corporation
tax rates and cross-border
tax rules
Risk mitigation
– Closely monitor relevant
cross-border tax rules and
broader taxation legislation
developments for any potential
adverse impact on the Group
FY24 outcome
– The levy on revenues earned
by long-distance transport
infrastructure operators
in France was enacted.
A legal challenge has been
issued and it remains
HICL’s expectation that
compensation will be due
through higher tolls if the
challenge is unsuccessful; in
any case the valuation impact
on the A63 is expected to
be immaterial because the
revenue threshold for this tax
is €120m
– No other material changes in
tax legislation
Link to strategic
objectives
HICL Annual Report 2024 Strategic Report Governance Financials
61
Link to strategy
Deliver a
sustainabledividend
Grow Net Asset Value
Build a diversified
portfolioto manage risk
Provide a compelling
cost proposition
Change in risk level
No change
Decreased risk Increased risk
Operational risk – execution
Principal risk
Inadequate due diligence
Movement in risk
status in FY2024
Potential impact
– Underperformance against
acquisition assumptions
due to poor or inadequate
due diligence
Risk mitigation
– InfraRed’s Investment team
adopts a thorough due diligence
approach and have a depth of
experience in buying and selling
infrastructure assets
– Support of specialist advisers
(e.g. lawyers, technical
consultants, sustainability
advisers and tax advisers)
– Oversight is provided by the
HICL Investment Committee,
and by the Risk Committee and
Board in respect of matters
falling outside the Investment
Manager’s Approved Investment
Parameters (“AIP”)
FY24 outcome
– New acquisitions well
integrated into the portfolio
and performing in line
with expectations
– The passive infrastructure
carve-out process at
Fortysouth was completed on
schedule and the business
has operated as a standalone
entity since 1 April 2024
Link to strategic
objectives
Principal risk
Asset pricing
Movement in risk
status in FY2024
Potential impact
– Infrastructure assets become
less attractive due to high
asset pricing
– Overpayment for assets leads
to lower realised investment
returns than expected
Risk mitigation
– InfraRed’s disciplined
and selective acquisition
strategy, leveraging the
Investment Manager’s
international Origination and
Execution platform
– New acquisitions can provide
inherent protection against rising
interest rates through inflation
correlation or regulated cost of
capital structures
FY24 outcome
– Discount rates used to value
new acquisitions corroborated
by market data points,
including HICL’s disposal
activity, and acquisitions and
disposals made by other
InfraRed-managed funds
Link to strategic
objectives
HICL Annual Report 2024
62
Viability Statement
The AIC Code of Corporate Governance (the “AIC Code”) requires the
Directors to make a statement regarding HICL’s viability in the Annual
Report, explaining how they have assessed the Group’s prospects,
the period of time for which they have made the assessment and why
they consider that period to be appropriate.
The Directors have determined that the five-year period to March
2029 remains an appropriate period over which to assess HICL’s
viability due to the following reasons:
– The period aligns with the Group’s business planning processes,
including how the Directors assess the Group at their annual
strategy Board meeting;
– It is the period over which the internal stress testing is performed;
and,
– Although the long-term and/or contractual nature of our
investments means that the Directors have a higher level of
confidence over the endurance and longevity of the Company,
it is challenging to assess and determine the regulatory, tax
and political environment outside of the five-year period with
any certainty.
Assessment of HICL’s prospects
Business planning process
The Directors’ primary assessment of the Group’s prospects is
achieved through the annual strategic and business planning
exercise. The Directors review a five-year budget and business plan,
which is prepared by the Investment Manager and includes cash
flow projections to aid strategic planning and provide support for the
dividend approval process. The projections consider cash balances,
investment commitments, key covenants and limits, dividend cover,
investment policy compliance and other key financial indicators over
that five-year period. These projections are based on the Investment
Manager’s expectations of future asset performance, income and
costs and are consistent with the methodology applied to provide the
valuation of investments.
Portfolio diversification
HICL’s portfolio consists of over 100 companies whose underlying
assets are predominantly fully constructed and operating PPPs
(58% of the portfolio at 31 March 2024) or similar highly revenue-
contracted projects with public sector counterparties in jurisdictions
with established and proven legal systems. The Group benefits from
predictable long-term, contracted and inflation-linked cash flows
together with a set of risks that can be identified and assessed (see
Risk and Risk Management on page 53). The projects are each
financed on a non-recourse basis to the Corporate Group and are
supported by detailed financial models. The Directors believe that
the non-recourse financing and diversification within the investment
portfolio (the Top 10 make up 49% of the portfolio) helps to withstand
and mitigate the risks it is most likely to meet. Finally, the Corporate
Group has a low level of operating expenses relative to forecast
receipts from its portfolio investments, with its largest single cost
being the management fee.
Approach to debt and gearing
The Group funds its investments using equity and a long-term £150m
Private Placement, which is due for repayment in two tranches in
2033 and 2035. The Corporate Group’s gearing is well within its
Board-approved investment parameters in the five-year period.
In addition, the Corporate Group can withstand a material increase
in interest costs due to the purchase of a £200m cap which protects
the Corporate Group if SONIA rates exceed 6.5%. The cap runs until
30 June 2026.
Capital allocation process
Consistent with others in the alternative assets investment company
sector, HICL has suffered from uncertain macroeconomic backdrop
and its shares have traded at a discount to NAV since February 2023.
Against this backdrop, the Group has demonstrated its disciplined
capital approach to capital allocation, by launching its strategic asset
disposal programme. This programme generated proceeds of over
£500m and will allow the full repayment of the drawings on its RCF.
Should capital markets remain closed for an extended period, IILP
has access to its £400m RCF, and the Group will look to rotate assets
in the portfolio to repay the drawn balance.
Assessment of viability
In making this statement, the Directors have considered the resilience
of HICL, considering both its current position and its principal risks,
in severe but plausible downside scenarios, and the effectiveness of
any mitigating actions. Consideration has been given to the current
increased market volatility and heightened political environment and
geopolitical risk.
The Investment Manager has prepared sensitivity analysis including
various stress scenarios which have been considered previously by
the Risk Committee. These include:
– Increasing tax rate assumptions by 5% for all assets;
– Increasing lifecycle costs by 33%;
– Inflation is 2% lower in every period than the base
case assumptions;
– Assuming an increase in projects not distributing of 20% of the
portfolio (note this represents projects entering distribution lock-up
for a period of 24 months after which they are released);
– A 15% reduction in distribution from HICL’s operational assets
highlighting hypothetical operational challenges;
– Delay of capital raising for a period of at least 12 months, funding
HICL’s committed acquisitions with an average forecast RCF cost
of at least 200 basis points above base case; and
– Combined scenario assuming:
• Delay of capital raising for a period of at least 12 months and
increased interest rates;
• Funding a hypothetical £50m equity injection to continue
operating one or multiple assets;
• 15% reduction in distributions from operational assets;
• Increase in lifecycle costs of 33%; and
• 50% reduction in final distributions from assets whose
concessions end within the viability period.
Individually, due to the diversified nature of the Group’s portfolio, these
scenarios pose a minimal threat to its solvency. A severe scenario
was also prepared to assess the loss in revenue necessary to cause
insolvency. Even under this scenario the analysis demonstrated that
HICL would remain viable over the five-year assessment period.
Viability Statement
The Directors have a reasonable expectation that HICL will be able
to continue in operation and meet its liabilities as they fall due over
the five-year period to March 2029, on the assumption that there is
sufficient liquidity in the debt market to allow it to refinance or repay
obligations becoming due under IILP’s Revolving Credit Facility and
Letter of Credit Facility, and that its investments are not materially
affected by retrospective changes to government policy, laws
or regulations.
HICL Annual Report 2024 Strategic Report Governance Financials
63
Strategic Report Disclosures
Investment Policy
HICL’s Investment Policy is to ensure a diversified portfolio which has
a number of similarly sized investments and is not dominated by any
single investment. HICL will seek to acquire Infrastructure Equity with
similar risk / reward characteristics to the current portfolio, which may
include (but is not limited to):
– Public sector, government-backed or regulated revenues;
– Concessions which are predominantly ‘availability’ based
(i.e. the payments from the concession do not generally depend
on the level of use of the project asset); and / or
– Companies in the regulated utilities sector.
HICL will also seek to enhance returns for shareholders by acquiring
more diverse infrastructure investments. The Directors currently
intend that HICL may invest in aggregate up to 35% of its total assets
(at the time the relevant investment is made) in:
– Project companies which have not yet completed the construction
phases of their concessions but where prospective yield
characteristics and associated risks are deemed appropriate to
the investment objectives of HICL. This may include investment in
companies which are in the process of bidding for concessions,
to the extent that such companies form part of a more mature
portfolio of investments which HICL considers appropriate
to acquire;
– Project companies with ‘demand-based’ concessions where
the Investment Manager considers that demand and stability of
revenues are not yet established, and / or project companies which
do not have public sector sponsored / awarded or government-
backed concessions; and
– To a lesser extent (but counting towards the same aggregate
35% limit, and again at the time the relevant investment is made)
in limited partnerships, other funds that make infrastructure
investments and / or financial instruments and securities issued
by companies that make infrastructure investments, or whose
activities are similar or comparable.
Geographic focus
The Directors believe that attractive opportunities for HICL to enhance
returns for investors are likely to arise outside as well as within the
UK (where the majority of the projects in the current portfolio are
based). HICL may therefore make investments in the European Union,
Norway, Switzerland, the Americas and selected territories in Asia
and Australasia. HICL may also make investments in other markets
should suitable opportunities arise. HICL will seek to mitigate country
risk by concentrating on investment opportunities in jurisdictions
where it considers that contract structures and enforceability are
reliable and where (to the extent applicable) public sector obligations
carry what the Investment Manager believes to be a satisfactory
credit rating and where financial markets are relatively mature.
Single investment limit and diversity
ofclients and suppliers
For each new acquisition made, HICL will ensure that such
investment acquired does not have an acquisition value (or, if it is a
further stake in an existing investment, the combined value of both the
existing stake and the further stake acquired is not) greater than 20%
of the total gross assets of HICL immediately post-acquisition.
The total gross assets will be calculated based on the last published
gross investment valuation of the portfolio plus acquisitions made
since the date of such valuation at their cost of acquisition.
The purpose of this limit is to ensure the portfolio has a number of
investments and is not dominated by any single investment.
In selecting new investments to acquire, the Investment Manager will
seek to ensure that the portfolio of investments has a range of public
sector clients and supply chain contractors, in order to avoid over-
reliance on either a single client or a single contractor.
Restrictions under the Listing Rules
In accordance with the requirements of the Financial Conduct
Authority, HICL has adopted the policies set out below:
– HICL’s primary objective is investing and managing its assets
with a view to spreading or otherwise managing investment risk.
HICL must, at all times, invest and manage its assets in a way
which is in accordance with its Investment Policy;
– HICL will not conduct a trading activity which is significant in the
context of HICL as a whole. HICL will not cross-finance businesses
forming part of HICL’s investment portfolio; and
– No more than 10%, in aggregate, of HICL’s assets will be invested
in other listed closed-ended investment funds.
The Listing Rules may be amended or replaced over time.
To the extent that the above investment restrictions are no longer
imposed under the Listing Rules, those investment restrictions shall
cease to apply to HICL.
HICL Annual Report 2024
64
Risks and uncertainties
The principal risks and uncertainties facing HICL can be found in
HICL’s March 2019 Prospectus which is available on the Company’s
website at www.hicl.com. An update on the key risks currently faced
by the Company and associated mitigants are set out in the Risk and
Risk Management section of this report starting on page 53.
Environmental, social and community
matters
For a detailed explanation of HICL’s approach to Environmental,
Social and Governance / Responsible Investment, please see HICL’s
Sustainability Policy, which can be found on the Company’s website
at www.hicl.com. A comprehensive review of the year, including
case studies from the portfolio, can be found in HICL’s Sustainability
Report 2024, also available on the website.
Research and development activities
None.
Section 172(1) Statement
The Directors discharge their duties under Section 172 of the Companies
Act 2006 to act in good faith and to promote the success of the
Company for the benefit of shareholders as a whole.
As a closed-ended investment company, HICL has no employees.
Explanations of the impact of HICL’s activities on other stakeholders
are included in the Strategic Report.
Gender diversity
At the year end, the Board of Directors comprised seven non-
executives: four male and three female.
HICL has no employees.
Leverage
HICL is required under the Alternative Fund Managers Directive
(“AIFMD”) to make available to investors information in relation
to its leverage. Leverage is considered in terms of HICL’s overall
exposure to financial or synthetic gearing and includes any method
by which its exposure is increased whether through borrowing of
cash or securities, foreign currency holdings, leverage embedded
in derivative positions or by any other means. It is expressed as
the ratio between the total exposure of HICL and its Net Asset
Value such that if its exposure was equal to its Net Asset Value,
leverage would be disclosed as 100%; a value above 100% means
that HICL has leverage equal to the percentage amount above
100%. Exposure values are calculated by two methods, gross and
commitment, as defined within the AIFMD. Exposure under the
gross method represents the aggregate of all HICL’s exposures other
than cash balances held in base currency; the commitment method
takes into account the effect of different treatment of certain cash
and cash equivalent items and of offsetting instruments between
eligible assets to reflect netting and hedging arrangements in line
withregulatory requirements.
Maximum leverage levels have been set by the Board and InfraRed
and are in accordance with the maximum borrowing allowed by
HICL’s Articles of Association.
The table below sets out the current maxima, and permitted limit
and actual level of leverage for HICL as a percentage of its Net Asset
Value as at 31 March 2024.
Leverage
Gross
Method
Commitment
Method
Maximum limit 150% 125%
Actual level 129% 103%
Mike Bane
Chair
21 May 2024
Strategic Report Disclosures continued
HICL Annual Report 2024 Strategic Report Governance Financials
65
Governance
The Board and Investment Manager strongly
believe that making a proactive and positive
contribution to climate action is in the best
interests of HICL’s shareholders, clients and
wider stakeholders. This has become clearer
in recent years as extreme weather events
and rising sea levels are increasingly visible
consequences of greenhouse gas emissions.
On behalf of HICL, InfraRed actively identifies and mitigates the
risks that climate change poses to the Company whilst also looking
to reduce the actual and potential adverse impacts of business
decisions on societies and the environment. The disclosures below
provide key climate-related information, and cross-references to
where additional information can be found (either within this report,
or within HICL’s 2024 Sustainability Report, published on the HICL
website on the same day as this report).
HICL began voluntarily reporting against a subset of the 11 TCFD
disclosure recommendations in its 2020 Annual Report and Financial
Statements and has reported against all 11 recommendations since
2021. We confirm that we have complied with the requirements of
LR 9.8.6R, by including climate-related financial disclosures that
are consistent with the four TCFD pillars and the 11 recommended
disclosures that are set out on page 70. We also acknowledge that
there is always scope for improvement, and that there are certain
areas where the Company is in the process of gathering and
publishing more data.
HICL’s robust and ambitious corporate governance framework helps
to ensure this is delivered and provides investors with transparency
on the Company’s sustainability strategy and the wider impact
environmental and societal impact of their investment, including in
relation to climate change.
The Board has overall responsibility for the oversight of HICL’s
sustainability risks and opportunities, of which climate change is an
important subset. The Board and the Investment Manager meet
on a quarterly basis, during which they review the risks facing the
Company, including risks related to climate change.
Sustainability is also a key topic at the Board’s annual
strategy meetings.
Some of the Board’s committees also have key roles:
– The Risk Committee oversees and challenges InfraRed’s risk
management processes and analysis, and has a specific remit to
examine ‘horizon’ risks such as the long-term consequences of
climate change
– The Management Engagement Committee considers how
HICL service providers, including InfraRed, adhere to HICL’s
Sustainability Policy
– The Audit Committee reviews the Company’s approach to
disclosures, including those relating to climate change
In relation to climate-related opportunities, the Investment Manager
presents a review of the market to the Board on a quarterly basis.
As part of this review, potential new acquisition opportunities are
highlighted, including those which directly support the transition to
alow-carbon economy.
Although management of the portfolio, as well as investment
decisions within agreed parameters, is delegated to InfraRed as
the Investment Manager, the Board has overall responsibility for the
Company’s investment policy.
Further information on HICL’s corporate governance framework is
provided on page 72 of this Report. A diagram setting out HICL’s
reporting and risk management framework is set out on page 53 of
this Report.
TCFD
HICL Annual Report 2024
66
Strategy
In FY24, InfraRed engaged Willis Towers Watson (“WTW”) to
conduct a refreshed climate change impact assessment of HICL’s
portfolio
1
. Since November 2021, when this portfolio-wide exercise
was first completed, all new investments have been subject to
a climate change impact assessment as part of InfraRed’s pre-
investment process.
The process and methodology undertaken by the Manager to analyse
potential physical and transition risks consists of four stages:
The Investment Manager has identified that in the short term, based
on current climate conditions, a subset of HICL’s assets remain
exposed to acute and chronic physical risks arising from different
extreme weather events, but the overall exposure is limited, and
mitigations are in place. The Group may also be exposed to transition
risks if there are rapid, unexpected changes to government policy,
which are more likely under the 1.5°C scenario as set out below.
In general, the portfolio-level findings of the climate change impact
assessment demonstrate that the Group remains highly resilient to
both physical and transition risks associated with climate change.
TCFD continued
Process and methodology
The flow chart below sets out the process undertaken by the Investment Manager and WTW:
1
Portfolio physical
riskassessment
A location-based quantitative and qualitative physical risk assessment of HICL’s portfolio
based on three scenarios:
Scenario
Assumed global
temperature increase from
pre-industrial times by the
end of the century
Representative
Concentration
Pathways (RCP)
2
Hothouse world 4°C 8.5
Middle of the road 2-3°C 4.5
Net zero by 2050 scenario 1.5°C 2.6
2
Impact
assessment
Assessment of acute and chronic hazards with the potential to reduce the
availability and capacity of specific assets using proprietary in-house developed
vulnerability models.
3
Modelling
Modelling of potential financial losses associated with current and future physical risks
arising from climate change. These were modelled over short-term (now until 2030) and
long-term (beyond 2040) time horizons.
4
Transitional risk
assessment
As part of the assessment, transitional risks were also identified.
Key outputs
Overall level of exposure to physical risks based on
current and future conditions (by project value), assuming
no mitigation
Potential financial exposure from flooding/wind storm (project-
level costs, 100% level) assuming no mitigation
Transition risks and opportunities by sector
Next steps
Flow down of climate risk information to project company
management teams
Update of operational procedures and processes at project
level if required
Focused engagement with clients
Reporting back to HICL Risk Committee
1 Excluding the Company’s investments in A13 senior bonds
2 RCPs specify concentrations of greenhouse gases that will result in total radiative forcing increasing by a target amount by 2100, relative to pre-industrial levels
HICL Annual Report 2024 Strategic Report Governance Financials
67
Physical risk analysis:
The primary impact of climate change for HICL is likely to be borne
by its portfolio companies: increased operating costs or reduced
revenues as a result of physical risks materialising. In many cases
physical mitigation measures already exist and there is a degree of
contractual protection from increased costs to implement further
measures. Such risks are likely to be exacerbated under a 4°C
scenario, whereas under a 1.5°C scenario assets are more likely
to be impacted by transition risks.
As part of the assessment, assets were given an overall hazard
exposure score considering their respective exposures to acute and
chronic hazards. Under the ‘current’ climate scenario, 17% of HICL’s
portfolio by value
1
has a hazard exposure score above 3 (medium).
This falls to 7% under the 4°C scenario beyond 2040, demonstrating
the resilience of the portfolio even in the event ofextreme
climate change.
Beyond 2040, under a 1.5°C scenario the impact of transition risks
could be greater, but many assets have inherent protection as they
provide vital services and have low direct emissions. Conversely,
there is likely to be greater scope to take advantage of opportunities
arising from the energy transition, such as asset repurposing and
additional investment.
HICL’s main physical risk exposures based on both current and future
conditions are to winter storms, subsidence, river flooding and coastal
flooding which is expected based on the weighting of the portfolio
towards Northern Europe. Geographical location is also an inherent
mitigant against other physical risks such as drought and heat stress.
Although some assets have very high exposure to flooding, significant
physical mitigation already exists in the form of flood defences,
particularly in low-lying countries such as the Netherlands.
The potential annual loss across the portfolio from windstorms and
flooding is not expected to be material, with mitigation measures
further reducing any impact in ‘severe’ years. HICL’s assets benefit
from comprehensive insurance policies, which include physical
damage as a result of climate-related events.
Transition risks analysis:
Examples of transition risks under a 1.5°C scenario include increased
public transport use, a reduction in overall journeys and car sharing,
which could impact some of HICL’s demand-based assets.
A transition to a low-carbon economy also presents a number of
opportunities. The primary example is the need for related investment
such as rapid charging or retrofitting of energy efficiency solutions.
A key tenet of HICL’s vision is to support sustainable modern
economies by investing in assets linked to the energy transition,
and a 1.5°C scenario is likely to increase the number of investable
opportunities in this space.
As is common with real assets, insurance is one of the primary risk
mitigants against the financial impact of physical damage. In the
future, and particularly under a 4°C scenario, it is possible that the
cost of obtaining insurance increases as a result of the increased
likelihood of severe weather events, although this is likely to be limited
to a small number of assets. The impact of climate change risks on
future insurance premia is factored into the assumptions used in the
valuation of each of HICL’s assets.
TCFD continued
TCFD Category Climate-related trend Potential financial impact Potential materiality
Physical Flooding Risk: Damage to physical structures resulting in unavailability / increased cost 4°C – Low
1.5°C – Low
Physical Winter storm Risk: Damage to physical structures resulting in unavailability / increased cost 4°C – Low
1.5°C – Low
Physical Drought Risk: Usage restrictions or increased costs at Affinity Water
Opportunity: Increased long-term investment required at Affinity Water
4°C – Med
1.5°C – Low
Transition Retrofitting of energy
efficiency solutions
Opportunity: Variation contracts awarded for existing PPP assets 4°C – Low
1.5°C – Low
Transition Increased public
transport use
Risk: Lower traffic using toll roads
Opportunity: greater usage of HS1
4°C – Low
1.5°C – Med
Transition Move towards electric
vehicles and trains
Opportunity: Co-located EV charging at HICL’s toll road projects
Opportunity: Long-term use case for XLT
4°C – Low
1.5°C – Low
Transition Increased need for
renewable energy
Opportunity: Long-term use case for OFTO 4°C – Low
1.5°C – Low
Transition Remote working Risk: Reduced traffic volumes using demand-based transport assets
Opportunity: Greater take-up and adoption of technology benefitting
communications assets
4°C – Low
1.5°C – Med
Summary of material risks and opportunities:
1 By value, using the Directors’ Valuation as at 31 March 2024
HICL Annual Report 2024
68
Risk management
How we identify and assess climate risk:
For new acquisitions, climate-related risks are considered throughout
the investment process by the Investment Manager. At the deal
screening phase, the identification of climate-related risks (physical
or transition) and the potential impact (positive or negative) are
mandatory requirements. Furthermore, the completion of a climate
change risk assessment prior to entering into a transaction is now a
formal condition of approval.
For existing projects, risks have been identified and assessed through
a detailed climate change impact assessment, as set out on page 66
and 67. The Company’s portfolio companies use the results of this
assessment to undertake proactive monitoring and assessment at
the project level.
Over the year, InfraRed’s Asset Management team engaged with the
management teams of HICL’s portfolio companies. Using the climate
change impact assessment, the vast majority of HICL’s portfolio
companies have adopted the findings by discussing climate-related
risks and opportunities at board level, updating risk matrices, and
developing and implementing mitigation and resilience strategies
as appropriate.
How we manage our risks:
InfraRed’s Asset Management team ensures the timely reporting
of project-specific risks relating to climate change to the HICL Fund
Management team as and when they arise; the HICL Investment
Committee also undertakes a formal review of all project-specific risks
on a quarterly basis. This process ensures that material climate-
related risks feed into the Investment Manager’s quarterly reporting to
the Risk Committee, which in turn reports to the Board.
The Company’s positioning with respect to a transition to
a low-carbon economy is primarily considered through the
Investment Manager’s active approach to asset management and
portfolio construction.
HICL’s core infrastructure investments provide essential services to
communities, and as a result are inherently well positioned. For HICL’s
PPP projects, energy use is driven by the client, with the portfolio
company generally responsible for maintaining the equipment which
provides the building’s heating, cooling and lighting. Any changes
to these systems required under a 1.5°C scenario would usually be
accounted for under existing lifecycle budgets or alternatively treated
as a contract variation. In relation to HICL’s GDP-correlated demand-
based assets such as toll roads, which may be exposed to transition
risks and opportunities under a 1.5°C scenario, these benefit from
strong strategic positioning. The Company also invests directly in
assets which are likely to benefit from a low-carbon transition, such
as OFTOs.
More broadly, InfraRed’s exclusion policy specifically covers carbon-
intensive industries such as coal, oil and gas (where not aligned to
a low-carbon transition) and HICL does not invest in assets whose
primary purpose is electricity generation.
Sustainability considerations are incorporated into the Investment
Manager’s risk management framework, which is used as the basis of
risk reporting to the HICL Risk Committee. In particular, sustainability
features as a material risk in the following risk classes:
– Political risk: in particular, policies associated with the transition
to net zero carbon emissions
– Operational risk – execution: through transaction due diligence
and investment decisions
– Portfolio performance risk: sustainability risks can affect
operational performance, including transitional and physical risks
associated with adverse climate change
Climate change risk is an explicit building block of portfolio
performance risk. Individual project companies submit regular
progress reports to InfraRed on the mitigation measures they are
taking in response to the climate change impact assessment. In turn,
this enables the HICL Risk Committee to consider the overall impact
and opportunities of climate change at fund level.
Further details are provided in the Risk and Risk Management on
page 53 of this Report.
TCFD continued
HICL Annual Report 2024 Strategic Report Governance Financials
69
TCFD continued
Metrics and targets
GHG emissions
HICL has disclosed the combined Scope 1, 2 and 3 greenhouse gas
emissions of its entire portfolio for calendar year 2023. The accurate
measurement and disclosure of emissions forms an important part of
InfraRed’s wider strategy relating to InfraRed’s net zero commitments,
further details of which are provided below.
Due to the nature of its business, HICL has no Scope 1 or Scope
2 greenhouse gas emissions. The Company’s Scope 3 emissions
primarily relate to the emissions of its portfolio companies, although
there is also a small contribution from office use and business travel
(which is offset using an accredited scheme).
Emissions (Attributable basis)
Year ended
31 December 2023
Scope 1 Nil
Scope 2 Nil
Scope 3 (tCO
2
e) 89,733
Weighted average carbon intensity (tCO
2
e/£m) 280
PAI indicators – Mandatory
PAI indicators – Voluntary
V
M
Other metrics and targets
1
Our specific climate and environment related metrics and targets, as set out in this report have been made considering the TCFD
recommendations and are set out below:
METRIC Current Year Previous Year
% PORTFOLIO
REPORTING PAI? TARGETS
Carbon Reduction Initiatives 76% 83% 100%
M
Net zero targets:
2
50%
Portfolio coverage
90%
Engagement threshold by 2030
Water Reduction Initiatives 88% 92% 100%
V
For portfolio companies where
wehaveoperational control:
3
100%
of portfolio companies with material
water and consumption to have reduction
initiatives in place by 2025
Waste Reduction Initiatives 87% 92% 100%
Positive Biodiversity Impacts 76% 83% 100%
Climate change risk register
andBoard meetings
83% 91% 100%
Total Attributable GHG
Emissions (Scopes 1, 2 and 3)
89,733
tCO
2
e
146,190
tCO
2
e
100%
4
M
90%
of emissions to be subject to direct or
collective engagement and stewardship
actions by 2030
1 Commentary on the changes in HICL’s metrics in comparison to FY23 can be found on pages 14, 28, 34 and 38 of HICL’s 2024 Sustainability Report
2 A more detailed explanation of HICL’s net zero targets and methodology can be found on pages 15 to 21 of HICL’s 2024 Sustainability Report
3 Note this target relates to portfolio companies where we have operational control in relation to setting and implementing water and waste reduction initiatives. Where we do not have operational
control (such as PPP/PFI projects), we will still engage on these initiatives
4 100% of HICL’s portfolio by valuation has emissions data reflected in the Total GHG Emissions calculations. For more information on HICL’s methodology for estimating and reporting GHG
emissions, please see pages 22 and 23 of HICL’s 2024 Sustainability Report
HICL Annual Report 2024
70
TCFD continued
Flash flood
Wildfire
Tornado
Lightning
Hailstorm
Winter storm
Tropical cyclone
Drought stress
Heat stress
Inland flood
Coastal flood
No Hazard
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Very low Low Medium High Very high
Portfolio exposure (by percentage of Directors’ valuation as at 31 March 2024 excluding A13 senior bonds)
The chart below sets out the portfolio exposure (by Directors’ valuation as at 31 March 2024 excluding A13 senior bonds) to physical climate
risks based on current climate conditions, without mitigation:
Net zero
Currently, 25% of HICL’s portfolio by value is aligning, aligned to or at
net zero
1
. This represents Affinity Water, HS1, XLT, TNT and HICL’s
OFTO projects (Burbo Bank, Galloper, Hornsea II, Race Bank and
Walney Extension). These assets either inherently outperform the
required decarbonisation trajectory for their sector or have put in
place science-based net zero targets.
As set out in this report, the Company has set interim targets relating
to net zero:
Portfolio Coverage: 50% of HICL’s portfolio to be net zero, aligned
to net zero, or aligning to net zero by 2030.
Engagement Threshold: 90% of all portfolio company emissions
to be subject to direct or collective engagement and stewardship
actions by 2030.
The Company commits to reviewing these targets every five years at
a minimum.
As of 31 March 2024, 26% of the portfolio is currently invested
in climate solutions. While the Company anticipates that this will
grow over time and commits to maintaining transparency on the
percentage of the portfolio invested in climate solutions, the Net Zero
Investment Framework for Infrastructure recognises the difficulty
in setting a Climate Solutions target for funds of HICL’s nature.
The Company is therefore not setting a formal target at this time.
The table below sets out the 11 TCFD recommendations, and where the related information can be found.
Recommendation Recommended Disclosure Pages
Governance
– Describe the board’s oversight of climate-related risks and opportunities.
– Describe management’s role in assessing and managing climate-related
risks and opportunities.
Pages 53 and 54,
Strategy
– Describe the climate-related risks and opportunities the organization
has identified over the short, medium, and long term.
– Describe the impact of climate-related risks and opportunities
on the organization’s businesses, strategy, and financial planning.
– Describe the resilience of the organization’s strategy, taking into consideration
different climate-related scenarios, including a 2°C or lower scenario.
Page 53 and 54,
65, 72 and 73, 83
and 84
Risk Management
– Describe the organization’s processes for identifying and assessing
climate-related risks.
– Describe the organization’s processes for managing climate-related risks.
– Describe how processes for identifying, assessing, and managing climate-related
risks are integrated into the organization’s overall risk management.
Page 68
Metrics and Targets
– Disclose the metrics used by the organization to assess climate-related risks
and opportunities in line with its strategy and risk management process.
– Disclose Scope 1, Scope 2 and, if appropriate, Scope 3 greenhouse gas (GHG)
emissions and the related risks.
– Describe the targets used by the organization to manage climate-related risks
and opportunities and performance against targets.
Page 69
1 The Investment Manager’s definition and approach to net zero is aligned with the Science Based Targets initiative (“SBTi”) methodology which informs the investee companies plan to transition to
net zero by 2050. Further details are provided in HICL’s 2024 Sustainability Report
HICL Annual Report 2024
71
Strategic Report Governance Financials
WHAT’S IN THIS SECTION
Board and Governance 72
Board of Directors 74
The Investment Manager 76
Corporate Governance Statement 77
Management Engagement 81
Committee (MEC)
Market Disclosure Committee 81
Nomination Committee 82
Risk Committee Report 83
Audit Committee Report 85
Directors’ Remuneration Report 91
Report of the Directors 95
Statement of Directors’ Responsibilities 98
Governance
HICL Annual Report 2024
72
Board and Governance
Operational structure
HICL Infrastructure PLC (“HICL”, or the “Company” and, together
with its subsidiaries, the “Group”) is a registered investment
company with an independent Board of Directors. Its shares have
a premium listing on the Official List of the UK Listing Authority and
trade on the main market of the London Stock Exchange.
HICL’s portfolio comprises over 100 infrastructure investments.
The Company’s strategy relies on the expertise of its Investment
Manager, InfraRed Capital Partners Limited (“InfraRed”) and is
centred around protecting and enhancing the value of the existing
portfolio, in addition to sourcing new, appropriately priced assets.
HICL has a 31 March year end, announces its full year results in
May and interim results in November. It also publishes two Interim
Update Statements each year, normally in March and August.
Equity
Independent Directors
– Governance
– Oversight
– Strategy
Investment Manager
– HICL’s AIFM
– Management
– Strategy
– Reporting
– Acquisition Pipeline
– Asset Management
– Risk and Portfolio
Management
Administrator and
Company Secretary
– Aztec Financial
Services (UK) Limited
Advisers and
Service Providers
– Legal
– Corporate Broking
– Public Relations
HICL’s Shareholders
HICL Infrastructure 2 S.a.r.l
Infrastructure Investments LP
(English limited partnership)
HICL’s portfolio companies
HICL Infrastructure PLC
AIF subject to the full scope of the AIFMD
(UK Investment Trust Company)
Portfolio of underlying investments
Dividends
Interest + Principal
HICL Annual Report 2024 Strategic Report Governance Financials
73
Group structure
Investments are made via the Corporate Subsidiaries, which
comprise a group structure involving a Luxembourg-domiciled
investment company and an English limited partnership (the
“Partnership”), together the Corporate Subsidiaries. HICL’s assets
are therefore held indirectly through the Corporate Subsidiaries
and any subsidiaries are wholly owned by the general partner of
the Partnership on behalf of the Partnership. InfraRed has been
appointed the Investment Manager of HICL and the Operator of
the Partnership.
InfraRed has been appointed AIFM in accordance with the AIFM
Directive, and also provides the registered office of HICL.
The Company invests in infrastructure investments indirectly via the
Corporate Subsidiaries:
– HICL Infrastructure 2 S.a.r.l., a société à responsabilité limitée
established in Luxembourg, is the sole limited partner in the
Partnership, an English limited partnership which has a special
purpose vehicle, the General Partner, as its general partner.
– The General Partner is a wholly owned indirect subsidiary of
InfraRed Partners LLP. The General Partner, on behalf of the
Partnership, has appointed InfraRed as Operator of the Partnership.
HICL Infrastructure 2 S.a.r.l. invests the contributions it receives in
capital contributions and partner loans to the Partnership, which
acquires and holds the infrastructure investments.
– HICL Infrastructure 2 S.a.r.l. has an independent Board, on which
a HICL Board Director sits, and takes advice on administration
matters from RSM Tax & Accounting Luxembourg Sàrl.
Aztec Financial Services (UK) Limited is the Administrator to HICL and
also provides company secretarial services.
HICL’s infrastructure investments are registered in the name of the
General Partner or wholly owned subsidiaries of the Partnership.
Each of the underlying investments is made by a portfolio company
(not shown in the structure diagram on the previous page), which
through its contractual structure ensures no cross-collateralisation of
the liabilities (being, principally, the debt repayment obligations).
The Board and the Committees
As at 31 March 2024, the Board of HICL comprised seven
independent, non-executive Directors whose role is to manage HICL
in the interests of shareholders and other stakeholders. In particular,
the Board approves and monitors adherence to the Investment Policy
and Acquisition Strategy, determines risk appetite, sets policies,
agrees levels of delegation to key service providers and monitors
their activities and performance (including, specifically, that of the
Investment Manager) against agreed objectives. The Board will
take advice from the Investment Manager, where appropriate – for
example, on matters concerning the market, the portfolio and new
acquisition opportunities.
The Board meets regularly – at least five times a year, each time for
two consecutive days – for formal Board and Committee meetings.
One of these Board meetings is devoted to considering the strategy
of HICL, both in terms of potential acquisitions and the management
of the current portfolio. There are also a number of ad hoc meetings
dependent upon business needs. In addition, the Board has
formed six Committees (Audit, Management Engagement, Market
Disclosure, Nomination, Remuneration and Risk) which manage risk
and governance.
Management of the portfolio, as well as investment decisions within
agreed parameters, is delegated to InfraRed as the Investment
Manager, which reports regularly to the Board.
At the quarterly Board and Committee meetings, the operating
and financial performance of the portfolio, its valuation and the
appropriateness of the risk and controls are reviewed.
HICL Annual Report 2024
74
Board of Directors
* Assuming a continuation of the years of service as a Director of HICL Infrastructure Company Limited
** Certain of the Directors maintain additional directorships that are also listed but not actively traded on various exchanges. Details may be obtained from the Company Secretary
Mr Mike Bane
Chair of Board of Directors
Chair of Nomination
Committee
Background and experience
Mike Bane (British) has been a Guernsey resident for over
25 years. He is a retired chartered accountant with over
35 years of professional experience providing services to
the asset management industry including the infrastructure
sector. He was a member of EY’s EMEIA Wealth and
Asset Management Board and led EY’s services to the
asset management industry in the Channel Islands. He is
non-executive chair of the Guernsey Health Improvement
Commission. Mike graduated with a BA in Mathematics from
Oxford University.
Date of appointment*
Appointed to the Board on 1 July 2018
Other public company directorships
(listed in London unless noted otherwise)**:
– Apax Global Alpha Limited
– abrdn Property Income Trust Limited
Mr Kenneth Reid
Senior Independent Director
Chair of Management
EngagementCommittee
Background and experience
Kenneth D. Reid (British), resident in Singapore, has
more than
35 years of international experience in the sectors
of construction, development and infrastructure investment.
Working initially with Kier Group, and then from 1990 with
Bilfinger Berger AG, he has been a project leader and senior
management executive responsible for businesses and
projects across all continents. From 2007 to 2010, Ken served
as a member of the Group Executive Board of Bilfinger Berger
AG. He graduated in Civil Engineering from Heriot-Watt
University with First Class Honours (BSc), and subsequently
from Edinburgh Business School with an MBA. Ken is a
Chartered Engineer, a non-executive director of Sicon Limited
and is a member of the Singapore Institute of Directors.
Date of appointment*
Appointed to the Board 1 September 2016
Other public company directorships
(listed in London unless noted otherwise)**:
– None
Ms Rita Akushie
Chair of Audit Committee
Background and experience
Rita Akushie (British) has more than 20 years’ experience
acting in leadership and finance roles for housing associations
and charities, including at Newlon Group, where she was
Chief Financial Officer and then Deputy Chief Executive; and
subsequently as Group Finance Director for Thames Valley
Housing. Rita has recently served as CFO for Cancer Research
UK, and currently serves as CFO & Pro Vice-Chancellor
(Operations) for the University of London. Rita graduated with
a BA in Economics and French from the University of Ghana.
She is a Fellow of the Institute of Chartered Accountants
of England and Wales and a Fellow of the Association of
Corporate Treasurers.
Date of appointment
Appointed to the Board on 1 January 2020
Other public company directorships
(listed in London unless noted otherwise)**:
– None
Ms Liz Barber
Background and experience
Liz Barber (British) was previously at Kelda Group (Yorkshire
Water) where she served as Chief Executive Officer from 2019
until 2022, having previously served as Chief Financial Officer
from 2010. Prior to that Liz held a number of senior partner
roles with Ernst & Young.
Liz is a chartered accountant and graduated with a BSc in Geography
from the University of Leeds, where she previously served
as Deputy Chair, and is the Chair of the Yorkshire and Humber Climate
Commission. Liz is the Senior Independent Director and interim
Remuneration Committee Chair of Cranswick plc and was formerly
a non-executive director of KCOM Plc, a UK fibre broadband provider.
Date of appointment
Appointed to the Board on 1 September 2022
Other public company directorships
(listed in London unless noted otherwise)**:
– Cranswick plc
– Renew Holdings plc
HICL Annual Report 2024 Strategic Report Governance Financials
75
Mr Simon Holden
Chair of Risk Committee
Background and experience
Simon Holden (British) is a Chartered Director (CDir) accredited
by the Institute of Directors. Previously an investment director
at Terra Firma Capital Partners (Candover Investments prior to
that), Simon has been an active independent director to listed
investment company, private equity fund and trading company
boards since 2015. In addition, Simon acts as the pro-bono
Business Advisor to Guernsey Ports, a States of Guernsey
enterprise that operates all of the Bailiwick’s critical airport and
harbour infrastructure. Simon is a member of several industry
interest groups in both financial services and intellectual
property and graduated from the University of Cambridge with
an MEng and MA (Cantab) in Manufacturing Engineering.
Date of appointment*
Appointed to the Board 1 July 2016
Other public company directorships
(listed in London unless noted otherwise)**:
– Hipgnosis Songs Fund Limited
– JPMorgan Global Core Real Assets Limited
– Chrysalis Investments Limited
– Trian Investors 1 Limited (traded on the Specialist Funds
Segment of the LSE) – retired 26 April 2023 as part of a
members voluntary liquidation following the successful
conclusion of the investment strategy and subsequent
company closure
Ms Frances Davies
Chair of Remuneration
Committee
Background and experience
Frances Davies (British) has more than 30 years of experience
across various roles within the banking and asset management
industries. Since 2007, she has been a partner of Opus
Corporate Finance, a corporate finance advisory business.
Frances is also on the Aegon UK plc Group Board and serves
as Chair of the Federated Hermes Property Unit Trust.
Previously Frances served as Head of Global Institutional
Business at Gartmore Investment Management. She had also
been a Director at Morgan Grenfell Asset Management and
SG Warburg. Ms Davies graduated with a MA in Philosophy,
Politics and Economics and a MPhil in Management Studies,
both from Oxford University.
Date of appointment
Appointed to the Board on 1 April 2019
Other public company directorships
(listed in London unless noted otherwise)**:
– Supermarket Income REIT PLC
Mr Martin Pugh
Background and experience
Martin Pugh (British) has over 35 years in the infrastructure
industry, spanning roles in construction, development,
investment, asset management and strategic projects.
Most recently he has provided executive management support
to several major infrastructure projects and prior to this he held
senior executive positions within Bilfinger Project Investments,
overseeing the investment performance of assets in multiple
sectors and across the UK and Europe.
Martin graduated in Civil & Structural Engineering and is a
Chartered Engineer.
Date of appointment
Appointed to the Board on 1 September 2022
Other public company directorships
(listed in London unless noted otherwise)**:
– None
HICL Annual Report 2024
76
InfraRed is the Investment Manager to HICL. In addition, InfraRed
is the Operator of the Partnership by the General Partner, on behalf
of the Partnership. Under the terms of the Limited Partnership
Agreement, the Operator has full discretion to acquire, dispose of
or manage the assets of the Partnership, subject to investment
guidelines set out by the Board.
InfraRed is part of the InfraRed Group, an infrastructure investment
business, managing a range of infrastructure funds and investments.
InfraRed’s infrastructure investment team has a strong record of
delivering attractive returns for its investors, which include pension
funds, insurance companies, funds of funds, asset managers and
high net worth investors domiciled in the UK, Europe, North America,
Middle East and Asia.
Since 1990, the InfraRed Group (including predecessor organisations)
has launched 22 investment funds investing in infrastructure and
property, including HICL.
Since July 2020, InfraRed has been owned by Sun Life Financial Inc.
(together with its subsidiaries and joint ventures, “Sun Life”), although
InfraRed continues to operate as a distinct business under SLC
Management, Sun Life’s alternatives asset management business.
The Sun Life acquisition has continued to provide further support
to InfraRed in its role as Investment Manager to HICL. Sun Life
is a leading international financial services organisation providing
insurance, wealth and asset management solutions to individual and
corporate clients. As of 31 March 2024, Sun Life had total assets
under management of C$1,470bn. For more information please visit
www.sunlife.com.
The InfraRed Group currently manages eight infrastructure funds
(including HICL). The InfraRed Group currently has a staff of over
160 employees and partners, based mainly in offices in London
and with regional offices in New York, Seoul, Madrid and Sydney.
Its infrastructure team comprises over 100 professionals, all with an
infrastructure investment background and a broad range of relevant
skills, including private equity, structured finance, construction,
renewable energy and facilities management.
Within the infrastructure team, there is:
– a Management team with overall responsibility for the activities
provided to HICL;
– an Investments team responsible for business development and
sourcing new investments;
– an Asset Management team responsible for managing the portfolio
of investments; and
– a Portfolio Management team responsible for financial reporting,
cash flow management, debt, foreign exchange hedging and tax.
Five senior members of the InfraRed team make up InfraRed’s
Investment Committee on behalf of HICL. The Investment Committee
has combined experience of over 100 years in making infrastructure
investments and managing investments and projects.
Further details on the InfraRed Group can be found at www.ircp.com.
Under the terms of the Investment Management Agreement, InfraRed
is entitled to a fixed management fee of £100,000 per annum,
together with all reasonable out-of-pocket expenses. InfraRed will not
receive any directors’ or other fees from any project company.
InfraRed, in its capacity as Operator, and the General Partner are
together entitled to annual fees calculated on the following basis and
in the following order:
(i)
1.1 per cent of the proportion of the Adjusted Gross Asset Value
of HICL’s investments which have a value of up to (and including)
£750m in aggregate;
(ii)
1.0 per cent of the proportion of the Adjusted Gross Asset Value
of HICL’s investments that is not accounted for under which,
together with the investments under (i) above, have an Adjusted
Gross Asset Value of up to (and including) £1.5bn in aggregate;
(iii)
0.9 per cent of the proportion of the Adjusted Gross Asset Value
of HICL’s investments not accounted for under (i) or (ii) above
which, together with investments under (i) and (ii) above, have an
Adjusted Gross Asset Value of up to (and including) £2.25bn;
(iv)
0.8 per cent of the proportion of the Adjusted Gross Asset Value
of HICL’s investments not accounted for under (i), (ii) or above
which, together with investments under (i), (ii) and above, have an
Adjusted Gross Asset Value of up to (and including) £3.0bn; and
(v)
0.65 per cent of the proportion of the Adjusted Gross Asset
Value of HICL that is not accounted for under (i), (ii), (iii), (iv) above.
There are no acquisition or performance fees payable.
These fees are calculated and payable quarterly in arrears and are
based on the Adjusted Gross Asset Value of HICL’s assets at the
beginning of the period concerned, adjusted on a time basis for
acquisitions and disposals during the period.
The Investment Management Agreement may be terminated by
either party giving the other party 36 months’ written notice (or, at
HICL’s option, making a payment in lieu of such notice). InfraRed’s
appointment as Operator has corresponding termination provisions,
and if InfraRed’s appointment as Investment Manager is terminated it
may unilaterally terminate its appointment as Operator, and vice versa.
The Investment Manager
HICL Annual Report 2024 Strategic Report Governance Financials
77
Introduction
The Board recognises the importance of a strong corporate
governance culture that meets the requirements of the UK
Governance framework, including the UK Listing Authority as well
as other relevant bodies such as the Association of Investment
Companies (“AIC”) of which HICL is a member. The Board has put
in place a framework for corporate governance which it believes
is appropriate for an investment company. All Directors contribute
to the Board discussions and debates. The Board believes in
providing as much transparency for investors and other stakeholders
as is reasonably possible within the boundaries of client and
commercial confidentiality.
AIFM Directive
The Alternative Investment Fund Managers Directive seeks to regulate
AIFMs and imposes obligations on Managers who manage alternative
investment funds (“AIF”) in the EU or who market shares in such
funds to EU investors. HICL is categorised as an externally managed
AIF for the purposes of the AIFM Directive. In order to maintain
compliance with the AIFM Directive, HICL complies with various
organisational, operational and transparency obligations, including
the pre-investment disclosure information required by Article 23 of the
AIFM Directive.
Non-mainstream pooled investments
HICL conducts its affairs as an investment trust. On this basis,
the Ordinary Shares should qualify as an “excluded security”
and therefore be excluded from the FCA’s restrictions in COBS
4.12 of the FCA Handbook that apply to non-mainstream pooled
investment products.
The AIC Code of Corporate Governance
As a member of the AIC, the Board has considered the Principles and
Provisions of the 2019 AIC Code of Corporate Governance (the “AIC
Code”), a framework of best practice in respect of the governance
of investment companies. The 2019 AIC Code applies to accounting
periods beginning on or after 1 January 2019.
The AIC Code addresses the Principles and Provisions set out in the
UK Corporate Governance Code (the UK Code), as well as setting
out additional Provisions on issues that are of specific relevance to
investment companies. The Board considers that reporting against
the Principles and Provisions of the AIC Code, which has been
endorsed by the Financial Reporting Council, provides more relevant
information to shareholders. HICL has complied with the Principles
and Provisions of the AIC Code.
The AIC Code is available on the AIC website (www.theaic.co.uk).
It includes an explanation of how the AIC Code adapts the Principles
and Provisions set out in the UK Code to make them relevant for
investment companies.
Board
As at 31 March 2024, the Board comprised seven non-executive
Directors. In accordance with Provision 10 of the AIC Code all of the
non-executives who served during the year are independent of the
Investment Manager. The Chair, Mike Bane, met the independence
criteria of the AIC Code Provision 11 upon appointment and has
continued to meet this condition throughout his term of service.
Although not a requirement of the AIC Code, in accordance with
guidance in Provision 11, the Board has a Senior Independent
Director, Kenneth Reid. Kenneth met the independence criteria of
the AIC Code Provision 11 upon appointment and has continued
to meet this condition throughout his term of service. Being non-
executive Directors, none of the Directors have a service contract
withthe Company.
The Articles of Incorporation provide that each of the Directors shall
retire at each Annual General Meeting in accordance with Provision
23 of the AIC Code. All seven Directors intend to retire and will offer
themselves for re-election at the forthcoming Annual General Meeting
in July 2024.
The Board believes that the composition of the Board and its
Committees reflects a suitable mix of skills and experience and that
the Board, as a whole, and its Committees functioned effectively
during the last 12 months. An external review was finalised in Q1
2024, with further detail included on page 82.
The Board is scheduled to meet at least five times a year and
between these formal meetings there is regular contact with the
Investment Manager, the Secretary and the Company’s Joint
Corporate Brokers. The Directors are kept fully informed of investment
and financial controls, and other matters that are relevant to the
business of the Company that should be brought to the attention of
the Directors.
The Directors also have access, where necessary in the furtherance
of their duties, to independent professional advice at the expense of
the Company.
The attendance record of Directors for the year to 31 March 2024 is
set out on page 79.
During the period to 31 March 2024 a further six ad hoc and
Committee meetings of the Board took place.
In addition to the statutory matters discussed at each quarterly
Board meeting, the principal focus is on the reports provided by
the Investment Manager, as well as those put forward by HICL’s
Corporate Brokers and financial public relations (“PR”) Agent.
These are all standing agenda items.
Papers are sent to Directors electronically, normally at least a week
in advance of the Board meetings by the Company Secretary.
Board papers include:
– investment activity in the period and the pipeline of potential new
investment opportunities;
– a review of portfolio performance in the period with material issues
identified and discussed;
– a review of any sustainability issues and Group sustainability
initiatives from the period;
– a review of any health and safety matters in the period;
– a detailed financial review, including detailed management
accounts, valuation and treasury matters; and
– reports from HICL’s Corporate Brokers and from the financial
PR company.
Matters relating to HICL’s risk management and internal control
systems (including associated stress tests), are considered by the
Risk Committee (which, in turn, reports any significant matters /
findings to the Board) and these are set out in more detail in the Risk
Committee Report on page 83.
The Board regularly requests further information on topics of interest
to allow informed decisions to be taken.
On a semi-annual basis, the Board, through the Audit Committee,
also considers the Interim and Annual Reports as well as the detailed
valuation of the investment portfolio prepared by the Investment
Manager and the third-party expert opinion on the proposed
valuation. On at least an annual basis, the Board considers a detailed
analysis of HICL’s Budget and Business Plan for the coming year.
Corporate Governance Statement
HICL Annual Report 2024
78
Diversity policy
The Board believes that a diversity of viewpoints and personal
experiences, along with broad professional expertise, lead to
better decisions, is critical to innovation and provide a competitive
advantage in HICL’s marketplace. When recruiting new Directors, the
Board searches for candidates from a diverse range of backgrounds
and communities to attract the widest breadth of talent, skills and
outlook. The Board’s policy is to appoint individuals on merit, based
on their skills, experience and expertise.
HICL has achieved the key targets of the Hampton−Alexander Review
and the Parker Review, that 33% of the Board of Directors should be
women by the end of 2020 and at least one Director is from an ethnic
minority by 2024. As at 31 March 2024, 43% (three) of the Board of
Directors were women and 14% (one) was from an ethnic minority.
The FCA’s Listing Rules require a listed company to disclose in its
annual report whether it has met its diversity target of at least one
senior position on its board of directors (i.e. Chair, Chief Executive,
Senior Independent Director or Chief Financial Officer) being held
by a woman. Furthermore, the Listing Rules recognise that such
a disclosure requirement might not be appropriate in the context
of Chapter 15 closed-ended investment companies, the boards of
which are typically comprised wholly of non-executive directors.
However, the HICL Board believes it important that this target should
be substantively met, and accordingly would highlight that both the
Chair of the Audit Committee and the Investment Manager’s CFO,
who is responsible for managing the financial activities carried out by
the Investment Manager for the Company, are female.
HICL has no employees beyond its non-executive Board.
The executive management of HICL is provided by its Investment
Manager, InfraRed, with the senior decision-making body being
InfraRed’s Investment Committee. InfraRed is a global business with a
broad cultural representation of employees reflecting the international
nature of its activities.
InfraRed supports equal opportunities regardless of age, race, gender
or personal beliefs and preferences, both in their recruitment and
when managing existing employees. InfraRed prioritises workforce
engagement and implements a range of initiatives to enhance
employee wellbeing, including fitness and mental health schemes,
mentorship programmes, promotion of charity work and recognises
social activities. HR systems are in place to allow employees to
raise any concerns in confidence. InfraRed recognises that when its
employees are engaged, it will benefit from elevated productivity and
increased employee loyalty.
The data shown in the table below reflects the gender and ethnic
background of the Investment Committee and Company Secretary,
and was collected on the basis of self-reporting by the individuals
concerned. The questions asked were “Which of the Parker Review
ethnicity categories do you consider yourself to fall within?” and
“What is the gender with which you identify?”
Corporate Governance Statement continued
Gender identity and ethnic background reporting as at 31 March 2024
Number of HICL
Board members
Percentage of the
HICL Board
Number of senior
positions on the
HICL Board
Number in Executive
Management
Percentage
of Executive
Management
Gender identity
Men 4 57% 2 5 71%
Women 3 43% 2 29%
Ethnic background
White British or other White (including minority-white groups) 6 86% 2 7 100%
Black/African/Caribbean/Black British 1 14% 0 0 0%
Other ethnic group
0 0% 0 0 0%
HICL Annual Report 2024 Strategic Report Governance Financials
79
Committees of the Board
As well as regular Board meetings, the following Committees met
during the course of the year (as set out in the table below):
Audit, Management Engagement, Market Disclosure, Nomination,
Remuneration and Risk. The formal terms of reference for each
Committee have been approved by the Board of HICL and are
available on the Investor Relations section of HICL’s website.
For efficiency and as all Directors are non-executive, all Committees
(apart from the Audit Committee) comprise all the Directors of
the Board.
The respective reports of the Remuneration Committee, the Risk
Committee and the Audit Committee are set out on pages 91, 83 and
85, respectively, of this Annual Report.
The Chair and members of each Committee as at 31 March 2024
were as follows below:
Board Committee membership
Audit
Committee
Management
Engagement
Committee
Market Disclosure
Committee
Nomination
Committee
Remuneration
Committee
Risk
Committee
Chair Ms R Akushie Mr K Reid Mr M Bane Mr M Bane Ms F Davies Mr S Holden
Members Ms E Barber Ms R Akushie Ms R Akushie Ms R Akushie Ms R Akushie Ms R Akushie
Ms F Davies Mr M Bane Ms E Barber Ms E Barber Mr M Bane Mr M Bane
Mr S Holden Ms E Barber Ms F Davies Ms F Davies Ms E Barber Ms E Barber
Mr M Pugh Ms F Davies Mr S Holden Mr S Holden Mr S Holden Ms F Davies
Mr K Reid Mr S Holden Mr M Pugh Mr M Pugh Mr M Pugh Mr M Pugh
Mr M Pugh Mr K Reid Mr K Reid Mr K Reid Mr K Reid
By invitation Mr M Bane
Delegation of responsibilities
The Board has delegated the day-to-day administration of the
Company to Aztec Financial Services (UK) Limited in its capacity as
Company Secretary and Administrator.
HICL delegates the majority of the day-to-day activities required to
deliver the business model, including responsibility for the majority of
HICL’s risk and portfolio management, to the Investment Manager,
InfraRed, subject to the overall oversight and supervision of the
Directors. InfraRed also operates and manages the Partnership and
its assets in accordance with and subject to the Investment Policy,
investment guidelines and approved investment parameters that are
adopted by the Directors from time to time in conjunction with (and
with the agreement of) InfraRed.
The strategies and policies which govern the delegated activities
have been set by the Board in accordance with section 172 of the
Companies Act 2016.
Board attendance
Formal Board
Meetings (5)
Audit
Committee (9)
Management
Engagement
Committee (1)
Market
Disclosure
Committee (1)
Nomination
Committee (3)
Remuneration
Committee (3)
Risk
Committee (4)
Mr M Bane* 5 9 1 1 3 3 4
Ms R Akushie 5 9 1 1 3 3 4
Mr S Holden 5 9 1 1 3 3 4
Mr K Reid 5 8 1 1 2 3 4
Ms F Davies 5 8 1 1 3 3 4
Ms E Barber 5 8 1 1 2 3 3
Mr M Pugh 5 8 1 1 3 3 4
Retired following 2023 AGM:
Mr F Nelson 2 2 0 1 1 1 1
* Mr Bane attends Audit by invitation
HICL Annual Report 2024
80
Conflict of interest
As at 31 March 2024, the Board comprised seven non-executive
Directors, all of whom are independent of the Investment Manager.
None of the Directors sit on boards of other entities managed by the
Investment Manager.
Each Director is required to inform the Board of any potential or actual
conflicts of interest prior to any Board discussion.
It is expected that further investments for HICL will be sourced by
InfraRed and it is likely that some of these will be investments that
have been originated and developed by, and may be acquired
from InfraRed or from a fund managed by, InfraRed. In order to
deal with these potential conflicts of interest, detailed procedures
and arrangements have been established to manage transactions
between HICL, InfraRed or funds managed by InfraRed (the “Rules
of Engagement”). If HICL invests in funds managed or operated
by InfraRed, HICL shall bear any management or similar fees
charged in relation to such fund provided, however, that the value of
HICL’s investments in such funds shall not be counted towards the
valuation of HICL’s investments for the purposes of calculating the
management fees payable to InfraRed.
It is possible that in the future HICL may seek to purchase certain
investments from funds managed or operated by InfraRed once those
investments have matured and to the extent that the investments suit
HICL’s investment objectives and strategy. If such acquisitions are
made, appropriate procedures from the Rules of Engagement will be
put in place to manage the conflict.
Key features of the Rules of Engagement are described in HICL’s
March 2019 Prospectus, available on the website at www.hicl.com.
Risk management and internal controls
The Board is responsible for HICL’s system of internal control and
for reviewing its effectiveness. To help achieve this end, the Board
has a designated Risk Committee. It follows a process designed to
meet the particular needs of HICL in managing the risks to which it
is exposed.
At each Board meeting, the Board also monitors HICL’s investment
performance in comparison to its stated objectives and it reviews
HICL’s activities since the last Board meeting to ensure adherence
to approved investment guidelines. The pipeline of new potential
opportunities is considered and the prices paid for new or
incremental investments during the quarter are also reviewed.
The Investment Manager prepares management accounts and
updates business forecasts on a quarterly basis, which allow the
Board to assess HICL’s activities and review its performance.
The Board has reviewed the need for an internal audit function and
it has decided that the systems and procedures employed by the
Investment Manager and the Secretary, including their own internal
review processes, and the work carried out by HICL’s external
Auditors, provide sufficient assurance that a sound system of internal
control, which safeguards HICL’s assets, is maintained. An internal
audit function specific to HICL is therefore considered unnecessary
albeit, from time to time, independent assurance assignments may
becommissioned by the Board.
The Board recognises that these control systems can only be
designed to manage rather than eliminate the risk of failure to achieve
business objectives, and to provide reasonable, but not absolute,
assurance against material misstatement or loss, and rely on the
operating controls established by both the Company Administrator
and the Investment Manager.
The Audit Committee also plays a vital role in overseeing internal
controls. For more information please see the Audit Committee
Report starting on page 85.
The Board and the Investment Manager have agreed clearly defined
investment criteria, return targets, risk appetite and exposure limits.
Reports on these performance measures, coupled with cash
projections and investment valuations, are submitted to the Board
and the relevant Committees at each quarterly meeting.
Relations with shareholders
The Board welcomes the views of shareholders and places great
importance on communication with HICL’s shareholders.
HICL reports its full year results to shareholders in May and interim
results in November as well as publishing two Interim Update
Statements each year, normally in March and August. HICL also
holdsan AGM in July.
Results of Extraordinary and Annual General Meetings are
announced by the Company promptly after the relevant meeting.
Additionally, other notices and information are provided to
shareholders on an ongoing basis through the Company’s website
inorder to assist in keeping shareholders informed. The Secretary
and Registrar monitor the voting of the shareholders and proxy voting
is taken into consideration when votes are cast at the AGM.
Senior members of the Investment Manager make themselves
available to meet with principal shareholders and key sector analysts.
Feedback from these meetings is provided to the Board on a
regular basis.
Shareholders may contact any of the Directors via the Company
Secretary – including any in his or her capacity as Chair of one of
HICL’s Committees, as appropriate – whose contact details are on
HICL’s website.
During the year Mike Bane (Chair), Kenneth Reid (SID) and Frances
Davies held individual meetings with certain large institutional
shareholders. The Board’s intention is to continue to foster an open,
two-way communication with its shareholders.
Corporate Governance Statement continued
HICL Annual Report 2024 Strategic Report Governance Financials
81
Market Disclosure
Committee
The Committee has responsibility for
overseeing the disclosure of information
by the Company to meet its obligations
under the Market Abuse Regulation and
theFinancial Conduct Authority’s Listing
Rules and Disclosure Guidance and
Transparency Rules.
The Market Disclosure Committee met once in the year to
31 March 2024.
The full terms of reference for the Market Disclosure Committee
are available from HICL’s website.
The MEC of the Board is responsible
for reviewing all major service providers
to HICL, which includes the Investment
Manager. The terms of reference of this
Committee are approved by the Board of
HICL and are available on HICL’s website.
The MEC met in February 2024 to review the performance of
the key service providers including the Investment Manager.
No material weaknesses were identified in relation to the
Investment Manager; the recommendation to the Board was that
the current arrangements are appropriate and that the Investment
Manager provides good quality services and advice to HICL.
A review of key service providers was also undertaken. Overall,
the feedback on performance throughout the year was that
key services had been delivered to a very high standard and
the Committee resolved that the continued appointment of all
providers, including InfraRed, be recommended to the Board for
approval, which was duly granted.
The full terms of reference for the MEC are available from
HICL’swebsite.
Management
Engagement
Committee (MEC)
Nomination Committee
The Nomination Committee has assessed
the composition of the Board and its
Committees taking account of the balance
of skills, gender, experience, knowledge and
length of service of Directors. These provide
a sound base from which the interests of
investors can be served to a high standard.
There is an appropriate spread of skills on the Board, combining
suitable knowledge of regulatory requirements, multiple Directors
with accounting qualifications and relevant practical experience, a
depth of infrastructure expertise, and a strong understanding of the
specific requirements of investment companies.
Succession planning for all roles, including the Chair and
Committee Chairs, is a key responsibility of the Nomination
Committee. During the year, the Committee explicitly considered
new Director recruitment recognising anticipated future retirements
from the Board. As a result of this process, which included the
profile and skillsets that would best complement remaining
Directors, an external recruitment process has been launched.
A further update will be provided in the 2024 Interim Report.
Other than in exceptional circumstances, it is the policy of the Board
that Directors, including the Chair, will not serve for more than nine
years including time spent on the Board of HICL Infrastructure
Company Limited. As a general rule, a Director who has served
more than nine years will not be considered independent.
The Nomination Committee met twice in the year to 31 March 2024.
The full terms of reference for the Nomination Committee are
available from HICL’s website.
Board Evaluation
In line with recognised best practice, the Nomination Committee
undertakes an externally facilitated Board evaluation at least once
every three years. In the intervening periods, the Nomination
Committee undertakes an annual self-evaluation which considers
the performance, tenure, and independence of each non-
executive Director.
Having last undertaken an external review in 2021, the
Nomination Committee engaged Lintstock Ltd to conduct
an external review of the performance of the Board and its
Committees which was finalised in early 2024. Lintstock is an
advisory firm that specialises in board reviews and has no other
connection with the Company or individual Directors. The scope
and findings of the evaluation are set out below:
Lintstock found that the HICL Board benefits from a dedicated
group of non-executives who are focused on discharging
diligent oversight, and maintain a constructive dialogue with the
Investment Manager. The core aspects of Board effectiveness
drew positive feedback, with the standard of rigour and the
oversight of the acquisition and disposal of assets drawing
particular praise.
The review identified a small number of areas where there was
scope for continuous improvement, which included maintaining
a strong focus on asset management to deliver outperformance,
board succession planning, seeking additional opportunities
for strategic dialogue, and identifying efficiencies in the meeting
process and supporting materials. These findings were
discussed openly by the Nomination Committee and
Investment Manager, in a session facilitated by Lintstock,
and will inform a set of specific actions which will enable the
Nomination Committee and Board to monitor progress.
As part of the review, Lintstock delivered an analysis informed
by the Lintstock Governance Index, which comprises around
60 core board performance metrics from over 100 board
reviews that Lintstock has recently facilitated for UK investment
companies. This helped the Directors to understand how the
HICL Board and its Committees compares with other similar
organisations, putting the findings into context.
Key findings
1
Scoping and tailoring
The review was designed to consider core aspects of governance such as
information, composition, and dynamics, as well as strategy and risk areas
relevant to the performance of HICL.
2
Completion of surveys
Board members and senior representatives of the Investment Manager
completed surveys assessing the performance of the Board and each of its
Committees, as well as the performance of the Chair.
3
Interviews
In-depth interviews with Board members and senior InfraRed staff were
conducted by two Lintstock Partners. The findings from the survey stage
enabled Lintstock to focus discussions on the key priorities for each Director.
4
Analysis and delivery
Lintstock analysed the findings from the surveys and interviews and
delivered focused reports documenting the findings, including a number of
recommendations to increase effectiveness.
HICL Annual Report 2024
82
HICL Annual Report 2024 Strategic Report Governance Financials
83
Risk Committee Report
The following pages set out the Risk
Committee’s report on its activities for
the year ended 31 March 2024. The Risk
Committee operates within clearly defined
terms of reference, which are available on
the Company’s website. The Risk Committee
comprises all Directors and meets four times
a year, coinciding with the quarterly Board
meetings, and is available to convene ad hoc
should material matters arise.
In discharging its responsibilities, the duties of the Risk Committee
comprise defining the risk appetite of the Group, assessing,
monitoring and managing the principal risks to which the Group is
exposed, as well as establishing and overseeing mitigating action.
In particular, we consider risk exposure and controls, stress and
scenario planning, regulatory compliance, portfolio company controls
and the three lines of defence.
Simon Holden
Risk Committee Chair
21 May 2024
Statement of the Chair of the
RiskCommittee
The Company has a risk management framework covering all aspects
of the Group’s business. The Company is an Alternative Investment
Fund (“AIF”) and the Investment Manager (as Alternative Investment
Fund Manager, (“AIFM”)) is responsible for risk management and has
well-established systems and controls to manage and monitor risk.
The Board places reliance on the Investment Manager’s systems and
controls and through its Risk Committee (and its Audit Committee),
monitors, reviews and challenges their effectiveness.
The risk management framework operates across a range of
timeframes and likelihoods, from: i) previously identified risks with
mitigating actions already underway, ii) the identification of near-term
emerging risks, including potential catalysts of ‘black swan’ events,
and iii) longer-term ‘horizon risks’ that might influence HICL’s portfolio
and investment policy in the decades ahead.
The risk management framework follows a cascade approach,
with three ‘lines of defence’, to effectively safeguard and protect
the interests of the Company and its shareholders. The Investment
Manager implements mitigation strategies, which are regularly
reported to and assessed by the Risk Committee:
– The first line is the development of systems to implement effective
controls. These are set out in documents such as the Company’s
and the Investment Manager’s Policies and Controls Manuals.
The Company must generally be satisfied that the Investment
Manager’s systems and processes ensure that risk is effectively
anticipated, controlled, reported and overseen. InfraRed, as the
Company’s Investment Manager and the Operator of HICL’s
portfolio, is responsible for the identification, classification,
assessment and management of risk both within the existing
portfolio and in evaluating new investment opportunities.
– The second line is that of oversight and engagement from the Risk
Committee, who scrutinise and challenge InfraRed’s approach to
risk management. At each quarterly meeting, the Risk Committee
conducts an in-depth review of the most material risks faced by
the Group, which are assessed quantitatively (based on potential
valuation and cash flow impact) and qualitatively (reputational
impacts). The Committee also considers longer-term factors to
which the Company may need to adapt in the future (‘horizon
risks’) such as climate change, as well as risks which may impact
the future delivery of the Company’s Investment Proposition,
including ‘black swan’ risks. Mitigation strategies are proposed by
the Investment Manager, with progress being monitored by the
Risk Committee. The Risk Committee also ensures that all relevant
policies are up to date and that delegated authorities are observed.
– The third line is third-party assurance which is used on an as-
needed basis to provide independent scrutiny of the Company’s
risk management framework, an audit of key controls and specialist
guidance. The results are reported to each of the Risk Committee
and the Audit Committee as appropriate.
Main duties and general approach
The Risk Committee’s main duties are, as set out in its terms of
reference, to consider and where necessary make recommendations to
the Board, on the following:
– the Company’s implementation of an effective governance
structure and control framework which covers key risk areas with
appropriate reporting;
– the Group’s risk appetite statement (reviewed annually at a minimum),
taking account of the current economic, political, and business
environment, as well as any short-term shocks or longer-term trends
(such as climate change) which might affect portfolio performance or
the reputation of the Company;
– risk limits and tolerances, and risk management;
– ongoing regulatory compliance;
– the Group’s risk profile, challenging the assessment and
measurement of key risks whilst monitoring the actions taken to
manage and mitigate them;
– scenario analysis to determine whether proposed mitigation is
sufficient to manage the business risk profile within the Company’s
appetite; and
– the Investment Manager’s advice on material changes to the
investment strategy, the treasury policy, the hedging policy and the
risk policy.
HICL Annual Report 2024
84
Routine business
The Committee considered and noted compliance with HICL’s
Investment Policy and other policies relating to gearing, hedging and
risk reportable events, which are fundamental to the Company’s
risk appetite.
Within the Investment Policy, the Risk Committee has established
Approved Investment Parameters (“AIPs”). These are designated
thresholds that are approved by the Board in coordination with the
Investment Manager. These set the perimeter of HICL’s risk appetite
as it relates to portfolio construction, fund level gearing and hedging.
The AIPs have served as intended during the year, with compliance
monitored by the Risk Committee and any proposed investment
which would exceed the limits set by the AIPs appropriately
considered in advance. AIPs are adjusted from time to time based
on the evolution of the Company’s investment strategy and operating
environment, with the current framework having been most recently
refreshed in February 2023.
In response to the volatile macroeconomic environment and the
consequential impacts on the Company’s share price and its
ability to access equity capital markets, the Risk Committee and
the Investment Manager agreed to temporarily implement a more
rigorous oversight framework. Whilst HICL’s shares trade below
the Company’s Net Asset Value, all potential new investments
are reviewed by the Board with approval sought to enter into the
transaction. The Risk Committee also considered and assisted the
Board with capital allocation decisions during the year, particularly
with respect to the use of disposal proceeds.
The Committee’s routine quarterly agenda covers, inter alia, a
summary of key risks faced by the Group (including changes to the
potential impact or timing of known risks as well as a consideration
of emerging and longer-term ‘horizon’ risks, with climate and
environmental risks notable amongst these), an assessment of ‘black
swan’ risks (which are by definition unlikely to occur but could arise
with limited warning and have a potentially significant impact on the
Company), a review of HICL’s risk management policies and updates
on relevant fund or portfolio company matters as required.
The Committee received quarterly reporting from the Investment
Manager in relation to health and safety matters. The safe working
practices of HICL’s service providers, portfolio companies and
contractors and the avoidance of injuries are always of paramount
concern and are closely monitored. During the year, a thorough
review of health and safety was undertaken as set out below.
The Committee considered, at each meeting, regulatory compliance
reports from Aztec, the Company’s Administrator and Secretary and
also from HICL’s Depositary. No significant action points or notable
comments arose in respect of these regular reviews.
The Committee concluded each quarterly meeting with an
assessment of whether HICL was performing in compliance with its
stated risk appetite and, confirmed that, taken as a whole, this was
the case. The Committee also concludes by ensuring the Investment
Manager’s attention focuses on any areas the Chair wishes to see
closer scrutiny of and reporting against in subsequent quarters as
matters arising.
Process and reporting updates
Over the course of the year, the Investment Manager continued to
refine its risk management process and its quarterly reporting to the
Risk Committee in a number of areas:
Health and safety
The management of health and safety is delegated to the Investment
Manager who, at every HICL Risk Committee meeting, will report
on significant (RIDDOR
1
notifiable) health and safety events for all
projects and make recommendations in respect of actual or potential
matters of concern. The Investment Manager worked with the Risk
Committee in the year to enhance its RIDDOR reporting, primarily
with greater focus on root cause analysis. It also undertook ‘deep
dives’ into health and safety considerations at specific assets in
response to concerns raised by the Committee. A full external
review of HICL’s legal duties regarding health and safety was also
undertaken by a third party on behalf of InfraRed and the Company.
Stress testing and scenario analysis
A rolling programme of stress testing and scenario analysis for
HICL was presented to the Risk Committee at each of its meetings
throughout the year. The Investment Manager continued to refine
the scenarios included within each Primary Risk Class based on the
Company’s evolving portfolio and operating environment. Given the
volatile macroeconomic backdrop over the year, the Investment
Manager presented four new stress tests covering the Financial/
Market and Political Primary Risk Classes. Existing stress testing
scenarios were also adjusted where relevant to better reflect these
macroeconomic dynamics, with a particular focus on the Group’s
direct and indirect exposure to interest rates.
New investments
Given the Company’s relatively recent investments in Fortysouth, TNT
and Altitude Infra, the Committee placed greater focus on risks faced
by assets that are more operational in nature. New bespoke stress
testing scenarios and key risk indicators related to management team
performance and the validity of assumptions made at acquisition
for key value drivers were introduced specifically for these assets.
The Risk Committee is also actively evaluating the role these assets
play in future portfolio construction, particularly in relation to the
potential they represent for delivering outperformance for HICL’s
shareholders in the medium to long term.
Risk appetite statement
The Investment Manager worked with the Risk Committee to
complete a detailed review of the Company’s Risk Appetite
Statement, which considers the economic, political, and business
environment, as well as any short-term shocks or longer-term trends
that may affect portfolio performance. The residual risk rating for the
Financial / Market Risk class was increased in July 2023, primarily
due to increases in interest rates and bond yields which impacted
HICL’s weighted average discount rate and increased borrowing
costs. The Investment Manager also provided more quantitative
and qualitative risk measures to support the Committee with its
assessment of risk appetite for each Primary Risk Class at each
quarterly meeting.
1 Reporting of Injuries, Diseases, and Dangerous Occurrences Regulations 1985
Risk Committee Report continued
HICL Annual Report 2024 Strategic Report Governance Financials
85
Governance and responsibilities
All members of the Committee are independent non-executive
Directors. The Board believes members have the necessary range
of financial, risk, control and commercial experience required to
provide effective challenge to the Investment Manager, external
Auditor, and other advisers as appropriate. In particular, the Board is
satisfied that Rita Akushie, Mike Bane, by invitation of the Committee,
and LizBarber have the recent and relevant financial experience as
outlined in the FRC’s Corporate Governance Code.
The external Auditor and the third-party valuation expert are invited
to attend the Audit Committee meetings
1
at which the Annual and
Interim Reports are considered, and at which they can meet with the
Audit Committee without representatives of the Investment Manager
being present. The Audit Committee has direct access to KPMG
LLP and to key senior staff of the Investment Manager, and it reports
its findings and recommendations to the Board, which retains the
ultimate responsibility for the Company’s financial statements.
Committee effectiveness
The results of the Committee effectiveness review for 2024
confirm the Committee is operating effectively. It is considered well
constituted and chaired, providing an effective and appropriate level
of challenge and oversight of the areas within its remit.
I am pleased to present the Audit Committee
report for the year ended 31 March 2024.
Myreport outlines the work performed by
theCommittee in the year.
We held regular scheduled meetings during the year, four
of which were aligned with the Company’s reporting cycle.
Member attendance can be found on page 79. Other regular
attendees at these meetings included: the Company Chair, members
of the Investment Manager including the CFO, and the external
Auditor, KPMG LLP. In accordance with the Committee’s role in
the investment valuations, separate meetings were held to review
and challenge the Investment Manager’s valuation assumptions,
judgements and resulting valuations of the Company’s underlying
portfolio of infrastructure assets. The full list of Committee roles and
responsibilities can be found in the terms of reference available on
HICL’s website.
The Audit Committee is the formal forum through which the external
Auditor reports to the Board of Directors.
We have reviewed the independence, objectivity and effectiveness
of KPMG and recommended to the Board that KPMG be appointed
as external Auditor of the Company in respect of the coming
financial year.
In advance of each Committee meeting, I met with the CFO, to
discuss their reports as well as any relevant issues. I also met privately
with KPMG as part of my ongoing review of their effectiveness and,
periodically, with other members of the Investment Manager who
have responsibility for HICL.
I, or another member of the Audit Committee, will continue to be
available at each AGM to respond to any questions from shareholders
regarding our activities.
Rita Akushie
Audit Committee Chair
21 May 2024
Audit Committee Report
1 The external Auditor is invited to all Audit Committee meetings, not solely those covering
the Annual and Interim Reports
HICL Annual Report 2024
86
Compliance with Corporate Governance code
The Committee received two updates on the changes to the UK
Corporate Governance code, with a focus at this stage being on
Internal Controls. Further updates will be provided in FY25 with a view
to being ready to adopt the code when it comes into force.
The Company’s internal control and risk management systems,
including those in relation to the financial reporting process include:
– an overview of the Investment Manager’s system of key control
and oversight processes, line manager reviews and systems’
access controls;
– updates for the Committee on accounting developments, including
draft and new accounting standards and legislation;
– approval of the Group’s budget in February 2024 by the Board and
a comprehensive system of financial reporting to the Board, based
on the annual budget with quarterly reporting of actual results,
analysis of variances, scrutiny of key performance indicators and
regular reforecasting;
– reports from the Investment Manager on matters relevant to the
financial reporting process, including quarterly assessments of
internal controls, processes and fraud risk;
– independent updates and reports from the external Auditor on
accounting developments, application of accounting standards,
key accounting judgements and observations on systems and
controls, where appropriate;
– an overview of the Investment Manager’s appointment of
experienced and professional staff, both by recruitment
and promotion, of the necessary calibre to fulfil their allotted
responsibilities as part of the Management Engagement
Committee in February 2024; and
– appropriate Board oversight of external reporting.
Going concern and viability
The Directors are required to make a statement in the Annual Report
as to HICL’s long-term viability. The Committee provides advice to
the Board on the form and content of the statement, including the
underlying assumptions, shown on page 62. To enable it to provide
this advice, the Committee evaluated a report from the Investment
Manager setting out its view of HICL’s long-term viability and content
of the proposed Viability Statement. This report was based on the
Group’s five-year strategic plan and covered forecasts for investments
and realisations, liquidity and gearing, including forecast outcomes
of the stress test of the plan and forecast capital and liquidity
performance against an assessment of the Group’s risk profile.
Areas of accounting judgement
and controlfocus
The Committee pays particular attention to matters it considers to
be important by virtue of their complexity, level of judgement and
potential impact on the financial statements and wider business
model. Significant areas of focus considered by the Committee
are detailed in the table below, alongside the actions taken by the
Committee (with appropriate challenge from the external Auditor) to
address them.
What the Committee reviewed in the year
ended 31 March 2024
Internal control, compliance
and risk management
– HICL’s system of control and risk management
– The Viability Statement and the supporting stress
test scenarios
– An update on compliance with HMRC’s Senior Accounting
Officer (“SAO”) Regime including wider tax controls
– An update on the changes to UK Corporate Governance
Code, covering Board responsibility around risk
management and internal control framework, with changes
effective from 1 January 2025.
Risk review
– Valuation reports and the investment portfolio valuation
– Updates on compliance with regulatory rules and
compliance monitoring findings
– Reports on approach to tax policy and strategy
– Annual tax update
– Going concern and liquidity
Financial reporting
– Annual and interim reports
– Key accounting judgements and estimates
– Application of APMs, including the Investment Basis
– The Annual Report to ensure that it is fair, balanced
and understandable
– Valuation process and policy review by an independent
third party, on behalf of InfraRed
External audit
– Confirmation of the external Auditor’s independence
– Policy and approval for non-audit fees
– FY2024 audit plan, including significant audit risks
(being the valuation of investments in investment
entity subsidiaries)
– Audit results report, including the results from audit
procedures performed to address significant audit risks
– External Auditor performance and effectiveness
Audit Committee Report continued
HICL Annual Report 2024 Strategic Report Governance Financials
87
Significant issue considered Audit Committee actions and conclusions
Valuation of investments
The total carrying value of ‘Investments at fair value through profit
or loss’ at 31 March 2024 was £3,212.5m (2023: £3,349.7m).
See Note12 to the financial statements.
The fair value of the Company’s investment is based on the Net Asset
Value of Infrastructure Investments Limited Partnership (“IILP”) and
the sundry assets and liabilities of the direct Corporate Subsidiary,
Luxco. IILP’s Net Asset Value is based on the fair value of the
underlying investments in its portfolio of infrastructure assets.
Other than the A13 Senior Secured Bonds (which are listed and
therefore valued based on the quoted market price), market
quotations are not available for the Company’s underlying
investments, so their valuation is undertaken using a discounted
cashflow methodology. This methodology requires a series of
material judgements to be made as further explained in the Valuation
of the Portfolio starting on page 46 of this report.
The Audit Committee discussed the valuation process and
methodology with the Investment Manager in September, October,
November 2023, and March and April 2024 as part of its review of the
September 2023 Interim Report and early NAV releases in October
2023 and April2024, as well as in March and May 2024 as part of its
review of theMarch 2024 Annual Report.
The Investment Manager carries out valuations semi-annually and
provides detailed valuation reports to the Audit Committee. The Audit
Committee also receives a half-year and year-end valuation report
and opinion from a third-party valuation expert. The Audit Committee
considered and challenged the valuation assumptions, with particular
focus on inflation, judgements, and methodology.
The Audit Committee met with KPMG five times during the year.
In November 2023, the Audit Committee reviewed and agreed KPMG’s
initial audit plan, while in April 2024 the Audit Committee discussed the
audit approach as well as in May 2023 following the conclusion of the audit.
KPMG explained the results of their audit and confirmed that the results
of KPMG’s audit testing were satisfactory.
Valuation of investments – key forecast assumptions
The key forecast assumptions are future inflation rates, interest rates,
rates of gross domestic product and tax rates. These assumptions
are explained in further detail in the Valuation of the Portfolio starting
on page 46 of this report.
The Audit Committee considered in detail and provided robust
challenge to the economic assumptions that are subject to judgement
and that may have a material impact on the valuation. In addition, the
Audit Committee considered the impact (both actual and potential)
of geopolitical issues on these key economic assumptions as well
as on the investments underlying cash flows, in particular for those
investments with demand risk.
The Audit Committee reviewed the Investment Manager’s valuation
reports, in conjunction with a report and opinion on the valuation from a
third-party valuation expert.
The Investment Manager confirmed to the Audit Committee that
the economic assumptions were consistent with those used for
acquisitions, and the third-party valuation expert confirmed that the
economic assumptions were within an acceptable range.
Whilst inflation has reduced during the year end March 2024 it is still at
an elevated level compared to historic periods and therefore the Audit
Committee paid particular focus to the assumptions applied to short-
term inflation assumptions. The third-party valuation expert confirmed
that the inflation assumptions were within an acceptable range.
The Investment Manager provided sensitivities showing the impact of
changing these assumptions, which have been considered by the Audit
Committee and the external Auditor.
The external Auditor challenged, with support of their internal valuation
specialist, discount rates and macroeconomic assumptions applied
in the valuation by benchmarking these to independent market data,
including recent market transactions, and using their specialist’s
experience in valuing similar investments. They further assessed the
reasonableness of the Company’s assumptions by comparing these
to the assumptions used by comparator companies, sales processes,
back-testing of disposals and other third-party information.
During the year the Investment Manager commissioned a suitably
qualified accounting firm to review their valuation process. The Audit
Committee was able to review the final report. The approach to
valuations was deemed to be appropriate with recommendations
provided to enhance the process further. The Audit Committee
concluded that the Investment Manager’s valuation process was
robust, that a consistent valuation methodology had been applied
throughout the year and that the key forecast assumptions applied
were appropriate.
HICL Annual Report 2024
88
Audit Committee Report continued
Significant issue considered Audit Committee actions and conclusions
Valuation of investments – discount rates
The discount rates used to determine the valuation are selected
and recommended by the Investment Manager. The discount rate
is applied to the expected future cash flows from each investment’s
financial forecasts to arrive at a valuation (discounted cash flow
valuation). The resulting valuation is therefore sensitive to the discount
rate selected.
The Investment Manager is experienced in valuing these investments
and adopts discount rates reflecting their current and extensive
experience of the market. The Investment Manager sets out the
discount rate assumptions and the sensitivity of the valuation of the
investments to this discount rate in the Valuation of the Portfolio
starting on page 46 of this report.
The Audit Committee challenged the Investment Manager on their
material judgements and compared this to feedback from the third-
party valuation expert.
The Investment Manager highlighted to the Audit Committee the
forecast impact on cash flows of several stress scenarios alongside its
assessment of the risk to these cash flows.
The Investment Manager presented analysis of the risk free rate
movement and implied risk premium when determining discount rates.
The Audit Committee was satisfied that the range of discount rates was
appropriate for the valuation carried out by the Investment Manager.
Going concern and Viability Statement
The financial statements have been prepared on a going concern
basis, with the assessment period of five years unchanged in the
viability statement. See Note 2 for details.
The Investment Manager provided a paper explaining the rationale for
the going concern basis of preparation, which has been considered by
the Audit Committee and the external Auditor.
The Audit Committee met with the Investment Manager to discuss the
rationale and challenge key assumptions applied, as part of its review of
the Annual Report.
The Audit Committee also reviewed the Company’s viability statement
and accompanying commentary, as well as projections and sensitivities
prepared by the Investment Manager to support the statement.
The Audit Committee concluded that the Investment Manager’s
judgement applied to the going concern basis of preparation and the
Company’s viability statement was appropriate.
Alternative Performance Measures (“APMs”)
There are various APMs used throughout the Annual Report to give
investors more information. One of these is the Investment Basis
which is included to aid users of the Annual Report to assess the
Company’s underlying operating performance and its gearing as well
as providing greater transparency into HICL’s Statement of Financial
Position, including its capacity for investment and ability to make
distributions. Total return, NAV, and EPS are the same under IFRS
and the Investment Basis. The Board and the Investment Manager
manage the Company on an Investment Basis.
The Audit Committee reviewed the Investment Manager’s assessment
of the Investment Basis including its presentation by challenging the
disclosures made in the Annual Report and whether due attention was
given to the distinction between the Investment Basis and IFRS.
Other APMs and their relevance to investors was challenged by the
Audit Committee in order that the Annual Report provides meaningful
disclosure to investors. The Financial Review starting on page 40 details
the assessment and calculation of APMs.
Fair, balanced and understandable
The 2019 AIC Code of Corporate Governance requires the Board
to present a fair, balanced and understandable assessment of the
Company’s position and prospects.
As noted above, the Company prepares pro forma summary
financial information under the Investment Basis, as well as reporting
in accordance with IFRS in order to report the relevant financial
performance and position to stakeholders.
The Audit Committee reviewed the March 2024 Annual Report to
ensure that, when taken as a whole, it presents a fair, balanced and
understandable assessment of the Company’s position and prospects.
The Audit Committee received a draft version of the March 2024 Annual
Report for their review and comment, as well as a specific paper from
the Investment Manager to aid their assessment of the March 2024
Annual Report being fair, balanced and understandable.
As such, the Audit Committee was able to provide positive confirmation
to the Board, for it to fulfil its obligations under the AIC Code of
Corporate Governance.
HICL Annual Report 2024 Strategic Report Governance Financials
89
Accounting policies and practices
The Audit Committee reviewed the appropriateness of, and was
satisfied with, the Company’s accounting policies.
The Directors exercised judgement in determining whether the
Company and the Corporate Subsidiaries meet the IFRS 10 definition
of an investment entity. By virtue of the Company and Corporate
Subsidiaries’ status as investment entities, all investments (including
the Corporate Subsidiaries) are accounted for at fair value through
profit or loss. Further detail is contained within Note 12 of the
financial statements.
Internal controls
The Audit Committee reviewed the Company’s statement on internal
controls in relation to accounting records, the valuation process and
accounts preparation, prior to endorsement by the Board.
The Management Engagement Committee reviews the adequacy
and effectiveness of the Investment Manager’s internal controls as
part of its annual review of the Investment Manager’s performance.
In addition, the Board reviews and debates a quarterly self-
assessment internal control report prepared by the Investment
Manager – see the Risk and Risk Management section of this report
starting on page 53 for further detail.
Internal audit
In line with FRC guidance, the Audit Committee keeps under review
the need for an internal audit function. The Audit Committee is
satisfied that the systems of internal control of the Company, the
Investment Manager and the Administrator are adequate to fulfil the
Board’s obligation in this regard and that currently an internal audit
function is not necessary. Additionally, HICL’s Depositary provides
cash flow monitoring, asset ownership verification and oversight
services to the Company. The Committee considers the need for
discrete internal audit engagements as appropriate.
In September 2023, the Committee received a report commissioned
by the Investment Manager on InfraRed’s valuation policies and
procedures, including the reporting to Audit Committee. The report
was prepared by an independent third party and concluded that the
valuation processes were operating as expected. Small changes
were recommended to the Company’s policies and these were
enacted inthe year.
External Auditor
The Audit Committee notes the requirements of the UK Corporate
Governance Code and in particular the requirement to put the
external audit out to tender at least every ten years. The external audit
was most recently tendered for the years commencing after 31 March
2015. As reported in the March 2015 Annual Report, KPMG Channel
Islands was re-appointed as auditor at the completion of the tender
process. Since then, KPMG UK was the auditor for the external audits
commencing after 31 March 2020. It is expected that the audit will be
tendered within the next financial year.
The Audit Committee continues to monitor developments on
‘Restoring trust in audit and corporate governance’ originally
published by the Department of Business, Energy and Industrial
Strategy. They remain supportive of the stated aims to strengthen
the UK’s framework for major companies and the way in which they
are audited.
The Company is in compliance with the requirements of The Statutory
Audit Services for Large Companies Market Investigation (Mandatory
Use of Competitive Tender Processes and Audit Committee
Responsibilities) Order 2014, which relates to the frequency and
governance of tenders for the appointment of the external Auditor and
the setting of a policy on the provision of non-audit services.
Auditor independence
The Audit Committee is responsible for reviewing KPMG’s
independence and performance. It establishes policies for the
provision of non-audit services by the external Auditor and reviews
the terms under which the external Auditor may be appointed to
perform non-audit services, and the scope and results of the audit,
including KPMG’s effectiveness. To safeguard the independence
and objectivity of the external Auditor, the Audit Committee ensures
that any advisory and/or consulting services provided by the external
Auditor do not conflict with their statutory audit responsibilities.
Permitted audit and audit-related services include the statutory audit
of HICL and of its subsidiaries, the Company’s interim review and
other permitted audit-related services. The Audit Committee has
pre-approved these services up to £20,000, which are reported after
the event to the Audit Committee. Non-audit services above this limit
require prior approval from the Committee.
HICL Annual Report 2024
90
Audit Committee Report continued
Assessment of independence and
effectiveness
To fulfil its responsibility regarding the independence of the external
Auditor, the Audit Committee considered:
– changes in the other audit personnel in the audit plan for the
current year;
– a report from the external Auditor describing their arrangements to
identify, report and manage any conflicts of interest; and
– the extent of non-audit services provided by the external Auditor
and its member network firms.
To assess the effectiveness of the external Auditor, the Audit
Committee reviewed:
– the external Auditor’s fulfilment of the agreed audit plan and
variations from it;
– the external Auditor’s UK Transparency Report 2024;
– reports highlighting the major issues that arose during the course
of the audit;
– feedback from the Investment Manager evaluating the performance
of the audit team; and
– the FRC’s annual report on audit quality inspections.
The Audit Committee is satisfied with KPMG’s effectiveness and
independence as auditor, having considered the degree of diligence
and professional scepticism demonstrated by them.
Audit and non-audit fees
The Audit Committee reviews the scope and results of the audit,
its effectiveness and the independence and objectivity of the
external Auditor, with particular regard to the level of non-audit fees.
Current year fees were:
March 2024
£m
March 2023
£m
Audit services
Audit of the Company and
intermediate holding entities 0.9 0.5
Audit of HICL’s project subsidiaries
and other audit-related services – –
0.9 0.5
Non-audit services
Interim review of the Company 0.1 0.1
Other non-audit services – 0.1
0.1 0.2
Total 1.0 0.7
Non-audit services in the table above consisted of audit-related
assurance services for the Company’s Interim Report. In total, it
represented 10% (2023: 29%) of total audit fees.
The Audit Committee considers KPMG to be independent of the
Company and that the provision of permitted non-audit services
in line with HICL’s policy is not a threat to the objectivity and
independence of the conduct of the audit. KPMG confirmed their
compliance with their standard independence and objectivity
procedures to the Audit Committee.
HICL Annual Report 2024 Strategic Report Governance Financials
91
Directors’ Remuneration Report
The Remuneration Committee’s report
includes the Directors’ Remuneration Policy,
an explanation of the Committee’s structure
and responsibilities, a report on its activities
in the year ended 31 March 2024 and
relevantrequired reporting on remuneration
and shareholdings.
This report is prepared in accordance with the Listing Rules of the
FCA, the relevant sections of the Companies Act 2006 and the
Large and Medium-sized Companies and Groups (Accounts and
Reports) Regulations 2008, (as amended by the Large and Medium-
sized Companies and Groups (Accounts and Reports) Amendment
Regulations 2013, the Companies (Miscellaneous Reporting)
Regulations 2018 and the Companies (Directors’ Remuneration
Policy and Directors’ Remuneration Report) Regulations 2019).
Those aspects of the report that are required to be audited are
labelled as such.
The Committee met three times during the year. The most notable
activity in the year was the triennial independent review of Directors’
remuneration. In accordance with the Remuneration Policy, the
Committee engaged an independent consultant to support this
work, as explained in more detail in this report. The review highlighted
that the existing fee levels had fallen behind the market levels and
therefore fee increases were proposed for all Board positions,
reflecting the evolution of the Company’s portfolio and the time
commitment and specialisms required from Directors to carry out
their duties.
There have been no changes to the Directors’ Remuneration Policy or
the terms of reference of the Remuneration Committee.
This Directors’ Remuneration Report was adopted by the Board and
signed on its behalf by:
Frances Davies
Remuneration Committee Chair
21 May 2024
Directors’ Remuneration Policy
The Directors’ Remuneration Policy is determined by the
Remuneration Committee. In accordance with the provisions
of the AIC Code of Corporate Governance (the “AIC Code”),
Directors’ remuneration is designed to reflect their duties and time
commitments. Remuneration is set at a reasonable level to attract and
retain Directors of the necessary quality and experience to execute
effective governance and oversight of the Company, to support
strategy and to promote long-term sustainable success. The specific
additional responsibilities of the Chair, Senior Independent Director,
and the Chairs of the various Committees of the Board are taken
into account. The policy aims to be fair and reasonable compared to
equivalent investment trusts, investment companies and other similar-
sized financial companies. The effects of inflation are also considered.
Reasonable travel and associated expenses are reimbursed.
HICL’s Articles of Association limit the aggregate fees payable to
the Board to a total of £700,000 p.a. (or such amount as HICL’s
shareholders, in a general meeting, shall determine from time to
time) excluding reimbursable expenses. Within that limit it is the
responsibility of the Remuneration Committee, as a Committee of the
Board, to determine Directors’ remuneration in conjunction with the
Chair of the Board, and in this case, by the Remuneration Committee
only. Relevant comparative information is considered in forming these
recommendations and the views expressed by shareholders are
taken into consideration. The Remuneration Committee seeks the
views of an independent external remuneration consultant at least
every three years to assist its review of remuneration. This was carried
out in late 2023 and the results duly reflected in the Remuneration
Committee’s recommendations.
Directors’ fees are fixed and are payable in cash. As all Directors
are non-executive, they are not eligible for share options, long-
term incentive schemes or other benefits, performance-related or
otherwise. Directors do not have service contracts and there is no
provision for compensation for loss of office. Each new Director is
provided with a letter of appointment. Additional fees are payable at
the discretion of the Remuneration Committee where Directors are
involved in duties beyond those normally expected, for example, in
relation to the issue of a prospectus.
This policy and the level of Directors’ fees is reviewed annually by the
Remuneration Committee and applies with effect from 1 April of each
year, subject to shareholder approval at the AGM.
Committee structure and responsibilities
The Remuneration Committee is composed of all the Directors
including the Chair of the Company, as he was deemed to be
independent at the time of his appointment. This membership is
deemed appropriate on the basis that all Directors are independent
and have the requisite experience and knowledge of the Company to
appropriately determine remuneration. The membership of all seven
Independent Directors ensures that no single Director has undue
influence on the outcome of their own remuneration. The Committee
operates in accordance with the Directors’ Remuneration Policy and
with Principles P, Q and R of the 2019 AIC Code.
450
0
150
50
100
200
250
300
HICL TSR (LHS) FTSE 250 TSR (LHS)
350
400
4.0
0
1.0
0.5
1.5
2.0
2.5
3.0
3.5
Mar 06 Mar 07 Mar 08 Mar 09 Mar 10 Mar 11 Mar 12 Mar 13 Mar 16 Mar 17Mar 14 Mar 15 Mar 18 Mar 21 Mar 22Mar 19 Mar 20 Mar 24Mar 23
FTSE All share TSR (LHS) Morningstar Investment Trust Infrastructure TSR HICL Beta vs FTSE All-Share (RHS)
Beta
Total Shareholder Return
HICL Annual Report 2024
92
Relevant performance information
In setting the Directors’ remuneration, consideration is given to the
size, complexity and relative performance of the Company. The graph
below highlights the comparative Total Shareholder Return (share
price and dividends) (“TSR”) for an investment in the Company
1
for
the 17-year period from inception until 31 March 2024 compared with
an investment in the FTSE All Share, FTSE 250 and the Morningstar
Investment Trust Infrastructure indices over the same period.
During that period the TSR was 6.7% p.a. compared with the FTSE
All share index return of 5.7% p.a., the FTSE 250 return of 6.9% p.a.
and the Morningstar Investment Trust Infrastructure index which
returned 3.5% p.a.
The table below is provided to enable shareholders to assess
the relative importance of Directors’ remuneration. It compares
remuneration against dividends paid and share buybacks of the
Company in the year ended 31 March 2024.
Actual expenditure 31 March 2024 31 March 2023
Aggregate Directors’ remuneration £520,645 £528,831
Aggregate dividends paid to
shareholders
2
£167,597,765 £165,638,002
Aggregate cost of Ordinary
Shares repurchased
£0 £0
Review of remuneration
The Remuneration Committee commenced its triennial independent
review of Board remuneration in the second half of 2023 with the
objective of ensuring that Board remuneration reflects the evolution
of the Company and its market and is set at an appropriate level
to attract and retain high-calibre Directors. To support the review,
the Remuneration Committee commissioned FIT Remuneration
Consultants (“FIT”), an independent professional remuneration
consultant with highly relevant experience in non-executive fee
structures. Fees of £10,000 (plus VAT) were paid to FIT for this
work which included market research, Director questionnaires
and interviews.
The report from FIT, which contained recommendations for the
financial year to 31 March 2025, was considered by the Committee
in February 2024. An increase in remuneration was proposed by
FIT for all roles, with consideration given to inflation, relevant market
comparables, the experience and specialisms required by Directors
and the upward trend in the dedicated time commitment required
from the Board, in line with the evolution of the Company and its
operating environment since the previous reviews conducted in 2020
and 2021.
In the Committee’s review of the FIT report, it elected to reduce
the observed gap in proposed remuneration between the Audit
and Risk Chairs, reflecting the substance of each role in the HICL-
specific context. The adjustments in fee ascribed to each role was
subsequently confirmed by FIT as resulting in levels better aligned
with the market.
The proposed remuneration, analysed by role, for the year ending
31 March 2025 is set out in the table on the following page, together
with comparatives.
Directors’ Remuneration Report continued
1 Including its predecessor, HICL Infrastructure Company Limited, from inception in March 2006 until March 2019
2 Dividends paid in the year rounded to £167.6m for the purposes of the financial statements (2023: £165.5m)
HICL Annual Report 2024 Strategic Report Governance Financials
93
1 The fees approved/proposed relate to the roles performed and not to individuals per se
2 Approved at the AGM on 19 July 2023
3 The total proposed fee presented is based on the full year remuneration for seven Directors (2024: seven Directors) and does not include pro-rata allocations which have not yet been confirmed
4 Frank Nelson stepped down from the HICL Board in July 2023, following the Company’s AGM and received pro-rata remuneration for the period served within the financial year to 31 March 2024.
Kenneth Reid received additional pro-rata remuneration for the period served as Senior Independent Director within the financial year to 31 March 2024 after Frank Nelson retired
Role
1
Total fees
proposed
(Year ended 31
March 2025)
Fees approved
(Year ended 31
March 2024)
2
Chair £119,000 £110,000
Senior Independent Director £84,000 £74,000
Audit Committee Chair £84,000 £73,000
Risk Committee Chair £82,000 £70,500
Director £67,500 £58,500
Luxembourg representative £9,000 £8,000
Total
3
£580,500 £511,000
Statement of implementation of Remuneration Policy in the current financial year
The Board have adopted the proposals for Directors’ remuneration as recommended by the Remuneration Committee and will seek
shareholder approval for the Directors’ Remuneration Policy and this report including the proposed remuneration at the AGM on 17 July 2024.
The total fees paid to Directors in the year were within the annual fee cap of £700,000, contained in the Remuneration Policy approved by
shareholders at the AGM on 19 July 2023.
Directors’ remuneration – audited
Total remuneration paid/due in year
Year ended
31 March 2024
Year ended
31 March 2023
M Bane*^ £118,000 £97,435
I Russell^ – £31,957
F Nelson^ £22,320 £70,500
K Reid^ £69,325 £55,500
R Akushie £73,000 £65,239
L Barber^ £58,500 £32,274
F Davies £58,500 £55,500
S Farnon^ – £21,152
S Holden £70,500 £67,000
M Pugh^ £58,500 £32,274
Total
4
£528,646 £528,831
Figures rounded to nearest £
*The Chair was the highest paid Director, includes £8,000 in respect of Luxembourg subsidiary
^ Remuneration pro-rated for the year
HICL Annual Report 2024
94
Statement of Directors’ shareholdings – audited
The Directors of the Company on 31 March 2024, and their interests in the shares of the Company, are shown in the table below:
Number of Ordinary Shares 31 March 2024 31 March 2023
M Bane 94,602 14,394
K Reid 29,011 11,991
R Akushie 16,500 6,500
L Barber 29,662 15,000
F Davies 25,000 15,000
S Holden 27,694 27,694
M Pugh 22,000 14,000
Total 244,603 104,579
*F Nelson stood down as a Director during the year and therefore his holdings are no longer reported
All of the holdings of the Directors and their families are beneficial. No changes to these holdings had been notified up to the date of this report.
Statement of shareholder voting
At the last AGM held on 19 July 2023, the resolutions relating to the Directors’ Remuneration Report for the year ended 31 March 2023 and the
Directors’ remuneration.
The percentage of votes cast was 67%. The results of the votes on resolutions relating to remuneration are summarised in the table below:
In Favour Discretion Against Withheld
Resolution Votes % age Votes % age Votes % age Votes % age
8 Remuneration Report 1,281,641,004 99.95 58,535 0.01 515,903 0.04% 201,160 0.02
9 Remuneration Policy 1,275,625,294 99.48 58,535 0.01 6,523,713 0.51% 209,060 0.02
Directors’ Remuneration Report continued
HICL Annual Report 2024 Strategic Report Governance Financials
95
Report of the Directors
The Directors present their Annual Report on
the affairs of HICL, together with the financial
statements and auditor’s report, for the year to
31 March 2024. The Corporate Governance
Statement forms part of this report.
Details of significant events since the balance sheet date are
contained in Note 20 to the financial statements.
An indication of likely future developments in the business of HICL
and details of research and development activities are included in the
Strategic Report.
Information about the use of financial instruments by HICL and its
subsidiaries is given in Note 14 to the financial statements.
Principal activity
HICL is a registered investment company under section 833 of the
Companies Act 2006, incorporated in the UK. Its shares have a
premium listing on the Official List of the UK Listing Authority and
trade on the main market of the London Stock Exchange.
Investment Trust status
The Company has been approved as an Investment Trust Company
(“ITC”) under sections 1158 and 1159 of the Corporation Taxes Act
2010. The Company had to meet relevant eligibility conditions to
obtain approval as an ITC, and must adhere to ongoing requirements
to maintain its ITC status including, but not limited to, retaining no
more than 15% of its annual income. The Company has conducted its
affairs to ensure it complies with these requirements.
Results
HICL’s results for the year are summarised in the Financial Review on
page 40 and are set out in detail in the financial statements.
Distributions and share capital
HICL declared four quarterly interim distributions, totalling 8.25p per
share, for the year ended 31 March 2024 as follows:
Amount Declared Record date Paid/to be paid
2.06p 19/07/2023 25/08/2023 30/09/2023
2.06p 15/11/2024 24/11/2023 29/12/2023
2.06p 21/02/2024 01/03 2024 28/03/2024
The fourth quarterly interim distribution, of 2.07p per share, for the
year ended 31 March 2024 was declared by HICL on 15 May 2024,
and is due to be paid on 28 June 2024.
HICL has one class of share capital, Ordinary Shares, of which there
were 2,031,488,061 in issue as at 1 April 2023. This number remained
unchanged in the year.
Shareholders may reinvest their dividends via a Dividend
Reinvestment Plan (“DRIP”), the details of which can obtained by
emailing shares@linkgroup.co.uk.
Dividend history
Interim dividend
Year ended
31 March 2024
Year ended
31 March 2023
Year ended
31 March 2022
Year ended
31 March 2021
Year ended
31 March 2020
3-month period ending 30 June 2.06 2.06 2.06 2.06 2.06
3-month period ending 30 September 2.06 2.06 2.06 2.06 2.06
3-month period ending 31 December 2.06 2.06 2.06 2.06 2.06
3-month period ending 31 March 2.07 2.07 2.07 2.07 2.07
Paid/declared 8.25p 8.25p 8.25p 8.25p 8.25p
Directors
The Directors who held office during the year to 31 March 2024 were:
Director Role(s) Years of service*
Mr M Bane* Chair of the Board and Nomination Committee 5 years 9 months
Mr F Nelson* /** Senior Independent Director until 20 July 23 9 years 10 months
Ms R Akushie Chair of the Audit Committee 4 years 3 months
Mr S Holden* Chair of the Risk Committee 7 years 9 months
Ms F Davies Chair of the Remuneration Committee 5 years 0 months
Mr K Reid* Senior Independent Director 7 years 7 months
Ms E Barber 1 year and 7 months
Mr M Pugh 1 year and 7months
* Assuming a continuation of the years of service as a Director of HICL Infrastructure Company Limited
** Retired 20 July 2023. The Director was considered to remain independent throughout his term served. Service was greater than nine years to facilitate handover to his successor as Senior
Independent Director, prior to retirement
HICL Annual Report 2024
96
Report of the Directors continued
Corporate governance
The Corporate Governance Statement on page 77 outlines the
code of corporate governance against which HICL reports and its
compliance, or otherwise, with the individual principles. It includes
detail on the various Committees of the Board, their composition
andtheir terms of reference.
Annual General Meeting (“AGM”)
HICL’s AGM is held in July each year. The forthcoming meeting is
scheduled for 17 July 2024.
Investment Manager and Operator
InfraRed Capital Partners Limited (the “Investment Manager”
or “InfraRed”) acts as Investment Manager to HICL and acts as
Operator of the limited partnership which holds and manages
HICL’s investments. A summary of the contract between HICL, its
subsidiaries and InfraRed in respect of services provided is set out in
Note 18 to the financial statements.
Further information on the Investment Manager, including fee
arrangements with HICL can be found in the Investment Manager
section on page 76.
The Investment Management Agreement was entered into in March
2019 and was reviewed and approved by the Board in connection
with the change in domicile of HICL from Guernsey to the United
Kingdom and shareholders had an opportunity to vote on the
Investment Management Agreement as part of those proposals.
The Board assesses InfraRed’s performance as Investment Manager
annually through the Management Engagement Committee. For more
information, see the Corporate Governance Statement on page 77.
The Directors are of the opinion that the continued appointment of
InfraRed as HICL’s Investment Manager is in the best interests of
theshareholders of HICL.
AIFMD disclosures
In accordance with the Alternative Investment Fund Managers Directive:
– information in relation to HICL’s leverage can be found in the
Strategic Report;
– remuneration of InfraRed as HICL’s AIFM can be found below in
AIFM Remuneration;
– a summary of the activities of HICL can be found in the Investment
Manager’s Report starting on page 20;
– a full list of the risks facing HICL can be found in HICL’s March 2019
Prospectus, available from the Company’s website (see also the
Risk Committee Report on page 83); and
– none of HICL’s assets are subject to special arrangements arising
from their illiquid nature.
AIFM remuneration
The AIFMD Remuneration Code requires InfraRed in its capacity as
AIFM of HICL, to make relevant remuneration disclosures available
to investors.
InfraRed assesses its list of AIFMD Code Staff. AIFMD Code Staff are
notified of their status and the associated implications.
InfraRed has established a remuneration policy. A summary of
InfraRed’s remuneration policy is contained in the Annual Report
and accounts of InfraRed Partners LLP, which are available from
Companies House.
The aggregate total remuneration paid by the InfraRed Group for the
year ended 31 March 2024 was £43,053,674.
This was divided into fixed remuneration of £21,666,799 attributable
to 176 beneficiaries and variable remuneration of £21,386,875
attributable to 153 beneficiaries. The aggregate total remuneration
paid by the Group which contains InfraRed to AIFMD Code Staff in
the year was £9,604,037 and the number of senior management and
risk takers was 18.
The Investment Manager fees charged to the Company were £0.1m
(disclosed as Investment Manager fees in Note 18), of which the full
balance remained payable at 31 March 2024. InfraRed is also the
Operator of IILP, the Corporate Subsidiary through which HICL holds
its investments. The total Operator fees were £33.8m, of which £8.1m
remained payable at 31 March 2024.
Brokers, Administrator
andCompanySecretary
HICL’s joint corporate brokers at 31 March 2024 are Investec Bank plc
and RBC Capital Markets.
The Administrator and Company Secretary is Aztec Financial
Services (UK) Limited.
Disclosure of information to auditor
The Directors who held office at the date of approval of this Directors’
Report confirm that, so far as they are each aware, there is no
relevant audit information of which HICL’s auditor is unaware; and
each Director has taken all the steps that he or she ought to have
taken as a Director to make him or herself aware of any relevant
audit information and to establish that HICL’s auditor is aware of
that information.
Other information
An indication of likely future developments in the business and
particulars of significant events which have occurred since the end of
the financial year have been included in the Strategic Report.
The Strategic Report includes information required by the Companies
Act 2006 (Strategic Report and Directors’ Report) Regulations 2008.
Auditor
In accordance with Section 489 of the Companies Act 2006, a
resolution for the reappointment of KPMG LLP as auditor of HICL is to
be proposed at the forthcoming Annual General Meeting.
HICL Annual Report 2024 Strategic Report Governance Financials
97
Substantial interests in share capital
As at 31 March 2024, HICL is aware of or has received notification
in accordance with the Financial Conduct Authority’s Disclosure
Guidance and Transparency Rule 5 of the following interests in 3% or
more of HICL’s shares to which voting rights are attached (at the date
of notification):
Number of
shares held
Percentage
held
Brewin Dolphin Limited 168,510,482 8.29%
Rathbones Investment Management 149,006,243 7.33%
Investec Wealth & Investment Limited 123,534,058 6.08%
M&G Investments 70,104,100 3.45%
Hargreaves Lansdown 64,590,078 3.18%
Payment of suppliers
It is the policy of HICL to settle all investment transactions in
accordance with the terms and conditions of the relevant market in
which it operates. HICL continues to meet the criteria to qualify for
Payment Practice Reporting. This requires HICL Infrastructure PLC
to report on its payment policies and specific data on payments and
suppliers that demonstrate achieved performance every six months.
For the purpose of this reporting HICL Infrastructure PLC is required
to state a standard payment term. As HICL Infrastructure PLC does
not have standard payment terms defined, the standard payment
period in line with government guidance is the contractual payment
period most commonly used in the period; this has been deemed to
be 30 days.
Greenhouse gas emissions (GHG) reporting
See page 69 – Metrics and targets.
Political contributions
HICL made no political donations during the year (2023: none).
Going concern
The Company’s business activities, together with the factors likely
to affect its future development, performance and position are set
out in HICL’s Business Model on page 14. The financial position of
the Group, its cash flow and liquidity position are described in the
Investment Manager’s Report on page 20 and the Financial Review
on page 40. In addition, the Notes of the financial statements include:
the Company’s objectives, policies and processes for managing its
capital; its financial risk management objectives; details of its financial
instruments and hedging activities; and its exposures to credit risk
and liquidity risk.
The Directors have assessed going concern by considering areas of
financial risk, the Group’s access to credit facilities and by reviewing
cash flow forecasts with a number of stress scenarios. They also
considered the Group’s considerable financial resources, including
investments in a significant number of project assets and access to
credit facilities (details of which are set out in the Financial Review on
page 40 and Note 15 to the financial statements).
The majority of these project assets operate long-term contracts
with various public sector customers and suppliers across a range
of infrastructure projects. The financing for these projects is non-
recourse to the Company.
Based on this analysis, the Directors have concluded that the
Company has adequate resources to continue in operational
existence for the foreseeable future, a period of at least 12 months
from the date of approving these financial statements. Thus,
they consider it appropriate to adopt the going concern basis of
accounting in preparing the annual financial statements.
Share repurchases
No shares have been bought back in the year. The latest authority
to purchase shares for cancellation was granted to the Directors on
19 July 2023.
Sustainability
The Board is committed to sustainability leadership in the sector.
To minimise the environmental impact of HICL’s corporate affairs, all
reporting to the Board and its various Committees is paperless.
In addition, the Investment Manager has offset all emissions
associated with Directors’ travel with an accredited scheme and will
continue to do so going forward. For more information, see pages 36
and 37 for the Sustainability Highlights.
Treasury shares
Section 724 of the UK 2006 Companies Act allows companies
to hold shares acquired by market purchase as treasury shares,
rather than having to cancel them. Issued shares may be held in
treasury and may be subsequently cancelled or sold for cash in the
market. This gives HICL the ability to reissue shares quickly and
cost efficiently, thereby improving liquidity and providing HICL with
additional flexibility in the management of its capital base.
While there are currently no shares held in treasury, the Board would
only authorise the resale of such shares from treasury at prices at
or above the prevailing Net Asset Value per share (plus costs of the
relevant sale). If such a measure were to be implemented, this would
result in a positive overall effect on HICL’s Net Asset Value. In the
interests of all shareholders the Board will keep the matter of treasury
shares under review.
HICL Annual Report 2024
98
The Directors are responsible for preparing the Annual Report
and the financial statements in accordance with applicable law
and regulations.
Company law requires the Directors to prepare financial statements
for each financial year. Under that law they have elected to prepare
the financial statements in accordance with UK-adopted international
accounting standards and applicable law.
Under company law the Directors must not approve the financial
statements unless they are satisfied that they give a true and fair view
of the state of affairs of the Company and of its profit or loss for that
period. In preparing these financial statements, the Directors are
required to:
– select suitable accounting policies and then apply
them consistently;
– make judgements and estimates that are reasonable, relevant
and reliable;
– state whether they have been prepared in accordance with UK-
adopted international accounting standards;
– assess the Company’s ability to continue as a going concern,
disclosing, as applicable, matters related to going concern; and
– use the going concern basis of accounting unless they either
intend to liquidate the Company or to cease operations, or have
norealistic alternative but to do so.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company’s
transactions and disclose with reasonable accuracy at any time the
financial position of the Company and enable them to ensure that its
financial statements comply with the Companies Act 2006. They are
responsible for such internal control as they determine is necessary
to enable the preparation of financial statements that are free from
material misstatement, whether due to fraud or error, and have
general responsibility for taking such steps as are reasonably open
to them to safeguard the assets of the Company and to prevent and
detect fraud and other irregularities.
Under applicable law and regulations, the Directors are also
responsible for preparing a Strategic Report, Directors’ Report,
Directors’ Remuneration Report and Corporate Governance
Statement that complies with that law and those regulations.
The Directors are responsible for the maintenance and integrity
ofthe corporate and financial information included on the
Company’swebsite. Legislation in the UK governing the preparation
and dissemination of financial statements may differ from legislation
inother jurisdictions.
Responsibility statement of the Directors in
respect of the annual financial report
We confirm that to the best of our knowledge:
– the financial statements, prepared in accordance with the
applicable set of accounting standards, give a true and fair view
of the assets, liabilities, financial position and profit or loss of the
Company; and
– the Strategic Report/Directors’ Report includes a fair review of the
development and performance of the business and the position
of the issuer, together with a description of the principal risks and
uncertainties that they face.
We consider the Annual Report and accounts, taken as a whole,
is fair, balanced and understandable and provides the information
necessary for shareholders to assess the Company’s position and
performance, business model and strategy.
By order of the Board authorised signatory:
Aztec Financial Services (UK) Limited
Company Secretary
21 May 2024
Registered Office:
Aztec Financial Services (UK) Limited:
Forum 4, Solent Business Park, Parkway South,
Whiteley, Fareham PO15 7AD
Statement of Directors’ Responsibilities
in respect of the Annual Report and the financial statements
Design tbc
99
HICL Annual Report 2024
Financials
GovernanceStrategic Report
Financials
KPMG LLP’s Independent
Auditor’s Report 100
Income statement 112
Statement of financial position 113
Statement of changes in
shareholders’ equity 114
Cash flow statement 115
Notes to the financial statements 116
Appendix 1: SFDR Disclosures 148
Appendix 2: Valuation Policy 160
Appendix 3: Infrastructure
Market – Sources 161
Glossary 162
Directors and Advisers 164
WHAT’S IN THIS SECTION
HICL Annual Report 2024
100
KPMG LLP’s Independent Auditor’s Report
To the members of HICL Infrastructure plc
1. Our opinion is unmodified
In our opinion, the financial statements of HICL Infrastructure plc (‘the Company’):
– give a true and fair view of the state of the Company’s affairs as at 31 March 2024, and of its profit for the year then ended;
– have been properly prepared in accordance with UK-adopted international accounting standards; and
– have been prepared in accordance with the requirements of the Companies Act 2006.
What our opinion covers
We have audited the financial statements of HICL infrastructure plc for the year ended 31 March 2024 (FY24) included in the Annual Report,
which comprise the Income Statement, Statement of Financial Position, Statement of Changes in Shareholders’ Equity, Cash Flow Statement
and the related Notes, including the accounting policies in note 2.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilities are
described below. We believe that the audit evidence we have obtained is a sufficient and appropriate basis for our opinion. Our audit opinion
and matters included in this report are consistent with those discussed and included in our reporting to the Audit Committee (“AC”).
We have fulfilled our ethical responsibilities under, and we remain independent of the Company in accordance with, UK ethical requirements
including the FRC Ethical Standard as applied to listed public interest entities.
2. Overview of our audit
Factors driving
ourview of risks
We considered the developments affecting the Company
since the last audit for the year ended 31 March 2023 and
have updated our risk assessment.
Geopolitical tension and global macroeconomic volatility
continue to be the dominant themes for the year ended
31 March 2024.
During the year, the infrastructure investment industry
continues to experience challenges, primarily driven by
the persistent high interest rate environment and low
investor confidence during a period of geopolitical and
macroeconomic uncertainty.
This means the level of judgement required to be exercised
by the Company in the valuation of investments in the
investment entity subsidiary, which is primarily driven by
the valuation of the underlying infrastructure, PFI and PPP
projects, continued to be a focus area.
As part of our risk assessment, we have maintained
our focus on the valuation of the investments in the
investment entity subsidiary. This has included specific
focus on the discount rate used in the valuation models,
macroeconomic assumptions (such as inflation, GDP
growth and interest rates), and project specific cash flow
forecasts and adjustments made by the Company.
Key Audit Matter Vs FY23 Item
Valuation of Investments
in Investment
Entity subsidiary
4.1
Audit committee
interaction
During the year, the AC met 9 times. KPMG are invited to attend all AC meetings
and are provided with an opportunity
to meet with the AC in private sessions. For the Key Audit Matter, we have set out communications with the AC in
section 4, including matters that required particular judgement.
The matters included in the Audit Committee Chair’s report on page 85 are materially consistent with our observations
of those meetings.
HICL Annual Report 2024 Strategic Report Governance Financials
101
Our independence We have fulfilled our ethical responsibilities and we
remain independent of the Company in accordance
with UK ethical requirements including the FRC Ethical
Standard as applied to listed public interest entities.
We have not performed any non-audit services during
FY24 or subsequently which are prohibited by the FRC
Ethical Standard.
We were first appointed as auditor by the directors
for the period ended 31 March 2019. The period
of total uninterrupted engagement, including HICL
Infrastructure Company Limited (the previous Guernsey
listed entity) is for the eighteen financial years ended
31 March 2024.
The engagement partner is required to rotate every 5
years. As these are the second set of the Company’s
financial statements signed by Fang Fang Zhou, she
willbe required to rotate off after the FY27 audit.
Total audit fee £0.9m
Audit related fees
(including interim review)
£0.1m
Other services £0.3m
Non-audit fee as a %
of total audit and audit
related fee %
30%
Date first appointed 26 February 2019
Uninterrupted audit tenure 6 years
Next financial period
which requires a tender
2026
Tenure of engagement
partner
2 years
Materiality
(item 6 below)
The scope of our work is influenced by our
view of materiality and our assessed risk of
material misstatement.
We have determined overall materiality for the financial
statements as a whole at £32.1m (FY23: £33.5m).
Consistent with FY23, we determined that total
assets remains the benchmark for the Company as
this is directly driven by the valuation of Investment in
Investment Entity subsidiary which ultimately is most
influential to the users of the financial statements.
As such, we based our Group materiality on total
assets,of which it represents 1% (FY23: 1%).
Materiality levels used in our audit
Materiality
PM
AMPT
£32.1m
£33.5m
£25m
£24m
2023
2024
2023
2024
2023
2024
£1.6m
£1.6m
Materiality: Company Materiality
PM: Performance Materiality
AMPT: Audit Misstatement Posting Threshold
The impact of
climate change
onour audit
Climate change is an area of increased focus for investors and stakeholders. HICL, as an Investment Trust is impacted
by climate change to the extent that shareholders are interested in how climate change and associated risks affect
investment decisions and investment valuations.
We have considered the potential impacts of climate change on the financial statements as part of planning our audit.
This included the impacts on the infrastructure, PPP and PFI projects held indirectly by the Company through its
investment entity subsidiaries.
As a part of our audit, we have made enquiries of management to understand the extent of the potential impact of
climate change risk on the Company’s financial statements. We also performed a risk assessment of how the impact
of climate change may affect the financial statements and our audit, in particular over the valuation of Investment in
Investment Entity subsidiary. We considered the impact of climate change on the performance of investee companies
with particular focus on the reasonableness of the free cash flow forecast. Taking into account the nature of the
Company’s underlying investments in infrastructure, PPP and PFI projects, our assessment is that the climate related
risks to the Company’s business strategy and financial planning did not have a significant impact on our audit,
includingour key audit matter.
We have also read the disclosure of climate related information in the front half of the annual report as set out on
pages65-70 and considered consistency with the financial statements and our audit knowledge.
HICL Annual Report 2024
102
KPMG LLP’s Independent Auditor’s Report continued
To the members of HICL Infrastructure plc
3. Going concern, viability and principal risks and uncertainties
The directors have prepared the financial statements on the going concern basis as they do not intend to liquidate the Company or to cease
their operations, and as they have concluded that the Company’s financial position means that this is realistic. They have also concluded that
there are no material uncertainties that could have cast significant doubt over their ability to continue as a going concern for at least a year from
the date of approval of the financial statements (“the going concern period”).
Going concern
We used our knowledge of the Company, its industry, and the
general economic environment to identify the inherent risks to its
business model and analysed how those risks might affect the
Company’s financial resources or ability to continue operations over
the going concern period. The risks that we considered most likely to
adversely affect the available financial resources over this period are;
– Operational or performance issues within the portfolio which
increases the number of infrastructure, PPP and PFI investments
not distributing and its impact on the Company’s distribution
income and cash flows; and
– Continued geopolitical tension and macroeconomic downturns
contributing to a prolonged high interest rate and low investor
confidence environment leading to a need to provide further
liquidity support to underlying infrastructure, PPP and
PFI investments
We considered whether these risks could plausibly affect the liquidity
of the Company in the going concern period by comparing severe,
but plausible downside scenarios that could arise from these risks
individually and collectively against the level of available financial
resources included in the Company’s financial forecasts.
Our procedures also included an assessment of whether the going
concern disclosure in note 2 of the financial statements gives a
complete and accurate description of the Directors’ assessment of
going concern.
Accordingly, based on those procedures, we found the directors’ use of
the going concern basis of accounting without any material uncertainty
for the Company to be acceptable. However, as we cannot predict all
future events or conditions and as subsequent events may result in
outcomes that are inconsistent with judgements that were reasonable
at the time they were made, the above conclusions are not a guarantee
that the Company will continue in operation.
Our conclusions
– We consider that the directors’ use of the going concern basis
of accounting in the preparation of the financial statements
is appropriate.
– We have not identified, and concur with the directors’ assessment
that there is not, a material uncertainty related to events or conditions
that, individually or collectively, may cast significant doubt on the
Company’s ability to continue as a going concern for the going
concern period;
– We have nothing material to add or draw attention to in relation to
the directors’ statement in note 2 to the financial statements on
the use of the going concern basis of accounting with no material
uncertainties that may cast significant doubt over the Company’s use
of that basis for the going concern period, and we found the going
concern disclosure in note 2 to be acceptable; and
– The related statement under the Listing Rules set out on page
97 is materially consistent with the financial statements and our
audit knowledge.
HICL Annual Report 2024 Strategic Report Governance Financials
103
Disclosures of emerging and principal risks and longer-term viability
Our responsibility
between the directors’ disclosures in respect of emerging and
principal risks and the viability statement, and the financial statements
and our audit knowledge.
Based on those procedures, we have nothing material to add or draw
attention to in relation to:
– the directors’ confirmation on page 53 that they have carried out a
robust assessment of the emerging and principal risks facing the
Company, including those that would threaten its business model,
future performance, solvency and liquidity.
– the Emerging and Principal Risks disclosures describing these
risks and how emerging risks are identified and explaining how
they are being managed and mitigated; and
– the directors’ explanation in the viability statement of how they
have assessed the prospects of the Company, over what period
they have done so and why they considered that period to be
appropriate, and their statement as to whether they have a
reasonable expectation that the Company will be able to continue
in operation and meet its liabilities as they fall due over the period
of their assessment, including any related disclosures drawing
attention to any necessary qualifications or assumptions.
We are also required to review the viability statement set out on
page62 under the Listing Rules.
Our work is limited to assessing these matters in the context of only
the knowledge acquired during our financial statements audit. As we
cannot predict all future events or conditions and as subsequent
events may result in outcomes that are inconsistent with judgements
that were reasonable at the time they were made, the absence of
anything to report on these statements is not a guarantee as to the
Company’s longer-term viability.
Our reporting
We have nothing material to add or draw attention to in relation to
these disclosures.
We have concluded that these disclosures are materially consistent
withthe financial statements and our audit knowledge.
4. Key audit matter
What we mean
Key audit matters are those matters that, in our professional judgement, were of most significance in the audit of the financial statements and
include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by us, including those which had the
greatest effect on:
– the overall audit strategy.
– the allocation of resources in the audit; and
– directing the efforts of the engagement team.
We include below the Key Audit Matter (unchanged from FY23) together with our key audit procedures to address this matter and our results
from those procedures. This matter was addressed, and our results are based on procedures undertaken, for the purpose of our audit of the
financial statements as a whole. We do not provide a separate opinion on this matter.
HICL Annual Report 2024
104
4.1 Valuation of investments held at fair value through profit and loss
Financial Statement Elements
Our assessment of risk vs FY23 Our results
FY24 FY23
Investments
in Investment
Entity subsidiary
£3,212.5m £3,349.7m
Our assessment is the risk
issimilar to FY23
FY24: Acceptable
FY23: Acceptable
Description of the Key Audit Matter
Subjective valuation
The Company’s investments in the investment entity subsidiary
are measured at fair value and represent a significant proportion of
the Company’s net assets. The fair value of the investment entity
subsidiary reflects its net asset value and is determined primarily
based on the valuation of the underlying infrastructure, PPP and
PFI projects.
The fair value is determined using the income approach whereby the
long term forecasted cash flows of individual assets are discounted,
with their cashflows and/ or discount rate adjusted to reflect risk
profile associated with these investments. In addition, inherent
to these long term forecasted cash flows are macro-economic
assumptions such as inflation, foreign exchange rates, tax rates,
deposit rates and, for certain demand-based investments, Gross
Domestic Product (GDP). The financial statements (note 14) disclose
the sensitivity estimated by the Company.
For the purposes of our audit, we have assessed the risk of
misstatement of the valuation related to these assumptions and
data points.
Discount rate
The discount rate is highly subjective and has a significant degree of
estimation uncertainty with a potential range of reasonable outcomes
(valuations) greater than our materiality for the financial statements as
a whole, and possibly many times that amount.
Other assumptions and data points
We considered that there is a lower level of audit risk associated with
other assumptions and data points as these are less judgemental
and, in some cases, are more readily comparable to third party data
sources. However, due to the relevance of these assumptions to the
overall valuation, we nonetheless consider these areas to also have
had the greatest effect on the overall audit strategy and planning of
the audit. Those assumptions and data points are:
– Inflation
– GDP growth rates
– Deposit rates
– Project revenue and expenses
– Management overlay adjustments to cash flow
Our response to the risk
Control design
We obtained an understanding of the Company’s processes to
determine the fair value of investments. We documented and assessed
the design and implementation of the investment valuation processes
and controls.
We performed the tests below rather than seeking to rely on any of the
Company’s controls because the nature of the balance is such that we
would expect to obtain audit evidence primarily through the detailed
procedures described.
Our procedures included:
Our valuations expertise
We challenged the Company on the assumptions inherent in the
valuation of infrastructure, PPP and PFI projects by using our own
valuations specialists to assess whether those assumptions are within
a reasonable range independently developed by them based on
market data.
Test of detail
We reperformed the discounted cash flow calculation using the
Company’s inputs and assumptions. We constructed our own
discounted cash flow models for each underlying asset tested and
compared the results with the Company’s valuation.
Assessing valuer’s credentials
We assessed the objectivity, capabilities and competence of the third
party valuation expert engaged by the Company to challenge the
reasonableness of the Company’s investment valuations.
We considered the methodology applied by the valuation expert
in performing their work. We obtained and assessed the valuation
expert’s findings, held discussions with them and considered the
impact, if any, on our audit work.
Assessing transparency
We considered the appropriateness, in accordance with relevant
accounting standards, of the disclosures in respect of investments in
the investment entity subsidiary and the effect of changing one or more
inputs to reasonably possible alternative valuation assumptions.
In addition, in respect of the other data points, our procedures included:
Test of detail
For a selection of investments, we agreed key revenue inputs and
relevant overlay adjustments to the forecasted cash flows to external
sources, such as third party contracts and invoices. Material expenses
and relevant overlay adjustments were agreed to the supplier invoices
received and where possible to underlying agreements for leases and
firm/finance maintenance contracts.
We obtained the audited financial statements (where available) of the
portfolio companies. We compared historic cashflow projections to
the audited financial information in order to evaluate the accuracy
of forecasts. Additionally, we used this information to assess the
reasonableness of the cashflow projection for the next financial period.
We inspected the financial statements for any material uncertainty on
going concern for the portfolio companies. Where identified, we held
discussions with management to understand the circumstances and
assess any impact on the valuation
KPMG LLP’s Independent Auditor’s Report continued
To the members of HICL Infrastructure plc
HICL Annual Report 2024 Strategic Report Governance Financials
105
Communications with HICL Infrastructure plc’s Audit Committee
Our discussions with and reporting to the Audit Committee included:
– Our approach to the audit of the fair value of the investment in investment entity subsidiary including details of our planned substantive
procedures and details of our assessment of the design and implementation of the controls relevant to the key audit matter.
– Our conclusions on the appropriateness of the Company’s fair value methodology.
– Our conclusions on the appropriateness of the valuation of the investments in investment entity subsidiary and, for investments subject
tospecialist review, an indication of where the Company’s valuation point lay within our reasonable range.
– The adequacy of the disclosures, particularly as it relates to the sensitivity of the valuation inputs.
Areas of particular auditor judgement
We identified the following as the areas of particular auditor judgement:
– The identification of the discount rate as being the assumption over which there is the highest degree of subjectivity, and our assessment
ofthe reasonableness of the discount rates used by the directors in the valuation
Our results
Based on the risk identified and our procedures performed, we consider the valuation of the investments in investment entity subsidiaries
tobe acceptable (FY2023: acceptable).
Further information in the Annual Report and Accounts: See the Audit Committee Report on pages 86-88 for details on how the Audit
Committee considered the valuation of the investments in investment entity subsidiaries as an area of significant attention, pages 116-118
forthe accounting policy on Key Audit Matter Area, and pages 122-124/notes 12 and 14 for the financial disclosures.
HICL Annual Report 2024
106
5. Our ability to detect irregularities, and our response
Fraud – identifying and responding to risks of material misstatement due to fraud
Fraud risk
assessment
To identify risks of material misstatement due to fraud (“fraud risks”) we assessed events or conditions that
could indicate an incentive or pressure to commit fraud or provide an opportunity to commit fraud. Our risk
assessment procedures included:
– enquiring of the Investment Manager, the Directors and the Audit Committee, as to the Company’s high-level
policies and procedures to prevent and detect fraud, including the Investment Manager’s policy and channel
for “whistleblowing”, as well as whether they have knowledge of any actual, suspected or alleged fraud.
– reading Board and Audit Committee minutes.
– considering the investment manager’s fee arrangement and how closely it is linked to the valuation
oftheCompany’s Investments in Investment Entity subsidiary.
– Discussions among the engagement team regarding how and where fraud might occur in the financial
statements and any potential indicators of fraud. The engagement team includes audit partners and staff
who have extensive experience of working with companies in the same sectors as the Company operates,
and this experience was relevant to the discussion about where fraud risks may arise.
Risk
communications
We communicated identified fraud risks throughout the audit team and remained alert to any indications
offraud throughout the audit.
Fraud risks
As required by auditing standards, and taking into account possible pressures to meet performance targets,
we perform procedures to address the risk of management override of controls, in particular the risk that the
Company may be in a position to make inappropriate accounting entries and the risk of bias in accounting
estimates and judgements.
On this audit we do not believe there is a fraud risk related to revenue recognition because of the simplistic
nature of income, which principally comprises dividend income. The simple nature and low volume of individual
revenue transactions means there is a remote risk of material misstatement from fraudulent manipulation; and
opportunities for a material misstatement due to fraudulent revenue recognition are limited due to the nature
ofthe dividend income received.
We did not identify any additional fraud risks.
Procedures to
address fraud risks
Our audit procedures included evaluating the design and implementation of controls over journal entries and
other adjustments and inquiring the Investment Manager about any inappropriate or unusual activity relating
tothe processes of journal entries and other adjustments.
We substantively tested all material post-closing journal entries by comparing the identified journal entries
tosupporting documentation. Based on the results of our risk assessment procedures and understanding
ofthe process, no further high-risk journal entries or other adjustments were identified.
We also assessed the accounting estimate related to the valuation of investments in investment entity
subsidiary for any indicator of management bias.
Laws and regulations – identifying and responding to risks of material misstatement
relating to compliance with laws and regulations
Laws and regulations
risk assessment
We identified areas of laws and regulations that could reasonably be expected to have a material effect on the
financial statements from our general commercial and sector experience, through discussion with the directors
and Investment Manager (as required by auditing standards), and discussed with the directors and Investment
Manager the policies and procedures regarding compliance with laws and regulations.
As the Company is regulated, our assessment of risks involved gaining an understanding of the control
environment including the entity’s procedures for complying with regulatory requirements.
Risk communications
We communicated identified laws and regulations throughout our team and remained alert to any indications
ofnon-compliance throughout the audit.
KPMG LLP’s Independent Auditor’s Report continued
To the members of HICL Infrastructure plc
HICL Annual Report 2024 Strategic Report Governance Financials
107
Direct laws context
andlink to audit
The potential effect of these laws and regulations on the financial statements varies considerably.
The company is subject to laws and regulations that directly affect the financial statements including:
– financial reporting legislation (including related companies’ legislation),
– distributable profits legislation,
– taxation legislation including the company’s status as an Investment Trust Company.
We assessed the extent of compliance with these laws and regulations as part of our procedures
ontherelatedfinancial statement items.
Most significant
indirect law/
regulationareas
The Company is subject to many other laws and regulations where the consequences of non-compliance
could have a material effect on amounts or disclosures in the financial statements, for instance through
theimposition of fines or litigation.
We identified the following areas as those most likely to have such an effect:
– Anti-bribery and corruption;
– Competition legislation;
– Market abuse regulations; and
Auditing standards limit the required audit procedures to identify non-compliance with these laws and
regulations to enquiry of the directors and other management and inspection of regulatory and legal
correspondence, if any. Therefore, if a breach of operational regulations is not disclosed to us or evident
fromrelevant correspondence, an audit will not detect that breach.
Context
Context of the ability
of the audit to detect
fraud or breaches of
law or regulation
Owing to the inherent limitations of an audit, there is an unavoidable risk that we may not have detected some
material misstatements in the financial statements, even though we have properly planned and performed our
audit in accordance with auditing standards. For example, the further removed non-compliance with laws and
regulations is from the events and transactions reflected in the financial statements, the less likely the inherently
limited procedures required by auditing standards would identify it.
In addition, as with any audit, there remained a higher risk of non-detection of fraud, as fraud may involve
collusion, forgery, intentional omissions, misrepresentations, or the override of internal controls. Our audit
procedures are designed to detect material misstatement. We are not responsible for preventing non-
compliance or fraud and cannot be expected to detect non-compliance with all laws and regulations.
HICL Annual Report 2024
108
6. Our determination of materiality
The scope of our audit was influenced by our application of materiality. We set quantitative thresholds and overlay qualitative considerations
tohelp us determine the scope of our audit and the nature, timing and extent of our procedures, and in evaluating the effect of misstatements,
both individually and in the aggregate, on the financial statements as a whole.
£32.1M
(FY23: £33.5M)
Materiality for the
financial
statements
as a whole
What we mean
A quantitative reference for the purpose of planning and performing our audit.
Basis for determining materiality and judgements applied
Materiality for the financial statements as a whole was set at £32.1m (FY23: £33.5m). This was determined
withreference to a benchmark of total assets.
Consistent with FY23, we determined that total assets remains the main benchmark for the Company as
shareholders consider the valuation of the investment portfolio as the primary financial indicator to understand
the Company’s performance.
Our materiality of £32.1m was determined by applying a percentage to total assets. When using a benchmark
of total assets to determine overall materiality, KPMG’s approach for listed entities considers a guideline
range of 0.5%-1% of the measure. In setting overall materiality, we applied a percentage of 1% (FY23: 1%)
tothe benchmark.
£24M
(FY23: £25M)
Performance
materiality
What we mean
Our procedures on individual account balances and disclosures were performed to a lower threshold,
performance materiality, so as to reduce to an acceptable level the risk that individually immaterial
misstatements in individual account balances add up to a material amount across the financial
statementsasa whole.
Basis for determining performance materiality and judgements applied
We have considered performance materiality at a level of 75% (FY2Y3: 75%) of materiality for HICL
Infrastructure plc financial statements as a whole to be appropriate.
We applied this percentage in our determination of performance materiality because we did not identify
anyfactors indicating an elevated level of risk.
£1.6M
(FY23: £1.6M)
Audit misstatement
posting threshold
What we mean
This is the amount below which identified misstatements are considered to be clearly trivial from a
quantitativepoint of view. We may become aware of misstatements below this threshold which could alter
thenature, timing and scope of our audit procedures, for example if we identify smaller misstatements
whichare indicators of fraud.
This is also the amount above which all misstatements identified are communicated to HICL Infrastructure Plc’s
Audit Committee.
Basis for determining the audit misstatement posting threshold and judgements applied
We set our audit misstatement posting threshold at 5% (FY23: 5%) of our materiality for the financial
statements. We also report to the Audit Committee any other identified misstatements that warrant
reportingonqualitative grounds.
The overall materiality for the financial statements of £32.1m compares as follows to the main financial statement caption amounts:
Total income Profit before tax Net assets
FY24 FY23 FY24 FY23 FY24 FY23
Financial statement caption £35.2m £202.3m £30.5m £198.4m £3,213m £3,350m
Materiality as % of caption 91% 16.6% 105% 16.9% 1% 1%
KPMG LLP’s Independent Auditor’s Report continued
To the members of HICL Infrastructure plc
HICL Annual Report 2024 Strategic Report Governance Financials
109
7. Other information in the annual report
The directors are responsible for the other information presented in the Annual Report together with the financial statements. Our opinion
onthefinancial statements does not cover the other information and, accordingly, we do not express an audit opinion or, except as explicitly
stated below, any form of assurance conclusion thereon.
All other information
Our responsibility
Our responsibility is to read the other information and, in doing so,
consider whether, based on our financial statements audit work, the
information therein is materially misstated or inconsistent with the
financial statements or our audit knowledge.
Our reporting
Based solely on that work we have not identified material misstatements
or inconsistencies in the other information.
Strategic report and directors’ report
Our responsibility and reporting
– Based solely on our work on the other information described above
we report to you as follows:
– we have not identified material misstatements in the strategic report
and the directors’ report;
– in our opinion the information given in those reports for the financial
year is consistent with the financial statements; and
– in our opinion those reports have been prepared in accordance
with the Companies Act 2006.
Directors’ remuneration report
Our responsibility
We are required to form an opinion as to whether the part of the
Directors’ Remuneration Report to be audited has been properly
prepared in accordance with the Companies Act 2006.
Our reporting
In our opinion the part of the Directors’ Remuneration Report
tobeaudited has been properly prepared in accordance with
theCompanies Act 2006.
HICL Annual Report 2024
110
Corporate governance disclosures
Our responsibility
We are required to perform procedures to identify whether there is a
material inconsistency between the financial statements and our audit
knowledge, and:
– the directors’ statement that they consider that the annual report
and financial statements taken as a whole is fair, balanced and
understandable, and provides the information necessary for
shareholders to assess the Company’s position and performance,
business model and strategy;
– the section of the annual report describing the work of the
Audit Committee, including the significant issues that the Audit
Committee considered in relation to the financial statements, and
how these issues were addressed; and
– the section of the annual report that describes the review of the
effectiveness of the Company’s risk management and internal
control systems.
Our reporting
Based on those procedures, we have concluded that each of these
disclosures is materially consistent with the financial statements and
ouraudit knowledge.
We are also required to review the part of the Corporate Governance
Statement relating to the Company’s compliance with the provisions
of the UK Corporate Governance Code specified by the Listing Rules
for our review.
We have nothing to report in this respect.
Other matters on which we are required to report by exception
Our responsibility
Under the Companies Act 2006, we are required to report to you if,
inour opinion:
– adequate accounting records have not been kept, or returns
adequate for our audit have not been received from branches not
visited by us; or
– the financial statements and the part of the Directors’
Remuneration Report to be audited are not in agreement with the
accounting records and returns; or
– certain disclosures of directors’ remuneration specified by law are
not made; or
– we have not received all the information and explanations we
require for our audit.
Our reporting
We have nothing to report in these respects.
KPMG LLP’s Independent Auditor’s Report continued
To the members of HICL Infrastructure plc
HICL Annual Report 2024 Strategic Report Governance Financials
111
8. Respective responsibilities
Directors’ responsibilities
As explained more fully in their statement set out on page 98, the directors are responsible for: the preparation of the financial statements
including being satisfied that they give a true and fair view; such internal control as they determine is necessary to enable the preparation
offinancial statements that are free from material misstatement, whether due to fraud or error; assessing the Company’s ability to continue
as agoing concern, disclosing, as applicable, matters related to going concern; and using the going concern basis of accounting unless
theyeither intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue our opinion in an auditor’s report. Reasonable assurance is a high level of assurance but does not
guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can
arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of the financial statements.
A fuller description of our responsibilities is provided on the FRC’s website at www.frc.org.uk/auditorsresponsibilities.
The Company will be including these financial statements in an annual financial report prepared using the single electronic reporting format
prepared under Disclosure Guidance and Transparency Rule (“DTR”) 4.1.17R and 4.1.18R. The auditor’s report on these financial statements
provides no assurance over whether the annual financial report has been prepared in accordance with those requirements.
9. The purpose of our audit work and to whom we owe our responsibilities
This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006.
Ouraudit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in
anauditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone
otherthan the Company and the Company’s members, as a body, for our audit work, for this report, or for the opinions we have formed.
Fang Fang Zhou (Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
15 Canada Square
Canary Wharf
London
E14 5GL
21 May 2024
HICL Annual Report 2024
112
Note
Year ended
31 March 2024
£m
Year ended
31 March 2023
£m
Dividends received 198.0 151.5
Interest received – 17.5
Net (loss)/gain on revaluation of investment in Investment Entity subsidiary (162.8) 33.3
Total investment income
5 35.2 202.3
Company expenses
6 (4.7) (3.9)
Profit before tax 30.5 198.4
Tax – –
Profit for the year
9 30.5 198.4
Earnings per share – basic and diluted (pence)
9 1.5 9.9
All results are derived from continuing operations. There is no other comprehensive income or expense and consequently a statement of other
comprehensive income has not been prepared.
The accompanying Notes are an integral part of these financial statements.
Income statement
For the year ended 31 March 2024
HICL Annual Report 2024 Strategic Report Governance Financials
113
Note
31 March 2024
£m
31 March 2023
£m
Non-current assets
Investments in Investment Entity subsidiary
12,14 3,212.5 3,349.7
Total non-current assets 3,212.5 3,349.7
Current assets
Trade and other receivables 0.3 0.4
Cash and cash equivalents 1.1 1.0
Total current assets 1.4 1.4
Total assets
3,213.9 3,351.1
Current liabilities
Trade and other payables (0.9) (1.1)
Total current liabilities
(0.9) (1.1)
Total liabilities
(0.9) (1.1)
Net assets 3,213.0 3,350.0
Equity
Share capital
16 0.2 0.2
Share premium 16 1,213.3 1,213.3
Revenue reserve 16 1,902.8 1,992.9
Capital reserve
16 96.7 143.6
Total equity
11 3,213.0 3,350.0
Net assets per Ordinary Share (pence)
11 158.2 164.9
The accompanying Notes are an integral part of these financial statements.
The financial statements were approved and authorised for issue by the Board of Directors on 21 May 2024, and signed on its behalf by:
M Bane R Akushie
Director Director
Statement of financial position
As at 31 March 2024
Company registered number: 11738373
HICL Annual Report 2024
114
Statement of changes in shareholders’ equity
For the year ended 31 March 2024
Note
Share
capital
£m
Share
premium
£m
Revenue
reserve
1
£m
Capital
reserve
1
£m
Total
shareholders’
equity
£m
Shareholders’ equity as at 31 March 2023 0.2 1,213.3 1,992.9 143.6 3,350.0
Profit for the year – – 77.4 (46.9)
1
30.5
Issue of share capital – – – – –
Cost of share issue – – – – –
Dividends paid
10 – – (167.6) – (167.6)
Shareholders’ equity at 31 March 2024 0.2 1,213.3 1,902.8 96.7 3,213.0
1 Revenue reserve and Capital reserve are described in accounting policies Note 16 Share capital and reserves
For the year ended 31 March 2023
Note
Share
capital
£m
Share
premium
£m
Revenue
reserve
1
£m
Capital
reserve
1
£m
Total
shareholders’
equity
£m
Shareholders’ equity as at 31 March 2022 0.2 1,055.3 1,993.3 110.3 3,159.1
Profit for the year – – 165.1 33.3
1
198.4
Issue of share capital – 160.0 – – 160.0
Cost of share issue – (2.0) – – (2.0)
Dividends paid
10 – – (165.5) – (165.5)
Shareholders’ equity at 31 March 2023 0.2 1,213.3 1,992.9 143.6 3,350.0
1 Revenue reserve and Capital reserve are described in accounting policies Note 16 Share capital and reserves
The accompanying Notes are an integral part of these financial statements.
HICL Annual Report 2024 Strategic Report Governance Financials
115
Cash flow statement
For the year ended 31 March 2024
Note
Year ended
31 March 2024
£m
Year ended
31 March 2023
£m
Cash flows from operating activities
Profit before tax 9 30.5 198.4
Adjustments for:
Total investment income
5 (35.2) (202.3)
Operating cash flows before movements in working capital (4.7) (3.9)
Changes in working capital:
Decrease/(Increase) in receivables 0.1 (0.2)
(Decrease)/Increase in payables (0.1) 0.3
Cash flow from operations (4.7) (3.8)
Investment income received 172.4 169.0
Net cash from operating activities 167.7 165.2
Cash flow from investing activities
Investment in subsidiary – (157.9)
Net cash used in investing activities – (157.9)
Cash flows from financing activities
Gross proceeds from issue of share capital
16 – 160.0
Cost of share issue – (2.0)
Dividends paid
10 (167.6) (165.5)
Net cash used in financing activities (167.6) (7.5)
Net (decrease)/increase in cash and cash equivalents 0.1 (0.2)
Cash and cash equivalents at beginning of year 1.0 1.2
Cash and cash equivalents at end of year 1.1 1.0
The accompanying Notes are an integral part of these financial statements.
HICL Annual Report 2024
116
Notes to the financial statements
For the year ended 31 March 2024
1. Reporting entity
HICL Infrastructure PLC (the “Company” or “HICL”) is a public limited
company incorporated, domiciled and registered in England and
Wales in the United Kingdom. The financial statements as at and for
the year ended 31 March 2024 comprise the financial statements
forthe Company only as explained in Note 2.
The Company has two corporate subsidiaries being HICL
Infrastructure 2 S.a.r.l. (“Luxco”) and Infrastructure Investments
Limited Partnership (“IILP”) (each a “Corporate Subsidiary” and
together the “Corporate Subsidiaries”). IILP is a direct subsidiary
of Luxco.
The Company and its Corporate Subsidiaries (together the
“Corporate Group”) invest in infrastructure projects in the UK,
Eurozone, North America and New Zealand.
2. Key accounting policies
Basis of preparation
The financial statements have been prepared in accordance with
UK-adopted International Accounting Standards (“IFRSs”).
The financial statements are presented in pounds sterling, which is
the Company’s functional currency. The principal accounting policies
applied in the preparation of the Company’s financial statements are
shown below. These policies have been consistently applied.
Going concern
The Company’s business activities, together with the factors likely
to affect its future development, performance and position are set
out in HICL’s Business Model section on the Investment Manager’s
Report starting on page 20. The financial position of the Company,
its cash flows, and liquidity position are described from page 40
in the Financial Review. In addition, Notes 14 to 17 of the financial
statements include: the Company’s objectives, policies and
processes for managing its capital; its financial risk management
objectives; details of its financial instruments and hedging activities;
and its exposures to credit risk and liquidity risk.
The Directors have assessed going concern by considering areas of
financial risk, the Group’s access to the Revolving Credit Facility and
Letter of Credit Facility (details of which are set out in the Financial
Review starting on page 40) as well as considering the £150m Private
Placement debt raised in May 2023 and by reviewing cash flow
forecasts. The Directors also performed stress testing under severe
but plausible scenarios including a significant increase in lifecycle
costs, operational assets underperformance and reduction in final
distributions from assets whose concessions end within the viability
period (details of which are set out in the Viability section of the
report on page 62). Judgement is applied in determining when the
cash flows from underlying assets is assumed to be received when
determining the cash flow forecast, based on the contractual nature
or demand assumptions of each asset.
The Directors also considered the Company’s considerable financial
resources, including indirect investments in a significant number of
project assets. The going concern analysis included an assessment
of the potential variability in returns and cash flows from project
companies including the effects of the heightened macroeconomic
volatility on demand assets as well as availability assets. The Directors
also noted that the financing for project companies is non-recourse to
the Company.
Based on this analysis, the Directors have concluded that the
Company has adequate resources to meet its liabilities as they fall
due for a period of at least 12 months from the date of approving
these financial statements (‘the going concern period’). Thus,
they consider it appropriate to adopt the going concern basis of
accounting in preparing the annual financial statements.
New and revised standards
There are no new or amended accounting standards or
interpretations adopted during the year that have a material impact on
the financial statements. The Company notes the following standards
and interpretations which were in issue and effective at the date of
these financial statements.
– IFRS 17 including Amendments to IFRS 17: Insurance
Contracts (effective for accounting periods beginning on or after
1 January 2023)
– Amendments to IAS 1 and IFRS Practice Statement 2: Disclosure
of Accounting Policies (effective for accounting periods beginning
on or after 1 January 2023)
– Amendments to IAS 8: Definition of Accounting Estimate (effective
for accounting periods beginning on or after 1 January 2023)
– Amendments to IAS 12: Deferred Tax related to Assets and
Liabilities arising from a Single Transaction (effective for accounting
periods beginning on or after 1 January 2023)
– Amendments to IAS 12: International Tax Reform – Pillar Two Model
Rules (issued on 23 May 2023 with immediate effectiveness)
The Company also notes the following standards and interpretations
which were in issue but not effective at the date of these financial
statements. They are not expected to have a material impact on the
Company’s financial statements.
– Amendments to IAS 1: Classification of Liabilities as Current or
Non-current (effective for accounting periods beginning on or after
1 January 2024)
– Amendments to IAS 7 and IFRS 7: Supplier Finance Arrangements
(effective for accounting periods beginning on or after
1 January 2024)
– Amendments to IFRS 16: Lease Liability in a Sale and
Leaseback (effective for accounting periods beginning on or after
1 January 2024)
– Amendments to IAS1: Non-current Liabilities with Covenants
(effective for accounting periods beginning on or after
1 January 2024)
– Amendments to IAS 21: Lack of Exchangeability (effective date
1 January 2025)
– IFRS 18: Presentation and Disclosure in Financial Statements
(effective date 1 January 2027)
Financial instruments
Financial assets and liabilities are recognised in the Statement
of Financial Position when the Company becomes a party to the
contractual provisions of the instrument. Financial assets and liabilities
are derecognised when the contractual rights to the cash flows from
the instrument expire or the asset or liability is transferred and the
transfer qualifies for derecognition in accordance with IFRS 9.
HICL Annual Report 2024 Strategic Report Governance Financials
117
Non-derivative financial instruments
Non-derivative financial instruments comprise the Company’s
investment in the equity and debt of its direct Corporate Subsidiary,
Luxco trade and other receivables, cash and cash equivalents, loans
and borrowings and trade and other payables.
Non-derivative financial instruments are recognised initially at fair
value including directly attributable transaction costs, except for
financial instruments measured at fair value through profit or loss.
Subsequent to initial recognition, non-derivative financial instruments
are measured as described below.
Investments in equity and debt securities
Investments in the equity and loan stock of entities engaged in
infrastructure activities, which are not classified as subsidiaries of
the Company or which are subsidiaries not consolidated in the
Company’s results, are designated at fair value through profit or loss
since the Company manages these investments and makes purchase
and sale decisions based on their fair value.
Other
Other non-derivative financial instruments are measured at amortised
cost using the effective interest method, less any impairment losses
for financial assets. Interest income or expenses, foreign exchange
gains and losses and impairment are recognised in the Income
Statement. Any gain or loss on derecognition is recognised in the
Income Statement.
Fair values
Fair value is the price that would be received to sell an asset or
paid to transfer a liability in an orderly transaction between market
participants at the measurement date in the principal or, in absence,
the most advantageous market to which the Company has access at
that date.
The fair value of the Company’s investment in Luxco is based on the
Net Asset Value of IILP and the sundry assets and liabilities of Luxco.
IILP’s Net Asset Value is based on the fair value of the underlying
investments in its portfolio of infrastructure assets, since IILP
manages these investments and makes purchase and sale decisions
based on their fair value.
The fair value of IILP’s underlying investments are determined using
the income approach, which discounts the expected cash flows
attributable to each asset at an appropriate rate to arrive at its fair
value. In determining the appropriate discount rate, regard is given to
relevant long-term government bond yields, the specific risks of each
investment and the evidence of recent transactions. Further detail on
methods and assumptions used in estimating the fair values of the
financial instruments is included in Note 14. IILP has issued a £150m
private placement. This note is held at amortised cost.
Investment income
Investment income comprises interest income, dividend income and
gains/(losses) on investments, which comprise the change in fair value
of the Company’s direct subsidiary. Interest income is recognised
in the Income Statement based on a calculation specified within the
financing loan agreement with Luxco. Dividend income is recognised
when the Company’s right to receive payment is established.
Share capital and share premium
Ordinary Shares are classified as equity. Costs associated with
the establishment of the Company or directly attributable to the
issue of new shares are recognised as a deduction from the share
premium account.
Equity and reserves
The Company is a UK approved Investment Trust Company.
Financial statements prepared under IFRS are not strictly required to
apply the provisions of the Statements of Recommended Practice
issued by the UK Association of Investment Companies for the
financial statements of Investment Trust Companies (the “SORP”).
However, where relevant and appropriate, the Directors have looked
to follow the recommendations of the SORP. The Directors have
chosen to rename distributable and other reserves into a Revenue
reserve and a Capital reserve respectively. The Directors have
exercised their judgement in applying the SORP and a summary of
these judgements are as follows:
– Net gains on investments are applied wholly to the Capital reserve
as they relate to the revaluation or disposal of investments;
– Dividends are applied to the Revenue reserve except under specific
circumstances where a dividend arises from a return of capital
or proceeds from a refinancing, when they are applied to the
Capital reserve;
– Fees payable are applied to the Capital reserve where the service
provided is, in substance, an intrinsic part of an intention to acquire
or dispose of an investment;
– Operating costs are applied wholly to the Revenue reserve as there
is no clear connection between the operating expenses of the
Company and the purchase and sale of an investment; and
– Foreign exchange movements are applied to the Revenue reserve
where they relate to movements on non-portfolio assets.
Cash and cash equivalents
Cash and cash equivalents held by the Company comprise cash
balances, deposits held at call with banks and other short-term,
highly liquid investments with original maturities of three months or
less. Cash equivalents, including demand deposits, are held for the
purpose of meeting short-term cash commitments rather than for
investment or other purposes.
HICL Annual Report 2024
118
2. Key accounting policies continued
Income tax
Income tax represents the sum of the tax currently payable and
deferred tax. Current tax is based on the taxable profit for the year.
Taxable profit differs from net profit as reported in the Income
Statement because it excludes items of income or expense that are
taxable or deductible in other years and it further excludes items
that are never taxable or deductible. Tax is calculated using tax rates
that have been enacted or substantively enacted by the balance
sheet date.
Foreign exchange gains and losses
Transactions entered into by the Company in a currency other
than its functional currency are recorded at the rates ruling when
the transactions occur. Foreign currency monetary assets and
liabilities are translated at the rates ruling at the balance sheet date.
Exchange differences arising on the re-translation of unsettled
monetary assets and liabilities are recognised immediately in the
Income Statement.
Expenses
All expenses are accounted for on an accruals basis. The Company’s
investment management fee, administration fees and all other
expenses are charged through the Income Statement.
Dividends payable
Dividends payable to the Company’s shareholders are recognised
when they become legally payable. In the case of interim dividends,
this is when they are paid. In the case of final dividends, this
is when they are approved by the shareholders at the Annual
General Meeting.
Segmental reporting
The Chief Operating Decision Maker (the “CODM”) has been
determined to be the Board, who are of the opinion that the Company
is engaged in a single segment of business, being the investment in
infrastructure. The Company has no single major customer.
The internal financial information used by the CODM on a quarterly
basis to allocate resources, assess performance and manage the
Company presents the business as a single segment comprising the
portfolio of investments in infrastructure assets.
3. Critical accounting judgements, estimates
and assumptions
The preparation of financial statements in accordance with UK-
adopted IFRS requires management to make judgements, estimates
and assumptions in certain circumstances that affect reported
amounts. The judgements, estimates and assumptions that have a
significant risk of causing a material adjustment to the disclosure or to
the carrying amounts of assets and liabilities are outlined below.
Key judgements
Investment Entities
The Company has applied IFRS 10 Consolidated Financial
Statements, IFRS 11 Joint Arrangements and IFRS 12 Disclosure of
Interests in Other Entities in these financial statements, which require
investment entities to measure certain subsidiaries, including those
that are themselves investment entities, at fair value through the
Income Statement, rather than consolidating their results.
To determine that the Company continues to meet the definition of
an investment entity, the Company is required to satisfy the following
three criteria:
– It obtains funds from one or more investors for the purpose
of providing these investors with professional investment
management services;
– It commits to its investors that its business purpose is to invest
its funds solely for returns from capital appreciation, investment
income or both; and
– It measures and evaluates the performance of substantially all of its
investments on a fair value basis.
The Corporate Subsidiaries carry out investment activities and incur
overheads and borrowings on behalf of the Company. They are
considered investment entities themselves and are therefore
measured at fair value in these financial statements.
Consistent with previous years, the Company meets the criteria due
to the following reasons:
– It delivers stable returns to shareholders through a mix of income
yield and capital appreciation;
– It provides investment management services and has several
investors who pool their funds to gain access to infrastructure-
related investment opportunities that they might not have had
access to individually; and
– It has elected to measure and evaluate the performance of all its
investments on a fair value basis. The fair value method is used
to represent the Company’s performance in its communication
to the market, including investor presentations. In addition, the
Company reports fair value information internally to Directors,
who use fair value as the primary measurement attribute to
evaluate performance.
The Directors are of the opinion that the Company has all the typical
characteristics of an investment entity and continues to meet the
definition in the standard. This conclusion is reassessed on an
annual basis.
The Company holds significant stakes in the majority of its portfolio
companies and must exercise judgement in the level of control of
the underlying portfolio company that is obtained in order to assess
whether the Company should be classified as a subsidiary.
Key estimation uncertainties
The key area where estimates are significant to the financial
statements and have a significant risk of causing a material
adjustment to the carrying amounts of assets and liabilities within
the next financial year is the valuation of the Company’s Investment
Entity subsidiary. Luxco holds the investment in IILP, which in turn
holds investments in infrastructure assets which are held at fair value.
The portfolio is well-diversified by sector, geography and underlying
risk exposures. The underlying investments are all valued based on
a discounted cash flow methodology with the exception of the A13
investment. Management exercise judgement in determining the
appropriate assumptions that underpin these valuations. Note 14
setsout the sensitivity of key assumptions to reasonably possible
changes in assumptions.
Notes to the financial statements continued
For the year ended 31 March 2024
HICL Annual Report 2024 Strategic Report Governance Financials
119
4. Geographical analysis
The tables below provide an analysis based on the geographical location of the Company’s underlying investments.
Investment income UK Eurozone
Rest of
the World Total
31 March 2024 £24.0m £8.8m £2.4m £35.2m
31 March 2023 £115.8m £69.5m £17.0m £202.3m
Investment in investment entity subsidiaries UK Eurozone
Rest of
the World Total
31 March 2024 £2,124.3m £645.0m £433.2m £3,212.5m
31 March 2023 £2,318.0m £535.6m £496.1m £3,349.7m
5. Total investment income
Year ended
31 March 2024
£m
Year ended
31 March 2023
£m
Dividends received 198.0 151.5
Interest received – 17.5
Net (loss)/gain on revaluation of investment in Investment Entity subsidiary (162.8) 33.3
Total 35.2 202.3
6. Company expenses
Year ended
31 March 2024
£m
Year ended
31 March 2023
£m
Fees to auditor 0.5 0.4
Investment Manager fees (Note 18) 0.1 0.1
Directors’ fees (Note 18) 0.5 0.5
Professional fees 3.6 2.9
Total 4.7 3.9
Fees to auditor comprise the Company’s £0.4m audit fees as well as £0.1m fees to KPMG LLP, in respect of their interim review of the
Company’s accounts (2023: £0.3m audit fees and £0.1m interim review fees). Additional fees relating to the audit of the Company’s subsidiaries
were £0.5m (2023: £0.2m). The non-audit services for the Company, its subsidiaries and affiliates were £0.3m (2023: £0.4m)
HICL Annual Report 2024
120
Information regarding the Group’s Auditor
During the year, the Group received the following services from its External auditor, KPMG LLP. The table below is prepared in accordance with
Companies Act requirements, which is consistent with both IFRS and the Investment basis.
Year ended
31 March 2024
£m
Year ended
31 March 2023
£m
Audit Services
Statutory audit
Company 0.4 0.3
UK Subsidiaries 0.5 0.2
Total audit services 0.9 0.5
Non-audit services
Other assurance services 0.4 0.5
Total audit and non-audit services 1.3 1.0
7. Employees
The Company had no employees during the year (31 March 2023: Nil).
8. Income tax
Year ended
31 March 2024
£m
Year ended
31 March 2023
£m
Current taxes
Current year – –
– –
The effective rate of corporation tax in the UK for a large company is 25% (2023: 19%). The tax charge in the year was lower than the standard
and effective tax rate due to differences explained below.
Year ended
31 March 2024
£m
Year ended
31 March 2023
£m
Profit before tax
Profit before tax multiplied by the UK corporation tax rate of 25% (2023: 19%) 7.6 37.7
Effect of:
Non-deductible capital losses/(gains) 40.7 (6.3)
Non-taxable dividend income (49.5) (28.8)
Dividends designated as interest distributions – (3.3)
Other 1.2 0.7
Total – –
The Directors are of the opinion that the Company has complied with the requirements for maintaining investment trust status for the purposes
of section 1158 of the Corporation Tax Act 2010. This allows certain capital profits of the Company to be exempt from UK tax. Additionally,
the Company may designate dividends wholly or partly as interest distributions for UK tax purposes. Interest distributions are treated as tax
deductions against taxable income of the Company so that investors do not suffer double taxation on their returns.
The Company is not expected to generate taxable profits not covered by the Investment Trust exemption in the foreseeable future.
Therefore nodeferred tax asset has been recognised in respect of these losses.
Tax payable by investments
The financial statements do not directly include the tax charges for any of the Company’s intermediate holding companies or investments as these
are held at fair value. All of these investments and intermediate holding companies are subject to taxes in the countries in which they operate.
Notes to the financial statements continued
For the year ended 31 March 2024
HICL Annual Report 2024 Strategic Report Governance Financials
121
9. Earnings per share
Basic and diluted earnings per share is calculated by dividing the profit attributable to equity shareholders of the Company by the weighted
average number of Ordinary Shares in issue during the year.
Year ended
31 March 2024
Year ended
31 March 2023
Profit attributable to equity holders of the Company £30.5m £198.4m
Weighted average number of Ordinary Shares in issue
1
2,031.5m 2,004.3m
Total basic and diluted earnings per Ordinary Share 1.5 pence 9.9 pence
1 No new shares were issued in the year (31 March 2023: 94,674,560 new shares issued). At 31 March 2024 the Company had 2,031,488,061 shares in issue (31 March 2023: 2,031,488,061).
10. Distributions to Company shareholders
Year ended
31 March 2024
£m
Year ended
31 March 2023
£m
Amounts paid and recognised as distributions to equity holders during the year:
Fourth quarterly interim dividend for the year ended 31 March 2023 of 2.07p 42.2 40.1
First quarterly interim dividend for the year ended 31 March 2024 of 2.06p per share 41.8 41.8
Second quarterly interim dividend for the year ended 31 March 2024 of 2.06p per share 41.8 41.8
Third quarterly interim dividend for the year ended 31 March 2024 of 2.06p per share 41.8 41.8
167.6 165.5
Amounts not recognised as distributions to equity holders during the year:
Fourth quarterly interim dividend proposed for the year ended 31 March 2024 of 2.07p 42.2 42.1
The Company has elected to distribute a percentage of the dividends paid to shareholders as an interest distribution for tax purposes.
Quarterly interest streaming fluctuates due to several factors, including the forecast annual effective interest received from underlying projects
(which moves with acquisitions and disposals) and FX hedging gains/losses.
11. Net assets per Ordinary Share
31 March 2024 31 March 2023
Shareholders’ equity as at 31 March £3,213.0m £3,350.0m
Less: fourth interim dividend £(42.2)m £(42.1)m
£3,170.8m £3,307.9m
Number of Ordinary Shares as at 31 March 2,031.5m 2,031.5m
Net assets per Ordinary Share after deducting fourth interim dividend 156.1p 162.8p
Add fourth interim dividend 2.07p 2.07p
Net assets per Ordinary Share at 31 March 158.2p 164.9p
HICL Annual Report 2024
122
12. Investment in Investment Entity subsidiary
31 March 2024 31 March 2023
Carrying amount of the investment in
Luxembourg Corporate Subsidiary
Equity
Investment
£m
Loan
investment
£m
Total carry
amount
£m
Equity
Investment
£m
Loan
investment
£m
Total carry
amount
£m
Opening balance 2,152.1 1,197.6 3,349.7 1,912.4 1,246.1 3,158.5
Additions to investment in the year – – – 157.9 – 157.9
(Loss)/gain on revaluation
of investment (Note 5) (3.6) (159.2) (162.8) 81.8 (48.5) 33.3
Additional loan drawdown – 25.6 25.6 – – –
Carrying amount at year end 2,148.5 1,064.0 3,212.5 2,152.1 1,197.6 3,349.7
The Company records the fair value of its direct Corporate Subsidiary, Luxco, based on the Net Asset Value of IILP and the sundry assets and
liabilities of Luxco. IILP’s Net Asset Value is based on the aggregate fair value of each of its investments along with the working capital of its
intermediate holding companies.
Refer to page 46 for the valuation techniques and key model inputs used for determining investment fair values.
The Investment Manager has carried out fair market valuations of IILP’s portfolio companies as at 31 March 2024. The Directors have satisfied
themselves as to the methodology used, the discount rates applied, and the valuation. The Directors have also engaged an independent third
party with experience in valuing these types of investments to assess and opine on the appropriateness of the assumptions and valuations
determined by the Investment Manager. This work included using independent market information, reviewing a selection of underlying data
and determining an appropriate range. Based on this, the Directors received an independent opinion supporting the reasonableness of the
valuation. All investments are valued using a discounted cash flow methodology except for the A13 investment in listed senior bonds which is
valued based on quoted market price at the balance sheet date. The valuation techniques and methodologies have been applied consistently
with the prior year. Discount rates (including the effective rate on A13) range from 1.6% to 9.6% (weighted average of 8.0%) (31 March 2023:
weighted average of 7.2%).
The fair values of the Group’s financial assets and liabilities not held at fair value, which include the £150m private placement issued by IILP, are
not materially different from their carrying values.
In general, the terms of senior funding arrangements may restrict the ability of portfolio companies to make distributions.
Significant restrictions include:
– Historic and projected debt service and loan life cover ratios exceed a given threshold;
– Required cash reserve account levels are met;
– Senior lenders have agreed the current financial model that forecasts the economic performance of the project company and have approved
the annual budget for the company; and
– Portfolio company compliance with the terms of senior funding arrangements.
13. Investments – acquisitions and disposals via the Corporate Subsidiaries
Acquisitions
The Company, via its Corporate Subsidiaries, made the following acquisitions during the year ended 31 March 2024:
– The acquisition of a 5.9% stake in Altitude Infra’s fibre-to-the-home platform for £88.4m;
– The acquisition of a 45.75% stake in Texas Nevada Transmission LLC for £207.3m;
– The acquisition of a 75% stake in the Hornsea II OFTO for £119.1m; and
– The incremental acquisition of a 3.1% stake in the A63 Motorway for £20.1m.
Notes to the financial statements continued
For the year ended 31 March 2024
HICL Annual Report 2024 Strategic Report Governance Financials
123
Disposals
The Company, via its Corporate Subsidiaries, made the following disposal and divestment during the year ended 31 March 2024:
– The partial disposal of Northwest Parkway (“NWP”) generated net proceeds of $82.8m (£68.5m);
– A portfolio disposal comprising Queens (Romford) Hospital, Oxford John Radcliffe Hospital, Priority Schools North East Batch and South
Ayrshire Schools and half of the Group’s investment in the Hornsea II OFTO which generated combined final proceeds received of £197.4m
1
.
– The disposal of Bradford BSF Schools PPP, phases 1 and 2 (UK) generated combined proceeds of £37.6m;
– The disposal of University of Sheffield accommodation generated proceeds of £18.5m;
– The disposal of the Group’s remaining 22.3% stake in NWP generated proceeds net of costs and taxes of $215.5m (£172.4m)
1
.
Note 20 details the acquisitions and disposals made by the Company, via its Corporate Subsidiaries, since the year end. The amounts above
reflect the acquisitions and disposals recognised under the IFRS Basis. Amounts shown in the Valuation of the Portfolio section on pages 46
to52 are under the Directors’ Valuation basis, which includes commitments.
14. Financial instruments
Fair value estimation
The following summarises the significant methods and assumptions used in estimating the fair values of financial instruments:
Financial instruments
The fair value of financial instruments traded in active markets is based on quoted market prices at the balance sheet date.
Where applicable, further information about the assumptions used in determining fair value is disclosed in the Notes specific to that asset
or liability.
Classification of financial instruments
31 March 2024
£m
31 March 2023
£m
Financial assets
Investment in Investment Entity subsidiary 3,212.5 3,349.7
Financial assets at fair value through profit or loss 3,212.5 3,349.7
Trade and other receivables 0.3 0.4
Cash and cash equivalents 1.1 1.0
Financial assets – amortised cost 1.4 1.4
Financial liabilities – other financial liabilities
Trade and other payables (0.9) (1.1)
Financial liabilities (0.9) (1.1)
The Directors are of the opinion that the carrying values of all financial instruments are approximately equal to their fair values.
Fair value hierarchy
The fair value hierarchy is defined as follows:
– Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities
– Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or
indirectly (i.e. derived from prices)
– Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs)
31 March 2024
Level 1
£m
Level 2
£m
Level 3
£m
Total
£m
Investment in Investment Entity subsidiary (Note 12) – – 3,212.5 3,212.5
1 By 21 May 2024, the proceeds from the disposals of Northwest Parkway and Hornsea II had been received
HICL Annual Report 2024
124
14. Financial instruments continued
31 March 2023
Level 1 Level 2 Level 3 Total
£m £m £m £m
Investment in Investment Entity subsidiary (Note 12) – – 3,349.7 3,349.7
There were no transfers between Level 1, 2 or 3 during the year. A reconciliation of the movement in Level 3 assets is disclosed in Note 12.
Level 3
Valuation methodology
Methodology Description Inputs
Fair value at
31 March (£m)
Sensitivity on key
unobservable input
Fair value impact
of sensitivities (£m)
+5%/-5%
NAV The fair value of the investment
in HICL’s Investment Entity
Subsidiary, Luxco, which is
equal to its carrying value
Inputs that are not based on observable
market data. The fair value of HICL’s
investment in Luxco is based on Luxco’s
holding in IILP that is held at fair value
£3,212.5 (31
March 2023:
£3,349.7)
A 5% sensitivity
on closing NAV
chosen due to
historical volatility
£160.6
The value of the Company’s investment in its Investment Entity subsidiary is sensitive to changes in the macroeconomic assumptions used as
part of the portfolio valuation process. As part of its analysis, the Directors have considered the potential impact of a change in a number of
the macroeconomic assumptions used in the valuation process. By considering these potential scenarios, the Directors are well positioned to
assess how the Company is likely to perform if affected by variables and events that are inherently outside of the control of the Directors and the
Investment Manager.
Sensitivities
In order to give investors a meaningful sensitivity analysis, the Directors have considered how changes in macroeconomic assumptions in the
underlying assets for which the Company holds an indirect interest would affect the investment that the Company has in its direct Investment
Entity subsidiary, rather than the sensitivity in the Investment Entity subsidiary. Consequently, the following numbers are presented on the
Investment Basis, with the sensitivity having the same impact on both net assets and total investment income. See also the Valuation of the
Portfolio section on page 46.
Sensitivities
-0.5% p.a.
change
Investment at fair
value through
profit or loss
+0.5% p.a.
change
Discount rates
31 March 2024 £173.8m £3,268.9m £(158.2)m
31 March 2023 £195.4m £3,498.6 £(177.1)m
Inflation rates
31 March 2024 £(141.3)m £3,268.9m £160.0m
31 March 2023 £(176.1)m £3,498.6 £207.5m
GDP
31 March 2024 £(55.3)m £3,268.9m £38.4m
31 March 2023 £(86.9)m £3,498.6m £82.6m
-1% p.a.
change
Investment at fair
value through
profit or loss
+1 p.a.
change
Cash deposit rates
31 March 2024 £(46.9)m £3,268.9m £46.5m
31 March 2023 £(58.8)m £3,498.6 £58.2m
Debt interest rates
31 March 2024 £25.5m £3,268.9m £(27.7)m
31 March 2023
£28.7m £3,498.6 £(20.4)m
-5% p.a.
change
Investment at fair
value through
profit or loss
+5% p.a.
change
Tax
31 March 2024 £107.1m £3,268.9m £(107.9)m
31 March 2023
£132.6m £3,498.6m £(131.6)m
Notes to the financial statements continued
For the year ended 31 March 2024
HICL Annual Report 2024 Strategic Report Governance Financials
125
The sensitivity assumes that the changes are for all future periods. The increase is consistent with that shown by the Company’s listed
infrastructure peers and this allows for comparisons to be made. A higher sensitivity is not considered necessary as the mix of the portfolio
means that the sensitivity is linear and it is possible to estimate the impact if percentage changes are in multiples of this sensitivity.
The Directors recognise that current levels of macroeconomic volatility are likely to give rise to materially greater possible ranges of values than
has been the case for a number of years.
15. Loans and borrowings
The Group’s multi-currency £650m facility is held by its Corporate Subsidiary, IILP. It has a three-year tenor, which runs to 30 June 2026. Post-
year end, the facility size was reduced from £650m to £400m at the Group’s request.
In May 2023, the Company’s Corporate Subsidiary, IILP, issued £150m of Private Placement loan notes. The notes were issued in two tranches:
£100m expiring in 2033 and £50m expiring in 2035. The weighted average interest rate is 5.80% (5.75% after hedging). The notes are held at
amortised cost by IILP.
16. Share capital and reserves
Ordinary Shares
31 March 2024
m
31 March 2023
m
Authorised and issued at the beginning of the year 2,031.5 1,936.8
Issued for cash – 94.7
Authorised and issued at end of year – fully paid 2,031.5 2,031.5
The holders of the 2,031,488,061 Ordinary Shares (31 March 2023: the 2,031,488,061) are entitled to receive dividends as declared from time to
time and are entitled to one vote per share at meetings of the Company.
For the year ended 31 March 2024
No new share issuances occurred during the year ended 31 March 2024.
For the year ended 31 March 2023
In July 2022, 94.7 million new Ordinary Shares of 0.01p each were issued to various institutional investors at an issue price per share (before
expenses) of 169.0p.
Share capital
31 March 2024
£m
31 March 2023
£m
Opening balance 0.2 0.2
Balance at end of year 0.2 0.2
Share premium
31 March 2024
£m
31 March 2023
£m
Opening balance 1,213.3 1,055.3
Issue of Ordinary Shares – 160.0
Costs of issue of Ordinary Shares – (2.0)
Balance at end of year 1,213.3 1,213.3
Revenue reserve and Capital reserve
Revenue reserve and Capital reserve are detailed in the Statement of Changes in Equity. The Capital reserve represents the accumulated
unrealised fair value gains/losses on the Company’s investment in its Investment Entity subsidiary since acquisition on 1 April 2019.
17. Financial risk management
The Corporate Group is exposed to market risk (which includes currency risk, interest rate risk and inflation risk), credit risk and liquidity risk
arising from the financial instruments it holds through IILP as disclosed below. The Corporate Group, via IILP, owns a portfolio of investments
predominantly in the subordinated loanstock and equity of project companies. These companies are structured at the outset to minimise
financial risks where possible. Ongoing risk management occurs through the individual boards of the project companies and monitored through
regular financial and operational performance reports.
HICL Annual Report 2024
126
17. Financial risk management continued
Market risk
Returns from HICL’s investments are affected by market events giving rise to changes in the value of underlying portfolio assets. The value of
these investments will be a function of the discounted value of their expected future cash flows and as such will vary with, inter alia, movements
in interest rates, market prices and the competition for such assets.
As at 31 March 2024, and following the sale of Northwest Parkway, the proportion of the portfolio considered sensitive to GDP as at 31 March
2024 has reduced to 14% (18% at 31 March 2023), with four assets sensitive to GDP, namely, the A63, M1-A1 Road, RMG Roads and HS1.
At times of higher economic activity there will be greater traffic volumes using these roads and railways, generating increased revenues for
theprojects than compared to periods of lower economic activity and therefore we assess these as GDP sensitive investments.
Interest rate risk
The Corporate Group has indirect exposure to interest rates through changes to the financial performance and the valuation of portfolio companies
caused by interest rate fluctuations in loans and borrowings. The Company itself does not have any borrowings but does have an interest-bearing
loan with Luxco and therefore is exposed to interest rate risk. The sensitivity of the portfolio companies to interest rates is shown in Note 14.
Inflation risk
The infrastructure project companies in which the Corporate Group invests are generally structured so that contractual income and costs
are either wholly or partially linked to specific inflation where possible to minimise the risks of mismatch between income and costs due to
movements in inflation. The Corporate Group’s overall cash flows vary with inflation, although they are not fully correlated as not all flows are
indexed. The effects of inflation changes do not always immediately flow through to the Corporate Group’s cash flows, particularly where
a project’s loanstock debt carries a fixed coupon and the inflation changes flow through by way of changes to dividends in future periods.
As RPIis to be aligned with CPIH from 2030, RPI-linked project companies have been aligned to CPIH from this date. The sensitivity of the
Corporate Group to inflation is shown in the sensitivities table in Note 14 on page 124.
Currency risk
The Corporate Group monitors its foreign exchange exposures using its near-term and long-term cash flow forecasts. Its policy is to use
foreign exchange hedging to provide protection against the effect of exchange rate fluctuations on the level of sterling distributions that the
Corporate Group expects to receive over the medium term, where considered appropriate. This may involve the use of forward exchange and
other currency hedging contracts at IILP level, as well as the use of Euro, Canadian dollar, US dollar, NZ dollar and other currency denominated
borrowings. At 31 March 2024, the Corporate Group, via IILP, hedged its currency exposure through Euro, Canadian dollar, New Zealand dollar
and US dollar forward contracts. This has reduced the volatility in the NAV from foreign exchange movements.
The hedging policy is designed to provide confidence in the near-term yield and to limit NAV per share sensitivity to no more than 2% for a 10%
foreign exchange movement. The sensitivity of the Corporate Group to currency risk is shown in the sensitivities table in Note 14 on page 124.
The proceeds from the NWP disposal were fully hedged from the date the sale was signed.
Credit risk
Credit risk is the risk that a counterparty of the Corporate Group will be unable or unwilling to meet a commitment that it has entered into with
the Corporate Group.
The Corporate Group is subject to credit risk on its loans, receivables, cash and deposits. The Corporate Group’s cash and deposits are
heldwith reputable banks. The credit quality of loans and receivables within the investment portfolio is based on the financial performance of
the individual portfolio companies. For those assets that are not past due, it is believed that the risk of default is small and capital repayments
and interest payments will be made in accordance with the agreed terms and conditions of the investment.
The Corporate Group’s maximum exposure to credit risk over financial assets is the carrying value of those assets in the balance sheet.
The Corporate Group does not hold any collateral as security.
Liquidity risk
The table below analyses the Company’s financial liabilities into relevant maturity groupings based on the remaining period at the balance sheet
date to the contractual maturity date.
31 March 2024
Less than
1 year
£m
Between 1
and 2 years
£m
Between 2
and 5 years
£m
More than
5 years
£m
Trade and other payables 0.9 – – –
Total 0.9 – – –
31 March 2023
Less than
1 year £m
Between 1
and 2 years
£m
Between 2
and 5 years
£m
More than
5 years
£m
Trade and other payables 1.1 – – –
Total 1.1 – – –
Notes to the financial statements continued
For the year ended 31 March 2024
HICL Annual Report 2024 Strategic Report Governance Financials
127
18. Related party transactions and transactions with the Investment Manager
InfraRed was appointed under an Investment Management Agreement, dated 4 March 2019, as Investment Manager to, and as the AIFM
ofHICL. The Investment Management Agreement may be terminated by either party to the agreement, being HICL or InfraRed, giving three
years’ written notice or if InfraRed’s appointment as Operator (see below) is terminated. Under the Investment Management Agreement,
InfraRed is entitled to a fee of £0.1m p.a., payable half-yearly in arrears by the Company and which is subject to review, from time to time.
The Investment Manager fees charged to the Company were £0.1m (2023: £0.1m) (disclosed as Investment Manager fees in Note 6).
InfraRed is also the Operator of IILP, the Corporate Subsidiary through which HICL holds its investments. InfraRed has been appointed as the
Operator by the General Partner of IILP, Infrastructure Investments General Partner Limited, a company within the same group as InfraRed.
The Operator and the General Partner may each terminate the appointment of the Operator by either party giving three years’ written notice.
Either the Operator or the General Partner may terminate the appointment of the Operator by written notice if the Investment Management
Agreement is terminated in accordance with its terms. The General Partner’s appointment does not have a fixed term; however, if InfraRed
ceases to be the Operator, HICL has the option to buy the entire share capital of the General Partner and the InfraRed Group has the option
to sell the entire share capital of the General Partner to HICL, in both cases for nominal consideration. The Directors consider the value of the
option to be insignificant.
In the year to 31 March 2024, in aggregate InfraRed and the General Partner were entitled to fees and/or profit share equal to: 1.1 per cent
perannum of the Adjusted Gross Asset Value of all investments of HICL up to £750m, 1.0 per cent per annum for the incremental value in
excess of £750m up to £1,500m, 0.9 per cent for the incremental value in excess of £1,500m, 0.8 per cent for the incremental value in excess
of£2,250m and 0.65 per cent for the incremental value in excess of £3,000m.
The total Operator fees were £33.9m (2023: £32.5m), of which £8.1m remained payable at 31 March 2024 (2023: £8.3m).
InfraRed is 80% owned by Sun Life Financial Inc. (together with its subsidiaries and joint ventures, “Sun Life”). InfraRed is a distinct business
under SLC Management, the alternatives asset manager of Sun Life under a put and call framework agreed with the InfraRed owners,
exercisable after four and five years respectively from 1 July 2020.
In May 2023, Sun Life subscribed for £50.0m on an arm’s length basis of the Private Placement Notes issued by IILP. As at 31 March 2024,
£50.0m remained outstanding and £1.0m of interest had been accrued. Total interest paid to Sun Life in the year was £1.5m.
The Directors of the Company, who are considered to be key management, received fees for their services. Their fees were £0.5m
(2023: £0.5m) for the year ended 31 March 2024 (see Note 6). One Director also receives fees for serving as Director of the Luxembourg
subsidiary – the annual fees are £8.0k (2023: £7.5k). (Further detail is included in the Directors’ Remuneration Report on page 91.)
All of the above transactions were undertaken on an arm’s length basis.
19. Guarantees and other commitments
As at 31 March 2024, the Company, via a Corporate Subsidiary, had £64.5m of commitments for future project investments
(31 March2023: £274.2m).
20. Events after balance sheet date
By 21 May 2024, proceeds from the disposals of Northwest Parkway and Hornsea II had been received. This represents the remaining
23.3%stake in Northwest Parkway and a 37.5% stake in Hornsea II.
On 21 May 2024, the RCF was fully repaid using proceeds from the disposal of Hornsea II and NWP.
HICL Annual Report 2024
128
21. Related undertakings
Below is a list of the Company’s subsidiaries and related undertakings – incorporated in the United Kingdom unless otherwise stated. Further,
the following subsidiaries have not been consolidated in these financial statements, as a result of applying IFRS 10 and Investment Entities
(Amendments to IFRS 10, IFRS 12 and IAS 27).
Entity Registered address
Shareholding
Year end
Profit/
(Loss)
£m
Aggregate
Capital &
Reserves
£m31-Mar-24 31-Mar-23
Academy Services (Norwich)
HoldingsLimited
10 St. Giles Square, London,
UnitedKingdom, WC2H 8AP
75% 75% N/A
2
N/A
2
N/A
2
Academy Services (Norwich) Limited 10 St. Giles Square, London,
UnitedKingdom, WC2H 8AP
75% 75% N/A
2
N/A
2
N/A
2
Academy Services (Oldham)
HoldingsLimited
10 St. Giles Square, London,
UnitedKingdom, WC2H 8AP
75% 75% N/A
2
N/A
2
N/A
2
Academy Services (Oldham) Limited 10 St. Giles Square, London,
UnitedKingdom, WC2H 8AP
75% 75% N/A
2
N/A
2
N/A
2
Academy Services (Sheffield)
HoldingsLimited
10 St. Giles Square, London,
UnitedKingdom, WC2H 8AP
75% 75% N/A
2
N/A
2
N/A
2
Academy Services (Sheffield) Limited 10 St. Giles Square, London,
UnitedKingdom, WC2H 8AP
75% 75% N/A
2
N/A
2
N/A
2
ADAGIA B.V. (Incorporated in Holland) Strawinskylaan 1021, 1077 XX,
Amsterdam, The Netherlands
100% 100% N/A
2
N/A
2
N/A
2
Addiewell Prison (Holdings) Ltd C/O Sodexo Remote Sites Limited 4th
Floor, Exchange No.1, 62 Market Street,
Aberdeen, Scotland, AB11 5PJ
67% 67% N/A
2
N/A
2
N/A
2
Addiewell Prison Ltd C/O Sodexo Remote Sites Limited 4th
Floor, Exchange No.1, 62 Market Street,
Aberdeen, Scotland, AB11 5PJ
33% 33% 31 Mar 23 (1.6) 176.1
Affinity Water Capital Funds Limited The Hub, Tamblin Way, Hatfield,
Hertfordshire, United Kingdom, AL10 9EZ
33% 33% 31 Mar 23 2.6 65.3
Affinity Water East Limited The Hub, Tamblin Way, Hatfield,
Hertfordshire, United Kingdom, AL10 9EZ
33% 33% N/A
2
N/A
2
N/A
2
Affinity Water Finance (2004) PLC The Hub, Tamblin Way, Hatfield,
Hertfordshire, United Kingdom, AL10 9EZ
33% 33% N/A
2
N/A
2
N/A
2
Affinity Water Finance PLC The Hub, Tamblin Way, Hatfield,
Hertfordshire, United Kingdom, AL10 9EZ
33% 33% 31 Mar 23 (1.7) 285.4
Affinity Water Holdco Finance Limited The Hub, Tamblin Way, Hatfield,
Hertfordshire, United Kingdom, AL10 9EZ
33% 33% 31 Mar 23 – 291.7
Affinity Water Holdings Limited The Hub, Tamblin Way, Hatfield,
Hertfordshire, United Kingdom, AL10 9EZ
33% 33% N/A
2
N/A
2
N/A
2
Affinity Water Limited The Hub, Tamblin Way, Hatfield,
Hertfordshire, United Kingdom, AL10 9EZ
33% 33% N/A
2
N/A
2
N/A
2
Affinity Water Pension Trustees Limited The Hub, Tamblin Way, Hatfield,
Hertfordshire, United Kingdom, AL10 9EZ
33% 33% 31 Mar 23 2.2 66.8
Affinity Water Southeast Limited The Hub, Tamblin Way, Hatfield,
Hertfordshire, United Kingdom, AL10 9EZ
37% 37% 31 Mar 23 2,222.0 66,764.0
AGP (2) Limited 8 White Oak Square, London Road,
Swanley, United Kingdom, BR8 7AG
100% 100% N/A
2
N/A
2
N/A
2
AGP Holdings (1) Limited 8 White Oak Square, London Road,
Swanley, United Kingdom, BR8 7AG
100% 100% N/A
2
N/A
2
N/A
2
Albion Healthcare (Doncaster)
Holdings Limited
Third Floor Broad Quay House, Prince
Street, Bristol, United Kingdom, BS1 4DJ
50% 50% N/A
2
N/A
2
N/A
2
Notes to the financial statements continued
For the year ended 31 March 2024
HICL Annual Report 2024 Strategic Report Governance Financials
129
Entity Registered address
Shareholding
Year end
Profit/
(Loss)
£m
Aggregate
Capital &
Reserves
£m31-Mar-24 31-Mar-23
Albion Healthcare (Doncaster) Limited Third Floor, Broad Quay House, Prince
Street, Bristol, United Kingdom, BS1 4DJ
50% 50% N/A
2
N/A
2
N/A
2
Albion Healthcare (Oxford)
HoldingsLimited
Third Floor, Broad Quay House, Prince
Street, Bristol, United Kingdom, BS1 4DJ
25% 25% N/A
2
N/A
2
N/A
2
Albion Healthcare (Oxford) Limited Third Floor, Broad Quay House, Prince
Street, Bristol, United Kingdom, BS1 4DJ
25% 25% N/A
2
N/A
2
N/A
2
Altitude Infra (Incorporated in France) Tour Trinity – 1bis Place de la Défense,
92400 Courbevoie
6% – 31 Dec 23 (23.5) 375.1
Altitude Infrastructure Construction
(Incorporated in France)
1bis Place de la Défense, 92400
Courbevoie, France
6% – 31 Dec 22 48.4 51.2
Altitude Infrastructure Exploitation
(Incorporated in France)
1bis Place de la Défense, 92400
Courbevoie, France
6% – 31 Dec 22 40.9 33.1
Altitude Infrastructure THD
(Incorporated in France)
1bis Place de la Défense, 92400
Courbevoie, France
3% – N/A
2
N/A
2
N/A
2
Amalie Infrastructure Limited Level 7, One Bartholomew Close,
Barts Square, London, United Kingdom,
EC1A 7BL
100% 100% N/A
2
N/A
2
N/A
2
Amalie PFI (UK) Limited Level 7, One Bartholomew Close,
Barts Square, London, United Kingdom,
EC1A 7BL
100% 100% 31 Mar 23 1.8 33.7
Annes Gate Property Plc 8 White Oak Square, London Road,
Swanley, United Kingdom, BR8 7AG
100% 100% N/A
2
N/A
2
N/A
2
Aotearoa Towers GP Limited
(Incorporated in New Zealand)
15 Customs Street West, Auckland
Central, Auckland, 1010, New Zealand
40% 40% N/A
2
N/A
2
N/A
2
Aotearoa Towers Group Limited
Partnership (Incorporated in
New Zealand)
15 Customs Street West, Auckland
Central, Auckland, 1010, New Zealand
40% 40% N/A
2
N/A
2
N/A
2
Aotearoa Towers Hold Limited
Partnership (Incorporated in
New Zealand)
15 Customs Street West, Auckland
Central, Auckland, 1010, New Zealand
40% 40% N/A
2
N/A
2
N/A
2
Ashburton Services (Holdings) Limited Cannon Place, 78 Cannon Street,
London, United Kingdom, EC4N 6AF
100% 100% N/A
2
N/A
2
N/A
2
Ashburton Services Limited Cannon Place, 78 Cannon Street,
London, United Kingdom, EC4N 6AF
100% 100% N/A
2
N/A
2
N/A
2
Aspire Defence Finance plc Aspire Business Centre, Ordnance
Road, Tidworth, United Kingdom,
SP9 7QD
12% 12% N/A
2
N/A
2
N/A
2
Aspire Defence Holdings Limited Aspire Business Centre, Ordnance
Road, Tidworth, United Kingdom,
SP9 7QD
12% 12% N/A
2
N/A
2
N/A
2
Aspire Defence Limited Aspire Business Centre, Ordnance
Road, Tidworth, United Kingdom,
SP9 7QD
12% 12% 31 Dec 22 31.6 16.7
Atlandes 15, avenue Léonard de Vinci, CS60024,
Cedex, Pessac, 33615, France
24% 21% 31 Dec 23 40.1 0.1
Axiom Education (Edinburgh)
HoldingsLimited
Blake House 3 Frayswater Place,
Cowley, Uxbridge, Middlesex,
United Kingdom, UB8 2AD
100% 100% N/A
2
N/A
2
N/A
2
HICL Annual Report 2024
130
Entity Registered address
Shareholding
Year end
Profit/
(Loss)
£m
Aggregate
Capital &
Reserves
£m31-Mar-24 31-Mar-23
Axiom Education (Edinburgh) Limited Blake House 3 Frayswater Place,
Cowley, Uxbridge, Middlesex,
United Kingdom, UB8 2AD
100% 100% N/A
2
N/A
2
N/A
2
Axiom Education (Perth & Kinross)
Holdings Limited
Blake House 3 Frayswater Place,
Cowley, Uxbridge, Middlesex,
UnitedKingdom, UB8 2AD
100% 100% N/A
2
N/A
2
N/A
2
Axiom Education (Perth & Kinross)
Limited
Blake House 3 Frayswater Place,
Cowley, Uxbridge, Middlesex,
UnitedKingdom, UB8 2AD
100% 100% N/A
2
N/A
2
N/A
2
BAAK Blankenburg-Verbinding B.V.
(Incorporated in Holland)
Ringwade 71, 3439 LM Nieuwegein,
TheNetherlands
70% 70% 31 Mar 23 12.0 821.8
Bangor and Nendrum Schools
Services Holdings Limited
50 Bedford Street, Belfast, United
Kingdom, BT2 7FW
26% 26% N/A
2
N/A
2
N/A
2
Bangor and Nendrum Schools
Services Limited
50 Bedford Street, Belfast, United
Kingdom, BT2 7FW
26% 26% N/A
2
N/A
2
N/A
2
BaSS LIFT Holdings Limited 5 The Triangle, Wildwood Drive,
Worcester, Worcestershire,
UnitedKingdom, WR5 2QX
100% 100% N/A
2
N/A
2
N/A
2
Bee Invest 1 91 rue du Faubourg Saint-Honoré
75008 Paris, France
100% 100% N/A
2
N/A
2
N/A
2
Betjeman Holdings JvCO Limited 5th Floor, Kings Place, 90 York Way
London, N1 9AG
22% 22% 31 Mar 23 36.9 157.2
CTRL (UK) Limited 5th Floor Kings Place 90 York Way,
London, N1 9AG
22% 22% N/A
2
N/A
2
N/A
2
Betjeman Holdings Limited 5th Floor, Kings Place, 90 York
WayLondon, United Kingdom, N1 9AG
22% 22% 31 Mar 23 (0.7) 80.9
Betjeman Holdings Midco Limited 5th Floor, Kings Place, 90 York Way,
London, United Kingdom, N1 9AG
22% 22% 31 Mar 23 63.4 320.8
Birmingham and Solihull LIFT (Fundco
1) Limited
5 The Triangle, Wildwood Drive,
Worcester, Worcestershire,
UnitedKingdom, WR5 2QX
60% 60% N/A
2
N/A
2
N/A
2
Birmingham and Solihull LIFT (Fundco
2) Limited
5 The Triangle, Wildwood Drive,
Worcester, Worcestershire,
UnitedKingdom, WR5 2QX
60% 60% N/A
2
N/A
2
N/A
2
Birmingham and Solihull LIFT (Fundco
3) Limited
5 The Triangle, Wildwood Drive,
Worcester, Worcestershire,
UnitedKingdom, WR5 2QX
60% 60% N/A
2
N/A
2
N/A
2
Birmingham and Solihull LIFT (Fundco
4) Limited
5 The Triangle, Wildwood Drive,
Worcester, Worcestershire,
UnitedKingdom, WR5 2QX
60% 60% N/A
2
N/A
2
N/A
2
Birmingham and Solihull Local
Improvement Finance Trust Limited
5 The Triangle, Wildwood Drive,
Worcester, Worcestershire,
UnitedKingdom, WR5 2QX
60% 60% 31 Dec 22 2.0 50.3
Blue Light Holdings Limited Level 7, One Bartholomew Close,
Barts Square, London, United Kingdom,
EC1A 7BL
100% 100% N/A
2
N/A
2
N/A
2
Blue3 (Gloucestershire Fire) (Holdings)
Limited
10 St. Giles Square, London,
UnitedKingdom, WC2H 8AP
75% 75% N/A
2
N/A
2
N/A
2
Notes to the financial statements continued
For the year ended 31 March 2024
21. Related undertakings continued
HICL Annual Report 2024 Strategic Report Governance Financials
131
Entity Registered address
Shareholding
Year end
Profit/
(Loss)
£m
Aggregate
Capital &
Reserves
£m31-Mar-24 31-Mar-23
Blue3 (Gloucestershire Fire) Limited 10 St. Giles Square, London,
UnitedKingdom, WC2H 8AP
75% 75% N/A
2
N/A
2
N/A
2
BNC IXAS SPC Holding B.V
(Incorporated in Holland)
Herikerbergweg 292, 1101CT
Amsterdam, The Netherlands
100% 80% N/A
2
N/A
2
N/A
2
BNC Pi2 Holding B.V. (Incorporated
inHolland)
Runnenburg 9, 381 AZ Bunnik,
TheNetherlands
100% 100% N/A
2
N/A
2
N/A
2
Boldon School (Holdings) Limited Cannon Place, 78 Cannon Street,
London, United Kingdom, EC4N 6AF
100% 100% N/A
2
N/A
2
N/A
2
Boldon School Limited Cannon Place, 78 Cannon Street,
London, United Kingdom, EC4N 6AF
100% 100% N/A
2
N/A
2
N/A
2
Brentwood Healthcare Partnerships
Holdings Limited
10 St. Giles Square, London,
UnitedKingdom, WC2H 8AP
75% 75% N/A
2
N/A
2
N/A
2
Brentwood Healthcare Partnerships
Limited
10 St. Giles Square, London,
UnitedKingdom, WC2H 8AP
75% 75% N/A
2
N/A
2
N/A
2
By Education (Barking) Holdings
Limited
Quadrant House Floor 6, 4 Thomas
More Square, London, UK E1W 1YW
100% 100% N/A
2
N/A
2
N/A
2
By Education (Barking) Limited Quadrant House Floor 6, 4 Thomas
More Square, London, UK E1W 1YW
100% 100% N/A
2
N/A
2
N/A
2
ByCentral Holdings Limited 8 White Oak Square London Road,
Swanley, United Kingdom, BR8 7AG
100% 100% N/A
2
N/A
2
N/A
2
ByCentral Limited 8 White Oak Square London Road,
Swanley, United Kingdom, BR8 7AG
100% 100% N/A
2
N/A
2
N/A
2
ByWest (Holdings) Limited 8 White Oak Square London Road,
Swanley, United Kingdom, BR8 7AG
100% 100% N/A
2
N/A
2
N/A
2
ByWest Limited 8 White Oak Square London Road,
Swanley, United Kingdom, BR8 7AG
100% 100% N/A
2
N/A
2
N/A
2
CAE Aircrew Training Services Plc RAF Benson, Wallingford, Oxfordshire,
United Kingdom, OX10 6AA
22% 22% N/A
2
N/A
2
N/A
2
Catalyst Healthcare (Romford)
Financing Plc
C/O Albany Spc Services Ltd 3rd Floor,
3-5 Charlotte Street, Manchester, UK,
M1 4HB
– 67% N/A
2
N/A
2
N/A
2
Catalyst Healthcare (Romford)
Holdings Limited
C/O Albany Spc Services Ltd 3rd Floor,
3-5 Charlotte Street, Manchester, UK,
M1 4HB
– 67% N/A
2
N/A
2
N/A
2
Catalyst Healthcare (Romford)Limited C/O Albany Spc Services Ltd 3rd Floor,
3-5 Charlotte Street, Manchester, UK,
M1 4HB
– 67% N/A
2
N/A
2
N/A
2
Catalyst Higher Education (Sheffield)
Holdings Limited
C/O Albany Spc Services Ltd 3rd Floor,
3-5 Charlotte Street, Manchester, UK,
M1 4HB
– 50% N/A
2
N/A
2
N/A
2
Catalyst Higher Education (Sheffield) plc C/O Albany Spc Services Ltd 3rd Floor,
3-5 Charlotte Street, Manchester, UK,
M1 4HB
– 50% N/A
2
N/A
2
N/A
2
Central Blackpool PCC Holding
Company Limited
10 St. Giles Square, London,
UnitedKingdom, WC2H 8AP
75% 75% N/A
2
N/A
2
N/A
2
Central Blackpool PCC Limited 10 St. Giles Square, London,
UnitedKingdom, WC2H 8AP
75% 75% N/A
2
N/A
2
N/A
2
HICL Annual Report 2024
132
Entity Registered address
Shareholding
Year end
Profit/
(Loss)
£m
Aggregate
Capital &
Reserves
£m31-Mar-24 31-Mar-23
Children’s Ark Partnerships Holdings
Limited
10 St. Giles Square, London,
UnitedKingdom, WC2H 8AP
50% 50% N/A
2
N/A
2
N/A
2
Children’s Ark Partnerships Limited 10 St. Giles Square, London,
UnitedKingdom, WC2H 8AP
50% 50% N/A
2
N/A
2
N/A
2
Claymore Roads (Holdings) Limited Cannon Place, 78 Cannon Street,
London, United Kingdom, EC4N 6AF
50% 50% N/A
2
N/A
2
N/A
2
Claymore Roads Limited Cannon Place, 78 Cannon Street,
London, United Kingdom, EC4N 6AF
50% 50% N/A
2
N/A
2
N/A
2
Connect M1-A1 Holdings Limited Q14 Quorum Business Park,
Benton Lane, Newcastle Upon Tyne,
United Kingdom, NE12 8BU
30% 30% 31 Mar 23 2.7 35.6
Connect M1-A1 Limited Q14 Quorum Business Park,
Benton Lane, Newcastle Upon Tyne,
United Kingdom, NE12 8BU
30% 30% 31 Mar 23 2.7 35.6
Consort Healthcare (Birmingham)
Funding plc
18 Riversway Business Village,
Navigation Way, Preston,
United Kingdom, PR2 2YP
30% 30% N/A
2
N/A
2
N/A
2
Consort Healthcare (Birmingham)
Holdings Limited
18 Riversway Business Village,
Navigation Way, Preston,
United Kingdom, PR2 2YP
30% 30% N/A
2
N/A
2
N/A
2
Consort Healthcare (Birmingham)
Intermediate Limited
18 Riversway Business Village,
Navigation Way, Preston,
United Kingdom, PR2 2YP
30% 30% N/A
2
N/A
2
N/A
2
Consort Healthcare (Birmingham)
Limited
18 Riversway Business Village,
Navigation Way, Preston,
United Kingdom, PR2 2YP
30% 30% N/A
2
N/A
2
N/A
2
Consort Healthcare (Blackburn)
Funding plc
8 White Oak Square, London Road,
Swanley, Kent, United Kingdom,
BR87AG
100% 100% N/A
2
N/A
2
N/A
2
Consort Healthcare (Blackburn)
Holdings Limited
8 White Oak Square, London Road,
Swanley, Kent, United Kingdom,
BR87AG
100% 100% N/A
2
N/A
2
N/A
2
Consort Healthcare (Blackburn)
Intermediate Limited
8 White Oak Square, London Road,
Swanley, Kent, United Kingdom,
BR87AG
100% 100% N/A
2
N/A
2
N/A
2
Consort Healthcare (Blackburn)
Limited
8 White Oak Square, London Road,
Swanley, Kent, United Kingdom,
BR87AG
100% 100% N/A
2
N/A
2
N/A
2
Consort Healthcare (Mid Yorkshire)
Funding plc
8 White Oak Square, London Road,
Swanley, Kent, United Kingdom,
BR87AG
100% 100% N/A
2
N/A
2
N/A
2
Consort Healthcare (Mid Yorkshire)
Holdings Limited
8 White Oak Square, London Road,
Swanley, Kent, United Kingdom,
BR87AG
100% 100% N/A
2
N/A
2
N/A
2
Consort Healthcare (Mid Yorkshire)
Intermediate Limited
8 White Oak Square, London Road,
Swanley, Kent, United Kingdom,
BR87AG
100% 100% N/A
2
N/A
2
N/A
2
Consort Healthcare (Mid Yorkshire)
Limited
8 White Oak Square, London Road,
Swanley, Kent, United Kingdom,
BR87AG
100% 100% N/A
2
N/A
2
N/A
2
Notes to the financial statements continued
For the year ended 31 March 2024
21. Related undertakings continued
HICL Annual Report 2024 Strategic Report Governance Financials
133
Entity Registered address
Shareholding
Year end
Profit/
(Loss)
£m
Aggregate
Capital &
Reserves
£m31-Mar-24 31-Mar-23
Consort Healthcare (Salford) Holdings
Limited
8 White Oak Square, London Road,
Swanley, Kent, United Kingdom,
BR87AG
50% 50% N/A
2
N/A
2
N/A
2
Consort Healthcare (Salford)
Intermediate Limited
8 White Oak Square, London Road,
Swanley, Kent, United Kingdom,
BR87AG
50% 50% N/A
2
N/A
2
N/A
2
Consort Healthcare (Salford) Plc 8 White Oak Square, London Road,
Swanley, Kent, United Kingdom,
BR87AG
50% 50% N/A
2
N/A
2
N/A
2
Consort Healthcare (Tameside)
Holdings Limited
8 White Oak Square, London Road,
Swanley, Kent, United Kingdom,
BR87AG
50% 50% N/A
2
N/A
2
N/A
2
Consort Healthcare (Tameside)
Intermediate Limited
8 White Oak Square, London Road,
Swanley, Kent, United Kingdom,
BR87AG
50% 50% N/A
2
N/A
2
N/A
2
Consort Healthcare (Tameside) Plc 8 White Oak Square, London Road,
Swanley, Kent, United Kingdom,
BR87AG
50% 50% N/A
2
N/A
2
N/A
2
Criterion Healthcare Holdings Limited 2nd Floor, Toronto Square, Toronto
Street, Leeds, United Kingdom, LS12HJ
36% 36% N/A
2
N/A
2
N/A
2
Criterion Healthcare Plc 2nd Floor, Toronto Square, Toronto
Street, Leeds, United Kingdom, LS1
2HJ
36% 36% N/A
2
N/A
2
N/A
2
Cross London Trains Finance
Company Limited
8 White Oak Square, London Road,
Swanley, Kent, United Kingdom,
BR87AG
6% 6% N/A
2
N/A
2
N/A
2
Cross London Trains Holdco Limited 8 White Oak Square, London Road,
Swanley, Kent, United Kingdom,
BR87AG
6% 6% 30 Jun 23 (11.8) 561.2
Cross London Trains Holdco 2 Limited 8 White Oak Square, London Road,
Swanley, Kent, United Kingdom,
BR87AG
6% 6% 30 Jun 23 32.8 (185.4)
Cross London Trains Limited 8 White Oak Square, London Road,
Swanley, Kent, United Kingdom,
BR87AG
6% 6% 30 Jun 23 36.5 (28.4)
Cross Texas Transmission, LLC (OpCo
Debt) (Incorporated in USA)
251 Little Falls Drive, Wilmington,
NewCastle, DE, 19808
46% – 31 Dec 23 27.9 597.8
CSES (Dorset) Limited Level 7, One Bartholomew Close,
BartsSquare, London, United Kingdom,
EC1A7BL
100% 100% N/A
2
N/A
2
N/A
2
CSM PPP Services (Holdings) Limited
(Incorporated in Ireland)
Suite 54, Morrison Chambers,
32Nassau Street, Dublin 2, Ireland
100% 100% N/A
2
N/A
2
N/A
2
CSM PPP Services Limited
(Incorporated in Ireland)
Suite 54, Morrison Chambers,
32Nassau Street, Dublin 2, Ireland
100% 100% N/A
2
N/A
2
N/A
2
CVS Leasing Limited RAF Benson, Wallingford, Oxfordshire,
United Kingdom, OX10 6AA
87% 87% N/A
2
N/A
2
N/A
2
D3 – Société de la deviation de
Troissereux (Incorporated in France)
21 rue Hippolyte Bayard, PAE du
Haut-Ville, 60000 Beauvais, France
90% 90% N/A
2
N/A
2
N/A
2
HICL Annual Report 2024
134
Entity Registered address
Shareholding
Year end
Profit/
(Loss)
£m
Aggregate
Capital &
Reserves
£m31-Mar-24 31-Mar-23
Daiwater Investment Limited The Hub, Tamblin Way, Hatfield,
Hertfordshire, United Kingdom,
AL10 9EZ
33% 33% 31 Mar 23 9.3 757.2
Derby School Solutions (Holdings)
Limited
Cannon Place, 78 Cannon Street,
London, UK, EC4N 6AF
100% 100% N/A
2
N/A
2
N/A
2
Derby School Solutions Limited Cannon Place, 78 Cannon Street,
London, UK, EC4N 6AF
100% 100% N/A
2
N/A
2
N/A
2
Diamond Transmission Partners BBE
Limited
Mid City Place, 71 High Holborn,
London, United Kingdom, WC1V 6BA
50% 50% N/A
2
N/A
2
N/A
2
Diamond Transmission Partners BBE
(Holdings) Limited
Mid City Place, 71 High Holborn,
London, United Kingdom, WC1V 6BA
50% 50% N/A
2
N/A
2
N/A
2
Diamond Transmission Partners
Galloper (Holdings) Limited
Mid City Place, 71 High Holborn,
London, United Kingdom, WC1V 6BA
49% 49% N/A
2
N/A
2
N/A
2
Diamond Transmission Partners
Galloper Limited
Mid City Place, 71 High Holborn,
London, United Kingdom, WC1V 6BA
49% 49% N/A
2
N/A
2
N/A
2
Diamond Transmission Partners
Hornsea Two (Holdings) Limited
Mid City Place, 71 High Holborn,
London, United Kingdom, WC1V 6BA
75% – N/A
2
N/A
2
N/A
2
Diamond Transmission Partners
Hornsea Two Limited
Mid City Place, 71 High Holborn,
London, United Kingdom, WC1V 6BA
75% – N/A
2
N/A
2
N/A
2
Diamond Transmission Partners RB
(Holdings) Limited
Mid City Place, 71 High Holborn,
London, United Kingdom, WC1V 6BA
50% 50% N/A
2
N/A
2
N/A
2
Diamond Transmission Partners RB
Limited
Mid City Place, 71 High Holborn,
London, United Kingdom, WC1V 6BA
50% 50% N/A
2
N/A
2
N/A
2
Diamond Transmission Partners
Walney Extension (Holdings) Limited
Mid City Place, 71 High Holborn,
London, United Kingdom, WC1V 6BA
29% 29% N/A
2
N/A
2
N/A
2
Diamond Transmission Partners
Walney Extension Limited
Mid City Place, 71 High Holborn,
London, United Kingdom, WC1V 6BA
29% 29% N/A
2
N/A
2
N/A
2
Directroute (Tuam) Holdings Limited M17/M18 Operations Centre, Furzy Park,
Athenry, Co Galway, Ireland
100% 100% N/A
2
N/A
2
N/A
2
Directroute (Tuam) Limited M17/M18 Operations Centre, Furzy Park,
Athenry, Co Galway, Ireland
100% 100% N/A
2
N/A
2
N/A
2
Dorset Emergency Services PPP
(Holdings) Limited
Unit 18 Riversway Business Village,
Navigation Way, Ashton-On-Ribble,
Preston, United Kingdom, PR2 2YP
100% 100% N/A
2
N/A
2
N/A
2
Ealing Care Alliance (Holdings) Limited 10 St. Giles Square, London,
UnitedKingdom, WC2H 8AP
63% 63% N/A
2
N/A
2
N/A
2
Ealing Care Alliance Limited 10 St. Giles Square, London,
UnitedKingdom, WC2H 8AP
63% 63% N/A
2
N/A
2
N/A
2
Ealing Schools Partnerships Holdings
Limited
10 St. Giles Square, London,
UnitedKingdom, WC2H 8AP
50% 50% N/A
2
N/A
2
N/A
2
Ealing Schools Partnerships Limited 10 St. Giles Square, London,
UnitedKingdom, WC2H 8AP
50% 50% N/A
2
N/A
2
N/A
2
Eastbury Park (Holdings) Limited 8 White Oak Square, London Road,
Swanley, Kent, United Kingdom,
BR87AG
50% 50% 31 Dec 22 – 38.1
Notes to the financial statements continued
For the year ended 31 March 2024
21. Related undertakings continued
HICL Annual Report 2024 Strategic Report Governance Financials
135
Entity Registered address
Shareholding
Year end
Profit/
(Loss)
£m
Aggregate
Capital &
Reserves
£m31-Mar-24 31-Mar-23
Eastbury Park Limited 8 White Oak Square, London Road,
Swanley, Kent, United Kingdom,
BR87AG
50% 50% N/A
2
N/A
2
N/A
2
Education 4 Ayrshire (Holdings) Limited 2nd Floor 2 Lochside View, Edinburgh,
United Kingdom, EH12 9DH
– 100% N/A
2
N/A
2
N/A
2
Educations 4 Ayrshire Limited 2nd Floor 2 Lochside View, Edinburgh,
United Kingdom, EH12 9DH
– 100% N/A
2
N/A
2
N/A
2
Emblem Schools (Holdings) Limited 2nd Floor Drum Suite, Saltire Court,
20 Castle Terrace, Edinburgh,
UnitedKingdom, EH1 2EN
30% 30% N/A
2
N/A
2
N/A
2
Emblem Schools Limited 2nd Floor Drum Suite, Saltire Court,
20 Castle Terrace, Edinburgh,
UnitedKingdom, EH1 2EN
30% 30% N/A
2
N/A
2
N/A
2
Enterprise Civic Buildings (Holdings)
Limited
Unit 18 Navigation Way, Ashton-On-Ribble,
Preston, United Kingdom, PR22YP
100% 100% N/A
2
N/A
2
N/A
2
Enterprise Civic Buildings Limited Unit 18 Navigation Way, Ashton-On-Ribble,
Preston, United Kingdom, PR22YP
100% 100% N/A
2
N/A
2
N/A
2
Enterprise Education Conwy Limited Unit 18 Riversway Business Village
Navigation Way, Ashton-On-Ribble,
Preston, United Kingdom, PR2 2YP
90% 90% N/A
2
N/A
2
N/A
2
Enterprise Education Holdings Conwy
Limited
Unit 18 Riversway Business Village
Navigation Way, Ashton-On-Ribble,
Preston, United Kingdom, PR2 2YP
90% 90% N/A
2
N/A
2
N/A
2
Enterprise Healthcare Holdings Limited Unit 18 Riversway Business Village
Navigation Way, Ashton-On-Ribble,
Preston, United Kingdom, PR2 2YP
100% 100% N/A
2
N/A
2
N/A
2
Enterprise Healthcare Limited Unit 18 Riversway Business Village
Navigation Way, Ashton-On-Ribble,
Preston, United Kingdom, PR2 2YP
100% 100% N/A
2
N/A
2
N/A
2
European Healthcare Projects Limited Level 7, One Bartholomew Close,
BartsSquare, London, United Kingdom,
EC1A7BL
100% 100% N/A
2
N/A
2
N/A
2
Falkirk Schools Gateway HC Limited Exchange Tower, 19 Canning Street,
Edinburgh, Scotland, EH3 8EH
29% 29% N/A
2
N/A
2
N/A
2
Falkirk Schools Gateway Limited Exchange Tower, 19 Canning Street,
Edinburgh, Scotland, EH3 8EH
29% 29% N/A
2
N/A
2
N/A
2
FCC (East Ayrshire) Holdings Limited 2nd Floor Drum Suite, Saltire Court,
20 Castle Terrace, Edinburgh,
UnitedKingdom, EH1 2EN
26% 26% N/A
2
N/A
2
N/A
2
FCC (East Ayrshire) Limited 2nd Floor Drum Suite, Saltire Court,
20 Castle Terrace, Edinburgh,
UnitedKingdom, EH1 2EN
26% 26% N/A
2
N/A
2
N/A
2
Fibre Business Infrastructure 2 Limited Level 7, One Bartholomew Close,
Barts Square, London, United Kingdom,
EC1A7BL
100% 100% N/A
2
N/A
2
N/A
2
Galvani Bidco Limited 3rd Floor, South Building, 200
Aldersgate Street, London,
UnitedKingdom, EC1A 4HD
19% 19% 31 Dec 22 141.0 460.3
HICL Annual Report 2024
136
Entity Registered address
Shareholding
Year end
Profit/
(Loss)
£m
Aggregate
Capital &
Reserves
£m31-Mar-24 31-Mar-23
Galvani JVCo Limited 3rd Floor, South Building,
200Aldersgate Street, London,
United Kingdom, EC1A 4HD
19% 19% N/A
2
N/A
2
N/A
2
Galvani Midco Limited 3rd Floor, South Building,
200Aldersgate Street, London,
United Kingdom, EC1A HD
19% 19% N/A
2
N/A
2
N/A
2
GGB inBalans B.V (Incorporated in
Holland)
Hagenweg 3 c, 4131 LX,Vianen,
TheNetherlands
85% 85% N/A
2
N/A
2
N/A
2
GGB inBalans Investco B.V
(Incorporated in Holland)
Hagenweg 3 c, 4131 LX,Vianen,
TheNetherlands
100% 100% N/A
2
N/A
2
N/A
2
Glasgow Healthcare Facilities
(Holdings) Limited
2nd Floor Drum Suite, Saltire Court,
20 Castle Terrace, Edinburgh,
UnitedKingdom, EH1 2EN
25% 25% N/A
2
N/A
2
N/A
2
Glasgow Healthcare Facilities Limited 2nd Floor Drum Suite, Saltire Court,
20 Castle Terrace, Edinburgh,
UnitedKingdom, EH1 2EN
25% 25% N/A
2
N/A
2
N/A
2
GO-PASS Mobility Services LLC
(Incorporated in USA)
2711 Centerville Road, Suite 400,
Wilmington, Delaware 19808, USA
– 33% N/A
2
N/A
2
N/A
2
Great Basin Investment, LLC
(Incorporated in USA)
251 Little Falls Drive, Wilmington,
New Castle, DE, 19808, USA
45% – N/A
2
N/A
2
N/A
2
Great Basin Transmission Holdings,
LLC ("GBTH") (Incorporated in USA)
251 Little Falls Drive, Wilmington,
New Castle, DE, 19808, USA
45% – N/A
2
N/A
2
N/A
2
Great Basin Transmission South, LLC
("GBTS") (OpCo Debt) (Incorporated
in USA)
"FL 21, 1 Tower Center Blvd
East Brunswick, NJ 08816-1145"
45% –
31 Dec 23 10.0 370.5
GT NEPS (Holdings) Limited Blake House 3 Frayswater Place,
Cowley, Uxbridge, Middlesex,
United Kingdom, UB8 2AD
90% – N/A
2
N/A
2
N/A
2
GT NEPS Limited Blake House 3 Frayswater Place,
Cowley, Uxbridge, Middlesex,
United Kingdom, UB8 2AD
90% – N/A
2
N/A
2
N/A
2
Green Timbers GP Limited
(Incorporated in Canada)
1060 – 1500 West Georgia Street,
Vancouver, BC, V6G 2Z6, Canada
100% 100% 31 Mar 24 9.6 70.3
Green Timbers Holdings Limited
(Incorporated in Canada)
1060 – 1500 West Georgia Street,
Vancouver, BC, V6G 2Z6, Canada
100% 100% N/A
2
N/A
2
N/A
2
Green Timbers Limited Partnership
(Incorporated in Canada)
1060 – 1500 West Georgia Street,
Vancouver, BC, V6G 2Z6, Canada
100% 100% 31 Mar 24 8.5 69.2
H&D Support Services (Holdings)
Limited
Cannon Place, 78 Cannon Street,
London, United Kingdom, EC4N 6AF
100% 100% N/A
2
N/A
2
N/A
2
H&D Support Services Limited Cannon Place, 78 Cannon Street,
London, United Kingdom, EC4N 6AF
100% 100% N/A
2
N/A
2
N/A
2
Hadfield Healthcare Partnerships
Holding Limited
10 St. Giles Square, London,
United Kingdom, WC2H 8AP
75% 75% N/A
2
N/A
2
N/A
2
Hadfield Healthcare Partnerships
Limited
10 St. Giles Square, London,
UnitedKingdom, WC2H 8AP
75% 75% N/A
2
N/A
2
N/A
2
HDM Schools Solution Limited Collins House, Rutland Square,
Edinburgh, Scotland, EH1 2AA
75% 75% N/A
2
N/A
2
N/A
2
Notes to the financial statements continued
For the year ended 31 March 2024
21. Related undertakings continued
HICL Annual Report 2024 Strategic Report Governance Financials
137
Entity Registered address
Shareholding
Year end
Profit/
(Loss)
£m
Aggregate
Capital &
Reserves
£m31-Mar-24 31-Mar-23
HDM Schools Solutions (Holdings)
Limited
Collins House, Rutland Square,
Edinburgh, Scotland, EH1 2AA
75% 75% N/A
2
N/A
2
N/A
2
Healthcare Centres PPP Holdings
Limited (Incorporated in Ireland)
Suite 54 Morrison Chambers,
32 Nassau Street, Dublin 2, Ireland
60% 60% N/A
2
N/A
2
N/A
2
Healthcare Centres PPP Limited
(Incorporated in Ireland)
Suite 54 Morrison Chambers,
32 Nassau Street, Dublin 2, Ireland
60% 60% 31 Dec 22 (1.2) 152.8
Helix Acquisition Limited 5th Floor, Kings Place, 90 York Way,
London, United Kingdom, N1 9AG
22% 22% 31 Mar 23 34.8 (2.2)
Helix Bufferco Limited 5th Floor, Kings Place, 90 York Way,
London, United Kingdom, N1 9AG
22% 22% 31 Mar 23 34.8 (2.1)
Helix Holdings Limited (Incorporated
in Jersey)
5th Floor, Kings Place, 90 York Way,
London, United Kingdom, N1 9AG
22% 22% N/A
2
N/A
2
N/A
2
Helix MidCo Limited 5th Floor, Kings Place, 90 York Way,
London, United Kingdom, N1 9AG
22% 22% 31 Mar 23 34.8 (2.1)
HICL Infrastructure (Green Timbers)
Inc (Incorporated in Canada)
1060 – 1500 West Georgia Street,
Vancouver, BC, V6G 2Z6, Canada
100% 100% N/A
2
N/A
2
N/A
2
HICL Infrastructure 2 SARL
1
(Incorporated in Luxembourg)
6, rue Adolphe, L-1116, Luxembourg 100% 100% 31 Mar 23 201.4 1,515.6
HICL Infrastructure 3 SARL
(Incorporated in Luxembourg)
42, Rue de la Vallee, L-2661,
Luxembourg
100% 100% N/A
2
N/A
2
N/A
2
HICL Infrastructure Canada Inc.
(Incorporated in Canada)
Suite 2600, Three Bentall Centre,
PO BOX 49314, 595 Burrard Street,
Vancouver BC V7X 1L3, Canada
100% 100% 31 Mar 23 12.6 101.2
High Speed One (HS1) Limited 5th Floor, Kings Place, 90 York Way,
London, United Kingdom, N1 9AG
22% 22% N/A
2
N/A
2
N/A
2
High Speed Rail Finance (1) PLC 5th Floor, Kings Place, 90 York Way,
London, United Kingdom, N1 9AG
22% 22% N/A
2
N/A
2
N/A
2
High Speed Rail Finance PLC 5th Floor, Kings Place, 90 York Way,
London, United Kingdom, N1 9AG
22% 22% N/A
2
N/A
2
N/A
2
Highway Management M80
Investment Limited
Part First Floor, 1 Grenfell
Road, Maidenhead, Berkshire,
UnitedKingdom, SL6 1HN
50% 50% N/A
2
N/A
2
N/A
2
Highway Management (Scotland)
Holdings Limited
Part First Floor, 1 Grenfell
Road, Maidenhead, Berkshire,
UnitedKingdom, SL6 1HN
50% 50% N/A
2
N/A
2
N/A
2
Highway Management (Scotland)
Limited
Part First Floor, 1 Grenfell
Road, Maidenhead, Berkshire,
UnitedKingdom, SL6 1HN
50% 50% N/A
2
N/A
2
N/A
2
Holdfast Training Services Limited Building 29, Hq Rsme Brompton
Barracks, Chatham, Kent,
UnitedKingdom, ME4 4UG
100% 100% N/A
2
N/A
2
N/A
2
HS1 Limited 5th Floor, Kings Place, 90 York Way,
London, United Kingdom, N1 9AG
22% 22% 31 Mar 23 36.9 157.2
Information Resources (Oldham)
Holdings Limited
10 St. Giles Square, London,
United Kingdom, WC2H 8AP
75% 75% N/A
2
N/A
2
N/A
2
Information Resources (Oldham)
Investment Limited
10 St. Giles Square, London,
United Kingdom, WC2H 8AP
75% 75% N/A
2
N/A
2
N/A
2
HICL Annual Report 2024
138
Entity Registered address
Shareholding
Year end
Profit/
(Loss)
£m
Aggregate
Capital &
Reserves
£m31-Mar-24 31-Mar-23
Information Resources (Oldham)
Limited
10 St. Giles Square, London,
United Kingdom, WC2H 8AP
75% 75% N/A
2
N/A
2
N/A
2
InfraRed Towers Investments Limited Level 7, One Bartholomew Close,
Barts Square, London, United Kingdom,
EC1A7BL
100% 100% 31 Mar 23 5.7 279.8
Infraspeed (Holdings) B.V.
(Incorporated in Holland)
2132 LS Hoofddorp, Taurusavenue 155,
The Netherlands
43% 43% 31 Dec 23 13.1 46.0
Infraspeed B.V. (Incorporated in
Holland)
2132 LS Hoofddorp, Taurusavenue 155,
The Netherlands
43% 43% 31 Dec 23 44.8 45.0
Infrastructure Central Limited Level 7, One Bartholomew Close,
Barts Square, London, United Kingdom,
EC1A7BL
100% 100% 31 Mar 23 (11.3) 265.7
Infrastructure Investment Limited
Partnership
Level 7, One Bartholomew Close,
Barts Square, London, United Kingdom,
EC1A7BL
100% 100% 31 Mar 23 202.4 3,350.4
Infrastructure Investments (A63)
Holdings Limited
Level 7, One Bartholomew Close,
Barts Square, London, United Kingdom,
EC1A7BL
100% 100% 31 Mar 23 25.2 214.1
Infrastructure Investments (Affinity)
Limited
Level 7, One Bartholomew Close,
Barts Square, London, United Kingdom,
EC1A7BL
91% 91% 31 Mar 23 (13.5) 302.3
Infrastructure Investments Aria Holdco
Limited
Level 7, One Bartholomew Close,
Barts Square, London, United Kingdom,
EC1A7BL
100% 100% N/A
2
N/A
2
N/A
2
Infrastructure Investments Aria TopCo
Limited
Level 7, One Bartholomew Close,
Barts Square, London, United Kingdom,
EC1A7BL
100% 100% N/A
2
N/A
2
N/A
2
Infrastructure Investments (Australia)
LLP
Level 7, One Bartholomew Close,
Barts Square, London, United Kingdom,
EC1A7BL
100% 100% 31 Mar 23
(31.5) 127.2
Infrastructure Investments (Bond)
Holdings LLP
Level 7, One Bartholomew Close,
Barts Square, London, United Kingdom,
EC1A7BL
100% 100% N/A
2
N/A
2
N/A
2
Infrastructure Investments (Colorado)
Limited
Level 7, One Bartholomew Close,
Barts Square, London, United Kingdom,
EC1A7BL
100% 100% 31 Mar 23 2.5 244.2
Infrastructure Investments (Defence)
Limited
Level 7, One Bartholomew Close,
Barts Square, London, United Kingdom,
EC1A7BL
100% 100% 31 Mar 23 18.3 97.7
Infrastructure Investments (Defence)
Holdings Limited
Level 7, One Bartholomew Close,
Barts Square, London, United Kingdom,
EC1A7BL
100% 100% 31 Mar 23 14.8 97.7
Infrastructure Investments (Germany)
Limited
Level 7, One Bartholomew Close,
Barts Square, London, United Kingdom,
EC1A7BL
100% 100% N/A
2
N/A
2
N/A
2
Infrastructure Investments (Health)
Limited
Level 7, One Bartholomew Close,
Barts Square, London, United Kingdom,
EC1A7BL
100% 100% N/A
2
N/A
2
N/A
2
Notes to the financial statements continued
For the year ended 31 March 2024
21. Related undertakings continued
HICL Annual Report 2024 Strategic Report Governance Financials
139
Entity Registered address
Shareholding
Year end
Profit/
(Loss)
£m
Aggregate
Capital &
Reserves
£m31-Mar-24 31-Mar-23
Infrastructure Investments (HSL ZUID)
Limited
Level 7, One Bartholomew Close,
Barts Square, London, United Kingdom,
EC1A7BL
100% 100% 31 Mar 23 26.0 66.7
Infrastructure Investments (No 7)
Limited
Level 7, One Bartholomew Close,
Barts Square, London, United Kingdom,
EC1A7BL
100% 100% N/A
2
N/A
2
N/A
2
Infrastructure Investments (No 8)
Limited
Level 7, One Bartholomew Close,
Barts Square, London, United Kingdom,
EC1A7BL
100% 100% N/A
2
N/A
2
N/A
2
Infrastructure Investments OFTO 1
Limited
Level 7, One Bartholomew Close,
Barts Square, London, United Kingdom,
EC1A7BL
100% 100% N/A
2
N/A
2
N/A
2
Infrastructure Investments (Portal) GP
Limited
Level 7, One Bartholomew Close,
Barts Square, London, United Kingdom,
EC1A7BL
100% 100% N/A
2
N/A
2
N/A
2
Infrastructure Investments (Portal)
Limited
Level 7, One Bartholomew Close,
Barts Square, London, United Kingdom,
EC1A7BL
100% 100% N/A
2
N/A
2
N/A
2
Infrastructure Investments (Portal) L.P. Level 7, One Bartholomew Close,
Barts Square, London, United Kingdom,
EC1A7BL
100% 100% 31 Mar 23 7.0 53.5
Infrastructure Investments
(Portsmouth) Limited
Level 7, One Bartholomew Close, Barts
Square, London, United Kingdom,
EC1A7BL
100% 100% 31 Mar 23 16.5 86.3
Infrastructure Investments (Roads)
Limited
Level 7, One Bartholomew Close,
Barts Square, London, United Kingdom,
EC1A7BL
100% 100% N/A
2
N/A
2
N/A
2
Infrastructure Investments (TNT)
Limited
Level 7, One Bartholomew Close,
Barts Square, London, United Kingdom,
EC1A7BL
100% 100% N/A
2
N/A
2
N/A
2
Infrastructure Investments Betjeman
(Holdco) Limited
Level 7, One Bartholomew Close,
Barts Square, London, United Kingdom,
EC1A7BL
100% 100% N/A
2
N/A
2
N/A
2
Infrastructure Investments Betjeman
Limited
Level 7, One Bartholomew Close,
Barts Square, London, United Kingdom,
EC1A7BL
62% 62% N/A
2
N/A
2
N/A
2
Infrastructure Investments Galvani
Limited
Level 7, One Bartholomew Close,
Barts Square, London, United Kingdom,
EC1A7BL
100% 100% 31 Mar 23 3.2 61.1
Infrastructure Investments Group
Limited
Level 7, One Bartholomew Close,
Barts Square, London, United Kingdom,
EC1A7BL
100% 100% 31 Mar 23 36.5 1,563.5
Infrastructure Investments Holdings
Limited
Level 7, One Bartholomew Close,
Barts Square, London, United Kingdom,
EC1A7BL
100% 100% 31 Mar 23 (6.2) 429.2
Infrastructure Investments NWP (US)
LLC (Incorporated in USA)
701 Northwest Parkway, Broomfield,
CO80023, USA
– 100% N/A
2
N/A
2
N/A
2
Infrastructure Investments OFTO 2
Limited
Level 7, One Bartholomew Close,
Barts Square, London, United Kingdom,
EC1A7BL
100% 100% N/A
2
N/A
2
N/A
2
HICL Annual Report 2024
140
Entity Registered address
Shareholding
Year end
Profit/
(Loss)
£m
Aggregate
Capital &
Reserves
£m31-Mar-24 31-Mar-23
Infrastructure Investments PPP OFTO
Holdings LLP
Level 7, One Bartholomew Close,
BartsSquare, London, United Kingdom,
EC1A7BL
100% 100% 31 Mar 23 (31.3) 114.3
Infrastructure Investments PPP OFTO
LLP
Level 7, One Bartholomew Close,
BartsSquare, London, United Kingdom,
EC1A7BL
100% 100% 31 Mar 23 0.0 0.2
Infrastructure Investments PPP OFTO
Midco LLP
Level 7, One Bartholomew Close,
BartsSquare, London, United Kingdom,
EC1A7BL
100% 100% 31 Mar 23 31.4 114.2
Infrastructure Investments Roads
Management Limited
Level 7, One Bartholomew Close,
BartsSquare, London, United Kingdom,
EC1A7BL
100% 100% N/A
2
N/A
2
N/A
2
Infrastructure Investments TNT (US)
LLC, (Incorporated in USA)
Level 7, One Bartholomew Close,
BartsSquare, London, United Kingdom,
EC1A7BL
100% 100% 31 Dec 23 1.5 65.5
Integrated Bradford Holco One Limited 3rd Floor 3 – 5 Charlotte Street,
Manchester, UK, M1 4HB
– 48% N/A
2
N/A
2
N/A
2
Integrated Bradford Holdco Two
Limited
3rd Floor 3 – 5 Charlotte Street,
Manchester, UK, M1 4HB
– 48% N/A
2
N/A
2
N/A
2
Integrated Bradford SPV One Limited 3rd Floor 3 – 5 Charlotte Street,
Manchester, UK, M1 4HB
– 62% N/A
2
N/A
2
N/A
2
Integrated Bradford SPV Two Limited 3rd Floor 3 – 5 Charlotte Street,
Manchester, UK, M1 4HB
– 62% N/A
2
N/A
2
N/A
2
Ivywood Colleges Holdings Limited 7 Queens Road, Belfast,
United Kingdom, BT3 9DT
75% 75% N/A
2
N/A
2
N/A
2
Ivywood Colleges Limited 7 Queens Road, Belfast,
United Kingdom, BT3 9DT
75% 75% N/A
2
N/A
2
N/A
2
Ivywood Colleges Parking Limited 7 Queens Road, Belfast,
United Kingdom, BT3 9DT
75% 75% N/A
2
N/A
2
N/A
2
IXAS Zuid-Oost B.V. (Incorporated in
Holland)
Langbroekdreef 18, 1108 EB,
Amsterdam
25% 25% N/A
2
N/A
2
N/A
2
Kajima Darlington Schools Holding
Limited
10 St. Giles Square, London,
UnitedKingdom, WC2H 8AP
50% 50% N/A
2
N/A
2
N/A
2
Kajima Darlington Schools Limited 10 St. Giles Square, London,
UnitedKingdom, WC2H 8AP
50% 50% N/A
2
N/A
2
N/A
2
Kajima Haverstock Holding Limited 10 St. Giles Square, London,
UnitedKingdom, WC2H 8AP
50% 50% N/A
2
N/A
2
N/A
2
Kajima Haverstock Limited 10 St. Giles Square, London,
UnitedKingdom, WC2H 8AP
50% 50% N/A
2
N/A
2
N/A
2
Kajima Newcastle Libraries Holding
Limited
10 St. Giles Square, London,
UnitedKingdom, WC2H 8AP
50% 50% N/A
2
N/A
2
N/A
2
Kajima Newcastle Libraries Limited 10 St. Giles Square, London,
UnitedKingdom, WC2H 8AP
50% 50% N/A
2
N/A
2
N/A
2
Kajima North Tyneside Holdings
Limited
10 St. Giles Square, London,
UnitedKingdom, WC2H 8AP
50% 50% N/A
2
N/A
2
N/A
2
Notes to the financial statements continued
For the year ended 31 March 2024
21. Related undertakings continued
HICL Annual Report 2024 Strategic Report Governance Financials
141
Entity Registered address
Shareholding
Year end
Profit/
(Loss)
£m
Aggregate
Capital &
Reserves
£m31-Mar-24 31-Mar-23
Kajima North Tyneside Limited 10 St. Giles Square, London,
UnitedKingdom, WC2H 8AP
50% 50% N/A
2
N/A
2
N/A
2
Kent Education Partnership (Holdings)
Limited
Part First Floor, 1 Grenfell
Road, Maidenhead, Berkshire,
UnitedKingdom, SL6 1HN
50% 50% N/A
2
N/A
2
N/A
2
Kent Education Partnership Limited Part First Floor, 1 Grenfell
Road, Maidenhead, Berkshire,
UnitedKingdom, SL6 1HN
50% 50% N/A
2
N/A
2
N/A
2
Kluster (Incorporated in France) 1 avenue Eugène Freyssinet, 78280
Guyancourt, France
85% 85% N/A
2
N/A
2
N/A
2
Liaison Infrastructure Routiere
Investissement (Incorporated in
France)
91, rue du Faubourg Saint-Honoré
75008 Paris, France
100% 100% N/A
2
N/A
2
N/A
2
Mahi Tahi Towers Investment Pty
Limited (Incorporated in Australia)
Level 4, Suite 4, 225 George Street,
Sydney NSW, 2000, Australia
100% 100% 30 Jun 23 0.0 197.8
Mahi Tahi Towers Limited
(Incorporated in New Zealand)
15 Customs Street West, Auckland
Central, Auckland, 1010, New Zealand
40% 40% 31 Mar 23 (8.1) 493.8
Manchester Housing (MP Equity)
Limited
Level 7, One Bartholomew Close,
BartsSquare, London, United Kingdom,
EC1A7BL
100% 100% N/A
2
N/A
2
N/A
2
Manchester Housing (MP Subdebt)
Limited
Level 7, One Bartholomew Close,
BartsSquare, London, United Kingdom,
EC1A7BL
100% 100% N/A
2
N/A
2
N/A
2
Manchester Housing (MP TopCo)
Limited
Level 7, One Bartholomew Close,
BartsSquare, London, United Kingdom,
EC1A7BL
100% 100% N/A
2
N/A
2
N/A
2
Manchester School Services Holdings
Limited
Cannon Place, 78 Cannon Street,
London, United Kingdom, EC4N 6AF
76% 76% N/A
2
N/A
2
N/A
2
Manchester School Services Limited Cannon Place, 78 Cannon Street,
London, United Kingdom, EC4N 6AF
76% 76% N/A
2
N/A
2
N/A
2
Medway Community Estates Limited 55 Station Road, Beaconsfield,
Buckinghamshire, United Kingdom,
HP91QL
60% 60% N/A
2
N/A
2
N/A
2
Medway Fundco Limited 55 Station Road, Beaconsfield,
Buckinghamshire, United Kingdom,
HP91QL
60% 60% N/A
2
N/A
2
N/A
2
Medway Fundco Two Limited 55 Station Road, Beaconsfield,
Buckinghamshire, United Kingdom,
HP91QL
60% 60% N/A
2
N/A
2
N/A
2
Metier Healthcare Limited 4 Estates Yard, Wellhouse Lane,
Barnet, Hertfordshire,
United Kingdom, EN5 3DG
100% 100% N/A
2
N/A
2
N/A
2
Metier Holdings Limited 4 Estates Yard, Wellhouse Lane,
Barnet, Hertfordshire,
United Kingdom, EN5 3DG
100% 100% N/A
2
N/A
2
N/A
2
Minerva Education and Training
(Holdings) Limited
3rd Floor, 3-5 Charlotte Street,
Manchester, UK, M1 4HB
45% 45% N/A
2
N/A
2
N/A
2
Minerva Education and Training
Limited
3rd Floor, 3-5 Charlotte Street,
Manchester, United Kingdom, M1 4HB
45% 45% N/A
2
N/A
2
N/A
2
HICL Annual Report 2024
142
Entity Registered address
Shareholding
Year end
Profit/
(Loss)
£m
Aggregate
Capital &
Reserves
£m31-Mar-24 31-Mar-23
Motorway Infrastructure SAS 92 Avenue de Wagram 75017 Paris,
France
100% 70% 31 Dec 23 40.0 0.1
New Intermediate Care Limited Level 7, One Bartholomew Close,
BartsSquare, London, United Kingdom,
EC1A7BL
100% 100% N/A
2
N/A
2
N/A
2
New Schools Investment Company
Limited
Level 7, One Bartholomew Close,
BartsSquare, London, United Kingdom,
EC1A7BL
100% 100% N/A
2
N/A
2
N/A
2
Newham Learning Partnership (Hold
Co) Limited
Third Floor Broad Quay House,
Prince Street, Bristol, United Kingdom,
BS1 4DJ
80% 80% N/A
2
N/A
2
N/A
2
Newham Learning Partnership (Project
Co) Limited
Third Floor Broad Quay House,
Prince Street, Bristol, United Kingdom,
BS1 4DJ
80% 80% N/A
2
N/A
2
N/A
2
Newham Learning Partnership (PSP)
Limited
Level 7, One Bartholomew Close,
BartsSquare, London, United Kingdom,
EC1A7BL
100% 100% N/A
2
N/A
2
N/A
2
Newham Transformation Partnership
Limited
Third Floor Broad Quay House,
Prince Street, Bristol, United Kingdom,
BS1 4DJ
80% 80% N/A
2
N/A
2
N/A
2
Newport School Solutions Limited Astral House, Imperial Way, Watford,
Hertfordshire, United Kingdom,
WD244WW
100% 100% N/A
2
N/A
2
N/A
2
Newport School Solutions (Holdings)
Limited
Astral House, Imperial Way, Watford,
Hertfordshire, United Kingdom,
WD244WW
100% 100% N/A
2
N/A
2
N/A
2
Newton Abbot Health Holdings
Limited
Unit 18 Riversway Business Village
Navigation Way, Ashton-On-Ribble,
Preston, United Kingdom, PR2 2YP
100%
100% N/A
2
N/A
2
N/A
2
Newton Abbot Health Limited Unit 18 Riversway Business Village
Navigation Way, Ashton-On-Ribble,
Preston, United Kingdom, PR2 2YP
100% 100% N/A
2
N/A
2
N/A
2
Nordie 2 Limited Level 7 One Bartholomew Close, Barts
Square, London, United Kingdom,
EC1A 7BL
39% 39% 31 Dec 23 9.9 139.1
Nordie France Limited (Incorporated
in France)
92 avenue de Wagram, 75017 Paris,
France
39% – 31 Dec 23 (6.4) 144.8
Nordie Limited Level 7 One Bartholomew Close, Barts
Square, London, United Kingdom,
EC1A 7BL
39% 39% 31 Dec 23 9.9 139.1
Northwest Connect General
Partnership (Incorporated in Canada)
10060 Jasper Avenue, Suite 1201,
Edmonton, AB T5J 4E5, Canada
50% 50% 31 Dec 23 8.5 48.4
Northwest Connect Holdings Inc.
(Incorporated in Canada)
10060 Jasper Avenue, Suite 1201,
Edmonton, AB T5J 4E5, Canada
50% 50% N/A
2
N/A
2
N/A
2
Northwest Connect Inc. (Incorporated
in Canada)
10060 Jasper Avenue, Suite 1201,
Edmonton, AB T5J 4E5, Canada
50% 50% N/A
2
N/A
2
N/A
2
Northwest Connect Investment Inc.
(Incorporated in Canada)
10060 Jasper Avenue, Suite 1201,
Edmonton, AB T5J 4E5, Canada
50% 50% N/A
2
N/A
2
N/A
2
Notes to the financial statements continued
For the year ended 31 March 2024
21. Related undertakings continued
3
HICL Annual Report 2024 Strategic Report Governance Financials
143
Entity Registered address
Shareholding
Year end
Profit/
(Loss)
£m
Aggregate
Capital &
Reserves
£m31-Mar-24 31-Mar-23
Northwest Parkway LLC (Incorporated
in USA)
701 Northwest Parkway, Broomfield,
CO 80023, USA
– 33% 31 Dec 23 (1.2) 248.4
NWP Holdco LLC (Incorporated in
USA)
701 Northwest Parkway, Broomfield,
CO 80023, USA
– 33% N/A
2
N/A
2
N/A
2
Ochre Solutions (Holdings) Limited Third Floor Broad Quay House,
PrinceStreet, Bristol, United Kingdom,
BS1 4DJ
40% 40% N/A
2
N/A
2
N/A
2
Ochre Solutions Limited Third Floor Broad Quay House,
Prince Street, Bristol, United Kingdom,
BS1 4DJ
40% 40% N/A
2
N/A
2
N/A
2
Paradigm (Sheffield BSF) Holdings
Limited
Third Floor Broad Quay House,
Prince Street, Bristol, United Kingdom,
BS1 4DJ
59% 59% N/A
2
N/A
2
N/A
2
Paradigm (Sheffield BSF) Limited Third Floor Broad Quay House,
Prince Street, Bristol, United Kingdom,
BS1 4DJ
59% 59% N/A
2
N/A
2
N/A
2
PFF (Dorset) Limited Unit 18 Riversway Business Village
Navigation Way, Ashton-On-Ribble,
Preston, United Kingdom, PR2 2YP
100% 100% N/A
2
N/A
2
N/A
2
Pi2 B.V. (Incorporated in Holland) Ringwade 71, 3439 LM Nieuwegein,
TheNetherlands
100% 100% N/A
2
N/A
2
N/A
2
Pi2 Holding B.V. (Incorporated in
Holland)
Ringwade 71, 3439 LM Nieuwegein,
TheNetherlands
100% 100% N/A
2
N/A
2
N/A
2
PIP Infrastructure Investments
(Southmead) Ltd
Cannon Place, 78 Cannon Street,
London, United Kingdom, EC4N 6AF
25% 25% N/A
2
N/A
2
N/A
2
Platon- Saclay 1 Avenue Eugène Freyssinet, 78280
Guyancourt, France
85% 85% N/A
2
N/A
2
N/A
2
PPP Services (North Ayrshire) Holdings
Limited
Infrastructure Managers Limited,
2ndFloor, 11 Thistle Street, Edinburgh,
EH21DF
26% 26% N/A
2
N/A
2
N/A
2
PPP Services (North Ayrshire) Limited Infrastructure Managers Limited,
2ndFloor, 11 Thistle Street, Edinburgh,
EH21DF
26% 26% N/A
2
N/A
2
N/A
2
Prima 200 Fundco No 1 Limited 5 The Triangle, Wildwood Drive,
Worcester, Worcestershire,
UnitedKingdom, WR5 2QX
60% 60% N/A
2
N/A
2
N/A
2
Prima 200 Fundco No 2 Limited 5 The Triangle, Wildwood Drive,
Worcester, Worcestershire,
UnitedKingdom, WR5 2QX
60% 60% N/A
2
N/A
2
N/A
2
Prima 200 Fundco No 3 Limited 5 The Triangle, Wildwood Drive,
Worcester, Worcestershire,
UnitedKingdom, WR5 2QX
60% 60% N/A
2
N/A
2
N/A
2
Prima 200 Limited 5 The Triangle, Wildwood Drive,
Worcester, Worcestershire,
UnitedKingdom, WR5 2QX
60% 60% N/A
2
N/A
2
N/A
2
Prime Infrastructure Investments
Limited
5 The Triangle, Wildwood Drive,
Worcester, Worcestershire,
UnitedKingdom, WR5 2QX
100% 100% N/A
2
N/A
2
N/A
2
HICL Annual Report 2024
144
Entity Registered address
Shareholding
Year end
Profit/
(Loss)
£m
Aggregate
Capital &
Reserves
£m31-Mar-24 31-Mar-23
Prime LIFT Investments Limited 5 The Triangle, Wildwood Drive,
Worcester, Worcestershire,
UnitedKingdom, WR5 2QX
100% 100% N/A
2
N/A
2
N/A
2
Prisma 21 (Incorporated in France) 1 avenue Eugène Freyssinet, 78280
Guyancourt, France
85% 85% N/A
2
N/A
2
N/A
2
Prospect Healthcare (Hinchingbrooke)
Holdings Limited
8 White Oak Square, London Road,
Swanley, Kent, United Kingdom,
BR87AG
75% 75% N/A
2
N/A
2
N/A
2
Prospect Healthcare (Hinchingbrooke)
Limited
8 White Oak Square, London Road,
Swanley, Kent, United Kingdom,
BR87AG
75% 75% N/A
2
N/A
2
N/A
2
Ravensbourne Health Services
Holdings Limited
Cannon Place, 78 Cannon Street,
London, United Kingdom, EC4N 6AF
100% 100% N/A
2
N/A
2
N/A
2
Ravensbourne Health Services
(Holdings) Limited
Cannon Place, 78 Cannon Street,
London, United Kingdom, EC4N 6AF
100% 100% N/A
2
N/A
2
N/A
2
RBLH Limited Level 7, One Bartholomew Close,
BartsSquare, London, United Kingdom,
EC1A7BL
100% 100% N/A
2
N/A
2
N/A
2
RBLH Medway Investment Company
Limited
Level 7, One Bartholomew Close,
BartsSquare, London, United Kingdom,
EC1A7BL
100% 100% N/A
2
N/A
2
N/A
2
RBLH RWF Investment Company
Limited
Level 7, One Bartholomew Close,
BartsSquare, London, United Kingdom,
EC1A7BL
100% 100% N/A
2
N/A
2
N/A
2
Redwood Partnership Ventures 2
Limited
10 St. Giles Square, London,
UnitedKingdom, WC2H 8AP
75% 75% N/A
2
N/A
2
N/A
2
Redwood Partnership Ventures 3
Limited
10 St. Giles Square, London,
UnitedKingdom, WC2H 8AP
75% 75% N/A
2
N/A
2
N/A
2
Redwood Partnership Ventures
Limited
10 St. Giles Square, London,
UnitedKingdom, WC2H 8AP
50% 50% N/A
2
N/A
2
N/A
2
Renaissance Miles Platting Holding
Company Limited
3rd Floor Suite 6c, Sevendale House,
5-7 Dale Street, Manchester,
United Kingdom, M1 1JB
50% 50% N/A
2
N/A
2
N/A
2
Renaissance Miles Platting Limited 3rd Floor Suite 6c, Sevendale
House, 5-7 Dale Street, Manchester,
UnitedKingdom, M1 1JB
50% 50% N/A
2
N/A
2
N/A
2
RL Investment Limited Level 7, One Bartholomew Close,
BartsSquare, London, United Kingdom,
EC1A7BL
100% 100% N/A
2
N/A
2
N/A
2
Road Infrastructure (Ireland) Limited Level 7, One Bartholomew Close,
BartsSquare, London, United Kingdom,
EC1A7BL
100% 100% 31 Mar 23 11.7 85.2
Road Management Consolidated PLC Cannon Place, 78 Cannon Street,
London, UK, EC4N 6AF
58% 58% N/A
2
N/A
2
N/A
2
Road Management Group Limited Cannon Place, 78 Cannon Street,
London, UK, EC4N 6AF
58% 58% 31 Dec 22 (4.9) 80.1
Road Management Limited Cannon Place, 78 Cannon Street,
London, UK, EC4N 6AF
58% 58% N/A
2
N/A
2
N/A
2
Notes to the financial statements continued
For the year ended 31 March 2024
21. Related undertakings continued
HICL Annual Report 2024 Strategic Report Governance Financials
145
Entity Registered address
Shareholding
Year end
Profit/
(Loss)
£m
Aggregate
Capital &
Reserves
£m31-Mar-24 31-Mar-23
Road Management Services (A13) PLC 43 Orchard Place, London,
UnitedKingdom, E14 0JW
42% 42% N/A
2
N/A
2
N/A
2
Road Management Services
(Gloucester) Limited
Cannon Place, 78 Cannon Street,
London, EC4N 6AF
58% 58% 31 Dec 22 (2.5) 41.3
Road Management Services
(Peterborough) Limited
Cannon Place, 78 Cannon Street,
London, EC4N 6AF
58% 58% 31 Dec 22 (2.5) 38.9
RSP (Holdings) Limited Precision House, Mcneil Drive,
Motherwell, Scotland, ML1 4UR
30% 30% N/A
2
N/A
2
N/A
2
RWF Health and Community
Developers (Tranche 1) Limited
55 Station Road, Beaconsfield,
Buckinghamshire, United Kingdom,
HP91QL
60% 60% N/A
2
N/A
2
N/A
2
RWF Health and Community
Developers Limited
55 Station Road, Beaconsfield,
Buckinghamshire, United Kingdom,
HP91QL
60% 60% N/A
2
N/A
2
N/A
2
S&W TLP (Hold Co Two) Limited Suite 6c, 3rd Floor Sevendale
House, 5-7 Dale Street, Manchester,
UnitedKingdom, M1 1JB
80% 80% N/A
2
N/A
2
N/A
2
S&W TLP (Hold Co One) Limited Suite 6c, 3rd Floor Sevendale
House, 5-7 Dale Street, Manchester,
UnitedKingdom, M1 1JB
80% 80% N/A
2
N/A
2
N/A
2
S&W TLP (Project Co One) Limited Suite 6c, 3rd Floor Sevendale
House, 5-7 Dale Street, Manchester,
UnitedKingdom, M1 1JB
80% 80% N/A
2
N/A
2
N/A
2
S&W TLP (Project Co Two) Limited Sevendale House 3rd Floor, Suite
6c, 5-7 Dale Street, Manchester,
UnitedKingdom, M1 1JB
80% 80% N/A
2
N/A
2
N/A
2
S&W TLP (PSP One) Limited Level 7, One Bartholomew Close,
BartsSquare, London, United Kingdom,
EC1A7BL
80% 80% N/A
2
N/A
2
N/A
2
S&W TLP (PSP Three) Limited Level 7, One Bartholomew Close,
BartsSquare, London, United Kingdom,
EC1A7BL
80% 80% N/A
2
N/A
2
N/A
2
S&W TLP (PSP Two) Limited Level 7, One Bartholomew Close,
BartsSquare, London, United Kingdom,
EC1A7BL
80% 80% N/A
2
N/A
2
N/A
2
S&W TLP Education Partnership
Limited
Suite 6c, 3rd Floor Sevendale
House, 5-7 Dale Street, Manchester,
UnitedKingdom, M1 1JB
80% 80% N/A
2
N/A
2
N/A
2
Salford Schools Solutions HoldCo
Limited
3rd Floor Suite 6c, Sevendale
House, 5-7 Dale Street, Manchester,
UnitedKingdom, M1 1JB
26% 26% N/A
2
N/A
2
N/A
2
Salford Schools Solutions Limited 3rd Floor Suite 6c, Sevendale
House, 5-7 Dale Street, Manchester,
UnitedKingdom, M1 1JB
26% 26% N/A
2
N/A
2
N/A
2
Schools Capital Limited Cannon Place, 78 Cannon Street,
London, United Kingdom, EC4N 6AF
51% 51% N/A
2
N/A
2
N/A
2
Schools Investment Company (Irl)
Limited
Level 7, One Bartholomew Close,
BartsSquare, London, United Kingdom,
EC1A7BL
100% 100% N/A
2
N/A
2
N/A
2
HICL Annual Report 2024
146
Entity Registered address
Shareholding
Year end
Profit/
(Loss)
£m
Aggregate
Capital &
Reserves
£m31-Mar-24 31-Mar-23
Schools Public/Private Partnership
(Ireland) Limited (Incorporated in
Ireland)
Suite 54, Morrison Chambers,
32 Nassau Street, Dublin 2, Ireland
50% 50% N/A
2
N/A
2
N/A
2
Services Support (Gravesend)
Holdings Limited
8 White Oak Square, London Road,
Swanley, Kent, United Kingdom,
BR87AG
73% 73% N/A
2
N/A
2
N/A
2
Services Support (Gravesend) Limited 8 White Oak Square, London Road,
Swanley, Kent, United Kingdom,
BR87AG
73% 73% N/A
2
N/A
2
N/A
2
Services Support (Manchester)
Holdings Limited
8 White Oak Square, London Road,
Swanley, Kent, United Kingdom,
BR87AG
73% 73% N/A
2
N/A
2
N/A
2
Services Support (Manchester) Limited 8 White Oak Square, London Road,
Swanley, Kent, United Kingdom,
BR87AG
73% 73% N/A
2
N/A
2
N/A
2
Services Support (Cleveland) Holdings
Limited
8 White Oak Square, London Road,
Swanley, Kent, BR8 7AG
100% 100% N/A
2
N/A
2
N/A
2
Services Support (Cleveland) Limited 8 White Oak Square, London Road,
Swanley, Kent, BR8 7AG
100% 100% N/A
2
N/A
2
N/A
2
Sheffield LEP Limited Third Floor Broad Quay House,
PrinceStreet, Bristol, United Kingdom,
BS1 4DJ
50% 50% N/A
2
N/A
2
N/A
2
Sheff Schools Topco Limited 10 St. Giles Square, London,
UnitedKingdom, WC2H 8AP
75% 75% N/A
2
N/A
2
N/A
2
Sheppey Route (Holdings) Limited Cannon Place, 78 Cannon Street,
London, United Kingdom, EC4N
50% 50% N/A
2
N/A
2
N/A
2
Sheppey Route Limited Cannon Place, 78 Cannon Street,
London, United Kingdom, EC4N 6AF
50% 50% N/A
2
N/A
2
N/A
2
Sussex Custodial Services (Holdings)
Limited
Unit 18 Riversway Business Village
Navigation Way, Ashton-On-Ribble,
Preston, United Kingdom, PR2 2YP
100% 100% N/A
2
N/A
2
N/A
2
Sussex Custodial Services Limited Unit 18 Riversway Business Village
Navigation Way, Ashton-On-Ribble,
Preston, United Kingdom, PR2 2YP
100% 100% N/A
2
N/A
2
N/A
2
Texas Nevada Transmission, LLC
(HoldCo Debt) (Incorporated in USA)
251 Little Falls Drive, Wilmington,
NewCastle, DE, 19808, USA
46% – 31 Dec 23 34.5 609.4
The Hospital Company (Oxford John
Radcliffe) Holdings Limited
Unit 18 Riversway Business Village,
Navigation Way, Ashton-On-Ribble,
Preston, United Kingdom, PR2 2YP
– 100% N/A
2
N/A
2
N/A
2
The Hospital Company (Oxford John
Radcliffe) Limited
Unit 18 Riversway Business Village,
Navigation Way, Ashton-On-Ribble,
Preston, United Kingdom, PR2 2YP
– 100% 31 Dec 22 0.9 (59.1)
The Hospital Company (Southmead)
Limited
8 White Oak Square, London Road,
Swanley, United Kingdom, BR8 7AG
63% 63% N/A
2
N/A
2
N/A
2
The Hospital Company (Southmead)
Holdings Limited
8 White Oak Square, London Road,
Swanley, United Kingdom, BR8 7AG
63% 63% N/A
2
N/A
2
N/A
2
The Renfrewshire Schools Partnership
Limited
Precision House, Mcneil Drive,
Motherwell, Scotland, ML1 4UR
30% 30% N/A
2
N/A
2
N/A
2
Notes to the financial statements continued
For the year ended 31 March 2024
21. Related undertakings continued
HICL Annual Report 2024 Strategic Report Governance Financials
147
Entity Registered address
Shareholding
Year end
Profit/
(Loss)
£m
Aggregate
Capital &
Reserves
£m31-Mar-24 31-Mar-23
Transpark Highway Finance Inc.
(Incorporated in Canada)
2800 Park Place, 666 Burrard Street,
Vancouver BC V6C 2Z7, Canada
50% 50% N/A
2
N/A
2
N/A
2
Transpark Highway General
Partnership (Incorporated in Canada)
2800 Park Place, 666 Burrard Street,
Vancouver BC V6C 2Z7, Canada
50% 50% N/A
2
N/A
2
N/A
2
Transpark Highway Holdings Inc.
(Incorporated in Canada)
2800 Park Place, 666 Burrard Street,
Vancouver BC V6C 2Z7, Canada
50% 50% N/A
2
N/A
2
N/A
2
Transpark Highway Inc. (Incorporated
in Canada)
2800 Park Place, 666 Burrard Street,
Vancouver BC V6C 2Z7, Canada
50% 50% N/A
2
N/A
2
N/A
2
Transpark Highway Investment Inc.
(Incorporated in Canada)
2800 Park Place, 666 Burrard Street,
Vancouver BC V6C 2Z7, Canada
50% 50% N/A
2
N/A
2
N/A
2
TW Accommodation Services Limited Cannon Place, 78 Cannon Street,
London, United Kingdom, EC4N 6AF
100% 100% N/A
2
N/A
2
N/A
2
TW Accommodation Services
(Holdings) Limited
Cannon Place, 78 Cannon Street,
London, United Kingdom, EC4N 6AF
100% 100% N/A
2
N/A
2
N/A
2
UK GDN Investments Holdco Limited Level 7, One Bartholomew Close,
BartsSquare, London, United Kingdom,
EC1A 7BL
100% 100% N/A
2
N/A
2
N/A
2
UK GDN Investments Limited Level 7, One Bartholomew Close,
BartsSquare, London, United Kingdom,
EC1A 7BL
100% 100% N/A
2
N/A
2
N/A
2
UK GDN Investments Topco Limited Level 7, One Bartholomew Close,
Barts Square, London, United Kingdom,
EC1A 7BL
100% 100% N/A
2
N/A
2
N/A
2
Via Erste Beteiligungsgesellschaft mbH Franz-Ehrlich-Str. 5 12489, Berlin,
Germany
100% 100% N/A
2
N/A
2
N/A
2
Via Muehlhausen GmbH & Co KG Vor dem Riedtor 7, 99998 Mühlhausen,
Germany
50% 50% N/A
2
N/A
2
N/A
2
Willcare (MIM) Limited 128 Buckingham Palace Road, London,
United Kingdom, SW1W 9SA
100% 100% N/A
2
N/A
2
N/A
2
Willcare Holdings Limited 128 Buckingham Palace Road, London,
United Kingdom, SW1W 9SA
100% 100% N/A
2
N/A
2
N/A
2
Wooldale Partnerships Holdings
Limited
10 St. Giles Square, London,
UnitedKingdom, WC2H 8AP
50% 50% N/A
2
N/A
2
N/A
2
Wooldale Partnerships Limited 10 St. Giles Square, London,
UnitedKingdom, WC2H 8AP
50% 50% N/A
2
N/A
2
N/A
2
Yorker Holdings PKR Limited Level 7, One Bartholomew Close,
BartsSquare, London, United Kingdom,
EC1A 7BL
100% 100% N/A
2
N/A
2
N/A
2
Zealburg Holdings Limited Level 7, One Bartholomew Close,
BartsSquare, London, United Kingdom,
EC1A 7BL
100% 100% N/A
2
N/A
2
N/A
2
1 Denotes a direct shareholding
2 In line with the Companies Act requirements, no disclosure has been made where capital and reserves and profit or loss are not considered to be material
HICL Annual Report 2024
148
Appendix 1
Mandatory indicators
Adverse sustainability indicator Metric Unit
Metric as at
31 December
2023
Portfolio
Coverage
Greenhouse
gas emissions
1
1. GHG emissions Scope 1 GHG emissions tCO
2
e 30,400 100%
Scope 2 GHG emissions tCO
2
e 23,534 100%
Scope 3 GHG emissions tCO
2
e 35,625 100%
Total GHG emissions tCO
2
e 89,559 100%
2. Carbon footprint Carbon footprint tCO
2
e/€m
invested
23 100%
3. GHG intensity of
investeecompanies
GHG intensity of investee companies tCO
2
e/€m
revenue
239 100%
4. Exposure to
companiesactive in
thefossil fuel sector
Share of investments in companies
activeinthe fossil fuel sector
% 0 100%
5. Share of non-renewable
energy consumption
andproduction
2
Share of non-renewable energy
consumption and non-renewable energy
production of investee companies from
non-renewable energy sources compared
to renewable energy sources, expressed
asa percentage of total energy sources
% 86 93%
6. Energy consumption
intensity per high impact
climate sector
3
Energy consumption in GWh per million
EUR of revenue of investee companies,
perhigh impact climate sector
GWh/€m 0.01 100%
Biodiversity
7. Activities negatively
affecting biodiversity-
sensitiveareas
Share of investments in investee companies
with sites/operations located in or near to
biodiversity-sensitive areas where activities
of those investee companies negatively
affect those areas
% 0 99%
Water
8. Emissions to water Tonnes of emissions to water generated
by investee companies per million EUR
invested, expressed as a weighted average
Tonnes/€m 0 99%
Waste
9. Hazardous waste and
radioactive waste ratio
4
Tonnes of hazardous waste and radioactive
waste generated by investee companies
per million EUR invested, expressed as
aweighted average
Tonnes/€m 0.80 100%
SFDR Principal Adverse
Impact (“PAI”) Disclosures
The indicators set out below outline HICL’s non-financial impact of its
investments in accordance with Article 7 of the SFDR. The Company
has reported in line with all 14 mandatory PAIs and 7 voluntary PAIs
to provide a high level of transparency as to HICL’s ESG performance
and to enable HICL’s shareholders to meet their own regulatory and
voluntary reporting requirements.
The Sustainability Report outlines the actions already taken as well
as actions planned in order for HICL to improve performance against
these PAIs. To read about those specific metrics and targets, please
see pages 12-13 of HICL’s 2024 Sustainability Report.
All PAIs have been calculated in accordance with the requirements of
Annex 1 of the SFDR Regulatory Technical Standards (RTS) and as
indicated in the notes below.
HICL Annual Report 2024 Strategic Report Governance Financials
149
Adverse sustainability indicator Metric Unit
Metric as at
31 December
2023
Portfolio
Coverage
Social and
employee
matters
10. Violations of UN Global
Compact principles
and Organisation for
Economic Cooperation
and Development (OECD)
Guidelines for Multinational
Enterprises
Share of investments in investee companies
that have been involved in violations of the
UNGC principles or OECD Guidelines for
Multinational Enterprises
% 0 99%
11. Lack of processes and
compliance mechanisms
to monitor compliance
with UN Global Compact
principles and OECD
Guidelines for Multinational
Enterprises
Share of investments in investee
companieswithout policies to
monitor compliance with the UNGC
principles or OECD Guidelines for
Multinational Enterprises or grievance/
complaints handling mechanisms
to address violationsof the UNGC
principles orOECDGuidelines for
MultinationalEnterprises
% 18
5
99%
12. Unadjusted gender
pay gap
6
Average unadjusted gender pay
gapofinvestee companies
% 20 32%
13. Board gender diversity
7
Average ratio of female to male board
members in investee companies,
expressed as a percentage of all
boardmembers
% 23 99%
14. Exposure to controversial
weapons (anti-personnel
mines, cluster munitions,
chemical weapons and
biological weapons)
Share of investments in investee
companiesinvolved in the manufacture
orselling of controversial weapons
% 0 100%
HICL Annual Report 2024
150
Appendix 1 continued
Voluntary climate and other environment-related indicators
Adverse sustainability indicator Metric Unit
Metric as at
31 December
2023
Portfolio
Coverage
Greenhouse
gas emissions
4. Investments in companies
without carbon emission
reduction initiatives
Share of investments in investee companies
without carbon emission reduction initiatives
aimed at aligning with the Paris Agreement
% 24
8
99%
Water, waste
and material
emissions
7. Investments in
companieswithout water
management policies
Share of investments in investee companies
without water management policies
% 11
8
99%
Voluntary indicators for social and employee, respect
for human rights, anti-corruption and anti-bribery matters
Adverse sustainability indicator Metric Unit
Metric as at
31 December
2023
Portfolio
Coverage
Social and
employee
matters
1. Investments in companies
without workplace accident
prevention policies
Share of investments in investee
companies without a workplace
accidentprevention policy
% 3 99%
2. Rate of accidents Rate of accidents in investee companies
expressed as a proportion of the total
number of investee companies
RIDDORs per
project
0.28 120
projects
6. Insufficient whistleblower
protection
8
Share of investments in entities
without policies on the protection
ofwhistleblowers
% 2 99%
Human
rights
11. Lack of processes and
measures for preventing
trafficking in human beings
9
Share of investments in investee
companies without policies against
trafficking in human beings
% 6 99%
Anti-corruption
and anti-
bribery
15. Lack of anti-corruption
andanti-bribery policies
Share of investments in entities without
policies on anti-corruption and anti-
bribery consistent with the United
Nations Convention against Corruption
% 0 99%
1 Calculated using valuation information as at 31 March 2024
2 Calculated as the average of each investee companies’ share of non-renewable energy as a proportion of its total energy consumption.
3 As per our interpretation of the material sectors based on NACE code categories A-H and J-L, the following sectors would be considered as high impact climate sectors: road, rail, power
transmission and water treatment
4 Calculated as the weighted average based on investment value to date
5 The UN Global Compact is a newer framework which has been recently introduced as a requirements in respect to human rights. Hence, a number of the projects or subcontractors haven’t
updated their processes to align with this framework yet. Given its prominence, through InfraRed, HICL will look to work with portfolio companies to improve alignment over the coming years.
6 This metric refers to Affinity Water and Altitude Infra only, as these are the two assets in HICL’s portfolio with the required number of employees to meet the criteria of this PAI. Portfolio coverage
for this metric is shown as a proportion of the valuation of portfolio companies which have direct employees
7 Calculated as the average of each investee companies’ board gender diversity
8 Share of investments calculated by valuation as at 31 March 2024
9 Share of investments calculated by valuation as at 31 March 2024. For the purposes of this metric we have assessed whether a project undertakes training and audit procedures in respect
totheUK Modern Slavery Act 2015 or equivalent
\\1082507 4159-1671-0727 v2 Hogan Lovells
ANNEX
Product name: HICL Infrastructure PLC
Legal entity identifier: 213800BVXR1E5L7PEV94
Environmental and/or social characteristics
To what extent were the environmental and/or social characteristics
promoted by this financial product met?
HICL Infrastructure PLC’s (the "Company" or "HICL") investment proposition is
to deliver sustainable income and capital growth from a diversified portfolio of
investments in core infrastructure. The Company offers investors stable, long-term
returns from core infrastructure assets that are vital to communities. HICL's vision is to
enrich lives through infrastructure and to attain the E/S Characteristics. The Company's
E/S Characteristics were met by focusing on the following sustainability themes:
• Strong Social Foundation, through investments in health, education, law & order,
and accommodation;
Did this financial product have a sustainable investment objective?
Yes
No
It made sustainable
investments with an
environmental objective: ___%
in economic activities that
qualify as environmentally
sustainable under the EU
Taxonomy
in economic activities that do
not qualify as environmentally
sustainable under the EU
Taxonomy
It promoted Environmental/Social (E/S)
characteristics and
while it did not have as its objective a
sustainable investment, it had a proportion of
___% of sustainable investments
with an environmental objective in economic
activities that qualify as environmentally
sustainable under the EU Taxonomy
with an environmental objective in
economic activities that do not qualify as
environmentally sustainable under the EU
Taxonomy
with a social objective
It made sustainable investments
with a social objective: ___%
It promoted E/S characteristics, but did not
make any sustainable investments
Sustainable
investment means
an investment in an
economic activity
that contributes to
an environmental or
social objective,
provided that the
investment does not
significantly harm
any environmental or
social objective and
that the investee
companies follow
good governance
practices.
The EU Taxonomy is
a classification
system laid down in
Regulation (EU)
2020/852,
establishing a list of
environmentally
sustainable
economic activities.
That Regulation
does not lay down a
list of socially
sustainable
economic activities.
Sustainable
investments with an
environmental
objective might be
aligned with the
Taxonomy or not.
HICL Annual Report 2024 Strategic Report Governance Financials
151
\\1082507 4159-1671-0727 v2 Hogan Lovells
• Connecting Communities, through investments in rail and rolling stock, fibre
net
works and telecom towers; and
• Sustainable Modern Economies, through investments in assets that contributi
ng
to the energy transition to achieve net zero carbon emissions and deliver climate
resilient infrastructure, including water, offshore electricity transmission, district
energy and electricity distribution.
(together, the "E/S Characteristics").
HICL’s Manager, InfraRed Capital Partners, (“The Investment Manager”, “The Manager”
or “InfraRed”) ensured that, through the reporting period, HICL:
• invested in assets with a social purpose and proactively engaged with it
s
st
akeholders to improve sustainability outcomes across the portfolio;
• promoted environmental initiatives for the benefit of current and future generations;
• made a positive overall impact on the communities in which our assets are located;
and
• through all of the above, aligned the interests of stakeholder groups of HICL’
s
i
nvestments which typically have long asset lives.
How did the sustainability indicators perform?
InfraRed used the following key performance indicators to measure the attainment of the
E/S Characteristics that the Company promotes:
• Environmental: Energy, water and waste management, consideration of climat
e
r
isks and Scope 1, 2, 3 emissions; and
• Social: community contributions to environmental or social initiatives, and healt
h
&
safety polices and performance, assessment of human rights and diversity and
inclusion policies
(together, the "Sustainability Indicators").
Information regarding the performance of HICL's investments against all sustainability
indicators besides Scope 1, 2 and 3 Emissions is provided in the table on page 148 of
this Annual Report. Information regarding the Company's investments' performance
against Scope 1, 2 and 3 Emissions is provided in the table on page 69 of this Annual
Report.
…and compared to previous periods?
HICL Annual Report 2024
152
Appendix 1 continued
HICL Annual Report 2024 Strategic Report Governance Financials
153
Financials
\\1082507 4159-1671-0727 v2 Hogan Lovells
How did this financial product consider principal adverse impacts on
sustainability factors?
Prior to acquisition of an investment, the Investment Manager considers
performance against the mandatory principal adverse impact indicators in Table 1 Annex 1 of
the SFDR RTS, to the extent that relevant data is available from each potential investee
company. Post-acquisition, the Manager ensured assessment of the mandatory principal
adverse impacts on an ongoing basis through an annual ESG Survey which portfolio
companies are asked to complete, the results of which are published in HICL’s Sustainability
Report each year. Information regarding InfraRed’s consideration of the principal adverse
impacts in respect of HICL’s investments is provided in HICL’s Sustainability Report.
What were the top investments of this financial product?
The information shown in the table below has also been provided on page 26 of
this Annual Report.
What was the proportion of sustainability-related investments?
N/A
What was the asset allocation?
99.6% of HICL’s investments were made to attain the E/S Characteristics in the
reporting period.
To confirm, the Company's asset allocation has been calculated based on market
values in respect of "#1 Aligned with E/S Characteristics" investments and mark-to-
market value in respect of the "#2 Other" assets.
Largest investments
Sector
% Assets
Country
Affinity Water
Water & Electricity
8.3%
UK
A63 Motorway
Transport
7.9%
France
Fortysouth
Communications
6.5%
New Zealand
Texas Nevada Transmission
Water & Electricity
5.6%
USA
High Speed 1
Transport
4.6%
UK
Southmead Hospital
Healthcare
3.9%
UK
Royal School of Military Engineering
Education
3.5%
UK
Pinderfields & Pontefract Hospital
Healthcare
3.5%
UK
Home Office
Fire, Law & Order
3.0%
UK
Cross London Trains
Transport
2.7%
UK
Asset
allocation
describes the
share of
investments
in specific
assets.
The list includes
the investments
constituting the
greatest
proportion of
investments of the
financial product
during the
reference period
which is: 1
January to 31
December 2023
HICL Annual Report 2024
154
Appendix 1 continued
\\1082507 4159-1671-0727 v2 Hogan Lovells
In which economic sectors were the investments made?
The Company’s investments were in core infrastructure assets, in the following sectors:
Accommodation, Communications, Education, Electricity & Water, Healthcare, Fire,
Law & Order and Transport.
To what extent were the sustainable investments with an environmental
objective aligned with the EU Taxonomy?
InfraRed is not currently in a position to disclose how and to what extent the investments
underlying the Company are in economic activities that qualify as environmentally
sustainable economic activities (as defined in Article 3 of the EU Taxonomy). This is
because HICL's investments are in social infrastructure, which cannot at present be
assessed against the EU Taxonomy. In accordance with the European Commission’s
Decision Notice of 13 May 2022 (C(2022) 3051), InfraRed confirms that the Company's
investments are 0% EU Taxonomy-aligned.
Did the financial product invest in fossil gas and/or nuclear energy related activities
complying with the EU Taxonomy
1
?
Yes
X No
1
Fossil gas and/or nuclear related activities will only compy with the EU Taxonomy where they contribute to limiting
climate change (“climate change mitigation”) and do not significantly harm any EU Taxonomy objective – see
explanatory not in the left hand margin. The full criteria for fossil gas and nuclear energy economy activities that
comply with the EU Taxonomy are laid down in Commission Delegated Regulation (EU) 2022/1214.
#1 Aligned with E/S characteristics includes the investments of the financial product used to
attain the environmental or social characteristics promoted by the financial product.
#2 Other includes the remaining investments of the financial product which are neither aligned
with the environmental or social characteristics, nor are qualified as sustainable investments.
Investments
#1 Aligned with E/S
characteristics - 80%
#2 Other - 20%
Taxonomy-aligned
activities are
expressed as a
share of:
- turnover
reflects the
“greenness” of
investee
companies
today.
- capital
expenditure
(CapEx) shows
the green
investments
made by
investee
companies,
relevant for a
transition to a
green economy.
- operational
expenditure
(OpEx) reflects
the green
operational
activities of
investee
companies.
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\\1082507 4159-1671-0727 v2 Hogan Lovells
What was the share of investments made in transitional and enabling activities?
As noted above, the Company is not currently in a position to disclose how and to what
extent the investments underlying the Company align with the EU Taxonomy. Therefore,
the Company is not in a position to disclose the minimum share of investments in
transitional and enabling activities.
How did the percentage of investments that were aligned with the EU Taxonomy compare
with previous reference periods?
N/A
The graphs below show in green the percentage of investments that were aligned with the EU
Taxonomy. As there is no appropriate methodology to determine the taxonomy-alignment of sovereign
bonds*, the first graph shows the Taxonomy alignment in relation to all the investments of the financial
product including sovereign bonds, while the second graph shows the Taxonomy alignment only in
relation to the investments of the financial product other than sovereign bonds.
*For the purpose of these graphs, ‘sovereign bonds’ consist of all sovereign exposures
To comply with
the EU
Taxonomy, the
criteria for fossil
gas include
limitations on
emissions and
switching to
fully renewable
power or low-
carbon fuels by
the end of 2035.
For nuclear
energy, the
criteria include
comprehensive
safety and waste
management
rules.
Enabling
activities
directly enable
other activities
to make a
substantial
contribution to
an
environmental
objective.
Transitional
activities are
activities for
which low-carbon
alternatives are
not yet available
and among others
have greenhouse
gas emission
levels
corresponding to
the best
performance.
OpEx
CapEx
Turnover
0% 50% 100%
1. Taxonomy-alignment of investments
including sovereign bonds*
Other investments
OpEx
CapEx
Turnover
0% 20% 40% 60% 80% 100%
2. Taxonomy-alignment of investments
excluding sovereign bonds*
Other investments
HICL Annual Report 2024
156
Appendix 1 continued
\\1082507 4159-1671-0727 v2 Hogan Lovells
What was the share of sustainable investments with an environmental
objective not aligned with the EU Taxonomy?
N/A
What was the share of socially sustainable investments?
N/A
What investments were included under “other”, what was their purpose and
were there any minimum environmental or social safeguards?
In relation to “other” investments, currency, interest rate and power price hedging
is carried out to seek to provide protection against foreign exchange risk and
increasing costs of servicing Group Debt (as defined in the Prospectus) drawn
down to finance investments. However, currency and interest rate hedging
transactions will only be undertaken for the purpose of efficient portfolio
management and will not be carried out for speculative purposes. In respective of
this reporting period specifically, the value of investments in “other” was 0%.
What actions have been taken to meet the environmental and/or social
characteristics during the reference period?
HICL took several actions during the period to meet its E/S Characteristics. An
outline and a few examples are provided below, for more detailed information please refer to
HICL’s 2024 Sustainability Report.
Social impact:
As a trusted steward of essential infrastructure assets, HICL sits at the heart of communities
and plays a key role in modern society. HICL therefore encourages its portfolio companies to
create impact initiatives which address the needs of their local communities. An example of
one of HICL's social initiatives over the past year was by its largest asset by value, Affinity
Water. In March 2024, Affinity Water announced its grant funding allocation to the Red Shed
Garden Project, a charity aimed at supporting individuals living with dementia in Hertfordshire
by offering horticultural therapy, gardening activities, and social interaction opportunities. The
grant funding will enable the Red Shed Garden Project to expand its services to reach more
beneficiaries and will support the operation of four garden clubs offering tailored activities
designed to meet the diverse needs and abilities of participants. The funding, facilitated in
partnership with the Hertfordshire Community Foundation, also highlights Affinity Water’s
commitment to addressing local needs and promoting social well-being.
Just as important as creating and implementing community initiatives is recognising and
rewarding HICL’s portfolio company teams that are already making a positive impact in their
local communities. InfraRed’s Creating Better Futures Awards are an annual event designed
to celebrate success, share best practice and drive increased ESG activity across HICL’s
portfolio. Judged on the four criteria of innovation, community need, collaboration and
are
sustainable
investments with an
environmental
objective that do
not take into
account the criteria
for environmentally
sustainable
economic activities
under Regulation
(EU) 2020/852.
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\\1082507 4159-1671-0727 v2 Hogan Lovells
resource efficiency, the Creating Better Futures Awards illustrate the importance placed by
HICL and its Investment Manager on creating a positive impact for the communities served by
its assets. Of the 38 submissions, 12 achieved the Gold Standard award, 7 of which were
initiatives put forward by HICL assets. With more than 220 ESG Community initiatives
reported across HICL’s portfolio during the period, the Creating Better Futures Awards
highlight only a subset of these but serve as a further incentive for HICL and InfraRed to
continually seek to work for local communities and reward those assets making a positive
difference.
Environment:
HICL's key themes for environment surround biodiversity, resources and climate change. In
2023 for biodiversity the project company at Pinderfields & Pontefract Hospitals, one of
HICL’s assets, donated funds and resources to the Mid Yorkshire Teaching NHS Trust to
support the delivery of biodiversity enhancement initiatives across this site. These initiatives
are expected to include the trials of new weed removal methods, the installation of structures
to support local wildlife, and the creation of a native hedgerow within which 1,500 of the trees
are supplied by the facilities management provider. In November 2023, volunteers from the
project company and the facilities management provider partnered with the NHS Trust to plant
1,000 of these trees at the hospital site in celebration of National Tree Week. In addition to
providing homes for wildlife, these will help to reduce air pollution, benefitting the hospital
outpatients of 250,000 each year and their extended family members, local communities and
Trust colleagues.
In regards to resources, InfraRed’s annual ESG survey reported that 88% of assets in HICL’s
portfolio have water consumption reduction initiatives in places and 87% of assets in HICL’s
portfolio have waste reduction initiatives in place. These results, a slight decline from 2023,
informed the Investment Manager on where to direct its resources to target resource
consumption across the portfolio. Some of the outcomes of this exercise came in the form of a
water saving initiative at Affinity Water and an investment into waste management technology
at High Speed 1.
HICL’s actions this year in the field of climate change are presented below in two parts; Net
zero and Emissions.
Net zero:
In 2023 HICL’s Investment Manager, InfraRed, created a detailed net zero transition plan for
HICL’s portfolio, including specific asset transition plans for the next three years and
reinforced its 2030 net zero targets. Details on this plan can be found on pages 15-19 of
HICL’s 2024 Sustainability Report.
InfraRed’s chosen methodology for its net zero targets is the Paris-aligned Investment
Initiative’s (PAII) Net Zero Investment Framework (NZIF) for Infrastructure.
2
Following this methodology, HICL has two types of net zero targets that have been approved
by the Net Zero Asset Managers initiative. HICL commits to reviewing these targets every five
years at a minimum:
2
Framework developed by the Institutional Investor Group on Climate Change (IIGCC)
HICL Annual Report 2024
158
Appendix 1 continued
\\1082507 4159-1671-0727 v2 Hogan Lovells
Portfolio Coverage Target = 50% aligned or aligning by 2030
Engagement Threshold Target = 90% portfolio engagement
The Investment Manager has also set interim net zero targets, which include HICL, outlined in
this report:
https://www.ircp.com/sites/default/files/2022-11/infrared_2022_net_zero_progress_report.pdf
Emissions Reporting:
HICL's financed emissions decreased over the period, largely due to Scope 3 emissions. In
2023, HICL’s Manager adopted EXIOBASE as its data source to estimate Scope 3 emissions.
Recommended by the GHG Protocol, it usesmore recent data, with greater granularity across
sectors and countries than the methodology previously adopted. The use of this newer
database has contributed to a material reduction in the Scope 3 emissions reported this year.
While the revised methodology provides a more accurate reflection of impact, we anticipate
further movements in emissions as data quality and methodologies improve.
How did this financial product perform compared to the reference
benchmark?
N/A
How does the reference benchmark differ from a broad market index?
N/A
How did this financial product perform with regard to the sustainability indicators to
determine the alignment of the reference benchmark with the environmental or social
characteristics promoted?
N/A
How did this financial product perform compared with the reference benchmark?
N/A
How did this financial product perform compared with the broad market index?
N/A
?
Reference
benchmarks are
indexes to
measure whether
the financial
product attains
the
environmental or
social
characteristics
that they
promote.
HICL Annual Report 2024 Strategic Report Governance Financials
159
HICL Annual Report 2024
160
Valuation Policy
As described in the Valuation of the Portfolio section on page 46, the
Group’s investments are predominantly valued using a discounted
cash flow (“DCF”) analysis of the forecast investment cash flows from
each portfolio company.
The following is an overview of the key assumptions and principles
applied in the valuation and forecasting of future cash flows:
– Discount rates and other key valuation assumptions (as outlined
above) continue to be applicable
– Contracts for PPP projects and demand-based assets are not
terminated before their contractual expiry date
– A reasonable assessment is made of operational performance,
including in relation to PPP projects, payment deductions and the
ability to pass these down to subcontractors
– Distributions from each portfolio company reflect reasonable
expectations, including consideration of financial covenant
restrictions from senior lenders
– Lifecycle and capital maintenance risks are either not borne
by the portfolio company because they are passed down to a
subcontractor or, where borne by the portfolio company, are
incurred per current forecasts
– For demand-based assets, a reasonable assessment is made of
future revenue growth, typically supported by forecasts made by an
independent third party
– Where assets are in construction, a reasonable assessment is
made as to the timing of completion and the ability to pass down
any costs of delay to subcontractors
– Where a portfolio company expects to receive residual value from
an asset, that the projected amount for this value is realised
– Non-UK investments are valued in local currency and converted to
sterling at the period end exchange rates
– A reasonable assessment is made of regulatory changes in the
future which may impact cash flow forecasts
– Perpetual investments are assumed to have a finite life (e.g.
Affinity Water is valued using a terminal value assumption)
– In forming the above assessments, the Investment Manager works
with portfolio companies’ management teams, as well as engaging
with suitably qualified third parties such as technical advisers, traffic
consultants, legal advisers and regulatory experts
Regulated assets – Affinity Water
The valuation drivers and metrics for certain regulated assets are
different in certain aspects from the Company’s other market
segments – in particular, it is necessary to forecast future regulatory
outcomes as well as operational performance against targets and
allowances agreed with the regulator.
The Regulated Capital Value (“RCV”) multiple, which measures a
company’s enterprise value as a multiple of RCV, is the most widely
used valuation metric for UK regulated assets and forms a useful
cross-check to the DCF-derived valuation. An RCV multiple will vary
depending on a company’s risk profile and operational performance,
influenced by factors such as whether the business is listed, its level
of gearing, whether it is responsible for funding a pension deficit, and
its business scope and complexity.
Appendix 2
HICL Annual Report 2024 Strategic Report Governance Financials
161
Appendix 3
The Infrastructure Market – Sources
Page 10
– Bridging infrastructure gaps: Has the world made progress?
McKinsey Global Institute (2017)
– Mind the gap: Time to rethink infrastructure finance,
WorldBank.Org (2022)
– Global Infrastructure Outlook, Global Infrastructure Hub (2018)
Page 11
– Deals, Inframation News (2024)
– £180m Cardiff cancer centre seals financial close, Construction
Enquirer (2024)
– Annual Report on the Mutual Investment Model 2021-22, Gov.
Wales (2022)
– New British Infrastructure Council meets to discuss investment
opportunities, New Civil Engineer (2023)
– Progress with the New Hospital Programme, Department of Health
& Social Care, NHS England (2023)
– Hospital building in England: Plans and progress, House of
Commons Library (2024)
Page 12
– Market Update, 2023 edition, European PPP Expertise Centre
(2024)
– Government sets ambitious target to grow rail freight by at least
75%, News Story, Gov.UK (2023)
– Gigabit infrastructure act: Council gives final green light to faster
deployment of high-speed networks in the EU, Press Release,
Council of the EU (2024)
– Connected Nations, UK Report 2023, Ofcom (2023)
– How to take advantage of the world’s demand for data, Investors’
Chronicle (2024)
– Savills: Pipeline of data centres needs to more than double by 2025
to meet demand for storage in Europe, Savills News (2022)
– What is a Data Center, Server Labs (2019)
– Completion of the One New Zealand acquisition, Infratil (2023)
– Corporate Governance Statement – 2023, Infratil (2023)
Page 13
– ESO publishes “Beyond 2030”, ESO (2024)
– Putting the mission in transmission: Grids for Europe’s energy
transition, Ember (2024)
– Resurgent US electricity demand sparks power grid warnings,
Financial Times (2024)
– Thousands of homes to be kept warm by waste heat from
computer data centres in UK first, News Story, Gov.UK (2023)
– Connections Action Plan, Department for Energy Security and Net
Zero & Ofgem (2023)
– UK Heat Networks Market Overview, Department for Energy
Security & Net Zero (2023)
– District heating potential in the EU-27: Evaluating the impacts of
heat demand reduction and market share growth, Applied Energy,
Volume 353, Part B (2024)
– The Role of District Heating in the Energy System in Denmark,
Danish District Heating Association (2024)
– The DHC Market Outlook 2023, Euroheat & Power (2023)
HICL Annual Report 2024
162
Glossary
Item Definition
Acquisition Strategy This identifies the scope for current acquisitions; further details can be found in HICL’s Business Model
section of this report
AIPs Approved Investment Parameters
AIF Alternative Investment Fund
AIFM Alternative Investment Fund Manager
AIFMD The Alternative Investment Fund Managers Directive seeks to regulate alternative investment fund managers
(“AIFM”) and imposes obligations on managers who manage alternative investment funds (“AIF”) in the EU or
who market shares in such funds to EU investors
AIC The Association of Investment Companies is a UK trade association for the closed-ended investment
company industry
AIC Code The 2019 AIC Code of Corporate Governance
AMP8 The UK water industry regulatory period from 2025 to 2030
Corporate assets These are assets that provide services or access to essential assets for corporate counterparties. 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
Corporate Group Refers to HICL and its Corporate Subsidiaries
Corporate Subsidiaries HICL Infrastructure 2 S.a.r.l. and Infrastructure Investments Limited Partnership
Demand-based assets Infrastructure assets with revenues linked to the usage of the underlying assets
Directors’ Valuation Fair market valuation of HICL’s investments and commitments at the balance sheet date. Further details
can be found in the Valuation of the Portfolio section of the report
ESG Environmental, Social and Governance
EPS Earnings per share
FATCA The Foreign Account Tax Compliance Act provisions of the US Hiring Incentives to Restore Employment Act
FCA UK Financial Conduct Authority
FM Facilities Management
IFRS Basis Basis on which HICL prepares its IFRS financial statements. HICL applies IFRS 10 and Investment Entities
(Amendments to IFRS 10, IFRS 12 and IAS 27) and therefore does not consolidate any of its subsidiaries,
including those that are themselves investment entities
HICL HICL Infrastructure Company Limited prior to 31 March 2019 and HICL Infrastructure PLC from 1 April 2019
InfraRed InfraRed Capital Partners and its Group, more details of which can be found at www.ircp.com
Investment Manager InfraRed Capital Partners Limited acting in its capacity as Investment Manager to HICL pursuant to the
Investment Advisory Agreement
Investment Basis Pro forma financial information on the basis that HICL consolidates the results of the Corporate Subsidiaries
Investment Policy HICL’s Investment Policy has not materially changed since IPO and can be found on the website at
/www.hicl.com/about-us/strategy-investment-policy/
HICL Annual Report 2024 Strategic Report Governance Financials
163
Item Definition
IPO Initial Public Offering, the act of offering the stock of a company on a public stock exchange for the first time.
HICL completed its IPO in March 2006
Lifecycle Concerns the replacement of material parts of an asset to maintain it over its concession life
Market capitalisation A measure of the size of a company calculated by multiplying the number of shares in issue by the price
of the shares
NAV Net Asset Value, the value of the investment company’s assets, less any liabilities it has. The NAV per share is
the NAV divided by the number of shares in issue. The difference between the NAV per share and theshare
price is known as the discount or premium
Net zero A portfolio coverage target, defined by the Net Zero Investment Framework for Infrastructure, is the
percentage of assets under management that will be net zero, aligned or aligning by a given year. To
be considered aligning, an asset must have short- and medium-term targets that are underpinned by
science-based pathways for its sector; it must disclose all material scope emissions (including Scope 3)
and evidence the governance of net zero plans. The requirements of aligned status have a greater focus
on implementation. The asset must have forecast emissions performance against targets set as well as a
decarbonisation strategy to support the reduction projection. To be considered net zero, actual emissions
must match or outperform the science-based decarbonisation pathway
Ofwat The UK Water Services Regulation Authority
Ongoing charges A measure of the regular, recurring costs of running an investment company, expressed as a percentage
ofNAV
Operating company A company that owns and operates infrastructure assets
Partnership Infrastructure Investments Limited Partnership
Portfolio company Companies that own or operate infrastructure assets, in which HICL has an investment
PPP project Public–Private Partnership projects involving long-term contracts between a public sector client and a private
company for the delivery of a service or facility for the use by the general public, public bodies, authorities
oragencies, usually in return for an availability payment
PR19 Ofwat’s final methodology for the 2019 Price Review, covering the regulatory period from 2020 to 2025
(“AMP7”)
PR24 Ofwat’s proposed methodology for the 2024 Price Review, covering the regulatory period from
2025 to 2030(“AMP8”)
PRI Principles for Responsible Investment
Project company An infrastructure project or concession with a defined expiry date, including a special purpose company
(orother entity) formed with the specific purpose of undertaking an infrastructure project
Regulated assets Infrastructure assets with monopolistic characteristics and which are subject to regulatory price controls
Revolving Credit Facility An acquisition facility provided by lenders, held via a Corporate Subsidiary and expiring in June 2026.
Seethe Financial Review section of the report
RIDDOR Reporting of Injuries, Diseases and Dangerous Occurrences Regulations
Total Shareholder Return Return based on interim dividends paid plus movement in the period, divided by opening NAV per share
UN SDGs United Nations Sustainable Development Goals
HICL Annual Report 2024
164
Directors and Advisers
Directors
Mike Bane (Chair)
Rita Akushie
Liz Barber
Frances Davies
Simon Holden
Martin Pugh
Kenneth Reid
Registered Office
One Bartholomew Close
Barts Square
London
EC1A 7BL
Registrar
Link Asset Services
The Registry
34 Beckenham Road
Beckenham
Kent BR3 4TU
Helpline: 0871 664 0300
Company Secretary
and Administrator
Aztec Financial Services (UK)
Limited
Forum 4, Solent Business Park
Parkway South
Whiteley
Fareham
PO15 7AD
Investment Manager
and Operator
InfraRed Capital
Partners Limited
One Bartholomew Close
Barts Square
London
EC1A 7BL
+44 (0)20 7484 1800
Auditor
KPMG LLP
15 Canada Square
London
E14 5GL
Financial PR
Brunswick Group Advisory Ltd
16 Lincoln’s Inn Fields
London
WC2A 3ED
Joint Corporate Brokers
Investec Bank plc
30 Gresham Street
London
EC2V 7QP
RBC Capital Markets
2 Swan Lane
London
EC4R 3BF
Company
HICL Infrastructure PLC is incorporated in England and Wales under
the Companies Act 2006 with registered no. 11738373 and registered
as an investment company under Section 833 of the Companies
Act 2006.
Investment Manager and Operator
InfraRed Capital Partners Limited is an English limited company
registered in England & Wales under number 03364976 and
authorised and regulated by the Financial Conduct Authority
(authorisation number 195766). InfraRed is a part of SLC
Management which is the institutional alternatives and traditional
asset management business of Sun Life.
Shareholders’ funds
£3.2bn as at 31 March 2023
Market capitalisation
£2.6bn as at 31 March 2023
Investment Manager and Operator fees
1.1% per annum of the Adjusted Gross Asset Value
1
of the portfolio
up to £750m, 1.0% from £750m up to £1.5bn, 0.9% from £1.5bn up
to £2.25bn, 0.8% from £2.25bn to £3.0bn, 0.65% above £3.0bn plus
£0.1m per annum investment management fee
No fee on new acquisitions
No performance fee
Fees relating to shareholder matters from underlying
project companies are paid to the Group (and not to the
Investment Manager).
ISA, NISA, PEP and SIPP status
The shares are eligible for inclusion in NISAs, ISAs and PEPs (subject
to applicable subscription limits) provided that they have been
acquired by purchase in the market, and they are permissible assets
for SIPPs.
NMPI status
HICL conducts its affairs as an investment trust. On this basis,
the Ordinary Shares should qualify as an ‘excluded security’
and therefore be excluded from the FCA’s restrictions in COBS
4.12 of the FCA Handbook that apply to non-mainstream pooled
investment products.
AIFMD status
HICL is a UK domiciled and tax-resident public limited company,
which will operate its affairs as a UK Investment Trust Company, and
an Alternative Investment Fund under the AIFM Directive.
HICL has appointed InfraRed Capital Partners Limited as
its Investment Manager and AIFM under the Investment
Management Agreement.
FATCA
HICL has registered for FATCA and has GIIN number E6TB47.99999.
SL.826
Investment Policy
HICL’s Investment Policy can be found in full on the website at
www.hicl.com
ISIN and SEDOL
ISIN: GB00BJLP1Y77 SEDOL: BJLP1Y7
Website
www.hicl.com
1 Adjusted Gross Asset Value means fair market value, without deductions for borrowed
money or other liabilities or accruals, and including outstanding subscription obligations
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HICL Infrastructure PLC
(Registered number: 11738373)
Level 7, One Bartholomew Close
Barts Square
London, EC1A 7BL