Annual Report • May 26, 2021
Annual Report
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Delivering Real Value.
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| 2021 Highlights | 2 | |
|---|---|---|
| 01 | Overview | |
| 1.1 Chairman's Statement |
6 | |
| 2.1 Strategy: HICL's Investment Proposition | 12 | |
|---|---|---|
| 2.2 Strategy: HICL's Business Model & Strategy | 13 | |
| 2.3 The Infrastructure Market | 14 | |
| 2.4 | Key Performance & Quality Indicators | 18 |
| 2.5 Investment Manager's Report | 20 | |
| 2.6 | Sustainability Report | 26 |
| 3.1 | Financial Review | 48 |
|---|---|---|
| 3.2 Valuation of the Portfolio | 53 | |
| 3.3 The Investment Portfolio | 64 | |
| 3.4 Portfolio Analysis | 66 | |
| 3.5 Risk & Risk Management | 68 | |
| 3.6 Viability Statement | 79 | |
| 3.7 | Risk Committee Report | 80 |
| 3.8 Strategic Report Disclosures | 84 |
| 4.1 | Board and Governance | 88 |
|---|---|---|
| 4.2 Board of Directors | 90 | |
| 4.3 The Investment Manager | 92 | |
| 4.4 Corporate Governance Statement | 93 | |
| 4.5 Audit Committee Report | 97 | |
| 4.6 Directors' Remuneration Report | 102 | |
| 4.7 | Report of the Directors | 106 |
| 4.8 Statement of Directors' Responsibilities | 109 |
| 5.1 | Independent Auditor's Report | 112 |
|---|---|---|
| 5.2 Financial Statements | 118 | |
| 5.3 Notes to the Financial Statements | 122 | |
| Glossary | 158 | |
| Directors & Advisers | 160 |
NAV per share1 (2020:152.3p)
Dividend cash cover2 (2020: 1.14x)
(2020: 1.9%)
8.25p
New Dividend Guidance4 for 2023 Reaffirmed Dividend Guidance4 8.25p for 2022
| March 2020 | |
|---|---|
| ------------ | -- |
| Mar 21 | Mar 20 | |
|---|---|---|
| PPP projects | 71% | 72% |
| Demand-based assets | 19% | 20% |
| Regulated assets | 10% | 8% |
March 2021
March 2020
| Mar 21 | Mar 20 | |
|---|---|---|
| UK | 74% | 76% |
| EU | 18% | 17% |
| North America | 8% | 7% |
1 Net Asset Value
5 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 0.8%
Percentage of the HICL portfolio that is rated 'high' for ESG performance6 significantly increased through investee company engagement
"The Company's performance is inextricably tied to the delivery of positive stakeholder outcomes, in particular for the communities who use, and interact with, the Company's assets in their daily lives."
Ian Russell CBE, Chairman
Further details on page 52
6 'High' rating in ESG performance means scoring 4/5 stars in the HICL Sustainability Survey
These last 12 months have been challenging for many of the Company's stakeholders, with unprecedented change across daily life.
The Board acknowledges the difficulties faced by many at this time, and wishes to express its sincere gratitude to HICL's partners, led by the Investment Manager, for their tireless support of the Company in the period. HICL's continued delivery of essential public infrastructure to communities throughout this pandemic-affected period is direct testament to the high quality of long-term partnerships that we share with our key stakeholders.
I am pleased to report a resilient result for the year to 31 March 2021. Total Shareholder Return1 over the year has been 5.5%, despite the impact of increases in UK corporation tax rates announced in the March 2021 Budget on the value of HICL's investments (see Financial Performance below). The underlying performance of the Company's portfolio continues to be robust, underpinned by the quality of its diversified cash flows, and is well-positioned to benefit from the post-pandemic economic recovery.
The Company continues to pursue acquisitions targeted at specific areas of the core infrastructure market, with a healthy pipeline of opportunities. These efforts remain anchored to an uncompromising focus on the appropriate risk and reward for the Company and the enhancement of HICL's investment proposition for shareholders.
Providing well-maintained core infrastructure for communities, which generates sustainable income for shareholders over the long term, sits at the heart of HICL's Investment Proposition. The Company's performance is inextricably tied to the delivery of positive stakeholder outcomes, in particular for the communities who use, and interact with, the Company's assets in their daily lives.
Through its 116 assets, HICL serves a population of over 20 million people globally. In the UK, 1 in 4 citizens interact with infrastructure where HICL is an investor. The Company is a trusted steward of these essential assets, acting as custodian on behalf of the communities that the assets serve and, in many cases, to which the assets will be returned at the end of the defined contractual term.
These touchpoints afford HICL an exceptional vantage point to progress the 'Social' dimension of the ESG framework, in particular, as the Company pursues its express intention to provide leadership on sustainability matters across the infrastructure sector.
Our long-term stewardship responsibilities demand an intergenerational perspective on risk, matched to the duration of the Company's assets. This year our Investment Manager, InfraRed, completed a climate change impact assessment across the HICL portfolio. As we now work through its findings, this important exercise will provide valuable insights at asset level and enable
further collaboration with relevant stakeholders to improve the resilience of public infrastructure, potentially extending well-beyond HICL's period of stewardship.
The underlying annual return2 from the portfolio was 7.7%, outperforming the Company's weighted average discount rate in the period. NAV remained flat despite several external factors negatively impacting the Company. Returns in the period were supported by: accretive acquisition and disposal activity, a positive outcome from the Competition and Markets Authority's PR19 redetermination, relevant to Affinity Water (more detail can be found in the Investment Manager's Report) and continued evidence of strong asset pricing. These were offset by several external factors: the UK budget's increase in corporation tax rates, the alignment of the UK Retail Price Index ("RPI") with the Consumer Prices Index including owner occupiers' housing costs ("CPIH") 2030, a further softening of long-term interest rates, negative movements in foreign exchange (net of hedging), and government restrictions on travel within the period.
The portfolio continues to perform robustly, with the significant majority of the portfolio not impacted by Covid-19. The ramifications of the pandemic continue to impact High Speed 1 (4% of portfolio value at 31 March 2021) in particular, given continued restrictions on international travel. The Investment Manager's Report (Section 2.5) provides further comment on the impact of Covid-19 on the valuation; in addition, an analysis of the movements in the Directors' Valuation in the year can be found in Section 3.2 – Valuation of the Portfolio.
The Company's balance sheet remains strong with no net debt and £322m of available liquidity. This was bolstered in the year with the establishment of a dedicated £60m Letter of Credit facility providing greater flexibility for the funding of the Company's greenfield investment pipeline.
In May 2021 HICL renegotiated its revolving credit facility to convert the loan to a Sustainability Linked Loan ("SLL") and transition from LIBOR to SONIA for GBP drawings. The innovative SLL structure links the loan's margin to the Company's performance against five sustainability targets, across Environmental, Social and Governance dimensions. This step further demonstrates the Board's and InfraRed's commitment to delivering HICL's sustainability strategy, and further aligns the Company's financial performance with key stakeholder outcomes.
1 On a Net Asset Value ("NAV") plus dividends paid basis
2 "Return" comprises the unwinding of the discount rate and portfolio outperformance, excluding the impact of changes in economic assumptions and discount rates, other than project specific changes
Equity capital markets remained supportive of HICL during the year, with the Company raising £120m via tap issuance in July 2020. The strong institutional demand for the key attributes of core infrastructure required significant scale back and the issuance at a premium to Net Asset Value was accretive to the Company's shareholders.
Over recent months the Board has been monitoring developments in the macro-economic environment particularly closely. Several relevant measures for the Company have reached inflection points, with observable step-changes in interest rates and UK corporation tax rates. Additionally, the prospect of an increase in the rate of inflation is a key focus for investors.
While higher corporation tax will become a reality for all healthy companies operating profitably, the impact of higher long-term interest rates on the Company would be nuanced and substantially mitigated. Firstly, the historically high equity risk premia implicit in the Company's asset valuations provide a substantial buffer against the risk that rising interest rates will translate into higher discount rates used in the portfolio valuation. Secondly, infrastructure projects invariably hold substantial cash reserves, which benefit from a higher interest rate environment. Finally, rising interest rates are generally a response to expectations of an inflationary environment, to which HICL's positive inflation correlation (at 0.8x) is a significant mitigant, and a key part of the Company's Investment Proposition.
HICL pays comfortably the highest dividend amongst its core infrastructure peer group. In the year, cash flow generation from the portfolio was in line with the annual forecast and the full year dividend declared for the year to 31 March 2021 of 8.25p per share was cash covered 0.9 times3 .
The Board is pleased to confirm the dividend guidance of 8.25p per share for the year to 31 March 2022, which is expected to be fully cash covered. This reflects the Company's expectations for a continuation in the recovery of HICL's demand-based assets over the course of the current financial year.
The Board has considered the recent announcement of an increase in UK corporation tax from 19% to 25% from 1 April 2023 and has assessed the impact that a change of this scale will have on the Company's forecast distributable cash flow. The Board has concluded that a continuation of the dividend at 8.25p per share for the year to 31 March 2023 is appropriate. This outcome supports the Company's intent to rebuild dividend cash cover, whilst also continuing to enhance the long-term earnings profile of the Company within the context of a lower return environment. Future dividend increases will be calibrated against these important metrics.
The Company continues to take meaningful strides in its sustainability reporting. This year's Sustainability Report (Section 2.6) sees the introduction of metrics across the key environmental, social and governance pillars that effectively capture the essence of sustainability within the context of a portfolio of 116 essential infrastructure assets. A specific sustainability-focused KQI has also been introduced within Section 2.4 – Key Performance & Quality Indicators.
HICL voluntarily elected to report against the Task Force on Climate-related Financial Disclosures ("TCFD") in 2020, documenting its progress towards full reporting and signalling the Company's clear intention to embrace best practice in sustainability. HICL's completion in the year of its climate change impact assessment across the portfolio marks the next major milestone in this journey. The Board is pleased to confirm that HICL has reported against all 11 of the recommended TCFD disclosures, again on a voluntary basis. The Company also formally became a 'TCFD Supporter' in the period.
The standard for sustainability disclosure continues to be raised and the Company welcomes the introduction of the EU Sustainable Finance Disclosure Regulation ("SFDR"). The SFDR seeks to provide a framework for greater transparency across those companies that make a genuine contribution to sustainability outcomes. Though the SFDR is an EU-focused and regulated initiative, the Company identifies with its best practice approach and intends to report against the SFDR, on a voluntary basis, noting that the industry is still settling on its interpretation of the recently released requirements.
The Board's role in providing oversight of the Company is underpinned by its commitment to maintaining a diversity of background, executive experience and perspective within its members. The Company is proud to continue to meet the requirements of both the Hampton-Alexander Review and the Parker Review.
Maintaining expert and diverse viewpoints within the Board composition remains paramount, particularly as the Board enters a period of renewal; this will be mine and Susie Farnon's final year as Directors. The Company benefits from welldeveloped succession planning which positions HICL for a smooth period of transition.
Including profits on disposals of £11.9m. Excluding this, dividend cash cover would have been 0.83 times
HICL's robust portfolio return in the period was delivered through successful operation of the Company's business model.
In an extraordinary year, the Company's value preservation activities were focused on the continued support of our public sector clients, particularly in healthcare, through a dynamic and extreme operational environment. This approach ensured the continued availability of critical public assets in the period, and the ongoing provision of essential services to local communities.
The Investment Manager achieved value enhancement through portfolio and asset management initiatives, as well as the effective management of portfolio composition with over £175m of acquisition and disposal activity.
Returns in the period were supported by four accretive acquisitions, including three incremental investments via offmarket arrangements, and a successful disposal at a premium to the Company's valuation. These proprietary routes to value creation, facilitated via the Investment Manager's networks and partnerships, are of particular significance while asset pricing remains at elevated levels.
"...proprietary routes to value creation, facilitated via the Investment Manager's networks and partnerships, are of particular significance while asset pricing remains at elevated levels."
This active management of portfolio composition through accretive acquisitions remains a core component of HICL's business model. For example, the weighted average life of the portfolio's assets has increased to 29 years compared to 28 years at HICL's initial public offering, despite the passage of over 15 years. The Board and Investment Manager remain focused on the continual improvement of HICL's key metrics, including in relation to portfolio longevity and the strong earnings and cash flow profile of the Company for decades to come.
Core infrastructure continues to play a role at the forefront of post-pandemic life: at the front line in facilitating the continued provision of essential services; responding to the pent-up demand of populations on the move again; or as a focal point for government action to stimulate post-pandemic economies while hastening progress towards decarbonisation.
The Board is highly encouraged by the momentum building behind future infrastructure procurement. Notably, in the UK, the Board welcomed the release of the Government's 'Build Back Better' policy paper, the National Infrastructure Strategy, the plan for a 'Green Industrial Revolution', the Energy White Paper, and the Gigabit-broadband programme. Similarly the \$2 trillion infrastructure package set out by the US Administration in March 2021 supports a 'once-in-a-generation' investment programme in its infrastructure.
This environment provides a very promising strategic backdrop for HICL as an active participant in the delivery of core infrastructure and a key conduit connecting the savings of families, pensioners and individual investors with the essential infrastructure assets upon which they rely. The Company looks forward to continuing its positive contribution towards the case for private sector support for core infrastructure investment, in line with its established track record as a trusted steward of essential core infrastructure over the long term.
Ian Russell Chairman 25 May 2021
HICL's investment proposition is to deliver sustainable income 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, spanning sectors such as roads, rail, utilities and social infrastructure.
The Investment Manager, on behalf of HICL, seeks to actively develop a portfolio of core infrastructure assets that delivers the investment attributes listed below to investors.
| Diversification | V HICL provides shareholders with immediate access to a portfolio of 116 core infrastructure investments V HICL's portfolio is purposefully diversified across market segments, sectors, revenue types, geographies and currencies V This active approach to diversification underpins HICL's resilience and the predictability of the Company's cash flows |
|---|---|
| Sustainability | V HICL invests in assets that sit at the heart of communities, which: – provide essential services with important social purpose (e.g. water, healthcare, education, law and order) – facilitate essential inter-regional connectivity (e.g. rail, road) – facilitate the transition to a lower carbon future (e.g. offshore transmission) |
| Total return | V HICL has delivered to investors an 8.9% Total Shareholder Return1 since IPO V Current return expectations align with HICL's weighted average discount rate of 6.8% (gross of fees)2 V This return is generated via the active and responsible stewardship of essential core infrastructure assets, delivered through the Company's business model (see facing page) |
| Yield | V HICL delivers the highest cash dividend within the core infrastructure peer group V The stability of the Company's yield profile is supported by HICL's diversification and active management approach |
| Inflation correlation |
V The Company delivers a return that is correlated to long-term inflation at 0.8x3 V Inflation linkage is a key part of the investment proposition, protecting real returns and mitigating against a higher interest rate environment |
| Asset life | V HICL provides shareholders with visibility over cash flows for several decades into the future, derived from its portfolio of long-life infrastructure assets V 28.6 years weighted average asset life V Through active management, the Company continually looks to improve this longevity through effective portfolio construction |
1 Based on NAV per share appreciation plus dividends paid
2 This is not a profit forecast. There can be no assurance that this expectation will be met
For a 1% increase in future inflation assumptions the portfolio return would increase by 0.8%
02 / STRATEGIC REPORT
VALUE ENHANCEMENT
ACCRETIVE INVESTMENT
VALUE PRESERVATION
The Board delegates the majority of the day-to-day activities required to deliver the Business Model to the Investment Manager, InfraRed Capital Partners Limited ("InfraRed"). More information on the InfraRed business can be found at Section 2.5 – Investment Manager's Report.
InfraRed's Asset Management and Portfolio Management teams work in partnership with the management teams in HICL's portfolio companies to preserve the value of investments for shareholders and stakeholders. The objective is to ensure portfolio companies continue to operate with the endorsement of their key stakeholders, including through the delivery of contractual and regulatory requirements, in order to deliver the base-case investment return.
This is achieved through:
InfraRed's Asset Management and Portfolio Management teams pursue opportunities to deliver outperformance from the existing portfolio through a systematic, strategic programme of value enhancement. This upside is often shared between HICL's shareholders and public sector clients for PPP projects, or with the customers of regulated assets through periodic regulatory price reviews.
This is achieved through:
HICL has a clearly defined Investment Policy, which can be found in Section 3.8 – Strategic Report Disclosures. 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.
This is achieved through:
– A structured evaluation framework focusing on cash flow quality, market positioning and criticality
The following summarises HICL's Acquisition Strategy
Located in developed infrastructure markets
Segmentation Core infrastructure market positioning
Defined by:
Value-add Accretive to HICL's Investment Proposition
Core infrastructure is a distinct market segment, comprising assets with good cash flow visibility and entrenched market positioning, that sit at the heart of communities and the economy; that is, essential infrastructure that delivers resilient cash flows from a protected market position.
In the 15 years since HICL's IPO in March 2006, the infrastructure asset class has matured, attracting an increasing allocation of institutional capital searching for the predictable, long-term cash yields that are typical of infrastructure investments. In turn, this capital has led to an expansion and broadening of the asset class, which has encouraged market segmentation resulting in observable tiers of risk and return.
The term 'core infrastructure' has become synonymous with those assets that exhibit the most coveted infrastructure characteristics,
and by definition sit at the lower end of the infrastructure equity risk spectrum. Since IPO, HICL's investment policy, which continues to guide HICL's acquisition strategy, has been aligned with the core infrastructure market. The Company's investment policy is set out in Section 3.8 – Strategic Report Disclosures.
The Company and its Investment Manager, InfraRed, systematically evaluate the infrastructure market using the following core infrastructure framework, with a principal focus on assessing asset quality via the three key tenets of cash flow quality, market positioning and criticality:
| Cash Flow Quality | Stable revenues | V Low volatility in a range of macro environments V Suitable / diverse counterparties V Inflation protection |
|---|---|---|
| Lower operational gearing / complexity |
V High capital cost V Low operational complexity |
|
| Market Positioning | Defensive positioning | V Monopolistic characteristics e.g. from exclusive contract or lack of feasible competition V Regulated in some circumstances |
| High barriers to entry | V Capital intensive business model V Structural protections |
|
| Criticality | Essential assets | V Strong social licence and public benefit V Real assets supporting essential services or facilitating important social function |
In this way, core infrastructure is a distinct market segment, comprising assets with good cash flow visibility, entrenched market positioning, that sit at the heart of society and the economy; that is, essential infrastructure that delivers resilient cash flows from a protected market position.
Investors accept the vital role that these assets play in society and therefore the importance of a stakeholder-led approach to maximising long-term shareholder value.
The Investment Manager analyses the core infrastructure market using a matrix with the following dimensions:
The intersection and interaction of these dimensions within the matrix is set out below.
| PPP | Regulated | Demand-based | Corporate | |||
|---|---|---|---|---|---|---|
| Overview | Highly contracted projects with exclusive revenue rights from government counterparties |
Monopoly infrastructure with cost variability mitigated by regulatory review mechanisms |
Predictable revenues from strategic positioning; limited competition and non-discretionary demand |
Strategic positioning from limited competition, typically including contracted revenues |
||
| Cash flow quality | – Highly contracted revenue and costs – Revenue covenant with public sector counterparty – Lower operational gearing |
– Cost variability mitigated by regulatory review mechanism – Medium operational gearing / complexity |
– Predictable 'user pays' revenues derived from non-discretionary demand – Low operational gearing |
– Revenues partially contracted with high-quality and / or suitably diversified corporate counterparties |
||
| Asset Quality | Market positioning | – Operate under exclusive licence / lease frameworks – High capital cost |
– Regional monopolies – Entrenched / incumbent networks – High capital cost |
– Strategic positioning with limited alternatives – High user value proposition – Non-discretionary demand – High capital cost |
– Defensive business models – Limited competition – Non-discretionary usage – Capital intensive businesses |
|
| Asset criticality | – Facilitating the delivery of essential services and / or important social function |
– Provision of essential goods; vital to individuals, communities and the economy |
– Typically vital transport links; connecting regions and facilitating employment |
– Infrastructure key to the delivery of essential goods and services (e.g. meters, fibre) |
||
| – Social infrastructure, Examples transportation |
– Water utilities, electricity and gas transmission and distribution |
– Toll roads, student – accommodation |
Rolling stock leasing | |||
| Contracted | Mitigated | Strategic | Contracted | Strategic |
This matrix illustrates the extent to which the various revenue profiles exhibit different risk characteristics, but also vary with respect to their alignment with the three core infrastructure markers of asset quality. By bringing these attributes together, the Investment Manager is able to make a further categorisation of the market for infrastructure investments: contracted, mitigated and strategic.
This investment categorisation reflects the nature of the revenue and cost base, and accordingly, the stability of the cash flows to equity. Through this classification matrix the Investment Manager is able to make a comprehensive assessment of risk characteristics across the infrastructure market. This informs asset pricing and provides a guide for robust portfolio construction via effective diversification.
The diagram below shows an illustration of the core infrastructure market segment, organised principally by revenue profile (i.e. PPP, regulated, demand-based and corporate) with a further overlay reflecting investment categorisation (i.e. contracted, mitigated and strategic).
KEY Inner wheel denotes Revenue Profile Outer wheel denotes Investment Categorisation
As society continues to be shaped and influenced by the powerful mega-trends set out on the diagram below, so too will its infrastructure requirements. Increasingly the infrastructure market will evolve in line with these themes, creating a subset of attractive core infrastructure investment opportunities across the 'modern economy'.
| Cash flow quality | Stable revenues | Lower operational gearing / complexity |
|---|---|---|
| Market positioning | Monopolistic characteristics | High barriers to entry |
| Criticality | Essential assets |
The above diagram sets out the Investment Manager's perspectives on the ways in which infrastructure continues to evolve, shaped by powerful 'megatrends'. Infrastructure themes are set out alongside each identified megatrend. A subset of these themes is expected to generate opportunities with core infrastructure characteristics, as the sectors mature or are supported by governments or corporates (e.g. through revenue support or risk sharing). In the period, the themes associated with 'Connectivity & Digitisation' and 'Lower Carbon Economy' continue to have
Government policy plays a pivotal role in the cadence of the evolution of these megatrends and infrastructure themes, with significant policy announcements over the 12-month period. Building on the UK Government's Ten Point Plan for a Green Industrial Revolution, the release of the National Infrastructure Strategy ("NIS") provided significant policy momentum to the decarbonisation of the UK economy by 2050. The NIS also highlights the key role of communications infrastructure in a post-Covid world, leveraging its central role in the Government's levelling-up agenda. The subsequent announcement in March 2021 of the UK's 'Project Gigabit'
builds on this strategic ambition. These themes are not unique to the UK. The \$2 trillion infrastructure package set out by the US Administration in March 2021 cites decarbonisation and connectivity among its primary spending commitments.
These two investment themes remain the most productive incubators of core infrastructure investments amongst the themes set out above; that is, investment opportunities that best display the characteristics requisite for HICL's core infrastructure mandate. An appropriate pipeline for the Company in these sectors continues to be primarily the delivery of the infrastructure (e.g. fibre in Europe, district opportunities for investors (e.g. contracting, take-or-pay structures, regulated asset models). Investor appetite for high-quality core infrastructure opportunities remains heightened with demand significantly outweighing supply. HICL continues to be a highly disciplined market participant, focusing origination efforts on those opportunities with the appropriate risk and reward attributes for HICL, sourced via InfraRed's networks.
The Board has identified metrics against which to measure clearly HICL's performance against its strategic objectives. The results for the year ended 31 March 2021 are set out below.
| KPI | Measure | Objective | Assessment | 31 March 2021 |
31 March 2020 |
|---|---|---|---|---|---|
| Dividends | Aggregate interim dividends declared per share for the year |
An annual distribution of at least that achieved in the prior year |
Achieved | 8.25p | 8.25p |
| Total Shareholder Return |
NAV growth and dividends paid per share since IPO |
A long-term IRR target of 7% to 8% as set out at IPO1 |
Achieved | 8.9% p.a. | 9.0% p.a. |
| Cash-covered Dividends |
Operational cash flow / dividends paid to shareholders |
Cash covered dividends | Not Achieved |
0.90x2 | 1.14x3 |
| Positive Inflation Correlation |
Changes in the expected portfolio return for 1% p.a. inflation change |
Maintain positive correlation with a correlation of at least 0.5x |
Achieved | 0.8x | 0.8x |
| Competitive Cost Proposition |
Annualised ongoing charges / average undiluted NAV4 |
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 |
Achieved | 1.07% | 1.11% |
1 Set by reference to the issue price of 100p/share, at the time of HICL's IPO in February 2006
2 Including profits on disposals of £11.9m. Excluding this, dividend cash cover would have been 0.83x
Including profits on disposals of £16.4m. Excluding this, dividend cash cover would have been 1.03x
4 Calculated in accordance with Association of Investment Companies guidelines. Ongoing charges excluding non-recurring items such as acquisition costs
| KQI | Measure | Objective | Assessment | 31 March 2021 |
31 March 2020 |
|---|---|---|---|---|---|
| Investment Concentration Risk |
Percentage of portfolio value represented by the ten largest investments1 |
Maintain a diversified portfolio of investments (thereby mitigating concentration risk) and, at all times, remain compliant with HICL's Investment Policy. |
Achieved | 46% | 44% |
| Percentage of portfolio value represented by the single largest investment1 |
Single asset concentration <15% | 8% | 6% | ||
| Risk / Reward Characteristics |
Percentage of portfolio value represented by the aggregate value of projects with construction and / or demand-based risk2 |
Compliance with HICL's Investment Policy, to be lower than the aggregate limit of 35% for such investment |
Achieved | 22% | 23% |
| Unexpired Concession Length |
Portfolio's weighted-average unexpired concession length |
Seek where possible investments that maintain or extend the portfolio concession life such that it remains above 20 years |
Achieved | 28.6 years |
27.8 years |
| Refinancing Risk |
Investments with refinancing risk within 24 months as a percentage of portfolio value3 |
Manage exposure to refinancing risk to 20% of portfolio value |
Achieved | 0.2% | 0%4 |
| Sustainability Stewardship |
Percentage of the portfolio that is rated 'high' for ESG performance5 |
>75% of the portfolio rated high in ESG performance |
Achieved | 99% | 87% |
1 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
2 '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 3 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
4 In 2021 the Refinancing Risk KQI methodology was redefined to look at the next 24 months. Under the previous methodology, which measured refinancing risk throughout the asset life, the 2020 number had been reported as 12%
5 'High' rating in ESG performance means scoring 4/5 stars in the HICL Sustainability Survey or subsequent metrics as ESG reporting evolves
02 / STRATEGIC REPORT
02 / STRATEGIC REPORT
Harry Seekings Head of Infrastructure, InfraRed Harry leads InfraRed's infrastructure investment business, including overall responsibility for the management of HICL
Keith Pickard Director, Infrastructure, InfraRed Keith is responsible for managing the for the HICL Group
InfraRed Capital Partners Limited ("InfraRed") acts as the Investment Manager to HICL and Operator of the Group's investment portfolio. InfraRed has day-to-day responsibility for the Company and manages key stakeholders. Activities include:
InfraRed is a specialist real asset investment manager:
190+ Staff across six countries
Offices in London, New York, Sydney, Seoul, Mexico City
Independent Non-Executive Board and Committees Governance Oversight Strategy
5
Equity under management
25+ Years of investment experience
25+
19
assets
Nationalities
Countries where InfraRed manages Funds raised
17
220+ Infrastructure assets under management
Partnership with Sun Life / SLC since 2020
financial activities carried out by InfraRed
Alternative Investment Fund Manager (AIFM) Fund Management Strategy Reporting
Shared responsibility across the Board and InfraRed To deliver a robust and proactive approach to governance to deliver sustainable income, to mitigate risks and to create a positive impact within the Company's portfolio Acquisitions and Disposals Asset Management Risk and Portfolio Management Portfolio Companies Non-recourse holding structure
Edward Hunt Director, Infrastructure, InfraRed Edward is responsible for the day-to-day management of the Company
The underlying portfolio has delivered a robust return1 of 7.7% for the year ended 31 March 2021, ahead of the Company's expected return of 7.2% at the start of the year.
The Company's PPP projects (71% of the portfolio by value as at 31 March 2021) benefit from highly contracted revenues and delivered performance in line with management expectations. The success of these joint ventures, for the public and private sectors alike, is built on the quality of the partnership principles exhibited at project level. The challenges of the pandemic in relation to public infrastructure have highlighted the considerable potential for effective partnership models that ensure continuity of essential service provision in a rapidly evolving operating environment.
HICL made two PPP investments in the period. Both investments were incremental stakes, taking HICL's ownership in each to 100%, in operational, availability-based assets and were accretive to the Company's key portfolio metrics. Specifically:
Selective disposals remain an important source of value for HICL and an effective tool to optimise portfolio construction. In March 2021 the Company announced the disposal of the South East London Police Stations PPP project at a premium to holding value.
The Company has an uncompromising approach to safety across its portfolio. For a number of years this has been particularly focused on fire protection. In the period since the Grenfell Tower tragedy alone, PPP projects in the HICL portfolio have proactively directed over £110m of improvements to fire safety measures, including the remediation of unsafe cladding. In the majority of cases the risk and responsibility is borne by subcontractors. However, on one healthcare asset delivered by the now-defunct Carillion, additional fire-related remediation was identified in the course of carrying out initial upgrade works. This was highlighted in HICL's Interim Report. HICL has committed to invest up to £28m of further equity into the project over a period of 12 months to ensure that these necessary works are delivered and this is reflected in the Directors' Valuation.
Investments where revenues are linked to usage accounted for 19% of the portfolio by value as at 31 March 2021. Three investments in the portfolio constitute the majority of this asset allocation and the impact of Covid-19 on these continues to be varied. Specific details on the revenue performance and the valuation approach for these investments are set out in Section 3.2 – Valuation of the Portfolio.
The A63 Motorway in France (7% of portfolio value) has performed in line with the forecast assumed at 30 September 2020. The swift and enduring recovery of the asset's revenues is underpinned by the A63's strategic positioning within the TEN-T trans-European transport network2 .
The Northwest Parkway ("NWP") in Colorado, USA, (5% of portfolio value) continues its path to recovery. Performance in the period was below the forecast assumed at 30 September 2020 due to the imposition of further travel restrictions in November 2020. However, the abatement of these restrictions and now the widespread availability of Covid-19 vaccines in Colorado have contributed to further recovery and support the Investment Manager's assessment that traffic levels will reach pre-Covid levels by June 2023. The investment's valuation has benefited from forecasts for a strong post-pandemic recovery in the US given the asset's GDP-correlation.
High Speed 1 ("HS1") in the UK (4% of portfolio value) continues to be significantly impacted by local and international restrictions on travel. International services (32% of track access revenue to 31 March 2020) remain broadly in line with HICL's forecast as at 30 September 2020, albeit materially below pre-Covid levels (-88%). The timing and extent of the recovery during the calendar year remain uncertain, and our forecast assumes a recovery of international services to c.50% of pre-Covid levels by 31 March 2022. The valuation considers the increased pressure on the financial covenants of the company's debt facilities, linked to the timing of the recovery of international services. Domestic services (68% of track access revenue to 31 March 2020) remain pre-booked to May 2021 at pre-Covid levels. Thereafter domestic revenues are assumed to align with the guaranteed level provided by the contractual underpin from the Department for Transport (96% of pre-Covid revenues) before recovering to pre-Covid levels by the end of 2022.
HS1 continues to enjoy productive working relationships with its key stakeholders, including its train operating customers and the company's lending group. This positions HS1 effectively for the continued cooperation and partnership expected of all parties over the coming months.
1 "Return" comprises the unwinding of the discount rate and portfolio outperformance, excluding the impact of changes in economic assumptions and discount rates, other than project specific changes
2 Trans-European Transport Network (TEN-T) is a planned network of roads, airports, railways and water infrastructure in the EU. The initiative seeks to establish intermodal, long-distance and high-speed corridors
In March 2021 HICL acquired additional loan note interests in the Medium Support Helicopter Aircrew Training Facilities project. The project has been operational since August 2000 and receives revenue based on usage by the UK Ministry of Defence and third parties, with guaranteed minimum amounts. The incremental investment was accretive to key portfolio metrics.
Regulated assets, comprising both Affinity Water and offshore transmission assets ("OFTOs"), accounted for 10% of the portfolio by value as at 31 March 2021.
In March 2021 the Competition and Markets Authority ("CMA") issued its redetermination of the PR19 regulatory price review for four appellant water companies. Notably, the CMA issued an increase in the applicable cost of capital and removed the gearing sharing mechanism introduced by Ofwat. Although Affinity Water (8% of portfolio value) did not lodge an appeal, these findings benefit the assumptions used to value the investment, resulting in a valuation increase in the period. The significant investment required in the network to meet the combined challenges of population growth and a changing climate in the South East of England underpins the strategic importance of the investment over the long term for HICL.
In the period HICL completed the acquisition of a 29% interest in the transmission assets associated with the Walney Extension Offshore Wind Farm. HICL's four OFTO investments continue to perform strongly in their support of the UK's transition to 'Net Zero', recording combined availability over the year to 31 March 2021 of over 99.8%.
The Company's Total Shareholder Return, based on the change in NAV per share plus dividends paid, was 5.5% for the year (2020: 1.9%). Changes to the Company's macro-economic assumptions, including lower forecast interest rates, the alignment of UK RPI with CPIH from 2030, negative movements in foreign exchange (net of hedging) and the increase in UK corporation tax from April 2023, reduced NAV by £130.7m / 6.9p per share; and the impact of Covid-19 on HICL's demand-based assets versus the Company's forecast in the 31 March 2020 valuation impacted NAV by £34.4m / 1.8p per share. These factors were more than offset by the robust return of £213.2m / 9.3p per share from the underlying portfolio, including accretive investment and disposal activity, and stronger asset pricing driven by further heightened demand for the key attributes of core infrastructure (£141.1m / 7.4p per share).
Cash flow receipts on an Investment Basis were £178.0m (2020: £205.9m) in line with forecast. After finance and operating costs, net operating cash flows on an Investment Basis were £142.9m (2020: £169.1m), which covered the dividends paid in the year 0.9 times (2020: 1.14 times)3 .
Profit after tax / earnings was £151.9m (2020: £49.5m), principally driven by the same factors as set out above.
HICL uses the Association of Investment Companies ("AIC") methodology to assess the ongoing charges percentage, which for the period was 1.07% (2020: 1.11%).
The Investment Manager supports the Board's confirmation of the guidance of 8.25p per share for the year ending 31 March 2022 and the additional guidance for a continuation of the dividend at this same level for the year ending 31 March 2023.
The Investment Manager provided extensive analysis on the impact of the evolving macro-economic context, including in relation to the proposed increase in UK corporation tax from 1 April 2023. The analysis also considered the relationship between the sustained lower return environment and the dividend level.
InfraRed believes it is appropriate to more closely link future dividend increases with the recovery of dividend cash cover and notes the importance of continuing to improve the long-term earnings profile of the Company to support dividend growth over the longer term, as has been the case since HICL's IPO in 2006.
InfraRed strives to be a responsible investment manager and to develop and manage long-term, sustainable infrastructure. We believe that we can only achieve long-term success for all stakeholders, including investors, by taking ownership of the environmental, social and governance outcomes across HICL's portfolio. This is essential to our vision and, in this regard, the Investment Manager shares the HICL Board's commitment to embracing sustainability best practice. This means recognising the Company's stewardship responsibilities across its portfolio of essential infrastructure. InfraRed continues to drive the delivery of sustainability outcomes across HICL's investments while consistently improving the level of transparency and detail in the associated reporting (see the Company's Sustainability Report – Section 2.6).
The recent completion of the climate change impact assessment across the HICL portfolio is a strategically important initiative: it provides important asset-level information to inform InfraRed's asset management strategies over time; enables collaboration with public sector clients on climate-driven risks and opportunities, potentially beyond the concession expiry; and instructs future acquisition screening and strategic portfolio construction. The Investment Manager continues to work closely with HICL's portfolio company management teams to evaluate and implement the findings from this important review.
3 Excluding the impact of disposals dividend cash cover was 0.83 times (2020: 1.03 times) Market best practice in relation to sustainability reporting is rapidly evolving. This year HICL is reporting, on a voluntary basis, against all 11 recommended disclosures from the Task Force on Climaterelated Financial Disclosures ("TCFD"). In addition, the Company recognises the importance of the new European Sustainable Finance Disclosure Regulation ("SFDR") in promoting transparency in sustainability disclosures that will benefit companies with bona fide sustainability credentials such as HICL. The Company intends to report against the SFDR framework on a voluntary basis, recognising that the industry is still working through the recently released requirements and with the expectation that UK-specific requirements will follow in due course.
InfraRed has been a signatory of the Principles for Responsible Investment ("PRI") since 2011 and is represented on the Infrastructure Advisory Committee of PRI. The infrastructure business line achieved an A+ rating for its 2020 assessment, its sixth successive year. InfraRed has been carbon neutral since 2019 and offsets its CO2 emissions using an accredited scheme.
Following significant fiscal programmes in HICL's key markets to respond to the impact of the pandemic, there is potential for national governments to seek to recover revenues through tax increases. In the period, the UK increased its rate of corporation tax applicable from 1 April 2023 and there is risk that other jurisdictions may follow in due course.
In the UK, there is 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. Of HICL's 70+ UK PPP projects, 13 projects expire by 2030, the next in 2026. Notwithstanding this relatively young portfolio by industry standards, InfraRed appreciates the importance of constructive engagement with the relevant public sector stakeholders to ensure a smooth, and equitable, handback process.
More broadly the Company seeks to engage proactively with stakeholders to assist in resolving key industry issues. In the period, InfraRed provided industry leadership in the UK on supporting the Infrastructure and Project Authority's initiative to co-ordinate a smooth transition from LIBOR to SONIA in the PPP market. This is scheduled to conclude at the end of the calendar year. Specifically, the Investment Manager is actively participating in a pilot transition project and has coordinated an industry response to the FCA consultation on the proposed use of synthetic LIBOR powers. InfraRed continues to actively engage with key stakeholders, such as the UK's Infrastructure and Projects Authority, on the issue.
Assessments have been made by the Investment Manager as to the timing and extent of the economic recovery from Covid-19, and assumptions produced at asset-level (e.g. traffic forecasts). Risk remains around these assumptions and the general cadence of the recovery.
The impact of the pandemic on consumer preferences for working practices, business travel and modal selection (i.e. vehicle, train or plane) remain uncertain over the longer term. The Directors' Valuation includes a judgement on the potential for this impact.
HICL's principal mechanism of risk management is passing asset-level service delivery obligations through to HICL's network of specialist service delivery partners. Risk arises to the extent that these partners are unable to deliver their contractual obligations. The ongoing assessment and management of the Company's counterparty exposures is a key activity of the Investment Manager.
An important component of counterparty management relates to the finalisation of specific construction-related issues. These 'construction defects' can materialise some years after construction completion and are typically the responsibility of the construction contractor to remediate. The resolution of such issues can be protracted and may delay the scheduled payments of equity distributions. Where the contractual liability period has expired, or the contractor no longer exists, responsibility for defect remediation then sits with the shareholders. The proactive identification of defects and pursuing necessary action to ensure that subcontractors assume their obligations in a responsible and timely manner is key to the management of this risk.
Climate change risk presents broadly in two categories for the Company:
Various mitigations exist at the project-level including, for example, insurances and contractual protections. At the Company level, climate-related risk is incorporated into HICL's risk management framework. The recently completed climate change impact assessment of the HICL portfolio enables enhanced identification, assessment and mitigation of this risk (see the Company's Sustainability Report – Section 2.6).
The primary focus of the Investment Manager remains the active and effective management of the Company's existing portfolio, working closely with HICL's stakeholders. This is particularly important given the protracted challenges of Covid-19 on specific assets, which continue to require expertise from InfraRed's experienced teams of asset and portfolio managers. As HICL's key markets now emerge from the pandemic, the portfolio's demand-based assets are well-positioned to benefit from the resumption of travel and economic activity.
HICL's business model seeks the consistent improvement of the Company's investment proposition over the long term. Accretive acquisition is key to delivering this and the Investment Manager continues to position the Company favourably for further growth. This includes proactive targeting of opportunities arising from the evolution of the core infrastructure sector (e.g. the energy transition and communications infrastructure), matched with a systematic adherence to HICL's established risk and reward framework. Greater emphasis on the Company's proprietary channels for investment origination enables HICL to access attractive core infrastructure opportunities, despite the current period of elevated asset pricing. HICL benefits from a robust balance sheet and is well-positioned to continue to execute its acquisition strategy in the current environment.
The likely scale of future infrastructure procurement in the post-pandemic recovery agendas of governments across HICL's key markets underscores the significant potential for private sector funding solutions to support these substantial ambitions. These policy dynamics create a favourable backdrop for HICL to execute its strategy successfully over the medium and long term.
02 / STRATEGIC REPORT
As a prominent long-term investor in core infrastructure, HICL has a role in society that extends beyond its shareholders.
The Company is a trusted steward of essential assets and has a responsibility towards the communities that the assets serve and, in many cases, to which the assets will be returned at the end of the defined contractual term. The Board and Investment Manager recognise that operating in a sustainable manner lies at the very heart of the Company's business model, and is fundamental for the successful delivery of its investment proposition.
"The Company's performance is inextricably tied to the delivery of positive stakeholder outcomes, in particular for the communities who use, and interact with, the Company's assets in their daily lives."
Ian Russell CBE, Chairman
The infrastructure in which HICL invests supports individuals, communities, societies and their environment. With this comes a responsibility for HICL, and its portfolio companies to act with care, consideration and integrity.
These responsibilities are discharged by the Board and InfraRed in order to mitigate risks and to create a positive impact which align with and go beyond HICL's commercial objectives.
HICL actively contributes to the United Nations ("UN") Sustainable Development Goals ("SDGs") through the delivery of reliable and resilient infrastructure that supports economic development and human wellbeing.
As a custodian of public, community infrastructure, there is a focus on inclusive, affordable and equitable access for all. The nature of HICL's investment proposition means the Company inherently contributes to developing industry, innovation and infrastructure (SDG 9); and building sustainable cities and communities (SDG 11).
Over the course of the year, the Company has taken significant strides to embed sustainability considerations across its activities.
The Board recognises that standards for best practice in sustainability continue to rise, and has set out the Company's recent progress and key sustainability objectives for the coming year on page 30.
| Completion of a detailed, portfolio wide climate impact assessment, enabling HICL to respond against all 11 TCFD recommendations |
Introduction of a suite of dedicated Sustainability metrics and targets to track performance and increase accountability |
|---|---|
| Pages 32-34 | Page 31 |
| The signing of an innovative ESG-linked RCF, linking sustainability performance to financial outcomes |
An enhanced annual ESG survey, featuring 20 new questions and covering the whole of HICL's portfolio |
| Page 52 | Page 45 |
InfraRed strives to be a responsible investor and to develop and manage long-term, sustainable infrastructure.
The Investment Manager believes that long-term success for all stakeholders (including investors) can only be achieved by taking responsibility for the environmental, social and governance impacts of its investment activities. This is essential to InfraRed's corporate vision, and in this regard, the Investment Manager is committed to embracing sustainability best practice. This means recognising and delivering stewardship responsibilities, on behalf of HICL, across the Company's portfolio of essential infrastructure.
"At InfraRed we have always believed that a sustainability-led mindset is essential to delivering outperformance. It is enshrined in our DNA that creating value for all stakeholder groups – not just one – is crucial to the long-term success of any asset."
Werner von Guionneau, CEO, InfraRed Capital Partners Limited
The application of HICL's Sustainability Policy is undertaken by InfraRed. The Investment Manager publishes and regularly updates its own sustainability policy on InfraRed's website. In May 2021, to formalise over a decade of continuous improvement and best practice, InfraRed published its first Sustainability Report1 . This report is part of the Investment Manager's commitment to provide transparency on its sustainability performance and its desire to be held accountable by all of its stakeholders, which includes those of HICL.
Approach to responsible investment
InfraRed has been a signatory of the Principles for Responsible Investment ("PRI") since 2011, and continues to take a leadership role in the implementation of responsible investment strategies. During the year, InfraRed's infrastructure business
We will
InfraRed has been a certified CarbonNeutral® company since 1 January 2019 and an official TCFD Supporter since October 2020.
was awarded the highest attainable A+ rating, as assessed by PRI, for the sixth consecutive year. The six Principles across which InfraRed have been assessed are set out below:
https://www.ircp.com/sites/default/files/2021-05/InfraRed%20Sustainability%20Report.pdf
The 17 Sustainable Development Goals ("SDGs") were adopted by all United Nations member states in 2015. The SDGs are an urgent call for action by all countries – developed and developing – in a global partnership. They recognise that ending poverty and other deprivations must go hand-in-hand with strategies that improve health and education, reduce inequality, and spur economic growth – all while tackling climate change and working to preserve our oceans and forests.
HICL supports all of the UN SDGs. We focus our efforts on the goals which align with our Environmental, Social and Governance objectives, contributing through the investments we make and impacting the local communities around our assets. Although the Company inherently contributes towards developing industry, innovation and infrastructure (SDG 9) and building sustainable cities and communities (SDG 11), HICL's ESG commitments have a broader reach. The table below demonstrates the Company's broader contribution to the SDGs, either through the Investment Manager or specific initiatives undertaken by its portfolio companies.
| SDG | HICL's assets facilitate | How HICL and InfraRed contribute |
|---|---|---|
| 12.5 million People with access to HICL's healthcare facilities, including three major regional trauma centres |
In response to Covid-19, we prioritised the health and wellbeing of our own staff, the end-users of our assets, as well as the staff of our clients, delivery partners and other stakeholders (page 43) |
|
| 140,000 Places across the school, college and university facilities and accommodation |
We encourage our investment companies to implement initiatives that educate young people about job opportunities and infrastructure projects as well as key environmental issues such as climate change. Improving social mobility through quality education is also a key priority of InfraRed's Community Engagement committee (page 42) |
|
| 1.8 GW Connecting offshore wind generation with enough capacity to power 1.7 million homes |
HICL has now completed its fourth investment into offshore transmission assets, further contributing to the UK's transition to a low-carbon economy (page 40) |
|
| 50 Police stations, custody centres, fire stations and training facilities |
The Investment Manager works closely with government and civil institutions to support and enable contract variations which materially improve facilities for all stakeholders (page 45) |
|
| 3.6 million Population served with clean water by Affinity Water |
We are actively engaging with our investment companies to ensure that measures are implemented to reduce water consumption (page 40) |
|
| 35% InfraRed appointed portfolio company directors are women |
HICL's Board has chosen to adopt definitive policies with quantitative targets for Board diversity. The Investment Manager reports to the Board their progress on inclusion and diversity in the workplace (page 42) |
|
| 16,000 Tonnes of CO2 emissions will be avoided over the life of HICL's concessions |
The Investment Manager has concluded a detailed climate change impact assessment and has set clear targets for the collection of greenhouse gas emissions data across the portfolio (page 31) |
|
| 1,200 Staff directly employed by HICL project companies, with thousands more employed through the supply chain |
We actively monitor our service provides to ensure that they have appropriate health & safety procedures in place, and HICL's portfolio companies uphold labour standards and initiate skills development programmes (page 43) |
In the 15 years since HICL's IPO, the Company has played a growing role as a long-term investor in essential core infrastructure. The fundamental social purpose of HICL's portfolio companies, such as its schools and hospitals, has ensured that the investment made by the Company's shareholders has a positive and long-lasting impact.
Today, through its portfolio of 116 investments, HICL serves a population of over 20 million people in six countries and, in the UK alone, the infrastructure in which HICL has invested touches the lives of one in four citizens.
This underlines the importance of the commitments made by the Board and the Investment Manager towards sustainability, and the need for continuous improvement.
In order to ensure that HICL remains at the forefront of sustainability best practice, the Company has significantly enhanced its disclosure, processes and risk management during the course of the year. This is summarised in the graphic below, which also sets out the key objectives for the next 12 months.
Sustainability considerations formally integrated into InfraRed's investment processes
Stakeholder mapping & strategic engagement strategy, launch of InfraRed industry Knowledge Centre
Publication of limited governance metrics at portfolio company level
Publication of HICL's sustainability policy
Incorporation of sustainability risks into InfraRed's risk reporting framework
Signing of an ESG-linked RCF, linking sustainability performance to financial outcomes
Enhanced ESG survey focused on driving change in project companies; launch of InfraRed's sustainability best practice guidance notes
Dedicated sustainability KQI and a full set of sustainability metrics and targets
Voluntary reporting against all 11 TCFD recommendations
Portfolio-wide climate change impact assessment undertaken to identify physical and transition risks, opportunities and mitigation
InfraRed to align investment process with UN Guiding Principles on Business and Human Rights
Direct engagement with project companies through bi-annual workshops and regular follow-up sessions with InfraRed staff
Progress measured against targets; expanded environmental metrics; InfraRed to implement a plan to achieve net zero carbon emissions
Launch of a detailed data collection exercise required for closer alignment with the full Level 2 provisions of the SFDR
Asset-level climate change mitigation plans put in place, with regular reporting on progress
Reporting on sustainability in a manner that is clear and easily absorbed by investors requires continual improvement. In addition to the formal sustainability KQI reported on page 18, HICL has published a full suite of metrics and targets to improve the objective measurement of the Group's Environmental, Social and Governance performance. These efforts will create a feedback loop which allows the Investment Manager to drive improvements
in the portfolio, and are expected to follow a natural sequence over time:
Portfolio companies with energy reduction initiatives
35%
Portfolio companies reporting Scope 1 and 2 emissions
Portfolio companies with water reduction initiatives
94% Portfolio companies report water usage
83% Portfolio companies with waste reduction initiatives
48%
Portfolio companies report waste amount
Of InfraRed appointed portfolio company
HICL's target is for all portfolio companies to report
Portfolio companies with voluntary charitable contributions to environmental or social initiatives
98%
Active Stewardship
35%
directors are women
RIDDORs (and equivalent Health & Safety incidents in non-UK countries) per project, including project subcontractors
Percentage of portfolio where InfraRed has:
Visited one of the project company's assets1
Attended all Board meetings
Target = 90%
Portfolio companies with appropriate policies concerning:
Train their staff to ensure they have an understanding of what the Act is AND undertake audit procedures to ensure policies are effective
Actively monitored the project / company's performance
Target = 100%
1 An exception was made where site visits were not conducted in person due to Covid-19 restrictions
Climate change is emerging as a key risk for infrastructure investors, with the potential to significantly impact infrastructure assets around the world. In 2015, world governments committed through the Paris Agreement to curbing global temperature rise to below 2°C above pre-industrial levels in order to prevent the most severe consequences of climate change.
Both HICL and InfraRed support the Paris Agreement and are committed to reducing carbon emissions where possible.
For HICL, climate change and the response to climate change are likely to impact the Company in two ways:
The Investment Manager incorporated climate-related risks into the Company's risk management framework in 2019 and, in September 2020, engaged Willis Towers Watson ("WTW") to conduct a detailed climate change impact assessment, the scope of which included the entirety of HICL's portfolio1 .
The flow chart below sets out the process undertaken by the Investment Manager and WTW:
| Identify physical risks | Analysis of exposure to 11 different physical risks2 | |||||
|---|---|---|---|---|---|---|
| 1 | based on current conditions | |||||
| based on current | Each risk ranked 1-5 based on relative severity and frequency | |||||
| conditions | Climate hazard index calculated for each asset | |||||
| Identify physical risks 2 based on future conditions |
Additional exposure rankings for five3 of the 11 physical risks based on: – Business as usual (4°C above pre-industrial levels) – Energy transition / net zero (1.5°C above pre-industrial levels) |
|||||
| Quantify physical | For flooding and wind storms, potential financial exposure modelled | |||||
| 3 | For each asset, statistical simulation undertaken 10,000 times | |||||
| climate risks | Average annual loss (excluding mitigation / insurance) estimated for each asset | |||||
| Assess transition | Potential impacts of lower carbon transition, broken down by sector and geography | |||||
| 4 | Focus on UK and EU regulations and market trends with highest impact | |||||
| climate risks | Opportunities as well as risks identified | |||||
| Undertake project 5 level 'deep dives' |
– Climate hazard index score | 16 Deep dives equivalent to over 45% of portfolio value selected by InfraRed based on: – Potential financial impact, weighted by concession length and HICL ownership |
||||
| 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 the Defence Sixth Form College and A13 senior bonds
Key findings from the climate impact assessment, based on the scenarios run, are:
At a fund level, the results demonstrate the overall financial resilience of the portfolio, enable better reporting and Board-level feedback on risk and instruct future acquisition screening and strategic portfolio construction.
Behavioural change (either uptake in mass transit use or overall reduction in journeys), increased car sharing
Related investment such as rapid charging, reduced congestion through autonomous driving technology
The results of the assessment will be used by InfraRed's Asset Management team and the project company management teams to develop and inform risk mitigation strategies over time, increase climate resilience and develop potential transition opportunities.
The graphic below shows how the findings of the WTW project reports (or for certain projects, the results of 'deep dives') will be used by the project teams, supported by InfraRed. Going forward, questions will be added to the annual ESG survey to monitor implementation, and the InfraRed Knowledge Centre will act as a tool to share climate change best practice.
The recommendations of the Task Force on Climate-related Financial Disclosures ("TCFD"), of which both HICL and InfraRed are supporters, is the established framework for consistent, comparable and clear reporting on a company's approach to climate change and assessing its potential impact on the company.
HICL began voluntarily reporting against a subset of the 11 TCFD disclosure recommendations in its 2020 Annual Report and Financial Statements. Having undertaken a portfolio-wide climate change impact assessment over the course of the year ended 31 March 2021, the Group is now in a position to report against all 11 of the recommended TCFD disclosures, again on a voluntary basis.
The tables below set out our disclosure against the 11 TCFD recommendations, with references to relevant information elsewhere in this report.
| Recommendation | Disclosure | |
|---|---|---|
| 1 Describe the Board's oversight of climate related risks and opportunities |
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. |
|
| Some of the Board's committees also have key roles: | ||
| V 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 |
||
| V The Management Engagement Committee considers how HICL service providers adhere to HICL's Sustainability Policy |
||
| V The Audit Committee reviews the Company's approach to disclosures, including those relating to climate change |
||
| 2 | Describe management's role in assessing and managing climate related risks and opportunities |
The application of HICL's Sustainability Policy to making new investments and the management of HICL's portfolio is undertaken by InfraRed, as Investment Manager and Operator. This includes the day-to-day monitoring, evaluation and management of risks, including those linked to climate change. The Investment Manager's risk framework explicitly considers climate-related risks across its Portfolio Performance, Political and Operational – Execution risk classes. |
| In September 2020, InfraRed commissioned a detailed climate change impact assessment to identify and assess climate-related risks and opportunities in the current portfolio. The Investment Manager will use the results of this exercise to transform the management and reporting of climate-related risks at portfolio company level. |
||
| InfraRed is also responsible for incorporating climate-related risks and opportunities into the investment process, which applies for all potential acquisitions as set out in more detail on page 44. |
| Recommendation | Disclosure | |
|---|---|---|
| 3 | Describe the climate related risks and opportunities the organisation has identified over the short, medium and long term |
Through the detailed climate change impact assessment, the Investment Manager has identified that in the short term, based on current climate conditions, a subset of assets in which HICL has invested are exposed to acute and chronic physical risks arising from different extreme weather events, although the overall exposure is limited and mitigations can be put in place. The Company may also be exposed to transition risks if there are rapid, unexpected changes to government policy. |
| In the medium to long term, based on a 4°C scenario, there is slightly increased exposure to physical risks. Under a 1.5°C scenarios 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. |
||
| Further details are provided in the case study on pages 32-34 | ||
| 4 | Describe the impact of climate-related risks and opportunities on the organisation's businesses, strategy and financial planning |
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, particularly from flooding and winter storms. In many cases physical mitigation measures already exist and there is a degree of contractual protection from increased costs to implement further mitigation 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. |
| The results of the climate impact assessment feed into the Company's strategy in a number of ways. InfraRed has developed Climate Risk Mitigation Guidance and the IRCP Knowledge Centre to improve resilience at the asset level. As set out in more detail on page 33, the risks and opportunities from climate change (including under a 1.5°C scenario) also inform future acquisition screening and strategic portfolio construction. |
||
| From a financial planning perspective, the climate impact assessment will enable a review of future insurance costs. Furthermore, in May 2021, HICL's revolving credit facility was renegotiated to incorporate ESG targets, converting the facility to a Sustainability Linked Loan ("SLL"). The innovative SLL structure links the margin applied on the facility to performance against five ESG targets, demonstrating HICL's commitment to its wider sustainability strategy by embedding it within the financing structure of the Company. |
||
| 5 | Describe the resilience of the organisation's strategy, taking into |
The portfolio-level findings of the climate change impact assessment demonstrate that the Company's strategy is highly resilient to both physical and transition risks associated with climate change. |
| consideration different future climate scenarios, including a 2°C or lower scenario |
Under a 'current' climate scenario, only 8 assets have an unmitigated physical impact index above 3.0 (medium) This rises to 19 assets under a 4°C scenario, demonstrating the resilience of the portfolio even in the event of extreme climate change. Under a 1.5°C scenario, the Company is more exposed to transition risks, but these are mitigated through the essential nature of HICL's investments, and the contractual risk allocation that exists through PPP contracts and concession agreements. A transition to a lower carbon economy also presents a number of opportunities. |
Further details are provided in the case study on pages 32-34
| Recommendation | Disclosure | |
|---|---|---|
| 6 | Describe the organisation's processes for identifying and |
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. |
| assessing climate related risks |
Further details are provided on page 44 | |
| For existing projects, risks have been identified and assessed through the climate change impact assessment. |
||
| Further details are provided in the case study on pages 32-34 | ||
| 7 | Describe the organisation's processes for managing climate-related risks |
Following the completion of the climate change impact assessment, InfraRed's asset management team has begun to engage with the management teams of each asset. Using the results from the climate change impact assessment 'one page' reports or 'deep dives', each project will systematically develop a risk mapping, risk prioritisation matrix and then begin to implement mitigation and resilience strategies as appropriate. |
| Each quarter, the Investment Manager will receive regular updates on progress through its Quarterly Review Meetings on the assets across HICL's portfolio, which give the HICL Investment Committee the opportunity to provide scrutiny and feedback. |
||
| The key points arising from the Quarterly Review Meetings are in turn communicated to the HICL Risk Committee through the Investment Manager's regular reporting. This enables direct oversight and challenge at Board level. |
||
| Further details are provided in the case study on pages 32-34 | ||
| 8 | Describe how processes for identifying, assessing and managing climate |
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: |
| related risks are integrated into the |
V Political risk: in particular, policies associated with the transition to net zero carbon emissions | |
| organisation's overall | V Operational risk – execution: through transaction due diligence and investment decisions | |
| risk management | V 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 will submit regular progress reports to InfraRed on the mitigation measures they are taking in response to the climate change impact assessment. In turn, this will enable the HICL Risk Committee to consider the overall impact and opportunities of climate change at fund level. |
||
| Further details are provided in Section 3.5 – Risk & Risk Management |
| Recommendation | Disclosure | |
|---|---|---|
| 9 | Disclose the metrics used by the organisation to assess climate related risks and opportunities |
As noted below, HICL has disclosed its Scope 1, 2 and 3 greenhouse gas emissions since 2020, which can be found on page 39 of this report. However, given the clear relationship between the level of greenhouse gas emissions and the future climate risk faced by the Group, the Board has elected to disclose an additional metric relating to the number of portfolio companies that consistently report their Scope 1 and Scope 2 greenhouse gas emissions (see page 31). Over the course of the coming year, the Investment Manager will work to standardise this reporting across the portfolio, such that HICL can disclose additional metrics relating to the overall level of Scope 1 and Scope 2 emissions from the portfolio. |
| As a result of the climate change impact assessment undertaken in the period, the Company is also able to report additional metrics relating to the portfolio's exposure to physical climate risks. These are set out on page 31, which also includes a chart detailing the level of exposure to 11 climate hazards, based on current climate conditions and the number of assets exposed. |
||
| 10 Disclose Scope 1, Scope 2, and if appropriate, Scope 3 greenhouse gas emissions, and the related risks |
Due to the nature of its business, HICL has no Scope 1 or Scope 2 greenhouse gas emissions. The Company has disclosed its Scope 3 greenhouse gas emissions since 2020, and voluntarily includes energy use where individual investments have operational control but where HICL does not have operational control within its Scope 3 data, as set out in the following section. |
|
| 11 Describe the targets used by the organisation to manage climate related risks and opportunities and |
One of the key ways in which climate-related risks can be reduced in the long term is through a global reduction in greenhouse gas emissions. HICL has therefore set a clear target, as shown on page 31, that 100% of portfolio companies routinely collect and report Scope 1 and Scope 2 emissions data by 31 March 2022. At this point, the Company plans to set additional targets relating to a reduction in greenhouse gas emissions across the portfolio. |
|
| performance against targets |
Over the coming year, the Investment Manager will work with HICL's portfolio companies to build on the findings of the climate change impact assessment at the asset level. Given the importance of this study as a risk management tool, HICL has set clear targets relating to its implementation; these are set out on page 31. |
HICL adopts the operational control boundary approach for the measurement of energy emissions, as the Directors believe this reflects the level of emissions that can be actively controlled and reduced, given the Company's role as an infrastructure owner rather than service provider. There are no subsidiaries where HICL has operational control and, as a result, HICL is classed as a low energy user.
As part of its commitment to improving carbon reporting, HICL voluntarily includes UK and global energy use where individual investments have operational control, but where HICL does not have operational control itself (Affinity Water, HS1, Belfast College1 and Northwest Parkway) within its Scope 3 emissions data.
An average UK household uses 14.1 tCO2 e (year ended 31 December 2019: 14.1 tCO2 e / year)4 .
HICL's Scope 3 carbon emissions have decreased by 19% year on year, primarily driven by lower utilisation of the assets due to the Covid-19 pandemic. Carbon emissions per user has remained consistent compared with the prior period, primarily as a result of lower passenger volumes on HS1 infrastructure.
As a result of the above energy use (i.e. electricity and use of transportation fuels), HICL was also responsible for the following emissions: methane 61 tCH4e (year ended 31 December 2019: 58 tCH4e), nitrous oxide 125 tN2 Oe (year ended 31 December 2019: 152 tN2 Oe). No hydrofluorocarbons, perfluorocarbons or sulphur hexafluoride emissions were made.
Emissions have been calculated in accordance with the GHG Protocol Corporate Accounting and Reporting Standard. UK Government Conversion Factors have been utilised for UK investments and Environmental Protection Agency Conversion Factors to calculate emissions for global (excluding UK) investments.
Energy use has primarily been collected from meter data and invoices from suppliers. In some instances, office energy use has been estimated with reference to the pro rata number of
employees using the office space or benchmarked where data is not directly available. Transport emissions have been based on mileage records or estimated based on distance and type of transport used.
Emissions have been measured over the period 1 January to 31 December. This is not coterminous with HICL's year end as not all data from underlying projects is available before the reporting date.
Acting sustainably is fundamental for the successful delivery of HICL's investment proposition and the Company currently intends to embrace the new requirements of the EU Sustainable Finance Disclosures Regulations ("SFDR") regime. The Board notes that as a UK-listed, UK-domiciled investment trust, HICL is not legally required to meet these requirements, so all disclosure will be on an entirely voluntary basis.
Over the course of the coming year, the Investment Manager will work closely with HICL's portfolio company management teams to improve data collection and processes at asset level. In turn, this will enable closer alignment with the full Level 2 provisions of the SFDR, which are currently anticipated to require detailed reporting in May 2023.
The Company is currently actively complying with the relevant provisions of the Level 1 requirements of the SFDR, and in its capacity as Alternative Investment Fund Manager to HICL, InfraRed has updated its remuneration policy in line with the relevant SFDR Level 1 requirements. HICL and InfraRed will also seek to publish information regarding compliance with the SFDR in the upcoming Article 23 Alternative Investment Fund Managers Directive ("AIFMD") disclosure to investors document.
Additional information and documentation related to SFDR can be found on our website5 .
The metrics and targets set out on page 31 of this report are an important first step towards closer alignment with the Level 2 requirements of the SFDR, and the Company will continue to enhance the environmental, social and governance data it collects over the coming year.
| Disclosure | 31 December 2020 | Global (excluding | 31 December 2019 | Global (excluding |
|---|---|---|---|---|
| UK and offshore | UK and offshore) | UK and offshore | UK and offshore) | |
| Emissions from investments with control over emissions, for which the Company does not control (Scope 3) / tCO2 e2 |
20,566 tCO2 e |
202 tCO2 e |
25,416 tCO2 e |
186 tCO2 e |
| Emissions from office use and business travel which the Company does not own or control (Scope 3) / tCO2 e3 |
65 tCO2 e |
2 tCO2 e |
118 tCO2 e |
9 tCO2 e |
| Total gross Scope 3 emissions / tCO2 | 20,631 tCO2 | 204 tCO2 | 25,534 tCO2 | 195 tCO2 |
| e | e | e | e | e |
| Intensity ratio: tCO2 | 0.001 tCO2 | 0.000 tCO2 | 0.001 tCO2 | 0.000 tCO2 |
| e (gross Scope 1, 2 & 3) per user | e / user | e / user | e / user | e / user |
1 HICL owns 75% of Belfast College, but does not have operational control over the asset. This is the only asset in the portfolio that is determined to have operational control and where HICL holds more than 50%. Emissions relating to this asset comprised 14 tCO2 e (year ended 31 December 2019: 25 tCO2 e). All other assets in the portfolio that HICL holds greater than a 50% ownership in are not determined to have control over their emissions
2 Scope 3 investment emissions relate to the operation of assets at the following projects; Affinity Water, Belfast College, HS1 and Northwest Parkway
3 Scope 3 emissions relate to emissions associated with office use and travel of the employees of the Investment Manager, the Board of Directors and the Company Secretary 4 Source: carbonindependent.org
5 https://www.hicl.com/sustainability/
The Investment Manager, project management teams and project subcontractors are focused on reducing negative environmental impacts and wherever possible, implementing measures which act as a catalyst for positive change, either directly at the asset and / or for the wider community in which that asset is located.
The Company acknowledges the real threat posed by climate change; further details on the potential impacts, risks and mitigants are provided on pages 32-34. Although HICL does not have operational control over any of its subsidiaries, the Company will take steps through the Investment Manager to influence those that do to act against and mitigate climate change, primarily through reducing energy consumption, water usage and waste, and increasing the use of renewable energy sources.
Key highlights and progress relating to the Company and its subsidiaries include:
V Continued uptake in renewable energy use by project companies, which now forms part of HICL's metrics and targets (see page 31). The companies voluntarily included in HICL's Scope 3 SECR disclosure used over 23,000MWh of renewable energy in the year ended 31 December 2020, compared with 98kWh in the year ended 31 December 2019
V The completion of HICL's investment in the Walney OFTO. Alongside the three other OFTOs in HICL's portfolio, this acquisition contributes to the UK's transition to a lower carbon economy by connecting a combined 1.8GW of offshore wind generation to the UK mainland, with energy capacity to power 1.7 million homes
Key highlights and progress relating to the Investment Manager include:
"Aiming to be the first UK railway to be powered entirely through renewable energy"
HS1 operates, manages and maintains the track and four stations along the route, including St Pancras, under a 30-year concession with the Department for Transport (DfT).
HS1 announced its Sustainability Strategy in October 2020, which was developed in close collaboration with InfraRed and launched by the Secretary of State for Transport. The Strategy clearly articulates the key environmental targets that the company has embraced to achieve its ambitious objective of being the most sustainable option for transport between the UK and mainland Europe, with a particular focus on reducing carbon emissions by guaranteeing that all energy used originates from renewable sources.
By 2030, the company expects to be fully carbon neutral, and hopes to deliver a Biodiversity Net Gain by leaving its immediate natural environment in a better condition than it was prior to the construction of the infrastructure.
100% renewable energy
2022
and stations by 2023
90% of operations and project waste recycled by
0% emissions (fully
carbon neutral) by 2030
"Protecting and restoring natural environments"
Serving three geographically separate regions in the South East of England, Affinity Water generates income from supplying water to both residential and, via intermediaries, commercial consumers within a 4,515km2 supply area. In doing so, Affinity Water maintains 95 water treatment works and over 100 reservoirs.
Over the year, the company has developed and implemented a number of initiatives which have made a significant positive contribution towards the natural environment:
As a trusted steward of essential infrastructure assets, HICL sits at the heart of communities and plays a key role in modern society.
The Company's diverse range of projects have a real and clear impact on the daily lives of their end users, by:
The statistics opposite demonstrate the reach of the portfolio and highlight the importance of the Investment Manager's sustainable, long-term approach to asset management.
Key highlights and progress relating to the Company and its subsidiaries include:
Over 20 million people around the world with access to HICL's infrastructure, including over:
12.5m with access to healthcare facilities, including three major regional trauma centres 2.3m served by HICL's courts, fire stations and police stations 4.5m 3.6m
unique users of HICL's transport assets1
people provided with clean drinking water
During the year, the Investment Manager established the InfraRed Charitable Foundation, which has obtained Charitable Incorporated Organisation status from the Charities Commission. The day-to-day operations of the Foundation will be managed by InfraRed's Community Engagement Committee, which has already undertaken a number of initiatives including:
During the height of the Covid-19 pandemic, over 175 members of InfraRed staff and business partners collectively walked or ran 16,983km (equivalent to the distance between London and Sydney) in order to raise money for charitable causes. Thanks to the generosity of sponsors, over £150,000 was raised for charities across all of InfraRed's office locations that provide vital support to those affected by the pandemic.
1 Annual estimate based on pre-Covid usage
"Actively promoting good heath and wellbeing"
The A63 motorway project in South West France forms part of the backbone of the wider European road network, as it provides a critical link between France and the Iberian Peninsula.
Over the past year, the portfolio company has worked together with subcontractors and stakeholders to deliver a number of industry-leading initiatives focused on heath and wellbeing. These include:
"Supporting HICL's stakeholders throughout the pandemic"
1
https://www.ircp.com/regulatory
The Company's investments in hospitals, emergency services buildings and schools have been at the very centre of the public sector's response to Covid-19, and both the Board and Investment Manager pay tribute to the efforts and sacrifices made by thousands of staff across HICL's clients, portfolio companies and subcontractors.
At the start of the pandemic, the Investment Manager set out its priorities for responding to the crisis in a dedicated Covid-19 Code of Conduct (the "Code")1 . This was developed based on InfraRed's corporate values, as well as experience and lessons learnt from managing the impact to HICL's portfolio from Carillion's liquidation in 2018. The Code also aligns with the Infrastructure and Projects Authority's Covid-19 guidance in relation to PPP projects.
Northwest Parkway toll road (USA) made a \$100,000 donation to local communities struggling with the impact of Covid-19
Mental health support provided to subcontracted staff at Ealing Care Homes; prompt payments made to business partners
Examples of support to NHS staff across HICL's project companies include free meals, vouchers and exercise equipment
InfraRed donated 69 laptops to three schools in the portfolio to enable remote learning for less privileged children
For HICL to act in a sustainable manner, it is critical that each of its portfolio companies (and the Company itself) takes responsibility for the environmental, social and governance impacts they have and the associated risks and opportunities.
HICL's robust and ambitious corporate governance framework helps to ensure this is delivered.
As a custodian of essential infrastructure, the Company has a holistic and proactive approach to stakeholder engagement, and intends to work with all relevant parties on matters that extend beyond HICL's period of ownership.
HICL's own approach to the stewardship of its investments, enshrined in HICL's business model, is built on a system of rigorous checks and balances. In accordance with the AIC Code of Corporate Governance (the "AIC Code"), the work and conduct of HICL's Board is regularly reviewed and evaluated. Further details on HICL's approach are provided in Section 4.4 – Corporate Governance Statement.
The Board has overall responsibility for HICL's Sustainability Policy1 and its application. This stems from its Terms of Reference where "sustainability, including the potential impact of climate change" is set out as a key strategic and financial consideration. HICL's Sustainability Policy is subject to ongoing development, including a formal annual review.
InfraRed's robust governance framework supports the day-to-day operations of HICL's investments, and is underpinned by an active approach to asset management.
The application of HICL's Sustainability Policy is undertaken by InfraRed. Furthermore, sustainability is integrated into each stage of the Investment Manager's investment process; from negative screening against the firm and fund exclusion lists, deal screening, due diligence, the investment approval, ongoing management and reporting throughout the ownership period until an investment reaches the end of its economic life and is decommissioned or when we exit the investment, as demonstrated in the graphic below.
V Reporting of sustainability KPIs and incidents to stakeholders
and examined by, the Investment Committee
InfraRed delivers HICL's Sustainability Policy by adherence to InfraRed's sustainability policy. Contributions to sustainability are embedded into staff performance objectives and are taken into
account in annual performance assessment and compensation reviews, including for the members of the HICL Investment Committee.
to implement postinvestment
1 https://www.hicl.com/wp-content/uploads/2020/11/Sustainability-Policy-May-2020.pdf
"Ensuring robust governance at the asset level"
First launched in 2014, it seeks to ensure that all of the Group's portfolio companies and subcontractors have appropriate sustainability policies in place and that these are followed in the delivery of the services to clients and end users. InfraRed's Asset Management team has worked diligently with project company management teams over the last six years to ensure the necessary policies were implemented and remained current, and has also increased the rigour and scope of the assessment each year whilst ensuring very high standards of compliance. The survey was expanded in 2020 to capture business continuity and contingency planning.
The survey is a key governance tool; the data collected forms the basis of HICL's sustainability KQI and a number of the metrics and targets on page 31. Project companies are required to provide a copy of each policy, which is then verified by an independent third-party consultant, to ensure that the policy is sufficient and has been updated within the last 18 months.
"Developing communities through active stakeholder engagement"
The past year saw a key milestone of the Army Basing Programme, a four-year project designed to cater for British troops withdrawing from Germany and other units rebasing in the UK by totally transforming a number of existing bases, including Tidworth, Larkhill and Bulford on Salisbury Plain. By working closely with all stakeholders, including local organisations, councils, military personnel and construction contractors, the project company was able to deliver a total facilities package for the benefit of the whole community. Key highlights include:
Guy Benson, Wiltshire Council's Military Civil Integration lead
HICL Infrastructure PLC ("the Company", also referred to in this section as "HICL") applies IFRS 10 and qualifies as an investment entity. IFRS 10 requires that investment entities measure investments, including subsidiaries that are themselves investment entities, at fair value except for subsidiaries that provide investment services which are required to be consolidated. The Company's single, direct subsidiary is the ultimate holding company for all HICL's investments. It is, itself, an investment entity and is therefore measured at fair value.
References to the "Corporate Group" in this section refer to the Company and its Corporate Subsidiaries (HICL Infrastructure S.a.r.l. 2 or "LuxCo 2" and Infrastructure Investments Limited Partnership or "IILP").1
The Company and its advisers have concluded that to report the relevant financial performance and position to stakeholders, it will prepare pro forma summary financial information on the basis that the Company consolidates the results of the Corporate Subsidiaries. This basis is designated the Investment Basis and provides shareholders with more information regarding the Corporate Group's gearing and expenses, coupled with greater transparency into HICL's capacity for investment and ability to make distributions.
NAV per share and Earnings per share are the same under the Investment Basis and the IFRS Basis.
| Summary Financial Statements | ||
|---|---|---|
| -- | -- | ------------------------------ |
| For the year ended 31 March 2021 | For the year ended 31 March 2020 | |||||
|---|---|---|---|---|---|---|
| £m | Investment Basis |
Consolidation adjustments |
IFRS Basis |
Investment Basis |
Consolidation adjustments |
IFRS Basis |
| Total income1 | 188.7 | (33.9) | 154.8 | 86.7 | (35.1) | 51.6 |
| Expenses & finance costs | (36.6) | 33.7 | (2.9) | (36.7) | 34.6 | (2.1) |
| Profit / (loss) before tax | 152.1 | (0.2) | 151.9 | 50.0 | (0.5) | 49.5 |
| Tax | (0.2) | 0.2 | – | (0.5) | 0.5 | – |
| Earnings | 151.9 | – | 151.9 | 49.5 | – | 49.5 |
| Earnings per share | 7.9p | – | 7.9p | 2.7p | – | 2.7p |
1 Includes net foreign exchange loss of £17.0m (2020: £14.4m gain)
On an IFRS Basis, Total income of £154.8m (2020: £51.6m) comprises income received by the Company and valuation movements in its investments. Expenses and finance costs on an IFRS Basis were £2.9m (2020: £2.1m) as they exclude costs incurred by the Corporate Subsidiaries where the main expenses are incurred – see Investment Basis Cost Analysis table below. Both Total income and Expenses & finance costs are lower on an IFRS Basis than on the Investment Basis, as costs incurred by the Corporate Subsidiaries are included within Total income under IFRS as a reduction in valuation, not under Expenses & finance costs.
On an Investment Basis, Total income of £188.7m (2020: £86.7m) represents the return from the portfolio recognised as income. This comprises dividends, interest, fees and the valuation movement for the year. The change in portfolio valuation reflects £129m gains from lower discount rates and a £38m reduction in
negative Covid-19 effects partially offset by higher reductions from economic assumptions of £55m and £36m negative foreign exchange movements (see below). Further detail on the valuation movements is given in Section 3.2 – Valuation of the Portfolio.
The £17.0m net foreign exchange loss (2020: £14.4m gain), which is included in Total income, comprises a £36.3m foreign exchange loss (2020: £20.1m gain) on revaluing the non-UK assets in the portfolio using 31 March 2021 exchange rates, partly offset by a £19.3m foreign exchange hedging gain (2020: £5.7m loss).
Earnings on an IFRS Basis and Investment Basis were £151.9m (2020: £49.5m), an increase of £102.4m against the prior year due to the factors stated above.
1 On 12 March 2020, the Company's single, direct subsidiary (HICL Infrastructure S.a.r.l. 1 or "LuxCo 1") merged with its single, direct subsidiary LuxCo 2. Up to that date, LuxCo 1 formed part of the Corporate Group
| £m | For the year ended 31 March 2021 |
For the year ended 31 March 2020 |
|---|---|---|
| Finance costs | 3.5 | 4.0 |
| Investment Manager fees | 28.7 | 29.2 |
| Audit fee for the Corporate Group | 0.3 | 0.3 |
| Non-audit fee – Interim review | 0.1 | 0.1 |
| Directors' fees & expenses | 0.5 | 0.5 |
| Acquisition bid costs | 1.3 | 1.0 |
| Professional fees | 1.9 | 1.4 |
| Other expenses | 0.3 | 0.2 |
| Expenses & finance costs | 36.6 | 36.7 |
Total fees accruing to the Investment Manager were £28.7m (2020: £29.2m) for the year, comprising the 1.1% p.a. management fee for assets up to £750m, 1.0% for assets above £750m, 0.9% for assets above £1.5bn, 0.8% for assets above £2.25bn and 0.65% for assets above £3bn and the £0.1m p.a. management fee.
The £0.5m reduction is due to the Investment Manager no longer receiving a 1.0% fee on acquisitions made from third parties, partially offset by a higher average portfolio valuation than in the prior year.
Neither the Investment Manager nor any of its affiliates receives other fees from the Corporate Group or the Corporate Group's portfolio of investments.
During the year, the Corporate Group incurred £1.3m of acquisition bid costs (2020: £1.0m), mainly being legal, technical and tax due diligence, on unsuccessful bids and bids in progress.
On an IFRS Basis, expenses and finance costs were £2.9m (2020: £2.1m) as they exclude those incurred by the Corporate Subsidiaries where the Investment Manager fees and the majority of expenses are recognised. The increase is due to a lower prior year figure, which included the reversal of accrued costs associated with the move of HICL's investment business from Guernsey to the UK.
| £m | For the year ended 31 March 2021 |
For the year ended 31 March 2020 |
|---|---|---|
| Investment Manager | 28.7 | 28.5 |
| Audit fee for the Corporate Group | 0.3 | 0.3 |
| Non-audit fee – interim review | 0.1 | 0.1 |
| Directors' fees & expenses | 0.5 | 0.5 |
| Other ongoing expenses | 1.6 | 1.5 |
| Total expenses | 31.2 | 30.9 |
| Average NAV | 2,923.4 | 2,791.7 |
| Ongoing charges | 1.07% | 1.11% |
Ongoing charges, in accordance with the Association of Investment Companies' ("AIC") guidance, is defined as annualised ongoing charges (i.e. excluding acquisition costs and other non-recurring items) divided by the average published undiluted net asset value in the year.
The ongoing charges percentage is 1.07%, reflecting costs being spread over a larger asset base and the removal of the acquisition fee payable to the Investment Manager.
| 31 March 2021 | 31 March 2020 | |||||
|---|---|---|---|---|---|---|
| £m | Investment Basis |
Consolidation adjustments |
IFRS Basis |
Investment Basis |
Consolidation adjustments |
IFRS Basis |
| Investments at fair value | 2,938.1 | 12.2 | 2,950.3 | 2,811.5 | 26.4 | 2,837.9 |
| Working capital | 5.3 | (5.8) | (0.5) | (2.2) | 1.7 | (0.5) |
| Net (debt) / cash | 6.8 | (6.4) | 0.4 | 28.7 | (28.1) | 0.6 |
| Net assets attributable to Ordinary Shares | 2,950.2 | – | 2,950.2 | 2,838.0 | – | 2,838.0 |
| NAV per share (before dividend) | 152.3p | – | 152.3p | 152.3p | – | 152.3p |
| NAV per share (post dividend) | 150.3p | – | 150.3p | 150.2p | – | 150.2p |
On an IFRS Basis, Investments at fair value increased 4% to £2,950.3m (2020: £2,837.9m) reflecting valuation movements in addition to acquisition and disposal activity in the year. On an IFRS Basis, Net cash was £0.4m (2020: £0.6m). The Group's cash and debt management is undertaken through the Corporate Subsidiaries.
On an Investment Basis, Investments at fair value increased 5% to £2,938.1m (2020: £2,811.5m), which is the Directors' Valuation of £3,011.9m (2020: £2,888.5m) net of £73.8m of future investment obligations (2020: £77.0m). Further detail on the movement in Investments at fair value is given in Section 3.2 – Valuation of the Portfolio.
The Corporate Group had Net cash, on an Investment Basis, at 31 March 2021 of £6.8m (2020: Net cash of £28.7m); the movement in the year reflecting cash generated through tap issuances in July 2020 offset by investments made in the year.
An analysis of the movements in Net cash / (debt) is shown in the cash flow analysis below.
NAV per share was 152.3p (2020: 152.3p) before the 2.07p fourth quarterly distribution. NAV per share has remained consistent year on year.
| Pence per share | |||
|---|---|---|---|
| NAV per share at 31 March 2020 | 152.3p | ||
| Valuation movements | |||
| Reduction in discount rates | 7.4p | ||
| Change in economic assumptions | (6.0p) | ||
| Forex loss | (0.9p) | ||
| 0.5p | |||
| Portfolio performance | |||
| Value enhancement | 0.5p | ||
| Covid-19 | (1.8p) | ||
| Expected NAV growth1 | 0.5p | ||
| (0.8p) | |||
| Accretive issuance of shares | 0.3p | ||
| Total | 0.0p | ||
| NAV per share at 31 March 2021 | 152.3p |
1 Expected NAV growth is HICL's budgeted EPS less target dividend
| For the year ended 31 March 2021 | For the year ended 31 March 2020 | |||||
|---|---|---|---|---|---|---|
| £m | Investment Basis |
Consolidation adjustment |
IFRS Basis |
Investment Basis |
Consolidation adjustment |
IFRS Basis |
| Cash from investments | 178.01 | (17.2) | 160.8 | 205.91 | (57.5) | 148.4 |
| Operating and finance costs outflow | (35.1) | 32.2 | (2.9) | (36.8) | 35.2 | (1.6) |
| Net cash inflow before acquisitions / financing |
142.9 | 15.0 | 157.9 | 169.1 | (22.3) | 146.8 |
| Net cost of new investments and divestments2 |
(135.0) | 16.6 | (118.4) | (16.0) | (97.0) | (113.0) |
| Share capital raised net of costs | 118.6 | – | 118.6 | 115.2 | – | 115.2 |
| Forex hedging settlements and other items3 |
9.9 | (9.9) | – | (6.9) | 6.9 | – |
| Distributions paid | (158.3) | – | (158.3) | (148.4) | – | (148.4) |
| Movement in the year | (21.9) | 21.7 | (0.2) | 113.0 | (112.4) | 0.6 |
| Net cash / (debt) at start of year | 28.7 | (28.1) | 0.6 | (84.3) | 84.3 | – |
| Net cash / (debt) at end of year | 6.8 | (6.4) | 0.4 | 28.7 | (28.1) | 0.6 |
1 Includes £11.9m profit on disposals of underlying investments (2020: £16.4m) based on historic cost
2 Divestments includes historic cost of £15.6m (2020: £40.0m). Disposal proceeds were £27.5m (2020: £56.4m)
3 Other items includes a £0.8m increase due to capitalised debt issue costs (2020: £2.4m decrease due to capitalised debt issue costs)
On an IFRS Basis, the Company received £160.8m from its direct Corporate Subsidiary (2020: £148.4m). These payments are sized to pay shareholder dividends and the Company's operating costs. On an IFRS Basis, Net cost of new investments of £118.4m (2020: £113.0m) relates to loans extended by the Company to its Corporate Subsidiary during the year, reflecting share capital raised net of costs.
Cash inflows from the portfolio on an Investment Basis were £178.0m (2020: £205.9m) or 14% lower. This was in line with expectations with the reduction due to the impact of Covid-19 related travel restrictions on the demand-based assets sensitive to GDP – see Section 3.2 for further detail.
Net cost of new investments on an Investment Basis of £135.0m (2020: £16.0m) represents the cash cost of investments in the Walney OFTO, Royal School of Military Engineering PPP, M17/M18 PPP (Ireland) and Medium Support Helicopter Aircrew Training Facilities projects, disposal of the South East London Police Stations project and acquisition costs of £0.3m (2020: £1.2m).
Hedging and borrowing is undertaken by a Corporate Subsidiary and therefore the Company had no cash flows for this on an IFRS Basis during the year. On an Investment Basis, the £9.9m cash inflow (2020: £6.9m outflow) comprised £9.1m from foreign exchange rate hedging settlements in the year due to the strengthening of Sterling against the Euro, US Dollar and Canadian Dollar, and £0.8m inflow due to recognition of capitalised debt issue costs. The Corporate Group enters into forward sales to hedge FX exposure in line with the Company's hedging policy set out below.
The issue of 73.2m shares in July 2020 at a premium to the prevailing NAV per share provided net cash receipts in the year of £118.6m (2020: £115.2m).
Dividends paid in the year increased 7%, or £9.9m, to £158.3m (2020: £148.4m). Dividend cash cover, which compares operational cash flow excluding profits on disposal of £131.0m (2020: £152.7m) to dividends paid, was 0.83 times4 (2020: 1.03 times). This was as expected and as communicated in the Company's March 2020 annual results which indicated a substantially cash covered dividend for the financial year ended 31 March 2021, given the forecast impact of Covid-19 on the demand-based assets that are sensitive to GDP.
4 Including profits on disposal of £11.9m (2020: £16.4m disposal profits), dividend cash cover was 0.90 times (2020: 1.14 times)
The Board's policy is that the Company should not hold material amounts of un-invested cash beyond what is necessary to meet outstanding equity commitments for existing investments or to fund potential acquisitions in the near term.
The Company has access to a £400m Revolving Credit Facility ("RCF") with Crédit Agricole, HSBC, ING, Lloyds, NAB, RBSi, Santander and SMBC, with an expiry date of 31 May 2023. Further, the Corporate Group signed a £60m Letter of Credit Facility ("LCF") with an expiry date of 31 December 2026, primarily to fund existing and future longer-term funding obligations. The LCF is provided by ING and SMBC. In May 2021, the RCF was renegotiated to incorporate ESG targets converting the facility to a Sustainability Linked Loan ("SLL") and transition from LIBOR to SONIA for GBP drawings. The innovative SLL structure links the margin applied on the facility to performance against five ESG targets demonstrating HICL's commitment to its wider sustainability strategy by embedding it within the financing structure. The Company is able to confirm that sufficient working capital is available for the 12 months from the date of the accounts, without needing to refinance.
The Investment Manager will consider options to increase borrowings dependent on the pipeline of potential transactions. As at 31 March 2021, the Group had cash drawings of £26.9m (2020: £nil) and drawings of £75.8m (2020: £79.1m) by way of letters of credit. Sufficient capacity is retained on the RCF for the Group to fund additional investments as and when further attractive opportunities arise.
The Corporate Group's hedging policy targets NAV per share volatility of no more than 2% for a 10% movement in foreign exchange rates. The policy balances the cost / benefit of hedging activity whilst retaining the key objective of materially mitigating the impact of foreign exchange movements on HICL's financial results. In the year, the impact of foreign exchange movements on NAV was 0.6% based on the net £17.0m movement in foreign exchange.
Hedging as at 31 March 2021 compared to non-Sterling portfolio values were:
| Non-UK assets £m |
FX Hedge £m |
FX Hedge as % of non-UK assets |
|
|---|---|---|---|
| Euro | 507 | 250 | 49% |
| North America | 224 | 79 | 35% |
| Total | 731 | 329 | 45% |
InfraRed, as the Investment Manager, is responsible for carrying out the fair market valuation of the Group's investments, which is presented to the Directors for their consideration and, if appropriate, approval. The valuation is carried out on a six-monthly basis as at 31 March and 30 September each year, with the result, the assumptions used and key sensitivities (see Valuation Assumptions and Sensitivities below) published in the annual and interim results.
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 which is valued using the quoted market price of the bonds. This valuation methodology is the same as that used at the time of HICL's launch and in each subsequent six-month reporting period (further details can be found in the March 2019 Prospectus for HICL Infrastructure PLC).
The key external (macro-economic and fiscal) factors affecting the forecast of each portfolio company's cash flows in local currency are inflation rates, interest rates, rates of GDP and applicable tax rates. The Investment Manager makes forecast assumptions for each of these external metrics, based on market data and economic forecasts. The Investment Manager exercises its judgement in assessing the expected future cash flows from each investment based on the detailed financial models produced by each portfolio company and adjusting where necessary to reflect the Group's economic assumptions as well as any specific operating assumptions.
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 an investment such as investment risks (e.g. liquidity, currency risks, market appetite) and any risks to the investment's earnings (e.g. predictability and covenant of the revenues and service delivery challenges), all of which may be differentiated by the phase of the investment's life (e.g. in construction or in operation).
The Directors' Valuation is the key component in determining HICL's Net Asset Value ("NAV") and so the Directors seek, from a third-party valuation expert, an independent report and opinion on the valuation provided by the Investment Manager. The Directors' Valuation is the preferred valuation measure of the portfolio because it is the total value at risk for the Group, as compared to investments at fair value through profit or loss which excludes future commitments.
The chart below shows the expected future cash flows to be received by the Group from the portfolio as at 31 March 2021 and how the portfolio valuation is expected to evolve over time using current forecasts and assumptions.
1 The chart represents a target only and is not a profit forecast. There can be no assurance that this target will be met
2 The cash flows and the valuation are based on a number of assumptions, including discount rates, inflation rates, interest rates, rates of gross domestic product growth, tax rates and foreign exchange rates. These assumptions and the valuation of the current portfolio may vary over time
3 The cash flows and the valuation are from the portfolio of 116 investments at 31 March 2021 and do not include other assets or liabilities of the Group, and assumes that during the period illustrated above, (i) no new investments are purchased, (ii) no existing investments are sold and (iii) the Group suffers no material liability to withholding taxes, or taxation on income or gains
4 Valuation considers cash flows beyond 2056, for example for Northwest Parkway 86 years of cash flows are assumed
The chart shows the steady long-term nature of the cash flows from the portfolio, coupled with a stable portfolio valuation in the medium term. Where cash flows have reduced, as signified by the hollow boxes in the chart on the previous page, this is largely due to the revised assumptions in the demand-based assets. The reduction in cash flows in 2030 is due to the disposal of South East London Police Stations PPP project. The valuation over time is also shown. Based on current forecasts over the long term, the portfolio will move into a repayment phase when cash receipts from the portfolio will be paid to HICL's shareholders as capital and the portfolio valuation reduces as projects reach the end of their concession term, assuming that the proceeds are not invested in new investments. By acquiring accretive investments, the intention is that the capital repayment phase is pushed further into the future.
It is these forecast cash flows from the Group's current portfolio of investments that give the Board the comfort to provide the target dividend guidance set out in the Chairman's Statement of 8.25p per share for the year to 31 March 2023.
The Directors' Valuation of the portfolio at 31 March 2021 was £3,011.9m – an increase of 4.3% compared to the valuation of £2,888.5m at 31 March 2020. A reconciliation between the Directors' Valuation at 31 March 2021 and that shown in the financial statements is given in Note 14 to the financial statements, the principal differences being that the Directors' Valuation includes the £73.8m outstanding equity commitments in respect of the Blankenburg Connection (Netherlands) and Paris-Sud University (France).
A breakdown of the movement in the Directors' Valuation in the year is shown in the chart and table below.
1 'Return' comprises the unwinding of the discount rate and project outperformance
2 FX movement net of hedging is a loss of £17.0m
3 £3,011.9m reconciles, on an Investment Basis, to £2,938.1m Investments at fair value through £73.8m of future commitments
Valuation blocks (purple) have been split into investments at fair value1 and future commitments. The percentage movements have been calculated on investments at fair value of £2,768.3m as this reflects the returns on the capital employed in the year.
Allowing for the investments during the year of £150.5m, divestments of £27.5m and investment receipts of £166.2m, the rebased net valuation was £2,768.3m. The growth in the valuation of the portfolio at 31 March 2020 over the rebased value was 6.1%.
The increase arises from positive movements of £213.2m return from the portfolio and a reduction in reference discount rates contributing £141.1m. These positive movements are partially offset by a £34.4m reduction due to the impact of Covid-19, a change in economic assumptions resulting in a negative impact of £113.7m and a negative impact from foreign exchange rates of £36.4m. The negative movement in economic assumptions includes higher tax rates in the UK, as announced by the Government in the March 2021 Budget and a lower inflation assumption from 2030 to align with the UK Statistics Authority's ("UKSA") intention to align RPI with CPIH from 2030.
The return from the underlying portfolio of £213.2m (2020: £233.9m) represents a 7.7% (2020: 8.6%) increase in the rebased value of the portfolio, versus the discount rate, or expected annualised return, of 7.2%. This demonstrates outperformance of the portfolio.
Incremental value was generated from operational outperformance across various cost savings, efficiency initiatives, acquisitions and refinancings that have occurred in the period which have delivered additional value over and above the base case.
During the period, the UK's Competition and Markets Authority ("CMA") delivered its final determination in relation to those water companies that appealed Ofwat's PR19 Final Determination. The CMA concluded that the weighted-average cost of capital ("WACC") applicable to these companies should increase by 24 bps. For Affinity Water there is a read-across such that from Asset Management Plan 8 ("AMP 8") onwards (2025+) its WACC assumption has been increased in line with the CMA's determination. Furthermore, the CMA also concluded that the gearing sharing mechanism imposed by Ofwat would also be removed from AMP 8 onwards. Both of these factors had a small positive impact on the valuation of the Group's investment in Affinity Water.
The valuation represents a 1.30x2 (March 2020: 1.25x) multiple of Regulatory Capital Value.
For further information on this please refer to the Investment Manager's Report.
HICL has six demand-based assets in the portfolio representing 19% of the portfolio value at 31 March 2021. During the year, the Covid-19 pandemic has resulted in reduced usage of these facilities, impacting on revenues and therefore their valuation.
Four of these demand-based assets, namely High Speed 1, the A63 Motorway (France), Northwest Parkway (USA) and M1-A1, are sensitive to GDP which means their valuations are more significantly affected by the Covid-19 pandemic. The impact has been assessed and adjustments made in three areas: discount rates, short-term traffic reduction and longer-term recovery which uses a variety of information sources including actual traffic figures, management assessments, GDP forecasts and sensitivity analysis.
This analysis has resulted in a reduction in valuation of £34.4m of which £20.5m was recognised in the Interim Results at September, and a further £13.9m recognised in the six months to March 2021. The £13.9m is almost exclusively through cash flow adjustments. The Investment Manager continues to work closely with management teams to monitor and manage the situation.
More information on the affected assets is included in a Case Study which can be found on page 56. For further information on HICL's approach to Covid-19, see Section 2.5 – Investment Manager's Report.
The Investment Manager responded by adjusting its forecasts for the short- and long-term performance of these assets as at 31 March 2020 and then again at 30 September 2020 with the benefit of six months of actual usage data. In the year to 31 March 2021, actual revenue has been below pre-Covid levels across all three of HICL's large GDP-correlated assets, as shown in the chart to the right. However, actual revenue has outperformed HICL's forecast for A63 and was broadly in line with HICL's historic forecast for Northwest Parkway and High Speed 1.
V A63 Motorway (France): Although the initial onset of Covid-19 saw a steep decline in road users, revenue rebounded strongly over the summer of 2020 and has proven very robust to subsequent national restrictions. Freight traffic has been particularly resilient, demonstrating the road's strategic positioning as part of the TEN-T1 trans-European network. As a result of the project's strong liquidity position and clear evidence of strong underlying demand, shareholder distributions resumed in March 2021.
1 Composite forecast for the financial year to 31 March 2021, based on valuation assumptions as at 31 March 2020 and 30 September 2020 for the first and second halves of the financial year respectively
V Northwest Parkway: As with the A63, traffic was significantly impacted by the onset of Covid-19 before recovering in summer 2020 to around 50% of pre-Covid levels. Although traffic subsequently plateaued at around these levels for the remainder of the financial year, April 2021 has seen revenue increase to around 70% of pre-Covid levels as a result of the gradual easing of restrictions on movement and business in Colorado. The project has retained significant liquidity reserves throughout the period and is well placed to take advantage of the strong economic recovery forecast in the USA over the coming years.
Given the stable position of both roads and the clear path back to more normal operations, the valuation approach used at 30 September 2020 has largely been retained, with minor adjustments linked to the latest available performance data and future economic outlook. The Investment Manager is comfortable that the short- and long-term forecasts for both assets appropriately balance downside risks with the potential for future outperformance.
As described in Section 2.5 – Investment Manager's Report, HS1 continues to be significantly impacted by international restrictions on travel, and the timing and extent of recovery remains uncertain.
Prior to mid-December 2020, HS1 was insulated from reduced international train path volumes due to pre-bookings in place from Eurostar. Thereafter, Eurostar moved to the more flexible 'spot' booking provisions available to it and, as a result, international track access revenues (32% of total track access revenue to 31 March 2020) directly reflect the number of services being run. In the quarter ended 31 March 2021, international train paths remained highly suppressed at 12% of pre-Covid levels.
In the short term, the updated forecast assumes that international train paths recover to 50% of pre-Covid levels by 31 March 2022. In doing so, the valuation considers the increased tension around the financial covenants of the business and the link to the recovery of international services over the summer. From 1 April 2022, international train paths are then forecast to recover gradually, reaching pre-pandemic levels by 31 March 2025. A similar recovery profile is assumed for unregulated revenues.
Domestic train paths, which made up 68% of track access revenue to 31 March 2020, have been booked at pre-Covid levels until May 2021, after which pre-bookings fall below pre-Covid levels until December 2021. The impact on HS1's revenue is almost entirely mitigated by the contractual underpin provided by
the Department for Transport. The ability to book additional 'spot' paths if passenger demand increases over the second half of the calendar year remains available to HS1's domestic operator, London & South Eastern Railway.
As the UK's only high-speed rail link and the only rail connection between London and Europe, HS1 enjoys a unique strategic position and plays a critical role in national and international connectivity which is reflected in the longer-term forecast. HS1 is particularly well placed to exploit opportunities from a transition to a lower carbon economy as passengers seek to divert from short haul flights to more sustainable transport modes.
The discount rate is determined based on the Investment Manager's knowledge of the market, taking into account intelligence gained from bidding activities, discussions with financial advisers knowledgeable of these markets and publicly available information on relevant transactions.
When there are limited transactions or information available, and as a second method and sense check, a 'bottom-up' approach is taken based on the appropriate long-term government bond yields and an appropriate risk premium. The risk premium takes into account risks and opportunities associated with the project earnings (e.g. predictability and covenant of the concession income and service delivery challenges), all of which may be differentiated by project phase, jurisdiction and market participants' appetite for these risks.
In the portfolio, there were two projects in construction at 31 March 2021, both which are located in the Eurozone. 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 in construction affect the investment value.
An analysis of the weighted average discount rates for the investments in the portfolio analysed by territory, and showing movement in the year, is shown below:
| Country | Long-term government bond yield |
Risk premium |
Discount rate |
31 March 2020 Discount rate |
Movement |
|---|---|---|---|---|---|
| UK | 1.4% | 5.3% | 6.7% | 7.1% | (0.4%) |
| Eurozone | 0.4% | 6.4% | 6.8% | 7.2% | (0.4%) |
| North America | 2.0% | 5.4% | 7.4% | 8.0% | (0.6%) |
| Portfolio | 1.3% | 5.5% | 6.8% | 7.2% | (0.4%) |
Generally, sufficient market data on discount rates is available and therefore the risk premium is derived from this market discount rate for operational social and transportation infrastructure investments less the appropriate long-term government bond yield.
During the year long-term government bond yields in the UK, North America and the Eurozone have risen while discount rates have reduced, resulting in lower risk premiums. The Investment Manager's view is that discount rates used to value projects do not rigidly follow bond yields, although naturally there is some correlation over the longer term. The risk premium at 5.5% is 1.0% lower than March 2020 which was the highest level since IPO. The average risk premium since IPO is 4.9%.
Since June 2020, the Investment Manager has seen healthy market activity and increased asset pricing in a number of recent UK, Eurozone and North American auction processes as a result of downward pressure on the respective UK, Eurozone and North American discount rates as at 31 March 2021.
For demand-based assets, an increase in discount rate remains where Covid-19 has introduced greater risk to the forecasting of the assets' cash flows. For PPP assets, the provision of service delivery has largely been unaffected and therefore no such discount rate premium exists in respect of Covid-19.
The negative impact of £113.7m as a result of a change in economic assumptions includes the increase in UK corporation tax rates to 25% from April 2023 (£69.2m), the reduction in the UK long-term inflation assumption (£19.8m), various changes in interest rate assumptions (£20.8m) and other minor movements (£3.9m) outlined in the assumptions on page 58.
As GBP strengthened against all other currencies in the period, there was a negative impact of £34.4m pre-hedging. Net of hedging the negative impact was £17.0m.
Apart from the discount rates, the other key economic assumptions used in determining the Directors' Valuation of the portfolio are as follows:
| 31 March 2021 | 31 March 2020 | ||
|---|---|---|---|
| UK (RPI and RPIx)1 CPIH2 |
2.75% p.a. to 2030, 2.0% thereafter 2.0% p.a. |
2.75% p.a. 2.0% p.a. |
|
| Inflation | Eurozone (CPI) | 2.0% p.a. | 2.0% p.a. |
| Rates | Canada (CPI) | 2.0% p.a. | 2.0% p.a. |
| USA (CPI) | 2.0% p.a. | 2.0% p.a. | |
| UK | 0.25% p.a. to March 2025, 1.25% p.a. thereafter | 0.5% p.a. to March 2023, 1.5% p.a. thereafter | |
| Interest | Eurozone | 0.0% p.a. to March 2025, 0.25% p.a. thereafter | 0.0% p.a. to March 2023, 1.0% p.a. thereafter |
| Rates | Canada | 0.5% p.a. to March 2024, 2.25% p.a. thereafter | 1.0% p.a. to March 2023, 2.25% p.a. thereafter |
| USA | 0.5% p.a. to March 2024, 2.25% p.a. thereafter | 1.0% p.a. to March 2023, 2.25% p.a. thereafter | |
| Foreign | CAD / GBP | 0.58 | 0.57 |
| Exchange Rates |
EUR / GBP | 0.85 | 0.89 |
| USD / GBP | 0.73 | 0.81 | |
| UK3 | 19% to 2023, 25% thereafter | 19% | |
| Tax Rates |
Eurozone | Ireland 12.5% France 26.5% in 2021, 25% thereafter Netherlands 25% |
Ireland 12.5% France 25% – 33.3% Netherlands 21.7% – 25% |
| USA | 21% Federal & 4.6% Colorado State | 21% Federal & 4.6% Colorado State | |
| Canada | 23% and 27% | 26% and 27% | |
| UK | (10.5%) in 2020, 5.0% in 2021, 5.5% in 2022, 2.0% p.a. thereafter |
(5.5%) in 2020, 4.0% in 2021, 2.0% p.a. thereafter | |
| GDP Growth |
Eurozone | (9.0%) in 2020, 5.5% in 2021, 4.0% in 2022, 1.8% p.a. thereafter |
(5.0%) in 2020, 4.0% in 2021, 1.8% p.a. thereafter |
| USA | (3.5%) in 2020, 5.5% in 2021, 4.0% in 2022, 2.5% p.a. thereafter |
(3.5%) in 2020, 3.0% in 2021, 2.5% p.a. thereafter |
1 Retail Price Index and Retail Price Index excluding mortgage interest payments. On 25 November 2020, the UK Government and UK Statistics Authority announced
the RPI would be aligned with CPI from 2030. As such, RPI-linked project companies have been aligned to CPI from this date
2 Consumer Prices Index including owner occupiers' housing costs
3 On 5 March 2021, the UK Chancellor of the Exchequer announced an increase to UK Corporation Tax rates from 19% to 25% with effect from 1 April 2023.
This assumption represents market expectations of the future UK tax change
The portfolio's valuation is sensitive to each of the macro-economic 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 follows below1,2,3. The sensitivities are also contained in Note 4 to the financial statements.
1 NAV per share based on 1,937 million Ordinary Shares as at 31 March 2021
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 at 31 March 2021
Whilst not a macro-economic assumption, the weighted average 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.
PPP projects in the portfolio have contractual income streams derived from public sector clients, which are rebased every year for inflation. UK projects tend to use either RPI or RPIx (RPI excluding mortgage payments) while non-UK projects use CPI (Consumer Price Index), and revenues are either partially or totally indexed (depending on the contract and the nature of the project's financing). Facilities management and operating subcontracts have similar indexation arrangements.
For the demand-based assets, the concession agreement usually prescribes how user fees are set, which is generally reset annually for inflation. Similarly to PPP projects in the UK, this is typically RPI, while non-UK projects use CPI. On Affinity Water, one of HICL's regulated assets, 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 2021 was 0.8x (2020: 0.8x) such that should inflation be 1% p.a. higher than the valuation assumption for all future periods the expected return from the portfolio would increase 0.8% from 6.8% to 7.6%.
The portfolio valuation assumes UK inflation of 2.75% per annum for both RPI and RPIx, to 2030 and 2.0% thereafter. The March 2021 forecasts for RPI out to December 2022 range from 2.0% to 5.3% from 10 independent forecasters as compiled by HM Treasury, with an average forecast of 2.9%.
On 25 November 2020 the UK Government said it would not approve any change proposed by the UK Statistics Authority or "UKSA" to reform RPI to potentially align it to CPIH before 2030. The UKSA said it intends to implement the change from 2030 at which point it does not require Government consent. This change, to reduce RPI to 2% from 2030, has been reflected in the portfolio valuation, reducing the valuation by £19.7m.
If outturn GDP growth was 0.5% p.a. lower for all future periods than those in the valuation assumptions set out on page 58 for all future periods, expected return from the portfolio (before Group expenses) would decrease 0.2% from 6.8% to 6.6% (7.0% at
Gross Domestic Product ("GDP") Sensitivity At 31 March 2021, the portfolio had four investments which are considered sensitive to GDP, comprising 18% of the portfolio value (20% at 31 March 2020) namely the A63 Motorway (France), M1-A1 Road, Northwest Parkway (USA) and High Speed 1. At times of higher economic activity there will be greater traffic volumes using these roads and railways, generating increased revenues for the projects than compared to periods of lower economic activity and therefore we assess these as GDP sensitive investments.
31 March 2020).
Each 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 two investments – Affinity Water and Northwest Parkway (USA), which have refinancing requirements, exposing these investments to interest rate risk. 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 2021, cash deposits for the portfolio were earning interest at a rate of 0.2% per annum on average. There is a consensus that UK base rates will remain low for an extended period, with a current median forecast for UK base rates in March 2021 of 0.1% during 2021.
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 usually either taken by the project company (and hence the investor) or is subcontracted and taken by the FM contractor. Of the 116 investments, 52 have lifecycle as a project company risk (i.e. not subcontracted to the supply chain).
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 19% to 2023 and 25% thereafter, in line with the budget announcement made in March 2021.
26% of the portfolio by portfolio value, has exposure to foreign exchange rates. The sensitivity shows, post-hedging, the impact of GBP appreciating or depreciating against these currencies by +/- 5%.
As described above, 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:
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.
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.
03 / PERFORMANCE & RISK
Portfolio of 116 assets at 31 March 2021
V Wooldale Centre for Learning
V Birmingham & Solihull LIFT
1 By value, at 31 March 2021, using the Directors' Valuation of £3,011.9m
V Barnet Hospital V Birmingham Hospitals
New investment since 31 March 2020
V Allenby & Connaught MoD Accommodation
HICL ANNUAL REPORT 2021 65
as at 31 March 2021
March 2021
| Mar 21 | Mar 20 | |
|---|---|---|
| PPP projects | 71% | 72% |
| Demand-based assets | 19% | 20% |
| Regulated assets | 10% | 8% |
| Mar 21 | Mar 20 | |
|---|---|---|
| UK | 74% | 76% |
| EU | 18% | 17% |
| North America | 8% | 7% |
| Mar 21 | Mar 20 | |
|---|---|---|
| 100% ownership | 31% | 26% |
| 50%–100% ownership | 29% | 34% |
| Less than 50% ownership | 40% | 40% |
| March 2020 | March 2020 | ||||
|---|---|---|---|---|---|
| Mar 21 | Mar 20 | Mar 21 | Mar 20 | ||
| 100% ownership | 31% | 26% | Accommodation | 11% | 11% |
| 50%–100% ownership | 29% | 34% | Education | 16% | 14% |
| Less than 50% ownership | 40% | 40% | Electricity, Gas & Water | 10% | 8% |
| Health | 29% | 30% | |||
| Fire, Law & Order | 5% | 7% | |||
Transport 29% 30%
| Mar 21 | Mar 20 | |
|---|---|---|
| Fully operational | 97% | 97% |
| Construction | 3% | 3% |
| Colas | 7% |
|---|---|
| Balfour Beatty | 4% |
| Laing O'Rourke | 2% |
| Strabag | 2% |
| DEME | 2% |
| Bouygues | 2% |
| Bilfinger | 1% |
| Morgan Sindall | 1% |
|---|---|
| Galliford Try | 1% |
| Other contractors | 5% |
| Latent defects limitation / warranty period expired |
61% |
| Affinity Water and High Speed 1 |
12% |
| Within 1 year | 3% |
|---|---|
| 1–2 years | 3% |
| 2–5 years | 13% |
| 5–10 years | 4% |
| 10+ years | 4% |
| Latent defects limitation / warranty period expired |
61% |
|---|---|
| Affinity Water and High Speed 1 |
12% |
1 By value, at 31 March 2021, 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
HICL's risk management framework covers all aspects of the Company's business. The Board monitors, challenges and evaluates InfraRed's management of risk through the consideration of scenarios and situations that, should they occur, could materially impact the performance of HICL.
Having considered and analysed key risks, mitigating action may be undertaken to reduce the likelihood and impact of each risk manifesting.
The schematic below sets out the Company's risk management framework:
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 HICL's overall risk profile, recommending a risk appetite, and ensuring its framework is adequately designed and effective in operation. 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, evaluated 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, and third-party advisers, to proactively 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 and this review includes a consideration of the Investment Manager's internal controls and their effectiveness. No issues were identified in the latest review. The Investment Manager's Risk and Compliance team has developed a detailed self-assessment internal control report, and this is reviewed on a quarterly basis by the Risk Committee.
Risk is evaluated across seven risk classes. These are set out in the table below along with the Investment Manager's assessment of:
The table below aligns with the scope of the risk reporting tool utilised by the Investment Manager with the Risk Committee. The Investment Manager regularly presents stress scenarios and associated mitigation strategies to the Risk Committee to assist its assessment of more severe but low-probability downside scenarios.
As for almost all companies, the year to 31 March 2021 has been characterised by the impacts of and response to the Covid-19 pandemic. For HICL, the financial impact has principally materialised through its GDP-linked demand-based projects, which have experienced reduced short-term usage as a result of restrictions on movement imposed by governments. Further detail on these assets is provided in Section 3.2 – Valuation of the Portfolio. Despite some encouraging signs of vaccination success
there is still risk associated with the extent and timing of further recovery; in particular the resumption in international travel for High Speed 1. Furthermore, reduced access to hospitals may continue to hinder defect resolution and in turn the resumption of distributions on some assets. As a result, residual portfolio performance risk is still considered to be high.
The pandemic will continue to affect both the financial / market risk and political risk classes, for which the residual risk rating is assessed as medium. For financial / market risk the most likely impacts are to short-term inflation, interest rate and GDP forecasts, which may be lower than HICL's assumptions. For political risk, pressure to restore public finances following high levels of pandemic-related spending may result in further taxation changes, noting that in March 2021, the UK Government announced an increase in corporation tax rates from 19% to 25% from 1 April 2023.
As described above, the Investment Manager sets out the potential financial impact of 12-month prudent downside scenarios. If any one of these were to materialise, the NAV / share impact would be felt immediately, but the impact on cash flow may extend beyond the current year, with a consequential impact on dividend cash cover. The Risk Committee has therefore decided to focus on the five-year cash flow impact of each scenario, which is presented in the table below.
The material components and mitigation strategies of each risk class are described in the tables that follow.
| Primary Risk Class | Residual Risk Rating |
NAV / share Impact Inherent vs Residual |
Cash Flow Impact five years Inherent vs Residual |
|---|---|---|---|
| Portfolio performance risk | High | ||
| Financial / market risk | Medium | ||
| Political risk | Medium | ||
| Operational risk – execution | Low | ||
| Operational risk – portfolio administration, asset management |
Very Low | ||
| HICL central management risk | Very Low | Key Inherent |
|
| Operational risk – regulation and compliance | Very Low | Residual |
1 There are five residual risk ratings: the lowest being 'Very Low', then 'Low', 'Medium', 'High' and 'Very High'
| Principal Risk | Risk Description | Risk Mitigation |
|---|---|---|
| Portfolio performance risk | ||
| Revenue adjustments |
For PPP projects, poor operational performance leading to a failure to meet contractual service standards may reduce the income of the portfolio company concerned through availability deductions. |
Operational issues can be caused by a number of factors. The Investment Manager's Asset Management team plays a pro-active oversight role, to ensure any trends in performance are identified early and, if necessary, corrected accordingly. When problems do arise, the relevant InfraRed asset manager will work on the corrective steps and relevant actions in order to preserve good working relations with the client and thereby |
| If the operational issues are significant, projects may also be prevented from making distributions by lenders, particularly when there are disputes concerning the level or attribution of deductions. In addition to the financial impact of these deductions, there is the potential for an adverse reputational impact from any material operational issues. For regulated assets, failure to meet certain delivery outcomes can result in penalties being incurred. |
minimise any potential financial and reputational damage. Payment deductions for periods of unavailability or poor service delivery are typically contractually passed down to the subcontractor who is at fault. In a severe case, the project company can terminate a subcontractor who fails to perform and either self-manage the services or tender for a new service provider. The cost of this action would, where possible, also be recovered from the previous supplier. Penalties levied against regulated assets for underperformance against key operational outcomes could result in lower investment returns. Some mitigation is achieved through the regulatory price control process through setting reasonable targets that are both stretching and achievable. The compensation of the portfolio company's management team is linked to performance against regulatory plan outcomes. The operational performance of the PPP and regulated assets in the portfolio has not been significantly impacted by Covid-19, and there have been no significant delays to the delivery of construction assets as a result of the pandemic. |
|
| Demand | The revenue generated by demand-based assets is dependent on the usage of the associated infrastructure. For some of these demand-based assets, usage may also be correlated to the rate of economic growth. Usage below valuation assumptions could lead to adverse financial performance of the portfolio company, with significant underperformance potentially resulting in default of the financing arrangements. |
Demand risk is extensively considered by the Investment Manager as part of the due diligence process at the time of acquisition. Usage history is considered and, where appropriate, third-party experts are used to assess demand projections. Governments' responses to Covid-19, particularly restrictions on movement, have impacted the usage and financial performance of some of HICL's demand-based assets, as set out in Section 3.2 – Valuation of the Portfolio. There continues to be material risk associated with the resumption of international travel for High Speed 1; further details are provided on page 56. Once restrictions associated with Covid-19 have eased, usage may be impacted by long-term behavioural changes, such as a permanent increase in remote working. This risk is substantially mitigated by the strategic, critical nature of the Group's demand based assets. |
Risks arising from the economic impact of Covid-19 on demandbased assets with returns correlated to GDP growth are set out below under the financial / market risk class summary.
For PPP projects where the cost of defect remediation is borne by the original construction subcontractor, there is a risk that projects may be prevented from making distributions by lenders if the subcontractor disputes the scope of remediation required.
Depending on the extent of the defects and the works required to remediate them, there is a risk that availability deductions may also be levied.
There is the potential for an adverse reputational impact from any material defect issue.
Typically, PPP project companies have a right to make claims against the relevant construction subcontractor in relation to defects in the design, construction or commissioning of the project assets. This right persists for a defined period of time following the completion of construction (the 'statutory limitations period').
Construction defects are in most cases revealed through the regular programme of operations and maintenance activities or as a result of surveys that are commissioned.
Defects detected within the statutory limitations period have been lodged with the relevant construction subcontractor for remediation. The cost of remediation is the responsibility of the construction subcontractor and not borne by the PPP project company. An adjudication or court process is used where disputes arise and cannot be commercially resolved, although this may result in projects being prevented from making distributions by lenders.
Following the expiry of the statutory limitations period, the risk of remediation of construction defects that are subsequently detected typically falls to the PPP project company itself and is an equity risk (for which the lifecycle budget can in some cases be a source of mitigation). In addition, there are certain other circumstances, for example if a subcontractor becomes insolvent, where a construction counterparty may no longer be able to fulfil its obligations to correct construction defects.
Management of counterparty credit risk is discussed later in this section.
Construction, operations and maintenance counterparties
HICL's PPP project companies and demand-based asset concessionaires typically subcontract the provision of construction, operations and maintenance services to specialist providers. The failure of a supply chain provider could negatively impact the project company's ability to fulfil its contractual obligations with the client, potentially leading to revenue adjustments (see above).
As one of its key objectives, HICL provides investors with access to a balanced, well-diversified portfolio of investments (in terms of clients, funders and supply chain contractors), thereby mitigating concentration risk and the impact of the default / non-performance by any single counterparty. HICL publishes an analysis of the portfolio's counterparty exposure in Section 3.4 – Portfolio Analysis. In addition, counterparty credit risk is considered at regular intervals by the Investment Manager's internal credit risk team.
If a key subcontractor were to fail, HICL's priority is the continuation of services to public sector clients and the users of the affected infrastructure.
HICL has developed contingency plans that specifically contemplate a scenario in which a key subcontractor enters administration or liquidation, and the Investment Manager's wide network provides a number of potential replacement service providers.
payment obligations could have a material adverse impact on that portfolio company's cash flows.
| Principal Risk | Risk Description | Risk Mitigation |
|---|---|---|
| Portfolio performance risk (continued) | ||
| Operational costs |
For PPP project companies and demand-based asset concessionaires, the budget for the management services contract, the lifecycle costs and the insurance premium generally lie with the portfolio company, and there is a risk that the budget could prove to be insufficient. Risk for other operational costs, such as facilities management and operations & maintenance, is generally passed down through fixed price contracts to industry specialists. For regulated assets, the regulatory price control process sets a total expenditure (capital and operational) allowance for the associated portfolio company to achieve its targets. Overspend against this allowance does not necessarily result in additional revenue, which may reduce the returns generated. |
As part of the due diligence process at the time of acquisition, all operating budgets are reviewed to determine if they are adequate. In the case of insurance, there is often some protection through contractual premium risk-sharing agreements with the project company's client. The adequacy of lifecycle budgets is regularly assessed, where the risk sits with the project companies. HICL publishes an analysis of the portfolio's sensitivity to lifecycle costs, which is set out in Section 3.2 – Valuation of the Portfolio. The management teams of regulated assets, with oversight from the Investment Manager, prepare detailed business plans as part of each price control process. These plans take inputs from in-house and third-party experts and are scrutinised by the regulator. Mitigation is achieved through setting reasonable expenditure allowances that are both stretching and achievable. The compensation of the portfolio company's management team is linked to performance against the total allowed expenditure. |
| Client credit risk | Reductions in revenue arising from clients facing financial difficulties and therefore failing to meet their |
The impact of any single client default to the overall Group is considered small, as the Group has low concentration risk associated with any individual client. |
The majority of the Group's clients are public sector institutions in developed countries, further mitigating this risk.
Climate change Climate change will impact most companies. The impact will result from the physical consequences of climate change, and also from government policy and consumer behaviour changes to arrest the pace of adverse climate change. This has the potential to impact the financial performance of Group's portfolio.
For most concessions, performance risk, including in relation to events arising from adverse climate change, is mitigated through risk pass-down to subcontractors, insurance coverage and public-sector client relief events.
During the year, the Investment Manager has completed a detailed climate change impact assessment across HICL's current portfolio, enabling a better understanding of the potential consequences of climate change. The key risks arising can be broken down into two categories:
Although a subset of HICL's portfolio is exposed to physical risks, mitigation measures can be identified and implemented. Furthermore, the overall exposure at a portfolio level is relatively low, even under a 4°C scenario, and is limited to a small number of physical risks.
HICL's portfolio benefits from inherent mitigation against transition risks, due to the essential nature of the infrastructure within it and the protections afforded by PPP and concession contracts.
Further details are set out in Section 2.6 – Sustainability Report.
For new investments, sustainability considerations (including climate change) are integrated into each stage of the Investment Manger's investment process. Further details are set out in Section 2.6 – Sustainability Report.
Cyber security Failure to protect data appropriately could have negative legal, operational and reputational repercussions.
A breach of data security could occur by accident or as a result of a deliberate cyber-attack.
A cyber-attack could affect the IT systems of the Group, the Investment Manager or a portfolio company, causing theft or loss of data, or damage to the infrastructure's control systems and equipment.
The Group has no IT systems as it relies on those of its services providers. The Investment Manager has data management policies and its staff receive regular training to reduce the risk of an accidental data breach. The Investment Manager has IT systems designed to withstand a cyber-attack and these systems have been subject to successful annual tests by a specialist third party.
Most portfolio companies tend not to have their own IT systems and rely on those of subcontractors. Data is normally backed up and the risk, should data be corrupted or stolen, is considered low.
Those portfolio companies with their own IT systems have data management policies and their staff receive regular training to reduce the risk of an accidental data breach. Typically, these companies also undergo cyber penetration testing or use the separation of critical operational systems from the internet through bespoke procedures and firewalls to support the implementation of IT systems designed to withstand a cyber-attack.
Data held by subcontractors or by portfolio companies themselves is normally backed up. The subcontractors or portfolio companies will also have disaster recovery plans. This reduces the potential impact of business interruption.
| Principal Risk | Risk Description | Risk Mitigation |
|---|---|---|
| Financial and market risk | ||
| Investor sentiment |
Prolonged periods where the prevailing share price trades below HICL's Net Asset Value inhibit HICL's ability to issue new |
The need to issue new equity capital primarily relates to the repayment of drawings under HICL's Revolving Credit Facility ("RCF"). HICL has a number of alternative options available. Inter alia, these include: |
| equity capital. | V Refinancing the RCF to extend its maturity, currently May 2023, reduces the near-term urgency to repay drawings, though it is not HICL's policy to be drawn for substantial periods of time. Details on the recent renegotiation of the RCF can be found in Section 3.1 – Financial Review. |
|
| V For construction assets, where equity commitments are deferred for a number of years, HICL's Letter of Credit Facility ("LCF") provides for longer-term drawings, as noted in Section 3.1 – Financial Review. |
||
| V Strategic management of the portfolio composition through disposals to pay down drawings under the RCF and facilitate opportunistic acquisitions without substantially increasing HICL's gearing. One accretive disposal was made in the year. |
||
| Inflation | Investment returns from portfolio companies typically have positive inflation correlation. Inflation levels below HICL's long-term assumptions would result in the |
The Board and Investment Manager consider a number of factors in determining the Group's long-term inflation assumptions. In response to the UK Government announcing the phasing out of RPI after 2030 and replacement with a consumer price index, the Group's forecast inflation rate has been aligned with CPIH from 1 April 2030. |
| valuation of the portfolio being adversely impacted, and sustained periods of deflation could result in defaults under loan arrangements. |
Some mitigation against the impact of a change in inflation rate basis is provided as the inflation rate is also applied to operating costs and, for some portfolio companies, part or all of the cost of debt. |
|
| HICL publishes an analysis of the portfolio's sensitivity to inflation in Section 3.2 – Valuation of the Portfolio. |
| Discount and interest rates |
A discounted cash flow methodology is used to value the majority of the Group's investments. Appropriate discount rates are key to deriving a fair and |
Interest rates and inflation are positively correlated over the long term. Therefore, an increase in discount rates due to increased interest rates over the long term is likely to coincide with higher inflation – factors which materially offset one another in the portfolio valuation calculation. |
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|---|---|---|---|---|---|
| reasonable valuation for the portfolio. The rate is established by reference to comparable market transactions, which is corroborated by considering the |
An interest rate increase would have a positive impact on cash deposit interest income for portfolio companies. This would partly mitigate a portfolio value reduction arising from increased discount rates. |
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| yield on long-dated government bonds (as a reference for the risk-free rate) plus an adequate risk premium. |
It does not necessarily follow that an increase in long-dated government bond yields would result in an increase in discount rates. As long-dated government bond yields have trended downwards since HICL's launch in 2006, the market discount rate applied to |
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| All other things being equal, higher discount rates would result in a reduction in the portfolio valuation. |
secondary transactions has not followed in lockstep. The resulting increase in equity risk premium provides a degree of buffer to absorb potential long-term increases in government bond yields thereby reducing the impact on the overall discount rate. |
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| The Group benefits from use of HICL's RCF and debt within the portfolio companies. Increases in interest rates would increase the cost of financing these instruments. |
To manage interest rate risk, the Group may use interest rate swaps to hedge RCF drawings. At portfolio company level, the risk of rising interest rates causing an increase in debt service cost is materially mitigated through the use of fixed-rate or inflation-linked bonds or hedging instruments. |
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| HICL publishes an analysis of the portfolio's sensitivity to discount and interest rates in Section 3.2 – Valuation of the Portfolio. |
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| Economic growth |
18% of the portfolio, by value at 31 March 2021, has an exposure to GDP. There is a risk |
The Investment Manager regularly presents GDP sensitivities to the Risk Committee, which remains comfortable with the Company's exposure. |
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| that the economic recovery from Covid-19 is below HICL's short-term forecasts. |
The Company retains its self-imposed exposure limit of 20% of the portfolio, by value at the time of acquisition, to assets with returns correlated to GDP. |
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| Foreign exchange |
HICL is exposed to changes in foreign exchange rates where investment return is received in a |
With a wide range of public sector counterparties, political risk is inherent in HICL's business model and has consistently been a key risk faced by HICL. |
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| currency other than Sterling from investments in jurisdictions outside the UK. |
There is a risk that clients of HICL's portfolio companies or national governments choose to terminate contracts. |
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| In the UK, the Group is observing 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. |
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| There remains a long-term risk that a future UK Government may consider taking utilities, including water companies, back into public ownership. |
| Principal Risk | Risk Mitigation | |
|---|---|---|
| Political risk | ||
| Policy changes | With a wide range of public sector counterparties, political risk is inherent in HICL's business model and has consistently been a key risk faced by HICL. |
Typically, public sector counterparties are entitled to voluntarily terminate a PPP contract and, if this occurs, project companies have a corresponding right to receive compensation. For most of HICL's PPP projects, this compensation is contractually based on market value which would be expected to be equal to the prevailing value of |
| There is a risk that clients of HICL's portfolio companies or national governments choose to terminate contracts. |
the asset in the portfolio. Whilst the near-term threat of nationalisation of utilities in the UK has receded it remains incumbent on private asset owners to continually demonstrate, through performance and service quality, the benefits of private investment in infrastructure. |
|
| In the UK, the Group is observing 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. |
The Investment Manager is an active member of various industry bodies, including the Global Infrastructure Investor Association and The Infrastructure Forum, which, on behalf of the infrastructure sector, engage with politicians, civil servants, other policy shapers, such as the National UK Infrastructure Commission, and regulators. |
|
| There remains a long-term risk that a future UK Government may consider taking utilities, including water companies, back into public ownership. |
The Investment Manager works with the Association of Investment Companies on behalf of the Company. |
|
| The Investment Manager interacts directly with stakeholders of the portfolio's projects, and with policy shapers through dialogue and by responding to relevant consultations and calls-for-evidence to extol the value that the private sector brings to the delivery of public infrastructure. |
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| Legal or regulatory changes |
Various legal and regulatory changes may adversely impact the Group and the portfolio |
HICL, the Investment Manager, and their advisers continually monitor any potential or actual changes to regulations to ensure both the Group and its service providers remain compliant. |
| companies in which the Group invests. This could take the form of legislation impacting the supply chain or contractual costs or obligations to which portfolio companies (and therefore the equity investor) are exposed. |
Most social and transport infrastructure concessions provide a degree of protection, through their contractual structures, in relation to changes in legislation which affect either the project asset or the way the services are provided. |
|
| Regulators seek to balance protecting customer interests with making sure that each company has enough money to finance |
||
| Certain investments in HICL's portfolio are subject to regulatory oversight. Regular price control reviews by the regulator determine levels of investment and service that the portfolio company must |
its functions. The Investment Manager participates 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. |
|
| deliver and revenue that may be generated. Particularly severe reviews may result in poor financial performance of the affected investment. |
Affinity Water has clarity on the parameters for its business plan for the next four years. In March 2021, the CMA published its Final Determination for those companies that challenged Ofwat's Final Determination. As described in Section 2.5 – Investment Manager's Report, certain elements of the CMA determination have read-across to future regulatory periods. |
| Principal Risk | Risk Mitigation | |||
|---|---|---|---|---|
| Political risk (continued) | ||||
| Taxation changes |
Taxation legislation or treaty changes may adversely impact the Group and the portfolio's value. This may include changes to: V Corporation tax rates; V Cross-border tax rules; and V Other taxation legislation such as changes to the deductibility of interest costs of debt used to finance projects arising from the implementation of the OECD's recommendations in relation to Base Erosion and Profit Shifting ("BEPS"). |
Certain risks, such as changes to corporation tax rates, cannot be prevented or mitigated. HICL values its portfolio based on enacted tax rates. Investors are provided with an illustration of the portfolio's sensitivity to changes in tax rates in Section 3.2 – Valuation of the Portfolio. In March 2021, the UK Government announced an increase in corporation tax rates from 19% to 25% from 1 April 2023, thereby crystalising a key risk which had previously been presented to the Risk Committee by the Investment Manager. Relevant cross-border tax rules are closely monitored for any potentially adverse changes to the Group. The Board and the Investment Manager actively monitor broader taxation legislation developments. |
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| Operational risk – execution | ||||
| Inadequate due diligence |
Poor or inadequate due diligence can result in underperformance against acquisition assumptions. |
The Investment Manager's Origination and Execution team has a depth of experience in buying and selling infrastructure assets and has developed a thorough checklist approach to the due diligence phase. The Investment Manager is supported by specialist advisers (e.g. lawyers, technical consultants, sustainability advisers and tax advisers). Oversight is provided by the Investment Manager's HICL Investment Committee, and by the Board in respect of matters falling outside the Investment Manager's 'Approved Investment Parameters'. |
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| Breach of policies |
New acquisitions may cause HICL to breach its Investment Policy, its banking covenants, or other internal control policies. |
This risk is mitigated by the Investment Manager's detailed internal sign-off procedures involving a team independent of the acquisition reviewing it against all policies and procedures. |
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| Operational risk – asset and portfolio management | ||||
| The Investment Manger |
HICL is heavily reliant upon the Investment Manager to implement the strategies and deliver its objectives. The Investment Manager's team is responsible for fund, portfolio and asset management, as well as investment selection and pricing discipline. A performance deterioration of any of these functions could have a material impact on HICL's performance. |
The Investment Manager has a track record of investing and managing infrastructure investments dating back to the 1990s. It has depth of resource and knowledge in the asset class, as well as appropriate and detailed policies, procedures and compliance systems. The Investment Manager's team benefits from a group of individuals possessing relevant qualifications, relationships and experience for their roles. The Board is satisfied that there is sufficient depth of expertise within the Investment Manager's team for the Group not to be reliant on any single 'key person'. |
| Valuations | The sensitivity analysis presented in Section 3.2 – Valuation of the Portfolio does not show a comprehensive picture of all potential scenarios. Further, variables do not tend to move in isolation, and the analysis does not show the potentially infinite number of permutations, and resultant impacts, that might arise. Financial models, either for the Group or the underlying project companies, may contain errors, or incorrect inputs, resulting in inaccurate outputs. These could adversely impact the assessment of HICL's financial position. |
HICL's investments are valued using discount rates above the risk-free rate, acknowledging the various risks faced by investors in core infrastructure. Sensitivity analysis seeks to illustrate to investors the impact that certain key variables have on the portfolio's valuation. It cannot however provide a comprehensive assessment of all of the risks and should be treated accordingly. Financial models are managed by an experienced team who are adept at working with them in a manner that seeks to minimise the introduction of errors. In addition to the processes of the Investment Manager, the Group's portfolio valuation is assessed by HICL's independent valuation expert twice a year. |
|---|---|---|
| HICL central management risk | ||
| Loss of key personnel |
HICL relies on the Board of Directors and key service providers, including the Investment Manager, to manage the Group. Loss of a 'key person' could lead to gaps in the 'corporate knowledge'. |
The Board is comfortable that it is not overly reliant on any one Director. Similarly, it is comfortable that the teams in all its key service providers, including the Investment Manager, have a suitable breadth and depth of resources such that if any one individual were to depart, the services can continue to be provided to the required standards by the remaining team members. |
| Service provider failure |
The Group has no employees and relies on service providers to provide management services, the most important of which is the Investment Manager. Failure of any one service provider would |
The Management Engagement Committee reviews the performance of all key service providers annually. Poor performance issues are communicated promptly back to the relevant service provider and, to date, this has had the necessary effect. Changes are made when necessary. The Investment Manager and the Administrator have confirmed that |
| lead to potential operating issues and a possible value impairment. |
controls relevant to the Company's business remain in place. | |
| The Investment Manager has identified key roles and processes and alternates planned to manage key person risk (see Loss of Key Personnel above). |
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| Poor controls | Poor control systems of either the Group or a service provider lead to a loss for the Group. |
Detailed operating procedures have been developed and adopted by the Group. These are regularly reviewed including by the compliance team of the Investment Manager. Service providers also have their own control systems which are reviewed as and when required. |
| Operational risk – regulation and compliance | ||
| Breach of regulations |
The Group's activities may breach regulations in the jurisdictions in which it operates. |
When entering new jurisdictions for the first time, specialist technical and legal advice is taken. Once investments are made, the Investment Manager seeks to remain abreast of changes of regulations and laws to ensure the Group and its portfolio companies remain compliant. |
The AIC Code of Corporate Governance (the "AIC Code") requires the Directors to make a statement regarding the Company's viability in the Annual Report, explaining how they have assessed the Company'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 2026 remains an appropriate period over which to assess HICL's viability as this period accords with the Company's business planning exercises, is appropriate for the investments owned by the Company and is consistent with HICL's long-term objective.
The Directors' primary assessment of the Company's prospects is achieved through its 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 the 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 the investments.
The Company has a low level of expenses relative to forecast receipts from its portfolio investments. The portfolio consists of companies whose underlying assets are predominantly fully constructed and operating PPP or similar projects with public sector counterparties in jurisdictions with established and proven legal systems. As a result, the Company benefits from predictable long-term contracted cash flows and a set of risks that can be identified and assessed, see Section 3.5 Risk & Risk Management. The projects are each financed on a non-recourse basis to the Company and are supported by detailed financial models. The Directors believe that the non-recourse financing and diversification within the portfolio of investments helps to withstand and mitigate the risks it is most likely to meet.
In making this statement, the Directors have considered the resilience of the Company, taking account of its current position and the principal risks facing the business, in severe but plausible downside scenarios, and the effectiveness of any mitigating actions. Consideration has been given to the current market and political environment, including the recent UK Corporation Tax rate change to 25% effective from 1 April 2023, as well as the continued impact of the Covid-19 pandemic.
The Investment Manager has prepared sensitivity analysis throughout the year, including various stress scenarios, which have been considered by the Risk Committee. Specific scenarios, in addition to those considered by the Risk Committee, have been prepared and considered by the Audit Committee for the purposes of the Viability Assessment as follows:
Individually, these scenarios pose little threat to the Company's solvency. A severe scenario was also prepared to assess the loss in revenue necessary to cause insolvency. The analysis demonstrated that the Company should remain viable over the five-year assessment period.
The Directors have a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the five-year period to March 2026. This is on the assumption that there is sufficient liquidity in the debt market to allow HICL to refinance or repay obligations becoming due under the Revolving Credit Facility and that its investments are not materially affected by retrospective changes to government policy, laws or regulations.
The following pages set out the Risk Committee's report on its activities in respect of the year ended 31 March 2021. The Risk Committee operates within clearly defined terms of reference, which are available on the Company's website. The Risk Committee is comprised of all the Directors and it 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 risk appetite for the Group and a robust assessment and monitoring of all matters relating to the risks to which the Group is exposed, as well as their management and oversight of mitigating actions. In particular, we consider risk exposure and controls, stress and scenario planning, regulatory compliance, portfolio company controls, tax policies and matters, and the three lines of defence.
Simon Holden Risk Committee Chair 25 May 2021
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 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) is responsible for risk management and has thus implemented 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, monitors, reviews and challenges their effectiveness.
The risk management framework utilises a cascade approach, with three 'lines of defence', to identify both imminently emerging risks as well as longer-term 'horizon risks', and effectively safeguard and protect the interests of the Company and its shareholders. The Investment Manager implements mitigation strategies, which are regularly reported against and assessed by the Risk Committee:
The Committee considered and noted compliance with the Approved Investment Parameters ("AIPs"), which are a component of HICL's risk management processes.
The AIPs operate within the Investment Policy as designated thresholds that are pre-agreed with the Risk Committee and 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 and are adjusted from time-totime as this evolves, considering both the Company's investment strategy and operating environment.
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 risks), a review of HICL's risk management policies and updates on relevant fund or portfolio company matters as required.
The Committee considered, at each meeting, various regulatory compliance reports from the Investment Manager and from Aztec, the Company's Administrator. The Committee also received compliance reports from the Depositary. No significant action points or notable comments arose in respect of these regular reviews.
The Committee concludes each meeting with an assessment of whether HICL is compliant with its stated risk appetite and, at each meeting during the year, confirmed that this was the case.
The Board and the Risk Committee are alert to the potential for the physical and transitional consequences of climate change to impact HICL's investment strategy and portfolio. During the period, the Investment Manager completed a detailed, portfoliowide climate change impact assessment, as set out in Section 2.6 – Sustainability Report. The results from this study will improve the ability of the Risk Committee to understand the potential consequences of climate change on HICL's underlying investments, to allow the Investment Manager to provide focused mitigation strategies and to instruct the Company's acquisition screening and portfolio construction activities.
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. In response to the impact of Covid-19 on certain portfolio companies and the uncertainty surrounding the timing and speed of recovery from the pandemic, the Investment Manager enhanced the frequency and scope of the stress testing cycle for portfolio performance risks.
During the year, a review of the risk reporting framework was conducted by the Investment Manager. Based on feedback from Risk Committee members, several refinements were made to the quarterly reports. As a result, the Risk Committee is now provided with enhanced clarity and visibility over the most material risks to the Group, their progression with time and the mitigation plan for each risk. Furthermore, through a new report on 'horizon risks', the Risk Committee is better placed to plan its longer-term priorities and strategies to adapt to future risk factors.
The key risks faced by the Group and associated mitigants are set out in Section 3.5 – Risk & Risk Management. The year to 31 March 2021 was characterised by assessing and responding to risks arising from the Covid-19 whilst maintaining a focus on key controls and monitoring the broader risk landscape beyond the pandemic.
During the year, the Risk Committee devoted time to consider several key risks, providing timely updates to the Board and shareholders as necessary, including:
HICL and its Investment Manager continue to take seriously their responsibilities as stewards of essential community assets and to demonstrate the benefits to society of private sector involvement in the responsible and sustainable operation of critical public infrastructure.
V Construction defects: The Risk Committee received regular updates from the Investment Manager on matters of building defects, including fire safety. The Risk Committee is supportive of the Investment Manager's focus on safety through thorough surveying and prioritising remediation works, which are expected to be borne by their respective construction contractors wherever possible.
If unresolved, construction defects, including those relating to fire safety, may impact on asset availability and / or the ability for projects to make distributions to investors. The time frames around the release of distributions that have been held back may be delayed as a result. Furthermore, for certain projects there is a risk that increased defect remediation costs could adversely affect the valuation of the investment, either because the statutory limitations period has expired or the original construction contractor is insolvent.
V Political and regulatory risk: In response to the short-term economic shock created by the Covid-19 pandemic, most governments have significantly increased borrowing and spending in order to preserve jobs and limit the impact on the most vulnerable. As a result, the Investment Manager reported a heightened risk of increased taxation to the Risk Committee, and in March 2021, the UK Government announced an increase in corporation tax rates from 19% to 25% from 1 April 2023.
Affinity Water has clarity on the parameters for its business plan for the next four years. In March 2021, the CMA published its Final Determination for those companies that challenged Ofwat's Final Determination. As described in Section 2.5 – Investment Manager's Report, certain elements of the CMA determination were beneficial to the assumptions used to value Affinity Water.
The Risk Committee also received a report from the Investment Manager in relation to the risks relating to the transition from LIBOR to SONIA, which is scheduled to conclude at the end of the calendar year. The Risk Committee continues to provide oversight to the coordinated response, as described in Section 2.5 – Investment Manager's Report.
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):
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:
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.
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.
In accordance with the requirements of the Financial Conduct Authority, HICL has adopted the policies set out below:
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.
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 Section 3.5 – Risk & Risk Management.
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 Section 2.6 – Sustainability Report.
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; however the Directors assess the impact of HICL's activities on other stakeholders, in particular public sector clients and the end users of the infrastructure investments, as well as the community as a whole, recognising that the investments of HICL are often key community assets. Details can be found in the Strategic Report, particularly in Section 2.6 – Sustainability Report.
At the year end, the Board of Directors comprised eight non-executives; five male and three female.
HICL has no employees.
HICL is required under the Alternative Fund Manager's 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 with regulatory 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 2021.
| Leverage | Gross Method | Commitment Method |
|---|---|---|
| Maximum limit | 150% | 150% |
| Actual level | 111% | 101% |
Ian Russell Chairman 25 May 2021
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 116 infrastructure investments. Its strategy to protect and enhance the value of the existing portfolio, and to source appropriately-priced new investments, utilises the expertise of its Investment Manager, InfraRed Capital Partners Limited ("InfraRed"). 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 February and July.
1 Independent of the Investment Manager
2 Alternative Investment Fund, as defined by the Alternative Investment Fund Managers Directive
3 Alternative Investment Fund Managers Directive
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"). 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 Capital Partners Limited ("InfraRed") has been appointed the Investment Manager of HICL and 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:
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, the Partnership 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 of HICL comprises eight 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.
Mr Ian Russell Chairman of the Board Chair of Nomination Committee
Ian Russell CBE (British), resident in the UK, is a qualified accountant. He was appointed to the Board on 1 May 2013. Ian worked for Scottish Power plc between 1994 and 2006, initially as Finance Director and, from 2001, as its CEO. Prior to this he spent eight years as Finance Director at HSBC Asset Management in Hong Kong and London. Ian is chairman of Scottish Futures Trust and National Museums Scotland.
Appointed to the Board on 1 May 2013
Other public company directorships (listed in London unless noted otherwise)**: None
Mr Frank Nelson Senior Independent Director Chair of Management Engagement Committee
Frank Nelson (British), resident in the UK, is a qualified accountant. He has over 25 years of experience in the construction, contracting, infrastructure and energy sectors. He was appointed to the Board on 1 June 2014. Frank was Finance Director of construction and house-building group Galliford Try plc from 2000 until October 2012. He was previously Finance Director of Try Group plc from 1987, leading the company through its floatation on the London Stock Exchange in 1989 and the subsequent merger with Galliford in 2001. Following his retirement, Frank was appointed as the Senior Independent Director of Eurocell and as the Chair of Van Elle Holdings. He is also Chair of a privately owned contracting and property development group.
Date of appointment* Appointed to the Board 1 June 2014
Other public company directorships (listed in London unless noted otherwise)**: Eurocell PLC Van Elle Holdings PLC
Ms Rita Akushie
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 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.
Appointed to the Board on 1 January 2020
Other public company directorships (listed in London unless noted otherwise)**: None
Mr Mike Bane Chair of Remuneration Committee
Mike Bane (British) is a chartered accountant and retired from public practice in June 2018. Mike has been a Guernsey resident for over 20 years. He has more than 35 years of audit and advisory experience in the asset management industry including in relation to infrastructure investment companies. He led EY's services to the asset management industry in the Channel Islands and was a member of EY's EMEIA Wealth and Asset Management Board. Prior to EY, Mike was at PwC, in both London and Guernsey. Mike was President of the Guernsey Society of Chartered and Certified Accountants from 2015 to 2017. Mike graduated with a BA in Mathematics from the University of Oxford and is a long-standing member of the Institute of Chartered Accountants in England and Wales.
Appointed to the Board on 1 July 2018
Other public company directorships (listed in London unless noted otherwise)**: Apax Global Alpha Limited
* 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
Ms Frances Davies
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 Aviva's With-Profits Committee and the committee of the Hermes Property Unit Trust. Previously she served as Head of Global Institutional Business at Gartmore Investment Management where she was responsible for Gartmore's relationships with pension funds and other institutions within the UK, Europe and the US. Previously she held roles at Morgan Grenfell Asset Management and SG Warburg. Ms Davies graduated with a MA in Philosophy, Politics and Economics and a M.Phil in Management Studies, both from Oxford University.
Other public company directorships (listed in London unless noted otherwise)**: JPMorgan Smaller Companies Investment Trust plc
Mrs Sally-Ann (Susie) Farnon Chair of the Audit Committee
Sally-Ann Farnon (known as Susie) (British), resident in Guernsey, is a fellow of the Institute of Chartered Accountants in England and Wales, having qualified as an accountant in 1983, and is a nonexecutive director of a number of property and investment companies. She was appointed to the Board on 1 May 2013. Susie was a Banking and Finance Partner with KPMG Channel Islands from 1990 until 2001 and Head of Audit KPMG Channel Islands from 1999. She has served as President of the Guernsey Society of Chartered and Certified Accountants and as a member of The States of Guernsey Audit Commission and as Vice-Chairman of The Guernsey Financial Services Commission, and is a director of The Association of Investment Companies.
Appointed to the Board on 1 May 2013
Apax Global Alpha Limited Bailiwick Investments Limited (TISE) BH Global Limited Real Estate Credit Investments Limited
Mr Simon Holden Chair of the Risk Committee
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.
Appointed to the Board 1 July 2016
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)
Mr Kenneth D. Reid
Kenneth D. Reid (British), resident in Singapore, has more than 30 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 James Walker Group Limited, and is a member of the Singapore Institute of Directors.
Appointed to the Board 1 September 2016
Other public company directorships (listed in London unless noted otherwise)**: None
InfraRed Capital Partners Limited ("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, a privately-owned property and infrastructure investment business, managing a range of infrastructure and property 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 21 investment funds investing in infrastructure and property, including HICL.
In July 2020, InfraRed was acquired by Sun Life Financial Inc. (together with its subsidiaries and joint ventures, "Sun Life"), with InfraRed continuing to operate as a distinct business under SLC Management, Sun Life's alternative asset management business. The Sun Life acquisition has provided 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 2021, Sun Life had total assets under management of C\$1,304bn. For more information please visit www.sunlife.com.
The InfraRed Group currently manages eight infrastructure funds (including HICL) and six real estate funds. The InfraRed Group currently has a staff of around 190 employees and partners, based mainly in offices in London and with smaller offices in New York, Mexico City, Seoul and Sydney. Its infrastructure team comprises over 100 professional staff who have, on average, c. 12 years of relevant industry experience.
Within the infrastructure team, there are:
Six senior members of the InfraRed team make up InfraRed's Investment Committee on behalf of HICL. The Investment Committee has combined experience of over 145 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:
There are no acquisition or performance fees payable.
These fees are calculated and payable three monthly 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 thirty six (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 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.
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. 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 AIFM Directive.
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.
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. uk1 ). 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.
The Board consists of eight non-executive Directors. In accordance with Provision 10 of the AIC Code all of the non-executives are independent of the Investment Manager. The Chairman, Ian Russell, 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, Frank Nelson. Frank 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 with the 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 eight Directors intend to retire and offer themselves for re-election at the forthcoming Annual General Meeting in July 2021.
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 commissioned in 2020, and is discussed on the following page under Performance Evaluation.
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 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 2021 is set out below:
| 2 | Formal Board Meetings |
Audit Committee |
Management Engagement Committee |
Market Disclosure Committee |
Nomination Committee |
Remuneration Committee |
Risk Committee |
|---|---|---|---|---|---|---|---|
| Mr I Russell | 5(c) | 8* | 1 | 2 | 3(c)** | 2 | 4 |
| Mr F Nelson | 5 | 8 | 1(c) | 2 | 4 | 2 | 4 |
| Mr M Bane | 5 | 8 | 1 | 2 | 5 | 2(c) | 4 |
| Ms R Akushie | 5 | 8 | 1 | 2 | 5 | 2 | 4 |
| Ms F Davies | 5 | 7 | 1 | 2 | 4 | 2 | 4 |
| Mrs S Farnon | 5 | 8(c) | 1 | 2 | 5 | 2 | 4 |
| Mr S Holden | 5 | 8 | 1 | 2 | 5 | 2 | 4(c) |
| Mr K Reid | 5 | 8 | 1 | 2 | 5 | 2 | 4 |
(c) denotes the Chair of each respective Committee
* Mr Russell is not a member of the Audit Committee, but is invited to attend
** Mr Russell did not attend Nomination Committee meetings focused on recruiting his successor, which were chaired by Mr Nelson
1 www.theaic.co.uk/system/files/policy-technical/AIC2019AICCodeofCorporateGovernanceFeb19.pdf
During the period to 31 March 2021 a further 13 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 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:
Matters relating to the Company'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 Section 3.7 – Risk Committee Report.
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 more detailed analysis of HICL's Budget and Business Plan for the prospective year.
While an internal evaluation is conducted most years, in the year to 31 March 2021 an external review was commissioned through Lintstock as part of the triannual independent review. The Board's composition in terms of range of skills and experience represented was rated very highly by the Lintstock Board Evaluation Report as was the management of Board meetings. The report noted the Board had been effective in adjusting its focus in response to the Covid-19 pandemic, and the effectiveness with which the Company's risk management arrangements coped with Covid-19 was rated very highly. The clarity of the Manager's remit in relation to investor stewardship and ESG factors was also rated highly, as was the extent to which sustainability is integrated into the investment strategy.
In the period between external performance evaluations, the Board conducts its own internal evaluation, considering the performance, tenure and independence of each Director. The annual self-evaluation is completed by the Chairman and takes the form of one-to-one interviews with each Director holding office in the year. The Chairman then presents summary of the conclusions to the Board. Comments on the Chairman are collated by the Senior Independent Director who then provides feedback to the Chairman.
The independence of each Director has been considered and each has been confirmed as being independent of the Company and its Managers. 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 and since the launch of the Company.
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.
The Board consists of eight 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 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.
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 be commissioned 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 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
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 February and July. HICL also holds an 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 in order 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 chairman of one of HICL's committees, as appropriate – whose contact details are on HICL's website.
During the year Mr I Russell (Chairman) held individual meetings with certain large institutional shareholders, facilitated by HICL's brokers. The Board's intention is to continue to foster an open, two-way communication with its shareholders.
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 in Sections 4.6, 3.7 and 4.5, respectively, of this Annual Report.
The Chairman and members of each committee as at 31 March 2021 were as follows:
| Audit Committee |
Management Engagement Committee |
Market Disclosure Committee |
Nomination Committee |
Remuneration Committee |
Risk Committee |
|
|---|---|---|---|---|---|---|
| Chairman | Mrs S Farnon | Mr F Nelson | Mr I Russell | Mr M Bane | Mr S Holden | |
| Members | Ms R Akushie | Ms R Akushie | Ms R Akushie | Ms R Akushie | Ms R Akushie | Ms R Akushie |
| Mr M Bane | Mr M Bane | Mr M Bane | Mr M Bane | Ms F Davies | Mr M Bane | |
| Ms F Davies | Ms F Davies | Ms F Davies | Ms F Davies | Mrs S Farnon | Ms F Davies | |
| Mr S Holden | Mrs S Farnon | Mrs S Farnon | Mrs S Farnon | Mr S Holden | Mrs S Farnon | |
| Mr F Nelson | Mr S Holden | Mr S Holden | Mr S Holden | Mr F Nelson | Mr F Nelson | |
| Mr K Reid | Mr K Reid | Mr F Nelson | Mr F Nelson | Mr K Reid | Mr K Reid | |
| Mr I Russell | Mr K Reid | Mr K Reid | Mr I Russell | Mr I Russell | ||
| Mr I Russell |
By invitation Mr I Russell
The full terms of reference for the Nomination Committee are available from HICL's website.
The Board believes that its composition with respect to the balance of skills, gender, experience and knowledge, coupled with the mixed length of service, provides for a sound base from which the interests of investors will be served to a high standard. There is a good spread of skills on the Board and an appropriate level of knowledge of regulatory requirements and regulations, generally, as well as a number of Directors with accounting qualifications and a good understanding of investment companies.
Succession planning for key roles, including the Chair and the Chair of the Audit Committee, as well as the mix of skills and experience on the Board more generally with respect to Director recruitment, are explicitly considered and discussed by the Nomination Committee.
Other than in exceptional circumstances, it is the policy of the Board that Directors, including the Chair, will not serve more than nine years on the Board, 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.
HICL has adopted a Diversity Policy (see Section 4.7 – Report of the Directors), which the Nomination Committee takes regard of in all decision making.
The Nomination Committee had five meetings in the year to 31 March 2021.
The full terms of reference for the MEC 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 once in the year to 31 March 2021 to review the performance of the key service providers including the Investment Manager. No material weaknesses were identified; 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.
The MEC meeting for the financial year occurred in February 2021, when a review of key service providers was 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 be recommended to the Board for approval, which was duly granted.
The full terms of reference for the Market Disclosure Committee are available from HICL's website.
The Committee has responsibility for overseeing the disclosure of information by the Company to meet its obligations under the Market Abuse Regulation and the Financial Conduct Authority's Listing Rules and Disclosure Guidance and Transparency Rules.
The Market Disclosure Committee met twice in the year to 31 March 2021.
The following pages set out the Audit Committee's Report on how it has discharged its duties in accordance with the 2019 AIC Code of Corporate Governance and its activities in respect of the year ended 31 March 2021 for HICL Infrastructure PLC (the "Company").
The Audit Committee has been in operation throughout the year and operates within clearly defined terms of reference, which are available to view on HICL's website. The Committee, which comprises all the Directors except for Mr Ian Russell, met formally seven times during the year to 31 March 2021. In addition to the four quarterly meetings which align with the Company's reporting cycle, three Audit Committee meetings were held to review and challenge the Investment Manager's semi-annual valuation assumptions, judgements and resulting valuations of the Company's underlying portfolio of infrastructure assets.
The duties of the Audit Committee in discharging its responsibilities include reviewing the Annual and Interim Reports, the semi-annual valuations of HICL's investment portfolio, the system of internal controls, and the terms of appointment, independence, remuneration and quality of the external auditor, KPMG LLP ("KPMG" or the "external auditor"). It is also the formal forum through which KPMG reports to the Board of Directors and meets at least four times each year. The objectivity of the external auditor is reviewed by the Audit Committee, which also reviews the terms under which the external auditor is appointed to perform non-audit services, and resulting fees paid, in accordance with the Company's Non-Audit Services policy.
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.
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.
Susie Farnon Audit Committee Chair 25 May 2021
The main duties of the Audit Committee are:
The external auditor and the third-party valuation expert are invited to attend the Audit Committee meetings 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 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.
Significant Areas of Focus
The table below details the key areas of focus by the Audit Committee during the current year, which were discussed and debated with the Investment Manager and KPMG. Consistent with prior years, the Audit Committee determined that the key risk of material misstatement of the Company's financial statements related to the valuation of its underlying investments in infrastructure assets, in particular regarding forecast assumptions used and discount rates applied.
| Significant Issue | Audit Committee Actions | ||
|---|---|---|---|
| Valuation of investments | |||
| The total carrying value of 'Investments at fair value through profit or loss' at 31 March 2021 was £2,950.3m (2020: £2,837.9m). See Note 14 to the financial statements. The fair value of the Company's investment is based on the |
The Audit Committee discussed the valuation process and methodology with the Investment Manager in August, October and November 2020 as part of its review of the September 2020 Interim Report, and in February, March, April and May 2021 as part of its review of the March 2021 Annual Report. |
||
| Net Asset Value of IILP and the sundry assets and liabilities of its direct Corporate Subsidiary. 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 cash flow methodology. This methodology requires a series of material judgements to be made as further explained in Notes 3 and 4 of the financial statements. |
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, judgements and methodology, especially in light of Covid-19, and the valuation of the demand-based assets, in particular, were given close scrutiny. The Audit Committee met with KPMG seven times during the year. In July 2020, the Audit Committee reviewed and agreed KPMG's initial audit plan, while in February and April 2021 the Audit Committee discussed, in particular, the audit approach to the valuation as well as in May 2021 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 considered to be future inflation rates, interest rates, rates of gross domestic product and tax rates. These assumptions are explained in further detail in Section 3.2 – Valuation of the Portfolio and in Note 4 of the financial statements. |
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 the Covid-19 pandemic 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. |
|||
| 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 macro-economic 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. |
|||
| 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.
| Significant Issue | Audit Committee Actions | ||
|---|---|---|---|
| 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 |
The Audit Committee challenged the Investment Manager on their material judgements and also compared this to feedback from the third-party valuation expert. |
||
| 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 highlighted to the Audit Committee the forecast impact on cash flows of a number of stress scenarios alongside its assessment of the risk to these cash flows. |
||
| The Investment Manager is experienced and active in the area of 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 Section 3.2 – Valuation of the Portfolio and in Note 4 of the financial statements. |
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(a) 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 March 2021 Annual Report. |
|||
| The Audit Committee also reviewed the Company's viability statement and accompanying commentary, as well as projections and sensitivities, including the risks associated with the Covid-19 pandemic, 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. |
|||
| 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. |
The Audit Committee reviewed the March 2021 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. |
||
| To report the relevant financial performance and position to stakeholders, the Company prepares pro forma summary financial information on the basis that HICL consolidates the results of the Corporate Subsidiaries, known as the "Investment Basis", as well as reporting in accordance with IFRS. |
The Audit Committee received a draft version of the March 2021 Annual Report for their review and comment, as well as commentary from the Investment Manager to aid their assessment of the March 2021 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 2019 AIC Code of Corporate Governance. |
04 / DIRECTORS' REPORT
Accounting Policies and Practices
The Audit Committee reviewed the appropriateness of, and was satisfied with, the Company's accounting policies.
The Audit Committee received reports from the Investment Manager in relation to key accounting judgements and estimates, such as valuation assumptions, semi-annual valuation report, going concern and the Company's long-term viability.
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 2(a) of the financial statements.
There were no new standards or interpretations effective during the current year that had a material effect on the Company's financial statements.
The Audit Committee received updates from the Investment Manager in relation to the Financial Reporting Council ("FRC") publications, including updated guidance on Covid-19, judgements and estimates and the expanded disclosure requirements on going concern.
The Company's 31 March 2020 Annual Report and Accounts were selected for review by the Financial Reporting Council as part of its review of corporate reporting for the year. The review was closed with no comments.
The FRC noted that its review provides no assurance that the Report and Accounts are correct in all material respects, and that the FRC's role is not to verify the information provided, but to consider compliance with reporting requirements. The FRC's review is based on a review of the Report and Accounts and does not benefit from detailed knowledge of the business, or an understanding of the underlying transactions entered into.
The Audit Committee is monitoring the current consultation on "Restoring trust in audit and corporate governance" by the Department for Business, Energy & Industrial Strategy and are supportive of the stated aims to strengthen the UK's framework for major companies and the way in which they are audited.
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. Further, each quarter, the Board review and debate a detailed self-assessment internal control report prepared by the Investment Manager – see Section 3.5 – Risk & Risk Management for further detail.
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 daily cash flow monitoring, asset ownership verification and oversight services to the Company.
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 10 years. The external audit was most recently tendered for the years commencing after 31 March 2015. As reported in the Annual Report for the year ended 31 March 2015, KPMG was re-appointed as auditor at the completion of the tender process and it is expected that the audit will be tendered within the next four years.
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. In order 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. The Company's Audit Committee Terms of Reference including the Non-Audit Services policy can be found on the website at: www.hicl.com.
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. In the year fees were:
| March 2021 £m |
March 2020 £m |
|
|---|---|---|
| Audit services | ||
| Audit of the Company and intermediate holding entities |
0.4 | 0.4 |
| Audit of HICL's project subsidiaries and other audit-related services |
0.6 | 0.4 |
| 1.0 | 0.8 | |
| Non-audit services | ||
| Interim review of the Company | 0.1 | 0.1 |
| Other non-audit services | – | – |
| 0.1 | 0.1 | |
| Total | 1.1 | 0.9 |
Non-audit services in the above table consisted of audit-related assurance services for the Company's Interim Report. In total, they represented 10% (2020: 13%) 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.
To fulfil its responsibility regarding the independence of the external auditor, the Audit Committee considered:
To assess the effectiveness of the external auditor, the Audit Committee reviewed:
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.
The Remuneration Committee's Report is set out on pages 102 to 105. The 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 2021 and relevant required 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.
Shareholders will recall that a triennial review of remuneration, which included engaging an independent external consultant and an independent external advisor, was carried out in the year to 31 March 2020, but that it was decided to defer the increases from that review for at least one year because of the uncertainties and challenges created by the Covid-19 pandemic. The main work of the Committee during the current year has been to re-assess those conclusions. After further consultation with the independent external parties, the Committee considers that it is now appropriate to implement the original increases. Accordingly, those increases, together with an increase in the existing fee cap, have been recommended to the Board for shareholder approval.
There have been no changes to the Directors' Remuneration Policy.
This Directors' Remuneration Report was adopted by the Board and signed on its behalf by:
Mike Bane Remuneration Committee Chair 25 May 2021
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 implement effective governance and oversight of the Company, to support strategy and to promote long-term sustainable success. The specific additional responsibilities of the Chairman, 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 £500,000 per annum (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 Chairman of the Board, and in his case, by the Remuneration Committee only. Relevant comparative information is considered in forming these recommendations and any views expressed by shareholders on fees or on this policy are taken into consideration. The Remuneration Committee will seek the views of an independent external remuneration consultant at least every three years to assist its review of remuneration.
Directors' fees are fixed and are payable in cash, quarterly in arrears. As all Directors are non-executive, they are not eligible for bonuses, pension benefits, 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.
The Remuneration Committee is composed of all the Directors including the Chairman 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. Further, the membership of eight 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.
In setting the Directors' remuneration, consideration is given to the size 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 and its predecessor, HICL Guernsey, for the 15-year period from inception at the end of March 2006 until 31 March 2021 compared with an investment in the FTSE 250 Index over the same period. During that period the TSR was 8.9% p.a. compared with the FTSE 250 Index which was 8.2% p.a.
The table below is shown to enable shareholders to assess the relative importance of spend on remuneration. It compares remuneration against dividends paid and share buybacks of the Company in the year ended 31 March 2021.
| Actual Expenditure | YE 2021 | YE 2020 |
|---|---|---|
| Aggregate Directors' Remuneration | £448,500 | £410,250 |
| Aggregate Dividends paid to shareholders |
£158,272,480 | £148,367,207 |
| Aggregate cost of Ordinary Shares repurchased |
£0 | £0 |
The Remuneration Committee completed its triennial independent review of Board remuneration last financial year (year ended 31 March 2020). In support of this review the Board appointed Trust Associates, an independent remuneration consultancy with deep experience of investment company fee structures, and sought advice from Longwater Partners, a reputable independent search consultancy specialising in boardroom advisory and executive search.
The review supported an increase in fees for all Board roles, commensurate with the increase in time commitments associated with the increased size, breadth and complexity of the Company and its operating environment since the previous review in 2017.
In particular a greater increase for the Board's Chair was supported by both consultants, reflecting the growth in the specific demands of the role.
In this Report a year ago, the Committee set out for shareholders its decision to defer the recommended increases to the following year because of the challenges and uncertainties created by the Covid-19 pandemic. Over the year the Company has demonstrated its resilience in the face of the unprecedented impact of Covid-19 and, whilst uncertainty remains, the range of possible outcomes for HICL has narrowed significantly. Accordingly, and after further consultation with both Trust Associates and Longwater Partners, the Committee has decided to adopt the increase in fees set out in the table below, applicable from 1 April 2021:
| Role (YE 2021)1 | Total Fees Proposed (YE 2022) |
Fees Approved (YE 2021)2 |
|---|---|---|
| Chairman | £100,000 | £78,000 |
| Senior Independent Director | £67,000 | £60,000 |
| Audit Committee Chair | £66,000 | £59,000 |
| Risk Committee Chair | £64,000 | £54,500 |
| Director (including Luxembourg subsidiary companies) | £60,000 | £53,000 |
| Director | £53,000 | £47,000 |
| Total3 | £516,000 | £445,500 |
1 The fees approved / proposed relate to the roles performed and not to individuals per se
2 Approved at the AGM on 14 July 2020
This total considers, in relation to the above role classifications, three individuals performing the role of 'Director' in both YE 2021 and YE 2022
04 / DIRECTORS' REPORT
The premium to the Directors' base fee for the Senior Independent Director, Audit Committee Chair and Risk Committee Chair is calibrated to recognise the additional responsibility specific to the performance of each role, as well as the greater interaction required with external parties, including the Investment Manager. An additional £7,000 annual fee (previously £6,000) is paid to the Director who represents the Company on the board of the Luxembourg subsidiary.
The proposed Directors' remuneration is broadly consistent with the recommendations made by Trust Associates, with departures in two main respects:
The Board has adopted the director remuneration proposal 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 in July 2021 with a view to implementing it, back-dated to 1 April 2021.
The total fees paid to Directors in the year were within the annual fee cap of £500,000, contained in the Remuneration Policy approved by shareholders at the AGM on 14 July 2020.
In line with the proposed Directors' remuneration, the Remuneration Committee recommends that the annual fee cap be increased to £700,000 p.a.. This allows for the proposed increases, provides a degree of headroom for any additional fees associated with non-routine business and caters for a temporary increase in the number of Directors as the Company's succession plan is executed over the course of this financial year.
| Total Remuneration paid / due in year | Year ended 31 March 2021 | Year ended 31 March 2020 |
|---|---|---|
| Mr I Russell* | £78,000 | £78,000 |
| Mr F Nelson | £60,000 | £60,000 |
| Ms R Akushie*** | £47,000 | £11,750 |
| Mr M Bane** | £53,000 | £53,000 |
| Mrs F Davies | £47,000 | £47,000 |
| Mrs S Farnon | £59,000 | £59,000 |
| Mr S Holden | £54,500 | £54,500 |
| Mr K Reid | £47,000 | £47,000 |
| Total | £445,500 | £410,250 |
* The chairman was the highest paid Director
** Includes £6,000 in respect of Luxembourg subsidiary
*** Ms Akushie was appointed on 1 January 2020
The Directors of the Company on 31 March 2021, and their interests in the shares of the Company, are shown in the table below.
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.
| Number of Ordinary Shares | 31 March 2021 | 31 March 2020 |
|---|---|---|
| Mr I Russell | 95,979 | 95,979 |
| Mr F Nelson | 51,568 | 51,568 |
| Ms R Akushie | 0 | 0 |
| Mr M Bane | 14,394 | 7,535 |
| Mrs F Davies | 0 | 0 |
| Mrs S Farnon | 59,931 | 59,931 |
| Mr S Holden | 27,694 | 27,694 |
| Mr K Reid | 10,975 | 10,484 |
| Total | 260,541 | 253,191 |
At the last AGM held on 14 July 2020, the resolutions relating to the Directors' Remuneration Report for the year ended 31 March 2020 and the Directors' Remuneration Policy were approved.
In total the numbers of shares voted was: 779,242,034 including 316 proxy forms. The percentage of votes cast was 42%. The results of the votes on resolutions relating to remuneration are summarised in the table below:
| In Favour | Discretion | Against | Withheld | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Resolution | Votes | % | Items | Votes | % | Items | Votes | % | Items | Votes | Items |
| 9- Remuneration Report | 778,503,686 | 99.92 | 302 | 0 | 0.00 | 0 | 623,708 | 0.08 | 17 | 114,640 | 9 |
| 10- Remuneration Policy | 778,513,932 | 99.92 | 301 | 6,525 | 0.01 | 1 | 613,462 | 0.08 | 17 | 114,640 | 9 |
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 2021. 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 2 to the financial statements.
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.
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.
HICL's results for the year are summarised in Section 3.1 – Financial Review and are set out in detail in the financial statements.
HICL declared three quarterly interim distributions, totalling 6.18p per share, for the year ended 31 March 2021 as follows:
| Amount | Declared | Record date | Paid / to be paid |
|---|---|---|---|
| 2.06p | 17/02/2021 | 05/03/2021 | 31/03/2021 |
| 2.06p | 18/11/2020 | 27/11/2020 | 31/12/2020 |
| 2.06p | 15/07/2020 | 07/09/2020 | 30/09/2020 |
The fourth quarterly interim distribution, of 2.07p per share, for the year ended 31 March 2021 was declared by HICL on 19 May 2021, and is due to be paid on 30 June 2021.
This number increased to 1,936,813,501 as at 31 March 2021 as a result of tap issuance during the year. Shareholders may reinvest their dividends via a Dividend Reinvestment Plan ("DRIP"), the details of which can obtained by emailing [email protected]
HICL has one class of share capital, Ordinary Shares, of which there were 1,863,642,769 in issue as at 1 April 2020.
| Interim dividend | Year ended 31 March 2021 |
Year ended 31 March 2020 |
Year ended 31 March 2019 |
Year ended 31 March 2018 |
Year ended 31 March 2017 |
|---|---|---|---|---|---|
| 3 month period ending 30 June | 2.06 | 2.06 | 2.01 | 1.96 | 1.91 |
| 3 month period ending 30 September | 2.06 | 2.06 | 2.01 | 1.96 | 1.91 |
| 3 month period ending 31 December | 2.06 | 2.06 | 2.01 | 1.96 | 1.91 |
| 3 month period ending 31 March | 2.07 | 2.07 | 2.02 | 1.97 | 1.92 |
| Paid / declared | 8.25p | 8.25p | 8.05p | 7.85p | 7.65p |
The Directors who held office during the year to 31 March 2021 were:
| Director | Role(s) | Years of Service* |
|---|---|---|
| Mr I Russell | Chairman of the Board, Chair of Nomination Committee | 7 years 11 months |
| Mr F Nelson | Senior Independent Director, Chair of Management Engagement Committee | 6 years 10 months |
| Ms R Akushie | Director | 1 year 3 months |
| Mr M Bane | Chair of the Remuneration Committee | 2 year 9 months |
| Ms F Davies | Director | 2 year 0 months |
| Mrs S Farnon | Chair of the Audit Committee | 7 years 11 months |
| Mr S Holden | Chair of the Risk Committee | 4 years 9 months |
| Mr K Reid | Director | 4 years 7 months |
*Assuming a continuation of the years of service as a Director of HICL Infrastructure Company Limited
HICL has made qualifying third-party indemnity provisions for the benefit of its Directors which were made during the period and remain in force at the date of this report.
HICL has no employees.
The Board believes that a diversity of viewpoints and personal experiences, along with broad professional expertise, lead to better decisions, are 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 2021, 37% (three) of the Board of Directors were women and 12% (one) was from an ethnic minority.
HICL is an investment company and as such does not have a senior management team. Day-to-day management of HICL is delegated to InfraRed Capital Partners ("InfraRed"), HICL's Investment Manager. InfraRed's diversity policy and statistics are published at: https://www.ircp.com/corporate-life
Section 4.4 – Corporate Governance Statement 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 and their terms of reference.
HICL's AGM is held in July each year. The forthcoming meeting is scheduled for July 2021.
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 Section 4.3 – The Investment Manager.
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 Section 4.4 – Corporate Governance Statement.
The Directors are of the opinion that the continued appointment of InfraRed as HICL's investment manager is in the best interests of the shareholders of HICL.
In accordance with the Alternative Investment Fund Managers Directive:
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 Capital Partners (Management) LLP, which are available from Companies House.
The aggregate total remuneration paid by the group which contains InfraRed for the year ended 31 March 2021 was £37,882,650. This was paid to 188 beneficiaries and was divided into fixed remuneration of £19,716,044 and variable remuneration of £16,166,606. The aggregate total remuneration paid by the group which contains InfraRed to AIFMD Code Staff in the year was £6,949,809 and the number of senior management and risk takers was 14.
The Investment Manager fees charged to the Company were £0.1m (disclosed as Investment Manager fees in Note 7), of which the full balance remained payable at 31 March 2021. InfraRed is also the Operator of IILP, the Corporate Subsidiary through which HICL holds its investments. The total Operator fees were £28.6m of which £7.1m remained payable at 31 March 2021.
HICL's joint corporate brokers at 31 March 2021 are Investec Bank plc and RBC Capital Markets.
The Administrator and Company Secretary is Aztec Financial Services (UK) Limited.
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.
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.
In accordance with Section 489 of the Companies Act 2006, a resolution for the re-appointment of KPMG LLP as auditor of HICL is to be proposed at the forthcoming Annual General Meeting.
As at 31 March 2021, HICL is aware of or has received notification in accordance with the Financial Conduct Authority's Disclosure 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 |
|
|---|---|---|
| Investec Wealth & Wealth Management | 118,393,999 | 6.1% |
| Rathbones | 108,804,501 | 5.6% |
| Brewin Dolphin | 108,126,159 | 5.6% |
| Baillie Gifford | 72,175,045 | 3.7% |
| Insight Investment | 61,066,765 | 3.2% |
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. Although no specific code or standard is followed, suppliers of goods and services are generally paid within 30 days of the date of any invoice.
See Section 2.6 – Sustainability Report.
HICL made no political donations during the period.
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 now 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 Section 2.6 – Sustainability Report.
The Company's business activities, together with the factors likely to affect its future development, performance and position are set out in Section 2.2 – HICL's Business Model & Strategy. The financial position of the Company, its cash flow and liquidity position are described in Sections 2.5 – Investment Manager's Report and 3.1 – Financial Review. In addition, Notes 1 to 4 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 Company's access to credit facilities and by reviewing cash flow forecasts with a number of stress scenarios. They also considered the Company'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 Section 3.1 – Financial Review and Note 16 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. As explained in the Investment Manager's Report, these infrastructure projects include several demand-based assets that have been impacted by Covid-19, and a large number of availability assets that have no exposure to economic growth. 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.
No shares have been bought back in the year. The latest authority to purchase shares for cancellation was granted to the Directors on 14 July 2020.
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.
The Directors are responsible for preparing the Annual Report and 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 are required to prepare the financial statements in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006 and applicable law. In addition the financial statements are required under the UK Disclosure and Transparency Rules to be prepared in accordance with International Financial Reporting Standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union ("IFRSs as adopted by the EU").
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 HICL and of its profit or loss for that period. In preparing these financial statements, the Directors are required to:
The Directors are responsible for keeping proper accounting records that are sufficient to show and explain HICL's transactions and disclose with reasonable accuracy at any time the financial position of HICL 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 HICL 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 of the corporate and financial information included on HICL's website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
We confirm that to the best of our knowledge:
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 HICL's position and performance, business model and strategy.
By order of the Board
Authorised signatory
Aztec Financial Services (UK) Limited Company Secretary
25 May 2021
Registered Office: Aztec Financial Services (UK) Limited: Forum 4, Solent Business Park, Parkway South, Whiteley, Fareham, PO15 7AD
We have audited the financial statements of HICL Infrastructure PLC ("the Company") for the year ended 31 March 2021 which comprise the Income Statement, Balance Sheet, Statement of Changes in Shareholders' Equity, Cash Flow Statement and the related notes, including the accounting policies in note 2.
In our opinion the financial statements:
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 is consistent with our report to the audit committee.
We were first appointed as auditor by the directors on 26 February 2019. The period of total uninterrupted engagement, including HICL Infrastructure Company Limited the previous Guernsey listed entity, is for fifteen years ended 31 March 2021. 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. No nonaudit services prohibited by that standard were provided.
| Overview | ||
|---|---|---|
| Materiality: financial statements as a whole |
0.95% (2020: 1.02%) of Company | £28m (2020:£29m) net asset value |
| Key audit matters | vs 2020 | |
| Recurring risks | Valuation of investment at fair value through profit and loss |
◄► |
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 summarise below the key audit matter (unchanged from 2020), in arriving at our audit opinion above, together with our key audit procedures to address those matters and, as required for public interest entities, our results from those procedures. These matters were addressed, and our results are based on procedures undertaken, in the context of, and solely for the purpose of, our audit of the financial statements as a whole, and in forming our opinion thereon, and consequently are incidental to that opinion, and we do not provide a separate opinion on these matters
| The risk | Our response | ||||
|---|---|---|---|---|---|
| Valuation of | Forecast based valuation: | Our procedures included: | |||
| investments at fair value through profit and loss |
The Company's investment in its immediate subsidiary is carried at fair value through profit and loss and represents a significant |
— Control design and observation: review and test of the design, implementation and operating effectiveness of the controls in operation around the reconciliation of changes to the relevant |
|||
| (£2,950.3 million; 2020: £2,837.9m) |
proportion of the Company's net assets. The carrying amount is calculated by assessing |
project cash flows models; | |||
| Refer to: Audit Committee |
the fair value of the immediate subsidiary which reflects its net asset value incorporating the fair value of the underlying infrastructure projects and holding |
— Historical comparisons: comparing the prior year forecasts to current year actual distributions to consider historical accuracy of forecasting. We assessed the valuation movements for each investment focusing on changes since prior reporting date, challenging any significant variances; |
|||
| Report on page 97 | companies. | — Our sector experience: obtaining and assessing responses from | |||
| Accounting policy on pages 123 Financial disclosures on pages 126 and 137 |
The fair value of infrastructure investments is determined using the income approach whereby the long term forecasted cash flows |
underlying project entities to identify significant matters identified for the projects and whether these have a material impact on the forecasted distributions. Similarly we held discussions with the |
|||
| of each individual infrastructure asset are discounted at a rate which reflects these risk profiles. In addition, inherent in these long term forecasted cash flows are key macro |
investment managers and identified specific operational issues relating to the projects, we assessed and challenged the impact of these issues on the forecasted distributions; |
||||
| economic assumptions such as inflation, tax, GDP growth and deposit rates. The valuation risk represents both a risk of fraud and error associated with estimating the timing and amounts of long term forecasted cash flows alongside the selection and application of appropriate assumptions. Changes to long term forecasted cash flows and/or the selection and application of different assumptions may result in a materially different valuation for the infrastructure investments. This valuation of assets involves estimation by management and is prone to management bias, there is a risk that the valuation might be fraudulently manipulated to overstate investment value. In the current year the macro-economic assumptions impacting all investments and specifically the forecasted cash flows of demand based investments continue to be impacted by the economic disruption caused by Covid-19. This is particularly relevant to certain of the demand-based assets where timing of recovery is dependent upon government restrictions. This results in a high degree of estimation uncertainty, with a potential range of reasonable outcomes greater than our materiality for the financial statements as a whole. The financial statements (note 4) disclose the sensitivity of the Fair Value of the investments to key assumptions used by the group. |
— gaining an understanding of and challenging any significant adjustments to forecasted distributions, including adjustments related to Covid-19; |
||||
| — testing evidence to support all significant acquisitions and disposal during the year; |
|||||
| — Benchmarking valuation assumptions: with support from KPMG valuation specialists, we reviewed and challenged the Company's assumed discount rates and macro-economic assumptions applied in the valuation model by benchmarking against independent market data and market transactions and using our valuation specialist's experience in valuing similar investments; |
|||||
| — In the current year the Company has made assumptions on discount rates and macro-economic assumptions in light of Covid 19 and its impact on demand based assets. We have gained an understanding of the methodology used and with input from the KPMG valuation specialists have assessed the reasonableness of this methodology and assumptions applied; |
|||||
| — 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; and |
|||||
| — Assessing transparency: we considered the Company's disclosures in relation to the use of estimates and judgements regarding the fair value of investments and the Company's investment valuation policies. Additionally we have assessed the transparency provided by the disclosures with regards to outlining sensitivities in investment values in relations to economic assumptions applied to assess the impact of Covid-19. |
As a result of our work we found the valuation of the investments at fair value through profit and loss and related sensitivity disclosures to be acceptable. (2020: Acceptable)
Materiality for the financial statements as a whole was set at £28.0m (2020: £29.0), determined with reference to a benchmark of net assets £2,950.2m, of which it represents 0.95% (2020: 1.02%).
In line with our audit methodology, 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 statements as a whole. Performance materiality was set at 75% (2020 : 75%) of materiality for the financial statements as a whole, which equates to £21.0m (2020 : £21.8m). We applied this percentage in our determination of performance materiality because we did not identify any factors indicating an elevated level of risk.
We agreed to report to the Audit Committee any corrected or uncorrected identified misstatements exceeding £1.4m (2020: £1.5m), in addition to other identified misstatements that warranted reporting on qualitative grounds.
Our audit of the company was undertaken to the materiality and performance materiality levels specified above and was performed by a single audit team.
The Directors have prepared the financial statements on the going concern basis as they do not intend to liquidate the Company or to cease its 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 its 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").
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 Company's available financial resources were:
We considered whether these risks could plausibly affect the liquidity or covenant compliance in the going concern period by assessing the degree of downside assumption that, individually and collectively, could result in a liquidity issue, taking into account the Company's current and projected cash and facilities (a reverse stress test).
Net Assets £2,950.2m (2020: £2,838.0m)
£1.45m) Net Assets Materiality
£28.0m Whole financial statements materiality (2020: £29.0m)
Whole financial statements performance materiality (2020: £21.75m)
Misstatements reported to the audit committee (2020:
Our conclusions based on this work:
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.
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:
We communicated identified fraud risks throughout the audit team and remained alert to any indications of fraud throughout the audit.
As required by auditing standards, and taking into account possible pressures to meet profit or investment valuation targets and our overall knowledge of the control environment, 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. We deemed that there is limited opportunity or incentive to manipulate income recognition.
We have identified a fraud risk associated with the valuation of investments, further detail in respect of this fraud risk is set out in the key audit matter disclosures section 2 of this report.
We also performed procedures including:
Identifying and responding to risks of material misstatement due to non-compliance with laws and regulations
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 other management (as required by auditing standards), and discussed with the directors and other management the policies and procedures regarding compliance with laws
and regulations. We communicated identified laws and regulations throughout our team and remained alert to any indications of non-compliance throughout the 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, and taxation legislation and we assessed the extent of compliance with these laws and regulations as part of our procedures on the related financial statement items.
Whilst the company is subject to many other laws and regulations, we did not identify any others where the consequences of non-compliance alone could have a material effect on amounts or disclosures in the financial statements.
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 these 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.
The directors are responsible for the other information presented in the Annual Report together with the financial statements. Our opinion on the financial 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.
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. Based solely on that work we have not identified material misstatements in the other information.
Based solely on our work on the other information:
In our opinion the part of the Directors' Remuneration Report to be audited has been properly prepared in accordance with the Companies Act 2006.
We are required to perform procedures to identify whether there is a material inconsistency 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:
We are also required to review the viability statement, set out on page 79 under the Listing Rules. Based on the above procedures, we have concluded that the above disclosures are materially consistent with the financial statements and our audit knowledge.
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.
We are required to perform procedures to identify whether there is a material inconsistency between the directors' corporate governance disclosures and the financial statements and our audit knowledge.
Based on those procedures, we have concluded that each of the following is materially consistent with the financial statements and our audit knowledge:
We are 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.
Under the Companies Act 2006, we are required to report to you if, in our opinion:
As explained more fully in their statement set out on page 109, 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 of financial statements that are free from material misstatement, whether due to fraud or error; assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and using the going concern basis of accounting unless they either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so.
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.
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 and the terms of our engagement by the Company. Our audit work has been undertaken so that we might state to the Company's members those matters we are required to state to them in an auditor's report and the further matters we are required to state to them in accordance with the terms agreed with the Company, and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company's members, as a body, for our audit work, for this report, or for the opinions we have formed.
Ian Griffiths (Senior Statutory Auditor) for and on behalf of KPMG LLP, Statutory Auditor Chartered Accountants 15 Canada Square London E14 5GL
25 May 2021
For the year ended 31 March 2021
| Note | Year ended 31 March 2021 Total £m |
Year ended 31 March 2020 Total £m |
|
|---|---|---|---|
| Investment income | 6 | 154.8 | 51.6 |
| Total income | 154.8 | 51.6 | |
| Fund expenses | 7 | (2.9) | (2.1) |
| Profit before tax | 151.9 | 49.5 | |
| Profit for the year | 11 | 151.9 | 49.5 |
| Earnings per share – basic and diluted (pence) | 11 | 7.9 | 2.7 |
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.
As at 31 March 2021
| 31 March 2021 | 31 March 2020 | ||
|---|---|---|---|
| Note | £m | £m | |
| Non-current assets | |||
| Investments at fair value through profit or loss | 4, 14 | 2,950.3 | 2,837.9 |
| Total non-current assets | 2,950.3 | 2,837.9 | |
| Current assets | |||
| Trade and other receivables | 0.2 | 0.1 | |
| Cash and cash equivalents | 0.4 | 0.6 | |
| Total current assets | 0.6 | 0.7 | |
| Total assets | 2,950.9 | 2,838.6 | |
| Current liabilities | |||
| Trade and other payables | (0.7) | (0.6) | |
| Total current liabilities | (0.7) | (0.6) | |
| Total liabilities | (0.7) | (0.6) | |
| Net assets | 2,950.2 | 2,838.0 | |
| Equity | |||
| Share capital | 17 | 0.2 | 0.2 |
| Share premium | 17 | 1,055.3 | 936.7 |
| Distributable reserves | 17 | 1,996.4 | 1,999.3 |
| Other reserves | 17 | (101.7) | (98.2) |
| Total equity | 13 | 2,950.2 | 2,838.0 |
| Net assets per Ordinary Share (pence) | 13 | 152.3 | 152.3 |
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 25 May 2021, and signed on its behalf by:
Director Director
Company registered number: 11738373
I Russell S Farnon
For the year ended 31 March 2021
| Note | Share capital and share premium £m |
Distributable reserves £m |
Other reserves £m |
Total shareholders' equity £m |
|
|---|---|---|---|---|---|
| Shareholders' equity as at 31 March 2020 | 936.9 | 1,999.3 | (98.2) | 2,838.0 | |
| Profit for the year | – | 155.4 | (3.5)1 | 151.9 | |
| Distributions paid to Company shareholders | 12 | – | (158.3) | – | (158.3) |
| Issues of Ordinary Shares | 17 | 120.0 | – | – | 120.0 |
| Costs of issues of Ordinary Shares | 17 | (1.4) | – | – | (1.4) |
| Shareholders' equity as at 31 March 2021 | 1,055.5 | 1,996.4 | (101.7) | 2,950.2 |
1 Other reserves comprises unrealised net loss on revaluation of investment (see Note 6)
| Share capital and share premium Note £m |
Distributable reserves £m |
Other reserves £m |
Total shareholders' equity £m |
|
|---|---|---|---|---|
| Shareholders' equity as at 31 March 2019 | 0.1 | 2,000.0 | - | 2,000.1 |
| Profit for the year | – | 147.7 | (98.2)1 | 49.5 |
| Distributions paid to Company shareholders 12 |
– | (148.4) | – | (148.4) |
| Redemption of preference shares 17 |
(0.1) | – | – | (0.1) |
| Issue of Ordinary Shares under the Scheme 17 |
821.7 | – | – | 821.7 |
| Issues of Ordinary Shares 17 |
117.1 | – | – | 117.1 |
| Costs of issue of Ordinary Shares under the Scheme 17 |
(0.7) | – | – | (0.7) |
| Costs of issues of Ordinary Shares issued for cash 17 |
(1.2) | – | – | (1.2) |
| Shareholders' equity as at 31 March 2021 | 936.9 | 1,999.3 | (98.2) | 2,838.0 |
1 Other reserves comprises unrealised net loss on revaluation of investment (see Note 6)
The accompanying Notes are an integral part of these financial statements.
For the year ended 31 March 2021
| Note | Year ended 31 March 2021 £m |
Year ended 31 March 2020 £m |
|---|---|---|
| Cash flows from operating activities | ||
| Profit before tax | 151.9 | 49.5 |
| Adjustments for: | ||
| Investment income | (154.8) | (51.6) |
| Operating cash flows before movements in working capital | (2.9) | (2.1) |
| Changes in working capital: | ||
| Increase in receivables | (0.1) | (0.1) |
| Increase in payables | 0.1 | 0.6 |
| Cash flow from operations | (2.9) | (1.6) |
| Investment income received | 160.8 | 148.4 |
| Net cash from operating activities | 157.9 | 146.8 |
| Cash flows from investing activities | ||
| Investment in subsidiary | (118.4) | (113.0) |
| Net cash used investing activities | (118.4) | (113.0) |
| Cash flows from financing activities | ||
| Net proceeds from issue of share capital 17 |
118.6 | 115.2 |
| Distributions paid to Company shareholders 12 |
(158.3) | (148.4) |
| Net cash used in financing activities | (39.7) | (33.2) |
| Net (decrease) / increase in cash and cash equivalents | (0.2) | 0.6 |
| Cash and cash equivalents at beginning of year | 0.6 | – |
| Cash and cash equivalents at end of year | 0.4 | 0.6 |
The accompanying Notes are an integral part of these financial statements.
For the year ended 31 March 2021
HICL Infrastructure PLC (the "Company" or "HICL UK") is a public limited company incorporated, domiciled and registered in England in the UK. The financial statements as at and for the year ended 31 March 2021 comprise the financial statements for the Company only, as explained in Note 2.
At 31 March 2021 the Company had two corporate level subsidiaries (31 March 2020: two) being, HICL Infrastructure S.a.r.l. 2 ("Luxco 2") and Infrastructure Investments Limited Partnership ("IILP") (each a "Corporate Subsidiary" and together "Corporate Subsidiaries").
The Company and its Corporate Subsidiaries invest in infrastructure projects in the United Kingdom, North America and Europe.
The financial statements were approved and authorised for issue by the Board of Directors on 25 May 2021.
The financial statements have been prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006, and in compliance with International Reporting Standards (IFRS) and IFRS Interpretations Committee interpretations as adopted pursuant to Regulation (EC) No 1606/2002 as it applied in the European Union (IFRS as adopted by the EU). The financial statements have been prepared using the historical cost basis, except for financial instruments and subsidiaries classified at fair value through profit or loss which are stated at fair values.
The financial statements are presented in Pounds Sterling, which is the Company's functional currency.
The preparation of these financial statements, in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006, requires the Directors and advisers to make judgements, estimates and assumptions that affect the application of policies and the reported amounts of assets and liabilities, income and expense. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that year or the period of the revision and future periods if the revision affects both current and future periods. Note 3 shows the critical accounting judgements, estimates and assumptions which have been applied in the preparation of these financial statements.
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.
The Directors are of the opinion that the Company has all the typical characteristics of an investment entity as defined in IFRS 10:
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.
The Company's business activities, together with the factors likely to affect its future development, performance and position are set out in Section 2.2 – HICL's Business Model & Strategy. The financial position of the Company, its cash flows, and liquidity position are described in Section 3.1 – Financial Review. In addition, Notes 1 to 4 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 Company's access to a Revolving Credit Facility via a Corporate Subsidiary and Letter of Credit Facility (details of which are set out in Section 3.1 – Financial Review) and by reviewing cash flow forecasts with a number of stress scenarios, including actual and potential downside impacts from Covid-19. They also considered the Company's considerable financial resources, including investments in a significant number of project assets. The majority of these project assets operate long-term contracts with various public sector customers and suppliers across a range of infrastructure projects. As explained in Section 2.5 – Investment Manager's Report, these infrastructure projects include several demand-based assets that are impacted by Covid-19, and a large number of availability assets that have no exposure to economic growth. 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 meet its liabilities as they fall 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.
The Company adopted the following standards, amendments and interpretations which became effected during the year, none of which had a material impact on the financial statements:
The Company has not identified any standards or interpretations which were in issue but not yet effective at the date of these financial statements that would have a material impact on the Company.
Financial assets and liabilities are recognised on the Balance Sheet when the Company becomes a party to the contractual provisions of the instrument. Financial assets and liabilities are de-recognised when the contractual rights to the cash flows from the instrument expire or the asset or liability is transferred and the transfer qualifies for de-recognition in accordance with IFRS 9 'Financial Instruments: Recognition and measurement'.
Non-derivative financial instruments comprise the Company's investment in equity and debt of its direct Corporate Subsidiary, 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 the equity and loanstock 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 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 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 its absence, the most advantageous market to which the Company has access at that date.
The fair value of the Company's investment is based on the Net Asset Value of IILP and the sundry assets and liabilities of its direct Corporate Subsidiary. 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.
Fair values of the 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 fair values. In determining the appropriate discount rate, regard is had 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 financial instruments is included in Note 4.
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 using the effective interest method. Dividend income is recognised when the Company's entitlement to receive payment is established.
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.
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.
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.
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.
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 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.
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 investment in infrastructure, which is currently predominately in private finance initiatives and public private partnership companies. 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.
The preparation of financial statements in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006 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.
The Directors have 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's status as an investment entity (see Note 2(a)) and the exemption provided by IAS 28 and IFRS 11 as well as the adoption of Investment Entities (Amendments to IFRS 10, IFRS 12 and IAS 27), investments are designated upon initial recognition to be accounted for at fair value through profit or loss.
The Directors have satisfied themselves that PPP, or similar, investments share the same investment characteristics and as such constitute a single asset class for IFRS 7 disclosure purposes.
The Company recognises its investment in Luxco 2, a Corporate Subsidiary, at fair value which includes the fair value of IILP and each of the individual project companies and holding companies in which the Company holds an indirect investment. Fair values for those investments for which a market quote is not available are determined using the income approach which discounts the expected cash flows at the appropriate rate except for those investments that have an observable market price in an active market. In determining the discount rate, regard is had to relevant long-term government bond yields, specific risks and the evidence of recent transactions.
The weighted average discount rate applied in the March 2021 valuation was 6.8% (2020: 7.2%). The discount rate is considered to be the most significant unobservable input through which an increase or decrease would have a material impact on the fair value of the Investments at fair value through profit or loss. In addition, in light of Covid-19, cash flow assumptions on the demand-based assets are also a significant input for the March 2021 valuation.
The other estimates that are likely to have a material effect on the measurement of fair value are inflation rates, deposit rates, gross domestic product and tax rates, which are further discussed in Note 4.
The following summarises the significant methods and assumptions used in estimating the fair values of financial instruments:
The fair value of financial instruments traded in active markets is based on quoted market prices at the balance sheet date.
The fair value of financial instruments that are not traded in an active market is determined by using valuation techniques. HICL uses the income approach which discounts the expected cash flows attributable to each asset at an appropriate rate to arrive at fair values. In determining the discount rate, regard is had to relevant long-term government bond yields, the specific risks of each investment and the evidence of recent transactions.
Where applicable, further information about the assumptions used in determining fair value is disclosed in the Notes specific to that asset or liability.
| 31 March 2021 £m |
31 March 2020 £m |
|
|---|---|---|
| Financial assets | ||
| Investments at fair value through profit or loss | 2,950.3 | 2,837.9 |
| Financial assets at fair value through profit or loss | 2,950.3 | 2,837.9 |
| Trade and other receivables | 0.2 | 0.1 |
| Cash and cash equivalents | 0.4 | 0.6 |
| Financial assets – loans and receivables | 0.6 | 0.7 |
| Financial liabilities | ||
| Trade and other payables | (0.7) | (0.6) |
| Financial liabilities – payables | (0.7) | (0.6) |
The Directors believe that the carrying values of all financial instruments are approximately equal to their fair values.
The fair value hierarchy is defined as follows:
| 31 March 2021 | ||||
|---|---|---|---|---|
| Level 1 £m |
Level 2 £m |
Level 3 £m |
Total £m |
|
| Investments at fair value through profit or loss (Note 14) | – | – | 2,950.3 | 2,950.3 |
| 31 March 2020 | ||||
| Level 1 | Level 2 | Level 3 | Total | |
| £m | £m | £m | £m | |
| Investments at fair value through profit or loss (Note 14) | – | – | 2,837.9 | 2,837.9 |
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 14.
The Company records the fair value of its direct Corporate Subsidiary based on the Net Asset Value of IILP and the sundry assets and liabilities of its direct Corporate Subsidiary. IILP's Net Asset Value is based on the aggregate fair value of each of the individual project companies and holding companies in which the Company holds an indirect investment, along with the working capital of intermediate holding companies. Detailed below are the valuation methodologies applied in valuing those indirect investments.
The Directors have satisfied themselves as to the methodology used, the discount rates and key assumptions applied, and the valuation of all the underlying investments. All equity investments are valued using a discounted cash flow methodology except for the A13 investment in listed senior bonds which is valued based on the quoted market price at the balance sheet date. The valuation techniques and methodologies have been applied consistently with those used in the prior year. This valuation uses key assumptions which are benchmarked from an assessment of recent comparable market transactions in order to arrive at a fair market value. Valuations are performed on a six monthly basis every September and March for all investments.
For the valuation of the underlying infrastructure investments, the Directors have also obtained an independent opinion from a third-party expert with experience in valuing these types of investments, supporting the reasonableness of the valuation.
The following economic assumptions were used in the discounted cash flow valuations:
| 31 March 2021 | 31 March 2020 | ||
|---|---|---|---|
| UK (RPI and RPIx)1 CPIH2 |
2.75% p.a. to 2030, 2.0% thereafter 2.0% p.a. |
2.75% p.a. 2.0% p.a. |
|
| Inflation | Eurozone (CPI) | 2.0% p.a. | 2.0% p.a. |
| Rates | Canada (CPI) | 2.0% p.a. | 2.0% p.a. |
| USA (CPI) | 2.0% p.a. | 2.0% p.a. | |
| UK | 0.25% p.a. to March 2025, 1.25% p.a. thereafter | 0.5% p.a. to March 2023, 1.5% p.a. thereafter | |
| Interest | Eurozone | 0.0% p.a. to March 2025, 0.25% p.a. thereafter | 0.0% p.a. to March 2023, 1.0% p.a. thereafter |
| Rates | Canada | 0.5% p.a. to March 2024, 2.25% p.a. thereafter | 1.0% p.a. to March 2023, 2.25% p.a. thereafter |
| USA | 0.5% p.a. to March 2024, 2.25% p.a. thereafter | 1.0% p.a. to March 2023, 2.25% p.a. thereafter | |
| Foreign | CAD / GBP | 0.58 | 0.57 |
| Exchange | EUR / GBP | 0.85 | 0.89 |
| Rates | USD / GBP | 0.73 | 0.81 |
| UK3 | 19% to 2023, 25% thereafter | 19% | |
| Tax Rates |
Eurozone | Ireland 12.5% France 26.5% in 2021, 25% thereafter Netherlands 25% |
Ireland 12.5% France 25% – 33.3% Netherlands 21.7% – 25% |
| USA | 21% Federal & 4.6% Colorado State | 21% Federal & 4.6% Colorado State | |
| Canada | 23% and 27% | 26% and 27% | |
| UK | (10.5%) in 2020, 5.0% in 2021, 5.5% in 2022, 2.0% p.a. thereafter |
(5.5%) in 2020, 4.0% in 2021, 2.0% p.a. thereafter | |
| GDP Growth |
Eurozone | (9.0%) in 2020, 5.5% in 2021, 4.0% in 2022, 1.8% p.a. thereafter |
(5.0%) in 2020, 4.0% in 2021, 1.8% p.a. thereafter |
| USA | (3.5%) in 2020, 5.5% in 2021, 4.0% in 2022, 2.5% p.a. thereafter |
(3.5%) in 2020, 3.0% in 2021, 2.5% p.a. thereafter |
1 Retail Price Index and Retail Price Index excluding mortgage interest payments. On 25 November 2020, the UK Government and UK Statistics Authority announced the RPI would be aligned with CPI from 2030. As such, RPI-linked project companies have been aligned to CPI from this date
2 Consumer Prices Index including owner occupiers' housing costs
3 On 5 March 2021, the UK Chancellor of the Exchequer announced an increase to UK Corporation Tax rates from 19% to 25% with effect from 1 April 2023. This assumption represents market expectations of the future UK tax change
Judgement is used in arriving at the appropriate discount rate for each investment, based on the Investment Manager's experience and knowledge of the market, taking into account intelligence gained from bidding activities, discussions with financial advisers knowledgeable in these markets and publicly available information on relevant transactions. Where there is an absence of market activity, comparators and historic data are used to inform the appropriate discount rate.
The discount rates used for valuing each infrastructure investment vary on a project-by-project basis, taking into account risks associated with the financing of an investment such as investment risks (e.g. liquidity, currency risks, market appetite) and any risks to the investment's earnings (e.g. predictability and covenant of the revenues and service delivery challenges), all of which may be differentiated by the phase of the investment's life (e.g. in-construction or in-operation).
When there are limited transactions or information available, and as a second method and sense check, a 'bottom-up' approach is taken based on the appropriate long-term government bond yields and an appropriate risk premium. The risk premium considers risks and opportunities associated with the project earnings (e.g. predictability and covenant of the revenues and service delivery challenges), all of which may be differentiated by project phase, jurisdiction and market participants' appetite for these risks.
The discount rates used for valuing the projects in the portfolio are as follows:
| Year ended | Range | Weighted average |
|---|---|---|
| 31 March 2021 | 0.9%1 to 8.7% |
6.8% |
| 31 March 2020 | 2.7%1 to 9.3% |
7.2% |
1 The 0.9% (31 March 2020: 2.7%) discount rate relates to the A13 senior bonds. The rate is the implied rate from the quoted market price of the bonds at the Balance Sheet date; excluding this, the discount range is from 5.8% to 8.7% (31 March 2020: 6.2% – 9.3%)
A change to the weighted average discount rate by plus or minus 0.5% has the following effect on the Investments at fair value through profit or loss and NAV per Ordinary Share:
| Discount rates | -0.5% p.a. change |
Investments at fair value through profit or loss |
+0.5% p.a. change |
|---|---|---|---|
| 31 March 2021 | +£162.1m | £2,950.3m | -£147.1m |
| 31 March 2020 | +£153.2m | £2,837.9m | -£139.3m |
| Implied change in NAV per Ordinary Share1 – 31 March 2021 (31 March 2020) |
+8.4 pence +8.2 pence |
152.3 pence 152.3 pence |
-7.6 pence -7.5 pence |
1 Net Asset Value per Ordinary Share based on 1,936.8 million Ordinary Shares as at 31 March 2021
The magnitude of sensitivities considered for the current year are unchanged from the previous year and are considered to be a plausible and reasonably possible change in the current year, based on historic movements. This is in the context that the sensitivities assess the impact from long-term changes in the key valuation assumptions, which are unlikely to be significantly impacted by current near-term volatility.
All PPP projects in the portfolio have contractual income streams with public sector clients, which are rebased every year for inflation. UK projects tend to use either Retail Price Index ("RPI") or RPI excluding mortgage payments ("RPIx") while non-UK projects use Consumer Price Index ("CPI"), and revenues are either partially or totally indexed (depending on the contract and the nature of the project's financing). Facilities management and operating subcontracts have similar indexation arrangements. On 25 November 2020, the UK Government and UK Statistics Authority announced the RPI would be aligned with CPI from 2030. As such, RPI-linked project companies have been aligned to CPI from this date.
A change to the inflation rate by plus or minus 0.5% for all future periods, which is deemed to be a plausible and possible change in the current year based on historic movements, has the following effect on the Investments at fair value through profit or loss and NAV per Ordinary Share:
| Inflation rates | -0.5% p.a. change |
Investments at fair value through profit or loss |
+0.5% p.a. change |
|---|---|---|---|
| 31 March 2021 | -£140.8m | £2,950.3m | +£155.1m |
| 31 March 2020 | -£125.8m | £2.837.9m | +£140.9m |
| Implied change in NAV per Ordinary Share1,2 – 31 March 2021 (31 March 2020) |
-7.3 pence -6.7 pence |
152.3 pence 152.3 pence |
+8.0 pence +7.6 pence |
1 Analysis is based on the Company's 35 largest investments, which are considered representative of the wider portfolio, pro-rata for the whole portfolio 2 Net Asset Value per Ordinary Share based on 1,936.8 million Ordinary Shares as at 31 March 2021
Each portfolio company's interest costs are either inflation-linked or fixed rate. This is achieved through fixed-rate or inflation-linked bonds, or bank debt which is hedged with an interest rate swap. The portfolio's sensitivity to interest rates primarily relates to the cash deposits required as part of the investments' senior debt funding, though a small number of projects are sensitive to interest rates as future refinancing is required.
Each PPP project and demand-based asset in the portfolio has cash held in bank deposits, which is a requirement of their senior debt financing. As at 31 March 2021 cash deposits for the portfolio were earning interest at a rate of 0.2% (31 March 2020: 0.7%) per annum on average.
A change to the interest rate and / or deposit rate by plus or minus 0.5% for all future periods, which is deemed to be a plausible and possible change in the current year based on historic movements, has the following effect on the Investments at fair value through profit or loss and NAV per Ordinary Share:
| Interest rates | -0.5% p.a. change |
Investments at fair value through profit or loss |
+0.5% p.a. change |
|---|---|---|---|
| 31 March 2021 | -£18.2m | £2,950.3m | +£21.4m |
| 31 March 2020 | -£19.0m | £2.837.9m | +£22.4m |
| Implied change in NAV per Ordinary Share1,2 – 31 March 2021 (31 March 2020) |
-0.9 pence -1.0 pence |
152.3 pence 152.3 pence |
+1.1 pence +1.2 pence |
1 Analysis is based on the Company's 35 largest investments, pro-rata for the whole portfolio
2 Net Asset Value per Ordinary Share based on 1,936.8 million Ordinary Shares as at 31 March 2021
The portfolio has four projects where revenues are positively correlated to changes in GDP. These projects are A63 Motorway, M1-A1 Road, Northwest Parkway and High Speed 1 which together comprise 18% of the Investments at fair value through profit or loss. At times of higher economic activity, there will be greater traffic volumes using these roads and railways generating increased revenues for the projects than compared to periods of lower economic activity.
Detailed, asset-specific adjustments have been made to the cash flows of the GDP-sensitive investments to reflect the near-term impact of Covid-19 – see Section 3.2 – Valuation of the Portfolio for detail.
A change to the GDP growth rate by plus or minus 0.5% for all future periods, which is deemed to be a plausible and possible change in the current year based on historic movements, has the following effect on the Investments at fair value through profit or loss and NAV per Ordinary Share:
| GDP growth rates | -0.5% p.a. change |
Investments at fair value through profit or loss |
+0.5% p.a. change |
|---|---|---|---|
| 31 March 2021 | -£89.1m | £2,950.3m | +£85.4m |
| 31 March 2020 | -£81.2m | £2.837.9m | +£80.3m |
| Implied change in NAV per Ordinary Share1 – 31 March 2021 (31 March 2020) |
-4.6 pence -4.4 pence |
152.3 pence 152.3 pence |
+4.4 pence +4.3 pence |
1 Net Asset Value per Ordinary Share based on 1,936.8 million Ordinary Shares as at 31 March 2021
The profits of each project company are subject to corporation tax in the country in which the project is located.
A change to the tax rate by plus or minus 5.0% for all future periods, which is deemed to be a plausible and possible change in the current year based on historic movements, has the following effect on the Investments at fair value through profit or loss and NAV per Ordinary Share:
| Tax rates | -5% p.a. change |
Investments at fair value through profit or loss |
+5% p.a. change |
|---|---|---|---|
| 31 March 2021 | +£102.0m | £2,950.3m | -£102.9m |
| 31 March 2020 | +£102.5m | £2.837.9m | -£102.0m |
| Implied change in NAV per Ordinary Share1,2 – 31 March 2021 (31 March 2020) |
+4.6 pence +5.5 pence |
152.3 pence 152.3 pence |
-4.7 pence -5.5 pence |
1 Analysis is based on the Company's 35 largest investments, pro-rata for the whole portfolio
2 Net Asset Value per Ordinary Share based on 1,936.8 million Ordinary Shares as at 31 March 2021
On 5 March 2021, the UK Chancellor of the Exchequer announced an increase to UK Corporation Tax rates from 19% to 25% with effect from 1 April 2023. This assumption represents the market expectations of the future UK tax change.
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 a Corporate Subsidiary as disclosed below.
Returns from HICL's investments are affected by the price at which they are acquired. 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. HICL has six demand-based assets in the portfolio representing 19% of the portfolio value at March 2021. Over the course of the year, the Covid-19 pandemic has resulted in reduced usage of these facilities, impacting on revenues and therefore their valuation.
As mentioned above, four of these demand-based assets are sensitive to GDP which means their valuations are more significantly affected by the Covid-19 pandemic. This impact has been assessed and has resulted in adjustments in three areas: short-term traffic reduction, longer-term recovery and discount rates, using a variety of information sources including actual traffic figures, management assessments, consensus GDP forecasts and sensitivity analysis.
The objective of the Corporate Group's financial risk management is to manage and control the risk exposures of its investment portfolio. The Board of Directors has overall responsibility for overseeing the management of risks, including financial risks, however the review and management of financial risks are delegated to the Investment Manager and the Operator which has documented procedures designed to identify, monitor and manage the financial risks to which the Corporate Group is exposed. This Note presents information about the Corporate Group's exposure to financial risks, its objectives, policies and processes for managing risk and the Corporate Group's management of its financial resources.
The Corporate Group owns a portfolio of investments predominantly in the subordinated loanstock and equity of project finance companies. These companies are structured at the outset to minimise financial risks where possible, and the Investment Manager and Operator primarily focus their risk management on the direct financial risks of acquiring and holding the portfolio but continue to monitor the indirect financial risks of the underlying projects through representation, where appropriate, on the boards of the project companies and the receipt of regular financial and operational performance reports.
The Corporate Group invests indirectly in subordinated loanstock of infrastructure project companies, usually with fixed interest rate coupons. Where floating rate debt is owned, the primary risk is that the Corporate Group's cash flows will be subject to variation depending upon changes to base interest rates. The portfolio's cash flows are continually monitored and re-forecasted both over the near future (five-year time horizon) and the long term (over whole period of projects' concessions) to analyse the cash flow returns from investments. Forecasts are used to monitor the impact of changes in borrowing rates against cash flow returns from investments as increases in borrowing rates will reduce net interest margins. The Company itself does not have any borrowings and so is not directly exposed to interest rate risk.
The Corporate Group's policy is to ensure that interest rates are sufficiently hedged, when entering into material medium / long-term borrowings, typically via a Corporate Subsidiary, to protect the Corporate Group and Corporate Subsidiary's net interest margins from significant fluctuations in interest rates. This may include engaging in interest rate swaps or other interest rate derivative contracts.
The Corporate Group has an indirect exposure to changes in interest rates through its investment in infrastructure project companies, which are financed by senior debt and mezzanine debt. Financing of project companies is generally either through floating rate debt, fixed-rate bonds or index-linked bonds. Where senior debt is floating rate, the projects typically have concession length hedging arrangements in place, which are monitored by the project companies' managers, finance parties and boards of directors. Floating rate debt is hedged using fixed floating interest rate swaps. The sensitivity of Investments at fair value through profit or loss to interest rates is shown above within Note 4.
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 indexes. The Corporate Group's overall cash flows vary with inflation, although they are not directly correlated as not all flows are indexed. The effects of these 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. On 25 November 2020, the UK Government and UK Statistics Authority announced the RPI would be aligned with CPI from 2030. As such, RPI-linked project companies have been aligned to CPI from this date. The sensitivity of Investments at fair value through profit or loss to inflation is also shown above within Note 4.
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 Corporate Subsidiary level, as well as the use of Euro, Canadian dollar, US dollar and other currency denominated borrowings via a Corporate Subsidiary. At 31 March 2021, the Corporate Group, via a Corporate Subsidiary, hedged its currency exposure through Euro, Canadian 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.
A change to foreign currency / Sterling exchange rates by plus or minus 5.0%, which is deemed to be a plausible and possible change in the current year based on historic movements, has the following effect on the Net Asset Value and NAV per Ordinary Share:
| Foreign exchange | -5.0% change | Net Asset Value | +5.0% change |
|---|---|---|---|
| 31 March 2021 | -£17.2m | £2,950.3m | +£17.2m |
| 31 March 2020 | -£7.8m | £2,837.9m | +£7.8m |
| Implied change in NAV per Ordinary Share1 – 31 March 2021 (31 March 2020) |
-0.9 pence -0.4 pence |
152.3 pence 152.3 pence |
+0.9 pence +0.4 pence |
1 Net Asset Value per Ordinary Share based on 1,936.8 million Ordinary Shares as at 31 March 2021
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's key direct counterparties are the project companies in which it makes investments. The Corporate Group's near-term cash flow forecasts are used to monitor the timing of cash receipts from project counterparties. Underlying the cash flow forecasts are project company cash flow models which are regularly updated by project companies and provided to the Operator, for the purposes of demonstrating the projects' ability to pay interest and dividends based on a set of detailed assumptions. The majority of the Corporate Group's investment and subsidiary entities receive revenue from government departments and public sector or local authority clients. Therefore, a significant portion of the Corporate Group's investments' revenue is with counterparties of good financial standing.
The Corporate Group is also reliant on each project's subcontractors continuing to perform their service delivery obligations such that revenues to projects are not disrupted. The Operator has a subcontractor counterparty monitoring procedure in place.
The credit standing of subcontractors is reviewed, and the risk of default estimated for each significant counterparty position. Monitoring is ongoing and period end positions are reported to the Board on a quarterly basis. The Corporate Group's largest credit risk exposure to a project at 31 March 2021 was to the Affinity Water project (8% of investments at fair value) and the largest subcontractor counterparty risk exposure was to subsidiaries of Bouygues, which provided facilities management services in respect of 15% of the investments at fair value.
The Corporate Group is subject to credit risk on its loans, receivables, cash and deposits. The Corporate Group's cash and deposits are held with well-known 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 is the risk that the Corporate Group will not be able to meet its financial obligations as they fall due. The Corporate Group's approach to managing liquidity is to ensure, as far as possible, that it will have sufficient financial resources and liquidity to meets its liabilities when due. The Corporate Group ensures it maintains adequate reserves and its Corporate Subsidiaries have sufficient banking facilities by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities. The Corporate Group's investments are predominantly funded by share capital.
The Corporate Group's investments are generally in private companies whose securities are not traded in an active market so could take time to realise. There is no assurance that the valuations placed on the investments would be achieved from any such sale process.
The Corporate Group's investments have third-party borrowings which rank senior to the Corporate Group's own investments into the companies. This senior debt is structured such that, under normal operating conditions, it will be repaid within the expected life of the projects. Debt raised by the investment companies from third parties is without recourse to the Corporate Group.
The Corporate Group's investments may include obligations to make future investments. These obligations will typically be supported by standby letters of credit, issued by the Corporate Group's bankers in favour of the senior lenders to the investment companies. Such investment obligations are met from the Corporate Group's cash resources when they fall due. At 31 March 2021, the Company's investment obligations totalled £73.8m (2020: £77.0m) (see Note 20) which were supported by letters of credit totalling £75.8m (2020: £79.1m) as set out in the Capital management section below.
Unconsolidated subsidiaries are subject to contractual agreements that may impose temporary restrictions on their ability to distribute cash. Such restrictions are not deemed significant in the context of the Corporate Group's overall liquidity.
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 2021 | 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 | 0.7 | – | – | – |
| Total | 0.7 | – | – | – |
| 31 March 2020 | 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 | 0.6 | – | – | – |
| Total | 0.6 | – | – | – |
The Corporate Group has a Revolving Credit Facility ("RCF") and a Letter of Credit Facility ("LCF") at Corporate Subsidiary level (see Note 16 for details), which had in aggregate cash drawings of £26.9m (2020: £Nil) and letter of credit commitments of £75.8m (2020: £79.1m) at the year end of which £18.6m was drawn on the RCF and £57.2m on the LCF. Further equity raisings are considered when debt drawings are at an appropriate level. The proceeds from the share issues are used to repay debt and to fund future investment commitments.
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 its Corporate Subsidiaries at any time.
The ratio of debt to Adjusted Gross Asset Value at the end of the year was as follows:
| 31 March 2021 £m |
31 March 2020 £m |
|
|---|---|---|
| Outstanding drawings | ||
| Bank borrowings | 26.9 | – |
| Letter of credits drawn | 75.8 | 79.1 |
| 102.7 | 79.1 | |
| Adjusted Gross Asset Value | ||
| Directors' Valuation (Note 14) | 3,011.9 | 2,888.5 |
| Cash and cash equivalents | 31.4 | 28.7 |
| 3,043.3 | 2,917.2 | |
| Borrowing ratio | 3.4% | 2.7% |
From time to time the Company issues its own shares to the market; the timing of these issuances depends on market prices.
To assist in the narrowing of any discount to the Net Asset Value at which the Ordinary Shares may trade, from time to time the Company may, at the sole discretion of the Directors:
There were no changes in HICL's approach to capital management during the year.
The tables below provide an analysis based on the geographical location of the Company's underlying investments.
| UK | Eurozone | North America | Total |
|---|---|---|---|
| £85.6m | £43.1m | £26.1m | £154.8m |
| 55% | 28% | 17% | 100% |
| £28.7m | £19.4m | £3.5m | £51.6m |
| 56% | 37% | 7% | 100% |
| Investments at fair value through profit and loss | UK | Eurozone | North America | Total |
|---|---|---|---|---|
| 31 March 2021 | £2,184.7m | £536.4m | £229.2m | £2,950.3m |
| % of Total Investments | 74% | 18% | 8% | 100% |
| 31 March 2020 | £2,158.0m | £470.5m | £209.4m | £2,837.9m |
| % of Total investments | 76% | 17% | 7% | 100% |
| Year ended 31 March 2021 Total £m |
Year ended 31 March 2020 Total £m |
|
|---|---|---|
| Dividends and interest received | 158.3 | 149.8 |
| Net loss on revaluation of investment (Note 14) | (3.5) | (98.2) |
| Total | 154.8 | 51.6 |
| Year ended 31 March 2021 Total £m |
Year ended 31 March 2020 Total £m |
|
|---|---|---|
| Fees to auditor | 0.4 | 0.4 |
| Investment Manager fees (Note 18) | 0.1 | 0.1 |
| Directors' fees (Note 18) | 0.5 | 0.5 |
| Professional fees | 1.9 | 1.1 |
| Total | 2.9 | 2.1 |
Fees to auditor comprise £0.3m audit fees and £0.1m fees to KPMG LLP in respect of their interim review of the Company's accounts (31 March 2020: £0.3m audit fees and £0.1m interim review fees).
The Company had no employees during the year (31 March 2020: Nil).
In the year ended 31 March 2021, the Company had de minimus net finance income consisting of interest earned on bank deposits offset by some bank charges.
| Year ended 31 March 2021 £m |
Year ended 31 March 2020 £m |
|
|---|---|---|
| Current taxes | ||
| Current year | – | – |
| – | – |
The effective rate of corporation tax in the UK for a large company is 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 2021 £m |
Year ended 31 March 2020 £m |
|
|---|---|---|
| Profit before tax | ||
| Profit before tax multiplied by the UK corporation tax rate of 19% | 28.9 | 9.4 |
| Effect of: | ||
| Non-deductible capital losses | 0.7 | 18.7 |
| Non-taxable dividend income | (7.1) | (12.9) |
| Dividends designated as interest distributions | (23.1) | (15.6) |
| Other | 0.6 | 0.4 |
| – | – |
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 financial statements do not include directly the tax charges for any of the Company's intermediate holding companies or 116 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.
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 2021 |
Year ended 31 March 2020 |
|
|---|---|---|
| Profit attributable to equity holders of the Company | £151.9m | £49.5m |
| Weighted average number of Ordinary Shares in issue | 1,914.0m | 1,813.6m |
| Total basic and diluted earnings per Ordinary Share | 7.9 pence | 2.7 pence |
| Year ended 31 March 2021 £m |
Year ended 31 March 2020 £m |
|
|---|---|---|
| Amounts paid and recognised as distributions to equity holders during the year: | ||
| Fourth quarterly interim dividend for the year ended 31 March 2020 of 2.07p | 38.6 | 36.2 |
| First quarterly interim dividend for the year ended 31 March 2021 of 2.06p per share | 39.9 | 36.9 |
| Second quarterly interim dividend for the year ended 31 March 2021 of 2.06p per share | 39.9 | 36.9 |
| Third quarterly interim dividend for the year ended 31 March 2021 of 2.06p per share | 39.9 | 38.4 |
| 158.3 | 148.4 |
| Fourth quarterly interim dividend for the year ended 31 March 2021 of 2.07p | 40.1 | 38.6 |
|---|---|---|
| ----------------------------------------------------------------------------- | ------ | ------ |
The fourth quarterly interim dividend for the year ended 31 March 2020 of £38.6m, representing 2.07 pence per share, was paid on 30 June 2020.
The Company has elected to distribute a percentage of the dividends paid to shareholders as an interest distribution for tax purposes.
The first quarterly interim dividend for the year ended 31 March 2021 of £39.9m, representing 2.06 pence per share, was paid on 30 September 2020 and had an interest streaming percentage of 56%.
The second quarterly interim dividend for the year ended 31 March 2021 of £39.9m, representing 2.06 pence per share, was paid on 31 December 2020 and had a streaming percentage of 59%.
The third quarterly interim dividend for the year ended 31 March 2021 of £39.9m, representing 2.06 pence per share, was paid on 31 March 2021 and had a streaming percentage of 84%.
The fourth quarterly interim dividend for the year ended 31 March 2021 of £40.1m, representing 2.07 pence per share, is payable on 30 June 2021 and has an interest streaming percentage of 98%.
Quarterly interest streaming fluctuates due to a number of factors, including forecast annual effective interest received from underlying projects (which moves with acquisitions and disposals) and FX hedging gains / losses.
The distributable reserves of the Company are £1,996.4m at 31 March 2021 (31 March 2020: £1,999.3m).
| Year ended 31 March 2021 £m |
Year ended 31 March 2020 £m |
|
|---|---|---|
| Interim dividends for the year | ||
| 3 months ended 31 March 2020 | 2.07p | 2.02p |
| 3 months ended 30 June 2020 | 2.06p | 2.06p |
| 3 months ended 30 September 2020 | 2.06p | 2.06p |
| 3 months ended 31 December 2020 | 2.06p | 2.06p |
| Total | 8.25p | 8.2p |
| Proposed dividend | ||
| 3 months ended 31 March 2021 | 2.07p | 2.07p |
| 31 March 2021 | 31 March 2020 | |
|---|---|---|
| Shareholders' equity at 31 March | £2,950.2m | £2,838.0m |
| Less: fourth interim dividend | (£40.1m) | (£38.6m) |
| £2,910.1m | £2,799.4m | |
| Number of Ordinary Shares at 31 March | 1,936.8m | 1,863.6m |
| Net assets per Ordinary Share after deducting fourth interim dividend | 150.3p | 150.2p |
| Add fourth interim dividend | 2.07p | 2.07p |
| Net assets per Ordinary Share at 31 March | 152.3p | 152.3p |
| 31 March 2021 £m |
31 March 2020 £m |
|
|---|---|---|
| Opening balance | 2,837.9 | – |
| Transfer of investments from HICL Guernsey (HICL Guernsey NAV at 31 March 2019) | – | 2,821.7 |
| Additions to investments in the year | 118.4 | 113.0 |
| Cash received from investments | (160.8) | (148.4) |
| Loss on revaluation of investment (Note 6) | (3.5) | (98.2) |
| Investment income (Note 6) | 158.3 | 149.8 |
| Carrying amount at year end | 2,950.3 | 2,837.9 |
| Carrying amount at year end | 152.3p | 152.3p |
Investments at fair value through profit or loss comprise the Company's debt and equity investments in its single wholly owned Corporate Subsidiary, measured at fair value on the basis explained in Note 2(b)(ii).
Investments in the year reflect funds paid to the Company's direct Corporate Subsidiary, following the issuance of equity to shareholders. The transfer of investments from HICL Guernsey (HICL Guernsey NAV at 31 March 2019) reflects the fair value of the assets acquired by the Company in the scheme of reconstruction effected on 1 April 2019.
Refer to Note 3 for the valuation techniques and key model inputs used for determining investment fair values.
The Investment Manager has carried out fair market valuations of the portfolio companies as at 31 March 2021. 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 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 equity 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 0.9% to 8.7% (weighted average of 6.8%).
The Directors' valuation shows the aggregate value at risk that the Company is exposed from its portfolio of investments. The valuation of the Company's underlying portfolio at 31 March 2021 reconciles to the Balance Sheet as follows:
| 31 March 2021 £m |
31 March 2020 £m |
|
|---|---|---|
| Directors' Valuation | 3,011.9 | 2,888.5 |
| Less: future commitments (Note 19) | (73.8) | (77.0) |
| Investments at fair value per Investment Basis | 2,938.1 | 2,811.5 |
| Net cash in Corporate Subsidiaries | 6.4 | 28.1 |
| Working capital in Corporate Subsidiaries | 5.8 | (1.7) |
| Investments at fair value through profit or loss | 2,950.3 | 2,837.9 |
Investments held at fair value through profit or loss includes the net cash and working capital in Corporate Subsidiaries as they are not consolidated under IFRS 10.
Investments are generally restricted on their ability to transfer funds to HICL under the terms of their senior funding arrangements for that investment. Significant restrictions include:
Details of percentage holdings in investments recognised at fair value through profit or loss were as follows (UK unless stated otherwise):
| 31 March 2021 | 31 March 2020 | |||||
|---|---|---|---|---|---|---|
| Subordinated | Mezzanine | Subordinated | Mezzanine | |||
| Project name | Equity | Debt | Debt | Equity | Debt | Debt |
| A13 Road6 | – | – | – | – | – | – |
| A249 Road | 50.00% | 50.00% | – | 50.00% | 50.00% | – |
| A63 Motorway4 | 20.95% | 20.95% | – | 20.95% | 20.95% | – |
| A9 Road2 | 20.00% | 20.00% | – | 20.00% | 20.00% | – |
| A92 Road | 50.00% | 50.00% | – | 50.00% | 50.00% | – |
| Addiewell Prison | 66.66% | 66.66% | – | 66.66% | 66.66% | – |
| Affinity Water | 33.20% | – | – | 33.20% | – | – |
| Allenby & Connaught MoD | 12.50% | 12.50% | – | 12.50% | 12.50% | – |
| Bangor and Nendrum Schools | 20.40% | 25.50% | – | 20.40% | 25.50% | – |
| Barking and Dagenham Schools | 100.00% | 100.00% | – | 100.00% | 100.00% | – |
| Barnet Hospital | 100.00% | 100.00% | – | 100.00% | 100.00% | – |
| Belfast | 75.00% | 75.00% | – | 75.00% | 75.00% | – |
| Birmingham & Solihull LIFT | 60.00% | 60.00% | – | 60.00% | 60.00% | – |
| Birmingham Hospitals | 30.00% | 30.00% | – | 30.00% | 30.00% | – |
| Bishop Auckland Hospital | 36.00% | 37.00% | 100.00% | 36.00% | 37.00% | 100.00% |
| Blackburn Hospital | 100.00% | 100.00% | – | 100.00% | 100.00% | – |
| Blackpool Primary Care Facility | 75.00% | 75.00% | – | 75.00% | 75.00% | – |
| Blankenburg PPP | 70.00% | 70.00% | – | 70.00% | 70.00% | – |
| Boldon School | 100.00% | 100.00% | – | 100.00% | 100.00% | – |
| Bradford BSF Phase 1 | 29.20% | 35.00% | – | 29.20% | 35.00% | – |
| Bradford BSF Phase 2 | 34.00% | 34.00% | – | 34.00% | 34.00% | – |
| Breda Court2 | 85.00% | 85.00% | – | 85.00% | – | – |
| Brentwood Community Hospital | 75.00% | 75.00% | – | 75.00% | 75.00% | – |
| Brighton Hospital | 50.00% | 50.00% | – | 50.00% | 50.00% | – |
| Burbo OFTO | 50.00% | 50.00% | – | 50.00% | 50.00% | – |
| Central Middlesex Hospital | 100.00% | 100.00% | – | 100.00% | 100.00% | – |
| Connect | – | – | 33.50% | – | – | |
| Conwy Schools | 90.00% | 90.00% | – | 90.00% | 90.00% | – |
| Cork School of Music1 | 75.50% | 75.50% | – | 75.50% | 75.50% | – |
| Croydon Schools | 100.00% | 100.00% | – | 100.00% | 100.00% | – |
| Darlington Schools | 50.00% | 50.00% | – | 50.00% | 50.00% | – |
| Defence Sixth Form College | 45.00% | 45.00% | – | 45.00% | 45.00% | – |
| Derby Schools | 100.00% | 100.00% | – | 100.00% | 100.00% | – |
| Doncaster Mental Health Unit | 50.00% | 50.00% | – | 50.00% | 50.00% | – |
| Dorset Fire & Rescue | 100.00% | 100.00% | – | 100.00% | 100.00% | – |
| Durham & Cleveland Police Tactical Training Centre | 100.00% | 100.00% | – | 100.00% | 100.00% | – |
| Dutch High Speed Rail Link2 | 43.00% | 43.00% | – | 43.00% | 43.00% | – |
| Ealing Care Homes | 63.00% | 63.00% | – | 63.00% | 63.00% | – |
| Ealing Schools | 50.00% | 50.00% | – | 50.00% | 50.00% | – |
| East Ayrshire Schools | 25.50% | 25.50% | – | 25.50% | 25.50% | – |
| Ecole Centrale Supelec4 | 85.00% | 85.00% | – | 85.00% | 85.00% | – |
| Edinburgh Schools | 100.00% | 100.00% | – | 100.00% | 100.00% | – |
| Exeter Crown Court | 100.00% | 100.00% | – | 100.00% | 100.00% | – |
| Falkirk NPD Schools | 29.30% | 29.30% | – | 29.30% | 29.30% | – |
| Fife Schools2 | 30.00% | 30.00% | – | 30.00% | 30.00% | – |
| 31 March 2021 | 31 March 2020 | ||||||
|---|---|---|---|---|---|---|---|
| Project name | Equity | Subordinated Debt |
Mezzanine Debt |
Equity | Subordinated Debt |
Mezzanine Debt |
|
| Galloper OFTO | 49.00% | 50.00% | – | 49.00% | 50.00% | – | |
| Glasgow Hospital | 25.00% | 25.00% | – | 25.00% | 25.00% | – | |
| Gloucestershire Fire & Rescue | 75.00% | 75.00% | – | 75.00% | 75.00% | – | |
| Greater Manchester Police Authority | 72.90% | 72.90% | – | 72.90% | 72.90% | – | |
| Haverstock School | 50.00% | 50.00% | – | 50.00% | 50.00% | – | |
| Health & Safety Executive (HSE) Merseyside Headquarters | 50.00% | 50.00% | – | 50.00% | 50.00% | – | |
| Helicopter Training Facility – AssetCo | 86.60% | 62.20% | 100.00% | 86.60% | 7.20% | 100.00% | |
| Helicopter Training Facility – OpCo | 23.50% | – | – | 23.50% | 74.10% | – | |
| Hinchingbrooke Hospital | 75.00% | 75.00% | – | 75.00% | 75.00% | – | |
| Home Office Headquarters | 100.00% | 100.00% | – | 100.00% | 100.00% | – | |
| High Speed Rail 1 | 21.80% | 21.80% | – | 21.80% | 21.80% | – | |
| Irish Grouped Schools1 | 50.00% | 50.00% | – | 50.00% | 50.00% | – | |
| Ireland Primary Care Centres | 60.00% | 60.00% | – | 60.00% | 60.00% | – | |
| Kent Schools | 50.00% | 50.00% | – | 50.00% | 50.00% | – | |
| Kicking Horse Canyon P33 | 50.00% | – | – | 50.00% | – | – | |
| Lewisham Hospital | 100.00% | 100.00% | – | 100.00% | 100.00% | – | |
| M1–A1 Link Road | 30.00% | 30.00% | – | 30.00% | 30.00% | – | |
| M80 Motorway | 50.00% | 50.00% | – | 50.00% | 50.00% | – | |
| Manchester School | 75.50% | 75.50% | – | 75.50% | 75.50% | – | |
| Medway LIFT | 60.00% | 60.00% | – | 60.00% | 60.00% | – | |
| Medway Police | 100.00% | 100.00% | – | 100.00% | 100.00% | – | |
| Metropolitan Police Specialist Training Centre | 72.90% | 72.90% | – | 72.90% | 72.90% | – | |
| Miles Platting Social Housing | 50.00% | 33.30% | – | 50.00% | 33.30% | – | |
| M17/M18 Road1 | 100.00% | 100.00% | – | 50.00% | 50.00% | – | |
| Newcastle Libraries | 50.00% | 50.00% | – | 50.00% | 50.00% | – | |
| Newham Schools BSF | 80.00% | 80.00% | – | 80.00% | 80.00% | – | |
| Newport Schools | 100.00% | 100.00% | – | 100.00% | 100.00% | – | |
| Newton Abbot Hospital | 100.00% | 100.00% | – | 100.00% | 100.00% | – | |
| North Ayrshire Schools | 25.50% | 25.50% | – | 25.50% | 25.50% | – | |
| North Tyneside Schools | 50.00% | 50.00% | – | 50.00% | 50.00% | – | |
| Northwest Anthony Henday P33 | 50.00% | 50.00% | – | 50.00% | 50.00% | – | |
| Northwest Parkway5 | 33.33% | – | – | 33.33% | – | – | |
| Northwood MoD Headquarters | 50.00% | 50.00% | – | 50.00% | 50.00% | – | |
| Norwich Schools | 75.00% | 75.00% | – | 75.00% | 75.00% | – | |
| Nuffield Hospital | 25.00% | 25.00% | – | 25.00% | 25.00% | – | |
| Oldham Library | 75.00% | 75.00% | – | 75.00% | 75.00% | – | |
| Oldham Schools | 75.00% | 75.00% | – | 75.00% | 75.00% | – | |
| Oxford Churchill Oncology | 40.00% | 40.00% | – | 40.00% | 40.00% | – | |
| Oxford John Radcliffe Hospital | 100.00% | 100.00% | – | 100.00% | 100.00% | – | |
| Paris–Sud University4 | 85.00% | 85.00% | – | 85.00% | 85.00% | – | |
| PSBP North East Batch Schools | 90.00% | 90.00% | – | 90.00% | 90.00% | – | |
| Perth and Kinross Schools | 100.00% | 100.00% | – | 100.00% | 100.00% | – | |
| Pinderfields and Pontefract Hospitals | 100.00% | 100.00% | – | 100.00% | 100.00% | – | |
| Queen Alexandra Hospital Portsmouth | 100.00% | 100.00% | – | 100.00% | 100.00% | – | |
| Queen's (Romford) Hospital | 66.70% | 66.70% | – | 66.70% | 66.70% | – | |
| Racebank OFTO | 49.00% | 50.00% | – | 49.00% | 50.00% | – |
| 31 March 2021 | ||||||
|---|---|---|---|---|---|---|
| Project name | Equity | Subordinated Debt |
Mezzanine Debt |
Equity | Subordinated Debt |
Mezzanine Debt |
| RD901 Road 4 | 90.00% | 90.00% | – | 90.00% | 90.00% | – |
| Redbridge & Waltham Forest LIFT | 60.00% | 60.00% | – | 60.00% | 60.00% | – |
| Renfrewshire Schools | 30.00% | 30.00% | – | 30.00% | 30.00% | – |
| Royal Canadian Mounted Police 'E' Division Headquarters 3 | 100.00% | 100.00% | – | 100.00% | 100.00% | – |
| Royal School of Military Engineering | 100.00% | – | – | 26.00% | 32.10% | – |
| Salford Hospital | 50.00% | 50.00% | – | 50.00% | 50.00% | – |
| Salford Schools | 25.50% | 25.50% | – | 25.50% | 25.50% | – |
| Salford & Wigan BSF Phase 1 | 80.00% | 80.00% | – | 80.00% | 80.00% | – |
| Salford & Wigan BSF Phase 2 | 80.00% | 80.00% | – | 80.00% | 80.00% | – |
| Sheffield BSF | 59.00% | 59.00% | – | 59.00% | 59.00% | – |
| Sheffield Hospital | 75.00% | 75.00% | – | 75.00% | 75.00% | – |
| Sheffield Schools | 75.00% | 75.00% | – | 75.00% | 75.00% | – |
| South Ayrshire Schools | 100.00% | 100.00% | – | 100.00% | 100.00% | – |
| Southmead Hospital | 62.50% | 62.50% | – | 62.50% | 62.50% | – |
| Staffordshire LIFT | 60.00% | 60.00% | – | 60.00% | 60.00% | – |
| Stoke Mandeville Hospital | 100.00% | 100.00% | – | 100.00% | 100.00% | – |
| Sussex Custodial Services | 100.00% | 100.00% | – | 100.00% | 100.00% | – |
| Tameside General Hospital | 50.00% | 50.00% | – | 50.00% | 50.00% | – |
| Tyne & Wear Fire Stations | 100.00% | – | – | 100.00% | – | – |
| University of Bourgogne 4 | 85.00% | 85.00% | – | 85.00% | 85.00% | – |
| University of Sheffield Accommodation | 50.00% | 50.00% | – | 50.00% | 50.00% | – |
| Walney OFTO | 29.00% | 40.00% | – | – | – | – |
| West Lothian Schools | 75.00% | 75.00% | – | 75.00% | 75.00% | – |
| West Middlesex Hospital | 100.00% | 100.00% | – | 100.00% | 100.00% | – |
| Willesden Hospital | 100.00% | 100.00% | – | 100.00% | 100.00% | – |
| Wooldale Centre for Learning | 50.00% | 50.00% | – | 50.00% | 50.00% | – |
| Zaanstad Prison 2 | 100.00% | 100.00% | – | 100.00% | 100.00% | – |
1 The project is located in Ireland
2 The project is located in the Netherlands
The project is located in Canada 4 The project is located in France
5 The project is located in the United States of America
6 Senior debt investment
The Company, via its Corporate Subsidiaries, made the following acquisitions during the year ended 31 March 2021:
V In May 2020, the Company, via its Corporate Subsidiaries, acquired 29% of the Walney Extension OFTO Project for £18m.
The Company, via its Corporate Subsidiaries, made the following disposal during the year ended 31 March 2021:
V In March 2021, the Company, via its Corporate Subsidiaries, disposed of its full 50% stake in South East London Police Stations at a profit for proceeds of £28m.
The Corporate Group's multi-currency Revolving Credit Facility is held via a Corporate Subsidiary and is jointly provided by Crédit Agricole, HSBC, ING, Lloyds, National Australia Bank, Royal Bank of Scotland International, Santander and SMBC. In May 2021, Lloyds signed up for a further year to May 2023 aligning its commitment with the rest of the lender group.
The facility is available to be drawn in cash and letters of credit for future investment obligations.
All bank covenants were complied with during the year; the most significant of which were requirements to maintain a forward and historic interest cover ratio above 3:1 and gearing ratio not greater than 30%.
On 20 November 2020 the Company entered into a Multicurrency Letter of Credit Facility Agreement provided by ING and SMBC.
A Corporate Subsidiary, had cash borrowings outstanding of £26.9m on the Revolving Credit Facility at 31 March 2021 (2020: nil). A Corporate Subsidiary had letters of credit utilised on the Revolving Credit Facility totalling £18.6m and £57.2m on the Letter of Credit Facility at 31 March 2021 (2020: £79.1m on Revolving Credit Facility). Both borrowing facilities are secured on the Company's investments and the bank accounts of the Corporate Subsidiaries.
A Corporate Subsidiary, had the following undrawn borrowing facilities at 31 March:
| 2021 £m |
2020 £m |
|
|---|---|---|
| Floating rate: | ||
| Secured | ||
| – expiring within one year | – | – |
| – expiring between 1 and 2 years | 33.4 | – |
| – expiring between 2 and 5 years | 288.1 | 320.9 |
| – expiring after 5 years | 0.2 | – |
| 321.7 | 320.9 |
| 31 March 2021 | 31 March 2020 | |
|---|---|---|
| Ordinary Shares | m | m |
| Authorised and issued at the beginning of the year | 1,863.6 | – |
| Issued during the year | – | 1,791.1 |
| Issued for cash | 73.2 | 72.5 |
| Authorised and issued at end of year – fully paid | 1,936.8 | 1,863.6 |
The holders of the 1,936,813,501 Ordinary Shares (31 March 2020: 1,863,642,769) are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company.
On 1 April 2019, the Company issued 1,791,142,767 £0.0001 Ordinary Shares as part of a scheme (see note 14), which were distributed by the liquidator to HICL Guernsey shareholders on a one for one basis, at a premium of £821.7m.
In November 2019, 62.5 million new Ordinary Shares of 0.01p each were issued to various institutional investors at an issue price per share (before expenses) of 160.0p.
In January 2020, 10 million new Ordinary Shares of 0.01p each were issued to various institutional investors at an issue price per share (before expenses) of 171.4p.
On 1 April 2019, the Company redeemed the 50,000 £1 Redeemable shares at par. There are no remaining redeemable preference shares in issue.
In July 2020, 73.2 million new Ordinary Shares of 0.01p each were issued to various institutional investors at an issue price per share (before expenses) of 164.0p.
| Share capital and share premium | 31 March 2021 £m |
31 March 2020 £m |
|---|---|---|
| Opening balance | 936.9 | 0.1 |
| (Redemption) of redeemable preference shares | – | (0.1) |
| Issue of Ordinary Shares under the Scheme | – | 821.7 |
| Issue of Ordinary Shares | 120.0 | 117.1 |
| Costs of issue of Ordinary Shares under the Scheme | – | (0.7) |
| Costs of issue of Ordinary Shares | (1.4) | (1.2) |
| Balance at end of year | 1,055.5 | 936.9 |
Share capital is £0.2m at 31 March 2021 (31 March 2020: £0.2m).
Distributable reserves and Other reserves are detailed in the Statement of Changes in Equity. Other reserves represent the accumulated unrealised fair value gains / losses on the Company's investment in its subsidiary since acquisition on 1 April 2019.
On 1 July 2020, InfraRed Capital Partners Limited ("IRCP") was acquired by Sun Life Financial Inc. (together with its subsidiaries and joint ventures, "Sun Life"). IRCP has remained a distinct business under SLC Management, the alternatives asset manager of Sun Life. This transaction saw Sun Life take an 80% stake in IRCP with a put and call option for the IRCP owners' remaining equity interest, exercisable after four and five years respectively.
InfraRed Capital Partners Limited ("IRCP") was appointed under an Investment Management Agreement, dated 4 March 2019, as Investment Manager to and Alternative Investment Fund Manager ("AIFM") of HICL. The Investment Management Agreement may be terminated by either party to the agreement, being HICL or IRCP, giving three years' written notice or if IRCP's appointment as Operator (see below) is terminated. Under the Investment Management Agreement, IRCP is entitled to a fee of £0.1m per annum, payable half-yearly in arrears by the Company and is subject to review, from time to time.
The Investment Manager fees charged to the Company were £0.1m (disclosed as Investment Manager fees in Note 7); half of this balance remained payable at 31 March 2021.
IRCP is also the Operator of IILP, the Corporate Subsidiary through which HICL holds its investments. IRCP has been appointed as the Operator by the General Partner of IILP, Infrastructure Investments General Partner Limited, a company within the same group as IRCP. 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 IRCP ceases to be the Operator, HICL has the option to buy the entire share capital of the General Partner and the IRCP 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 2021, in aggregate IRCP and the General Partner were entitled to fees and / or profit share equal to: 1.1 per cent per annum 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 £28.6m (2020: £28.4m) of which £7.1m (2020: £7.1m) remained payable at 31 March 2021.
The Directors of the Company, who are considered to be key management, received fees for their services. Their fees were £0.5m (2020: £0.5m) for the year ended 31 March 2021 (see Note 7). One Director also receives fees for serving as Director of the Luxembourg subsidiary – the annual fees are £6k (2020: £6k).
All of the above transactions were undertaken on an arm's length basis.
As at 31 March 2021, the Company, via a Corporate Subsidiary, had £73.8m commitments for future project investments (31 March 2020: £77.0m).
The fourth quarterly interim dividend for the year ended 31 March 2021 of 2.07 pence per share was approved by the Board on 19 May 2021 and is payable on 30 June 2021 to shareholders on the register as at 28 May 2021.
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).
| Shareholding | Profit / | Aggregate Capital & |
||||
|---|---|---|---|---|---|---|
| Entity | Registered address | 31-Mar 2021 |
31-Mar 2020 |
Year end |
(Loss) £m |
Reserves £m |
| Academy Services Norwich Holdings Limited |
10 St. Giles Square, London, United Kingdom, WC2H 8AP | 75% | 75% | N/A2 | N/A2 | N/A2 |
| Academy Services Norwich Limited | 10 St. Giles Square, London, United Kingdom, WC2H 8AP | 75% | 75% | N/A2 | N/A2 | N/A2 |
| Academy Services Oldham Holdings Limited |
10 St. Giles Square, London, United Kingdom, WC2H 8AP | 75% | 75% | N/A2 | N/A2 | N/A2 |
| Academy Services Oldham Limited | 10 St. Giles Square, London, United Kingdom, WC2H 8AP | 75% | 75% | N/A2 | N/A2 | N/A2 |
| Academy Services Sheffield Holdings Limited |
10 St. Giles Square, London, United Kingdom, WC2H 8AP | 75% | 75% | N/A2 | N/A2 | N/A2 |
| Academy Services Sheffield Limited | 10 St. Giles Square, London, United Kingdom, WC2H 8AP | 75% | 75% | N/A2 | N/A2 | N/A2 |
| ADAGIA B.V. BV | Strawinskylaan 1021, 1077 XX, Amsterdam, Netherlands | 100% | 100% | N/A2 | N/A2 | N/A2 |
| Addiewell Prison (Holdings) Limited | C/O Sodexo Remote Sites Limited 5th Floor, Exchange No.2, 62 Market Street, Aberdeen, Scotland, AB11 5PJ |
67% | 67% | N/A2 | N/A2 | N/A2 |
| Addiewell Prison Limited | C/O Sodexo Remote Sites Limited 5th Floor, Exchange No.2, 62 Market Street, Aberdeen, Scotland, AB11 5PJ |
67% | 67% | N/A2 | N/A2 | N/A2 |
| Affinity Water Acquisitions (HoldCo) Limited |
The Hub, Tamblin Way, Hatfield, Hertfordshire, United Kingdom, AL10 9EZ |
33% | 37% | 31 Mar '20 | – | 375.9 |
| Affinity Water Acquisitions (Investments) Limited |
The Hub, Tamblin Way, Hatfield, Hertfordshire,United Kingdom, AL10 9EZ |
33% | 37% | 31 Mar '20 | 1.0 | 391.2 |
| Affinity Water Acquisitions (MidCo) Limited |
The Hub, Tamblin Way, Hatfield, Hertfordshire, United Kingdom, AL10 9EZ |
33% | 37% | 31 Mar '20 | – | 375.6 |
| Affinity Water Acquisitions Limited | The Hub, Tamblin Way, Hatfield, Hertfordshire, United Kingdom, AL10 9EZ |
33% | 37% | 31 Mar '20 | -11.0 | 332.5 |
| Affinity Water Capital Funds Limited | The Hub, Tamblin Way, Hatfield, Hertfordshire, United Kingdom, AL10 9EZ |
33% | 37% | 31 Mar '20 | -0.3 | 189.2 |
| Affinity Water East Limited | The Hub, Tamblin Way, Hatfield, Hertfordshire, United Kingdom, AL10 9EZ |
33% | 37% | 31 Mar '20 | 3.3 | 65.7 |
| Affinity Water Finance (2004) PLC | The Hub, Tamblin Way, Hatfield, Hertfordshire, United Kingdom, AL10 9EZ |
33% | 37% | N/A2 | N/A2 | N/A2 |
| Affinity Water Finance PLC | The Hub, Tamblin Way, Hatfield, Hertfordshire, United Kingdom, AL10 9EZ |
33% | 33% | N/A2 | N/A2 | N/A2 |
| Affinity Water Holdco Finance Limited | The Hub, Tamblin Way, Hatfield, Hertfordshire, United Kingdom, AL10 9EZ |
33% | 33% | 31 Mar '20 | – | 287.7 |
| Affinity Water Holdings Limited | The Hub, Tamblin Way, Hatfield, Hertfordshire, United Kingdom, AL10 9EZ |
33% | 37% | 31 Mar '20 | – | 287.7 |
| Affinity Water Limited | The Hub, Tamblin Way, Hatfield, Hertfordshire, United Kingdom, AL10 9EZ |
33% | 37% | 31 Mar '20 | -21.7 | 187.0 |
| Affinity Water Pension Trustees Limited |
The Hub, Tamblin Way, Hatfield, Hertfordshire, United Kingdom, AL10 9EZ |
33% | 37% | N/A2 | N/A2 | N/A2 |
| Affinity Water Programme Finance Limited |
The Hub, Tamblin Way, Hatfield, Hertfordshire, United Kingdom, AL10 9EZ |
33% | 37% | N/A2 | N/A2 | N/A2 |
| Affinity Water Shared Services Limited |
The Hub, Tamblin Way, Hatfield, Hertfordshire, United Kingdom, AL10 9EZ |
33% | 37% | N/A2 | N/A2 | N/A2 |
| Affinity Water Southeast Limited | The Hub, Tamblin Way, Hatfield, Hertfordshire, United Kingdom, AL10 9EZ |
33% | 37% | 31 Mar '20 | 2.7 | 67.0 |
| AGP (2) Limited | 8 White Oak Square, London Road, Swanley, United Kingdom, BR8 7AG |
100% | 100% | N/A2 | N/A2 | N/A2 |
| AGP Holdings (1) Limited | 8 White Oak Square, London Road, Swanley, United Kingdom, BR8 7AG |
100% | 100% | N/A2 | N/A2 | N/A2 |
| Shareholding | Profit / | Aggregate Capital & |
||||
|---|---|---|---|---|---|---|
| 31-Mar | 31-Mar | Year | (Loss) | Reserves | ||
| Entity Albion Healthcare (Doncaster) |
Registered address Third Floor Broad Quay House, Prince Street, Bristol, |
2021 50% |
2020 50% |
end N/A2 |
£m N/A2 |
£m N/A2 |
| Holdings Limited | United Kingdom, BS1 4DJ | |||||
| Albion Healthcare (Doncaster) Limited Third Floor Broad Quay House, Prince Street, Bristol, United Kingdom, BS1 4DJ |
50% | 50% | N/A2 | N/A2 | N/A2 | |
| Albion Healthcare (Oxford) Holdings Limited |
Third Floor Broad Quay House, Prince Street, Bristol, United Kingdom, BS1 4DJ |
25% | 25% | N/A2 | N/A2 | N/A2 |
| Albion Healthcare (Oxford) Limited | Third Floor Broad Quay House, Prince Street, Bristol, United Kingdom, BS1 4DJ |
25% | 25% | N/A2 | N/A2 | N/A2 |
| Amalie Infrastructure Limited | Level 7 One Bartholomew Close, Barts Square, London, United Kingdom, EC1A 7BL |
100% | 100% | 31 Mar '20 | 1.6 | 38.7 |
| Amalie PFI (UK) Limited | Level 7 One Bartholomew Close, Barts Square, London, United Kingdom, EC1A 7BL |
100% | 100% | 31 Mar '20 | 3.2 | 47.7 |
| Annes Gate Property Plc | 8 White Oak Square, London Road, Swanley, United Kingdom, BR8 7AG |
100% | 100% | N/A2 | N/A2 | N/A2 |
| Ashburton Services (Holdings) Limited |
Cannon Place, 78 Cannon Street, London, United Kingdom, EC4N 6AF |
100% | 100% | N/A2 | N/A2 | N/A2 |
| Ashburton Services Limited | Cannon Place, 78 Cannon Street, London, United Kingdom, EC4N 6AF |
100% | 100% | N/A2 | N/A2 | N/A2 |
| Aspire Defence Finance plc | Aspire Business Centre, Ordnance Road, Tidworth, United Kingdom, SP9 7QD |
13% | 13% | N/A2 | N/A2 | N/A2 |
| Aspire Defence Holdings Limited | Aspire Business Centre, Ordnance Road, Tidworth, United Kingdom, SP9 7QD |
13% | 13% | N/A2 | N/A2 | N/A2 |
| Aspire Defence Limited | Aspire Business Centre, Ordnance Road, Tidworth, United Kingdom, SP9 7QD |
13% | 13% | N/A2 | N/A2 | N/A2 |
| Atlandes | 15, avenue Léonard de Vinci, CS60024, Cedex, Pessac, 33615, France |
21% | 21% | N/A2 | N/A2 | N/A2 |
| Axiom Education (Edinburgh) Holdings Limited |
Blake House 3 Frayswater Place, Cowley, Uxbridge, Middlesex, United Kingdom, UB8 2AD |
100% | 100% | N/A2 | N/A2 | N/A2 |
| Axiom Education (Edinburgh) Limited | Blake House 3 Frayswater Place, Cowley, Uxbridge, Middlesex, United Kingdom, UB8 2AD |
100% | 100% | 31 Dec '19 | 1.6 | -46.4 |
| Axiom Education (Perth & Kinross) Holdings Limited |
Blake House 3 Frayswater Place, Cowley, Uxbridge, Middlesex, United Kingdom, UB8 2AD |
100% | 100% | N/A2 | N/A2 | N/A2 |
| Axiom Education (Perth & Kinross) Limited |
Blake House 3 Frayswater Place, Cowley, Uxbridge, Middlesex, United Kingdom, UB8 2AD |
100% | 100% | 31 Dec '19 | -0.7 | -83.1 |
| BAAK Blankenburg B.V. (Project Co) | Ringwade 71, 3439 LM Nieuwegein, Netherlands | 70% | 70% | N/A2 | N/A2 | N/A2 |
| Bangor & Nendrum Schools Services Holdings Limited |
50 Bedford Street, Belfast, United Kingdom, BT2 7FW | 26% | 26% | N/A2 | N/A2 | N/A2 |
| Bangor & Nendrum Schools Services Limited |
50 Bedford Street, Belfast, United Kingdom, BT2 7FW | 26% | 26% | N/A2 | N/A2 | N/A2 |
| BaSS LIFT Holdings Limited | 5 The Triangle, Wildwood Drive, Worcester, Worcestershire, United Kingdom, WR5 2QX |
60% | 60% | N/A2 | N/A2 | N/A2 |
| Bee Invest 1 (Incorporated in France) | 91 rue du Faubourg Saint-Honoré 75008 Paris | 85% | 85% | N/A2 | N/A2 | N/A2 |
| Betjemen Holdings Jvco Limited | 5th Floor Kings Place 90 York Way, London, United Kingdom, N1 9AG |
22% | 35% | 31 Mar '20 | – | 336.4 |
| Betjemen Holdings Limited | 5th Floor Kings Place 90 York Way, London, United Kingdom, N1 9AG |
22% | 35% | 31 Mar '20 | – | 165.2 |
| Betjemen Holdings Midco Limited | 5th Floor Kings Place 90 York Way, London, United Kingdom, N1 9AG |
22% | 35% | 31 Mar '20 | – | 336.4 |
| Birmingham and Solihull (Fundco 1) Limited |
5 The Triangle, Wildwood Drive, Worcester, Worcestershire, United Kingdom, WR5 2QX |
60% | 60% | N/A2 | N/A2 | N/A2 |
| Birmingham and Solihull (Fundco 2) Limited |
5 The Triangle, Wildwood Drive, Worcester, Worcestershire, United Kingdom, WR5 2QX |
60% | 60% | N/A2 | N/A2 | N/A2 |
| Shareholding | Aggregate | |||||
|---|---|---|---|---|---|---|
| 31-Mar | 31-Mar | Year | Profit / (Loss) |
Capital & Reserves |
||
| Entity Birmingham and Solihull (Fundco 3) |
Registered address 5 The Triangle, Wildwood Drive, Worcester, Worcestershire, |
2021 60% |
2020 60% |
end N/A2 |
£m N/A2 |
£m N/A2 |
| Limited | United Kingdom, WR5 2QX | |||||
| Birmingham and Solihull (Fundco 4) Limited |
5 The Triangle, Wildwood Drive, Worcester, Worcestershire, United Kingdom, WR5 2QX |
60% | 60% | N/A2 | N/A2 | N/A2 |
| Birmingham and Solihull Local Improvement Finance Trust Limited |
5 The Triangle, Wildwood Drive, Worcester, Worcestershire, United Kingdom, WR5 2QX |
100% | 100% | N/A2 | N/A2 | N/A2 |
| Birmingham and Solihull Local Improvement Finance Trust Limited |
5 The Triangle, Wildwood Drive, Worcester, Worcestershire, United Kingdom, WR5 2QX |
100% | 100% | N/A2 | N/A2 | N/A2 |
| Blue Light Holdings Limited | Level 7 One Bartholomew Close, Barts Square, London, United Kingdom, EC1A 7BL |
100% | 100% | N/A2 | N/A2 | N/A2 |
| Blue3 (Gloucestershire Fire) (Holdings) Limited |
10 St. Giles Square, London, United Kingdom, WC2H 8AP | 75% | 75% | N/A2 | N/A2 | N/A2 |
| Blue3 (Gloucestershire Fire) Limited | 10 St. Giles Square, London, United Kingdom, WC2H 8AP | 75% | 75% | N/A2 | N/A2 | N/A2 |
| BNC IXAS SPC Holding B.V (Incorporated in Holland) |
Ringwade 71, 3439 LM Nieuwegein, Netherlands | 20% | 80% | N/A2 | N/A2 | N/A2 |
| BNC Pi2 Holding B.V. (Incorporated in Holland) |
c/o BAM PPP Nederland B.V., Runnenburg 9, 3981 AZ Bunnik, Netherlands |
100% | 100% | N/A2 | N/A2 | N/A2 |
| Boldon School (Holdings) Limited | Cannon Place, 78 Cannon Street, London, United Kingdom, EC4N 6AF |
100% | 100% | N/A2 | N/A2 | N/A2 |
| Boldon School Limited | Cannon Place, 78 Cannon Street, London, United Kingdom, EC4N 6AF |
100% | 100% | N/A2 | N/A2 | N/A2 |
| Bootle Accommodation Partnership Holdings Limited |
10 St. Giles Square, London, United Kingdom, WC2H 8AP | 50% | 50% | N/A2 | N/A2 | N/A2 |
| Bootle Accommodation Partnership Limited |
10 St. Giles Square, London, United Kingdom, WC2H 8AP | 50% | 50% | N/A2 | N/A2 | N/A2 |
| Brentwood Healthcare Partnerships Holdings Limited |
10 St. Giles Square, London, United Kingdom, WC2H 8AP | 75% | 75% | N/A2 | N/A2 | N/A2 |
| Brentwood Healthcare Partnerships Limited |
10 St. Giles Square, London, United Kingdom, WC2H 8AP | 75% | 75% | N/A2 | N/A2 | N/A2 |
| By Education (Barking) Holdings Limited |
First Floor Templeback, 10 Temple Back, Bristol, United Kingdom, BS1 6FL |
100% | 100% | N/A2 | N/A2 | N/A2 |
| By Education (Barking) Limited | First Floor Templeback, 10 Temple Back, Bristol, United Kingdom, BS1 6FL |
100% | 100% | N/A2 | N/A2 | N/A2 |
| ByCentral (Holdings) Limited | 8 White Oak Square London Road, Swanley, United Kingdom, BR8 7AG |
100% | 100% | N/A2 | N/A2 | N/A2 |
| ByCentral Limited | 8 White Oak Square London Road, Swanley, United Kingdom, BR8 7AG |
100% | 100% | 31 Dec '19 | -0.1 | -54.9 |
| ByWest (Holdings) Limited | 8 White Oak Square London Road, Swanley, United Kingdom, BR8 7AG |
100% | 100% | N/A2 | N/A2 | N/A2 |
| ByWest Limited | 8 White Oak Square London Road, Swanley, United Kingdom, BR8 7AG |
100% | 100% | N/A2 | N/A2 | N/A2 |
| CAE Aircrew Training Services Plc | Raf Benson, Wallingford, Oxfordshire, United Kingdom, OX10 6AA |
22% | 22% | N/A2 | N/A2 | N/A2 |
| Catalyst Healthcare (Romford) Financing Plc |
C/O Albany Spc Services Ltd 3rd Floor, 3-5 Charlotte Street, Manchester, United Kingdom, M1 4HB |
67% | 67% | N/A2 | N/A2 | N/A2 |
| Catalyst Healthcare (Romford) Holdings Limited |
C/O Albany Spc Services Ltd 3rd Floor, 3-5 Charlotte Street, Manchester,United Kingdom, M1 4HB |
67% | 67% | N/A2 | N/A2 | N/A2 |
| Catalyst Healthcare (Romford) Limited |
C/O Albany Spc Services Ltd 3rd Floor, 3-5 Charlotte Street, Manchester, United Kingdom, M1 4HB |
67% | 67% | N/A2 | N/A2 | N/A2 |
| Catalyst Higher Education (Sheffield) Holdings Limited |
C/O Albany Spc Services Ltd 3rd Floor, 3-5 Charlotte Street, Manchester, United Kingdom, M1 4HB |
50% | 50% | N/A2 | N/A2 | N/A2 |
| Shareholding | Profit / | Aggregate Capital & |
||||
|---|---|---|---|---|---|---|
| 31-Mar | 31-Mar | Year | (Loss) | Reserves | ||
| Entity Catalyst Higher Education (Sheffield) |
Registered address C/O Albany Spc Services Ltd 3rd Floor, 3-5 Charlotte |
2021 50% |
2020 50% |
end N/A2 |
£m N/A2 |
£m N/A2 |
| plc | Street, Manchester,United Kingdom, M1 4HB | |||||
| Central Blackpool PCC Holding Company Limited |
10 St. Giles Square, London, United Kingdom, WC2H 8AP | 75% | 75% | N/A2 | N/A2 | N/A2 |
| Central Blackpool PCC Limited | 10 St. Giles Square, London, United Kingdom, WC2H 8AP | 75% | 75% | N/A2 | N/A2 | N/A2 |
| Children's Ark Partnerships Holding Limited |
10 St. Giles Square, London, United Kingdom, WC2H 8AP | 50% | 50% | N/A2 | N/A2 | N/A2 |
| Children's Ark Partnerships Limited | 10 St. Giles Square, London, United Kingdom, WC2H 8AP | 50% | 50% | N/A2 | N/A2 | N/A2 |
| Citylink Telecommunications Holdings Limited |
15 Canada Square, London, E14 5GL | 34% | 34% | N/A2 | N/A2 | N/A2 |
| Citylink Telecommunications Limited | 15 Canada Square, London, E14 5GL | 29% | 34% | N/A2 | N/A2 | N/A2 |
| Claymore Road (Holdings) Limited | Cannon Place, 78 Cannon Street, London, United Kingdom, EC4N 6AF |
50% | 50% | N/A2 | N/A2 | N/A2 |
| Claymore Road Limited | Cannon Place, 78 Cannon Street, London, United Kingdom, EC4N 6AF |
50% | 50% | N/A2 | N/A2 | N/A2 |
| Connect M1-A1 Holdings Limited | 6th Floor 350 Euston Road, Regents Place, London, United Kingdom, NW1 3AX |
30% | 30% | N/A2 | N/A2 | N/A2 |
| Connect M1-A1 Limited | 6th Floor 350 Euston Road, Regents Place, London, United Kingdom, NW1 3AX |
30% | 30% | 31 Mar '20 | 2.0 | 45.3 |
| Consort Healthcare (Birmingham) Funding plc |
8 White Oak Square, Swanley, Kent, United Kingdom, BR8 7AG |
30% | 30% | N/A2 | N/A2 | N/A2 |
| Consort Healthcare (Birmingham) Holdings Limited |
8 White Oak Square, Swanley, Kent, United Kingdom, BR8 7AG |
30% | 30% | N/A2 | N/A2 | N/A2 |
| Consort Healthcare (Birmingham) Intermediate Limited |
8 White Oak Square, Swanley, Kent, United Kingdom, BR8 7AG |
30% | 30% | N/A2 | N/A2 | N/A2 |
| Consort Healthcare (Birmingham) Limited |
8 White Oak Square, London Road, Swanley, Kent, United Kingdom, BR8 7AG |
30% | 30% | N/A2 | N/A2 | N/A2 |
| Consort Healthcare (Blackburn) Funding Plc |
8 White Oak Square, Swanley, Kent, United Kingdom, BR8 7AG |
100% | 100% | N/A2 | N/A2 | N/A2 |
| Consort Healthcare (Blackburn) Holdings Limited |
8 White Oak Square, Swanley, Kent, United Kingdom, BR8 7AG |
100% | 100% | N/A2 | N/A2 | N/A2 |
| Consort Healthcare (Blackburn) Intermediate Limited |
8 White Oak Square, Swanley, Kent, United Kingdom, BR8 7AG |
100% | 100% | N/A2 | N/A2 | N/A2 |
| Consort Healthcare (Blackburn) Limited |
8 White Oak Square, Swanley, Kent, United Kingdom, BR8 7AG |
100% | 100% | N/A2 | N/A2 | N/A2 |
| Consort Healthcare (Mid Yorks) Funding Plc |
8 White Oak Square, London Road, Swanley, Kent, United Kingdom, BR8 7AG |
100% | 100% | N/A2 | N/A2 | N/A2 |
| Consort Healthcare (Mid Yorks) Holdings Limited |
8 White Oak Square, London Road, Swanley, Kent, United Kingdom, BR8 7AG |
100% | 100% | N/A2 | N/A2 | N/A2 |
| Consort Healthcare (Mid Yorks) Intermediate Limited |
8 White Oak Square, London Road, Swanley, Kent, United Kingdom, BR8 7AG |
100% | 100% | N/A2 | N/A2 | N/A2 |
| Consort Healthcare (Mid Yorks) Limited |
8 White Oak Square, London Road, Swanley, Kent, United Kingdom, BR8 7AG |
100% | 100% | N/A2 | N/A2 | N/A2 |
| Consort Healthcare (Salford) Holdings Limited |
Second Floor, 46 Charles Street, Cardiff, United Kingdom, CF10 2GE |
50% | 50% | N/A2 | N/A2 | N/A2 |
| Consort Healthcare (Salford) Intermediate Limited |
Second Floor, 46 Charles Street, Cardiff, United Kingdom, CF10 2GE |
50% | 50% | N/A2 | N/A2 | N/A2 |
| Consort Healthcare (Salford) Plc | Second Floor, 46 Charles Street, Cardiff, United Kingdom, CF10 2GE |
50% | 50% | N/A2 | N/A2 | N/A2 |
| Consort Healthcare (Tameside) Holdings Limited |
Second Floor, 46 Charles Street, Cardiff, United Kingdom, CF10 2GE |
50% | 50% | N/A2 | N/A2 | N/A2 |
| Shareholding | Profit / | Aggregate Capital & |
||||
|---|---|---|---|---|---|---|
| 31-Mar | 31-Mar | Year | (Loss) | Reserves | ||
| Entity Consort Healthcare (Tameside) |
Registered address Second Floor, 46 Charles Street, Cardiff, United Kingdom, |
2021 50% |
2020 50% |
end N/A2 |
£m N/A2 |
£m N/A2 |
| Intermediate Limited | CF10 2GE | |||||
| Consort Healthcare (Tameside) Plc | Second Floor, 46 Charles Street, Cardiff, United Kingdom, CF10 2GE |
50% | 50% | N/A2 | N/A2 | N/A2 |
| Criterion Healthcare Holdings Limited | Third Floor Broad Quay House, Prince Street, Bristol, United Kingdom, BS1 4DJ |
36% | 36% | N/A2 | N/A2 | N/A2 |
| Criterion Healthcare Plc | Third Floor Broad Quay House, Prince Street, Bristol, United Kingdom, BS1 4DJ |
36% | 36% | N/A2 | N/A2 | N/A2 |
| CSES (Dorset) Limited | Level 7 One Bartholomew Close, Barts Square, London, United Kingdom, EC1A 7BL |
100% | 100% | N/A2 | N/A2 | N/A2 |
| CSM PPP Services Holdings Limited (Incorporated in Ireland) |
Suite 54, Morrison Chambers, 32 Nassau Street, Dublin 2, Ireland |
76% | 100% | N/A2 | N/A2 | N/A2 |
| CSM PPP Services Limited (Incorporated in Ireland) |
Suite 54, Morrison Chambers, 32 Nassau Street, Dublin 2, Ireland |
76% | 100% | N/A2 | N/A2 | N/A2 |
| CVS Leasing Limited | Raf Benson, Wallingford, Oxfordshire, United Kingdom, OX10 6AA |
87% | 87% | N/A2 | N/A2 | N/A2 |
| D3 - Société de la deviation de Troissereux (Incorporated in France) |
21 rue Hippolyte Bayard, PAE du Haut-Villé, 60000 Beauvais, France |
90% | 90% | N/A2 | N/A2 | N/A2 |
| Daiwater Investment Limited | The Hub, Tamblin Way, Hatfield, Hertfordshire, United Kingdom, AL10 9EZ |
37% | 37% | 31 Mar '20 | 13.5 | 613.4 |
| Derby School Solutions (Holdings) Limited |
Astral House, Imperial Way, Watford, Hertfordshire, United Kingdom, WD24 4WW |
100% | 100% | N/A2 | N/A2 | N/A2 |
| Derby School Solutions Limited | Astral House, Imperial Way, Watford, Hertfordshire, United Kingdom, WD24 4WW |
100% | 100% | N/A2 | N/A2 | N/A2 |
| Diamond Transmission Partners BBE Limited |
Mid City Place, 71 High Holborn, London, United Kingdom, WC1V 6BA |
50% | 50% | N/A2 | N/A2 | N/A2 |
| Diamond Transmission Partners BBE Holdings Limited |
Mid City Place, 71 High Holborn, London, United Kingdom, WC1V 6BA |
50% | 50% | N/A2 | N/A2 | N/A2 |
| Diamond Transmission Partners Galloper (Holdings) Limited |
Mid City Place, 71 High Holborn, London, United Kingdom, WC1V 6BA |
49% | 49% | N/A2 | N/A2 | N/A2 |
| Diamond Transmission Partners Galloper Limited |
Mid City Place, 71 High Holborn, London, United Kingdom, WC1V 6BA |
49% | 49% | N/A2 | N/A2 | N/A2 |
| Diamond Transmission Partners RB (Holdings) Limited |
Mid City Place, 71 High Holborn, London, United Kingdom, WC1V 6BA |
49% | 49% | N/A2 | N/A2 | N/A2 |
| Diamond Transmission Partners RB Limited |
Mid City Place, 71 High Holborn, London, United Kingdom, WC1V 6BA |
49% | 49% | N/A2 | N/A2 | N/A2 |
| Diamond Transmission Partners Walney Extension (Holdings) Limited |
Mid City Place, 71 High Holborn, London, United Kingdom, WC1V 6BA |
49% | 29% | N/A2 | N/A2 | N/A2 |
| Diamond Transmission Partners Walney Extension Limited |
Mid City Place, 71 High Holborn, London, United Kingdom, WC1V 6BA |
49% | 29% | N/A2 | N/A2 | N/A2 |
| Directroute (Tuam) Holdings Limited | M17/M18 Operations Centre, Furzy Park, Athenry, Co Galway, Ireland |
100% | 10% | 31 Dec '19 | 2.7 | -40.9 |
| Directroute (Tuam) Limited | M17/M18 Operations Centre, Furzy Park, Athenry, Co Galway, Ireland |
100% | 10% | 31 Dec '19 | 2.7 | -40.9 |
| Dorset Emergency Services PPP (Holdings) Limited |
Unit 18 Riversway Business Village Navigation Way, Ashton On-Ribble, Preston,United Kingdom, PR2 2YP |
100% | 100% | N/A2 | N/A2 | N/A2 |
| Ealing Care Alliance (Holdings) Limited |
10 St. Giles Square, London, United Kingdom, WC2H 8AP | 63% | 63% | N/A2 | N/A2 | N/A2 |
| Ealing Care Alliance Limited | 10 St. Giles Square, London, United Kingdom, WC2H 8AP | 63% | 63% | N/A2 | N/A2 | N/A2 |
| Ealing Schools Partnerships Holdings Limited |
10 St. Giles Square, London, United Kingdom, WC2H 8AP | 50% | 50% | N/A2 | N/A2 | N/A2 |
| Ealing Schools Partnerships Limited | 10 St. Giles Square, London, United Kingdom, WC2H 8AP | 50% | 50% | N/A2 | N/A2 | N/A2 |
| Shareholding | Profit / | Aggregate Capital & |
||||
|---|---|---|---|---|---|---|
| 31-Mar | 31-Mar | Year | (Loss) | Reserves | ||
| Entity | Registered address | 2021 | 2020 | end | £m | £m |
| Eastbury Park (Holdings) Limited | 8 White Oak Square, London Road, Swanley, United Kingdom, BR8 7AG |
50% | 50% | N/A2 | N/A2 | N/A2 |
| Eastbury Park Limited | 8 White Oak Square, London Road, Swanley, United Kingdom, BR8 7AG |
50% | 50% | N/A2 | N/A2 | N/A2 |
| Education 4 Ayrshire Holdings Limited |
2 Lochside View Edinburgh, United Kingdom, EH12 1LB | 100% | 100% | N/A2 | N/A2 | N/A2 |
| Education 4 Ayrshire Limited | 2 Lochside View Edinburgh, United Kingdom, EH12 1LB | 100% | 100% | N/A2 | N/A2 | N/A2 |
| Egis Investment Partners France (Incorporated in France) |
15, avenue du Centre, CS 20538 Guyancourt, 78286 Saint-Quentin-en-Yvelines Cedex – France |
70% | 70% | N/A2 | N/A2 | N/A2 |
| Emblem Schools (Holdings) Limited | 2nd Floor, 11 Thistle Street, Edinburgh, United Kingdom, EH2 1DF |
30% | 30% | N/A2 | N/A2 | N/A2 |
| Emblem Schools Limited | 2nd Floor, 11 Thistle Street, Edinburgh, United Kingdom, EH2 1DF |
30% | 30% | N/A2 | N/A2 | N/A2 |
| Enterprise Civic Buildings (Holdings) Limited |
Unit 18 Navigation Way, Ashton-On-Ribble, Preston,United Kingdom, PR2 2YP |
100% | 100% | N/A2 | N/A2 | N/A2 |
| Enterprise Civic Buildings Limited | Unit 18 Navigation Way, Ashton-On-Ribble, Preston,United Kingdom, PR2 2YP |
100% | 100% | N/A2 | N/A2 | N/A2 |
| Enterprise Education Conwy Limited | Unit 18 Riversway Business Village Navigation Way, Ashton On-Ribble, Preston, United Kingdom, PR2 2YP |
90% | 90% | N/A2 | N/A2 | N/A2 |
| Enterprise Education Holdings Conwy Limited |
Unit 18 Riversway Business Village Navigation Way, Ashton On-Ribble, Preston, United Kingdom, PR2 2YP |
90% | 90% | N/A2 | N/A2 | N/A2 |
| Enterprise Healthcare (Holdings) Limited |
Unit 18 Riversway Business Village Navigation Way, Ashton On-Ribble, Preston, United Kingdom, PR2 2YP |
100% | 100% | N/A2 | N/A2 | N/A2 |
| Enterprise Healthcare Limited | Unit 18 Riversway Business Village Navigation Way, Ashton On-Ribble, Preston, United Kingdom, PR2 2YP |
100% | 100% | N/A2 | N/A2 | N/A2 |
| Euro IV PPP Platform Limited Partnership |
1st Floor Connaught House, 1 Burlington Road, Dublin 4, Ireland |
100% | 100% | N/A2 | N/A2 | N/A2 |
| European Healthcare Projects Limited |
Level 7 One Bartholomew Close, Barts Square, London, United Kingdom, EC1A 7BL |
100% | 100% | N/A2 | N/A2 | N/A2 |
| Falkirk Schools Gateway (Holdings) | Quartermile One, 15 Lauriston Place, Edinburgh, United Kingdom, EH3 9EP |
29% | 29% | 31 Mar '20 | 5.0 | -44.2 |
| Falkirk Schools Gateway Limited | Quartermile One, 15 Lauriston Place, Edinburgh, United Kingdom, EH3 9EP |
29% | 29% | N/A2 | N/A2 | N/A2 |
| FCC (East Ayrshire) Holdings Limited | 2nd Floor, 11 Thistle Street, Edinburgh, United Kingdom, EH2 1DF |
26% | 26% | N/A2 | N/A2 | N/A2 |
| FCC (East Ayrshire) Limited | 2nd Floor, 11 Thistle Street, Edinburgh, United Kingdom, EH2 1DF |
26% | 26% | N/A2 | N/A2 | N/A2 |
| GGB inBalans B.V | Hagenweg 3 c, 4131 LX, Vianen, Netherlands | 85% | 85% | N/A2 | N/A2 | N/A2 |
| GGB inBalans Investco B.V | Hagenweg 3 c, 4131 LX, Vianen, Netherlands | 100% | 100% | N/A2 | N/A2 | N/A2 |
| Glasgow Healthcare Facilities (Holding) Limited |
2nd Floor, 11 Thistle Street, Edinburgh, United Kingdom, EH2 1DF |
25% | 25% | N/A2 | N/A2 | N/A2 |
| Glasgow Healthcare Facilities Limited | 2nd Floor, 11 Thistle Street, Edinburgh, United Kingdom, EH2 1DF |
25% | 25% | 31 Dec 19 | 1.6 | -41.9 |
| GO-PASS Mobility Services LLC | 3701 Northwest Parkway, Broomfield, CO 80023 | 33% | 33% | N/A2 | N/A2 | N/A2 |
| Green Timbers GP Limited (Incorporated in Canada) |
14200 Green Timbers Way, Mailstop 1006, Surrey BC V3T 6P3, Canada |
100% | 100% | 31 Mar '20 | 5.8 | 34.3 |
| Green Timbers Holdings Limited (Incorporated in Canada) |
14200 Green Timbers Way, Mailstop 1006, Surrey BC V3T 6P3, Canada |
100% | 100% | N/A2 | N/A2 | N/A2 |
| Green Timbers Limited Partnership (Incorporated in Canada) |
14200 Green Timbers Way, Mailstop 1006, Surrey BC V3T 6P3, Canada |
100% | 100% | 31 Mar '20 | 5.8 | 34.3 |
| Shareholding | Profit / | Aggregate Capital & |
||||
|---|---|---|---|---|---|---|
| 31-Mar | 31-Mar | Year | (Loss) | Reserves | ||
| Entity GT (NEPS) Limited |
Registered address Blake House 3 Frayswater Place, Cowley, Uxbridge, Middlesex, United Kingdom, UB8 2AD |
2021 90% |
2020 90% |
end N/A2 |
£m N/A2 |
£m N/A2 |
| GT NEPS (Holdings) Limited | Blake House 3 Frayswater Place, Cowley, Uxbridge, Middlesex, United Kingdom, UB8 2AD |
90% | 90% | N/A2 | N/A2 | N/A2 |
| H&D Support Services (Holdings) Limited |
Astral House, Imperial Way, Watford, Hertfordshire, United Kingdom, WD24 4WW |
100% | 100% | N/A2 | N/A2 | N/A2 |
| H&D Support Services Limited | Astral House, Imperial Way, Watford, Hertfordshire, United Kingdom,WD24 4WW |
100% | 100% | N/A2 | N/A2 | N/A2 |
| Hadfield Healthcare Partnerships Holdings Limited |
10 St. Giles Square, London, United Kingdom, WC2H 8AP | 75% | 75% | N/A2 | N/A2 | N/A2 |
| Hadfield Healthcare Partnerships Limited |
10 St. Giles Square, London, United Kingdom, WC2H 8AP | 75% | 75% | N/A2 | N/A2 | N/A2 |
| HDM Schools Solution Limited | C/O Dla Piper Scotland Llp Fao Stuart Mcmillan Collins House, Rutland Square, Edinburgh, United Kingdom, EH1 2AA |
75% | 75% | N/A2 | N/A2 | N/A2 |
| HDM Schools Solutions (Holding) Limited |
C/O Dla Piper Scotland Llp Fao Stuart Mcmillan Collins House, Rutland Square, Edinburgh, United Kingdom, EH1 2AA |
75% | 75% | N/A2 | N/A2 | N/A2 |
| Healthcare Centres PPP Holdings Limited |
Suite 54 Morrison Chambers, 32 Nassau Street, Dublin 2, Republic of Ireland |
60% | 60% | N/A2 | N/A2 | N/A2 |
| Healthcare Centres PPP Limited | Suite 54 Morrison Chambers, 32 Nassau Street, Dublin 2, Republic of Ireland |
60% | 60% | N/A2 | N/A2 | N/A2 |
| Helix Acquisition Limited | 5th Floor, Kings Place, 90 York Way, London, United Kingdom, N1 9AG |
22% | 35% | N/A2 | N/A2 | N/A2 |
| Helix Bufferco Limited | 5th Floor, Kings Place, 90 York Way, London, United Kingdom, N1 9AG |
22% | 35% | N/A2 | N/A2 | N/A2 |
| Helix Holdings Limited | 5th Floor, Kings Place, 90 York Way, London, United Kingdom, N1 9AG |
22% | 35% | 31 Mar '20 | -33.6 | -623.8 |
| Helix MidCo Limited | 5th Floor, Kings Place, 90 York Way, London, United Kingdom, N1 9AG |
22% | 35% | N/A2 | N/A2 | N/A2 |
| HICL Infrastructure (Green Timbers) Inc (Incorporated in Canada) |
14200 Green Timbers Way, Mailstop 1006, Surrey BC V3T 6P3, Canada |
100% | 100% | N/A2 | N/A2 | N/A2 |
| HICL Infrastructure 2 SARL | 6, rue Adolphe, L-1116, Luxembourg | 100% | 100% | 31 Mar '21 | 37.0 | 1,191.0 |
| HICL Infrastructure 3 SARL | 6, rue Adolphe, L-1116, Luxembourg | 100% | 100% | N/A2 | N/A2 | N/A2 |
| 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 '20 | 3.7 | 30.0 |
| High Speed One (HS1) Limited | 5th Floor, Kings Place, 90 York Way, London, United Kingdom, N1 9AG |
22% | 22% | N/A2 | N/A2 | N/A2 |
| High Speed Rail Finance (1) PLC | 5th Floor, Kings Place, 90 York Way, London, United Kingdom, N1 9AG |
22% | 35% | N/A2 | N/A2 | N/A2 |
| High Speed Rail Finance PLC | 5th Floor, Kings Place, 90 York Way, London, United Kingdom, N1 9AG |
22% | 35% | N/A2 | N/A2 | N/A2 |
| Highway Management M80 Investment Management Limited |
Part First Floor, 1 Grenfell Road, Maidenhead, Berkshire, United Kingdom, SL6 1HN |
50% | 50% | N/A2 | N/A2 | N/A2 |
| Highway Management Scotland (Holdings) Limited |
Part First Floor, 1 Grenfell Road, Maidenhead, Berkshire, United Kingdom, SL6 1HN |
50% | 50% | N/A2 | N/A2 | N/A2 |
| Highway Management Scotland Limited |
Part First Floor, 1 Grenfell Road, Maidenhead, Berkshire, United Kingdom, SL6 1HN |
50% | 50% | 31 Dec '19 | -0.3 | -44.2 |
| Holdfast Training Services Limited | Building 29, Hq Rsme Brompton Barracks, Chatham, Kent, England, England, ME4 4UG |
100% | 26% | 31 Mar '20 | 20.0 | 69.5 |
| HS1 Limited | 5th Floor, Kings Place, 90 York Way, London, United Kingdom, N1 9AG |
22% | 35% | 31 Mar '20 | 95.0 | 530.4 |
| Shareholding | Profit / | Aggregate Capital & |
||||
|---|---|---|---|---|---|---|
| 31-Mar | 31-Mar | Year | (Loss) | Reserves | ||
| Entity | Registered address | 2021 | 2020 | end | £m | £m |
| Information Resources (Oldham) Holdings Limited |
10 St. Giles Square, London, United Kingdom, WC2H 8AP | 75% | 75% | N/A2 | N/A2 | N/A2 |
| Information Resources (Oldham) Investments |
10 St. Giles Square, London, United Kingdom, WC2H 8AP | 75% | 75% | N/A2 | N/A2 | N/A2 |
| Information Resources (Oldham) Limited |
10 St. Giles Square, London, United Kingdom, WC2H 8AP | 75% | 75% | N/A2 | N/A2 | N/A2 |
| Infraspeed (Holdings) BV (Incorporated in Holland) |
2132 LS Hoofddorp, Taurusavenue 155, Netherlands | 43% | 43% | 31-Dec-20 | 8.7 | 29.9 |
| Infraspeed BV (Incorporated in Holland) |
2132 LS Hoofddorp, Taurusavenue 155, Netherlands | 43% | 43% | 31-Dec-20 | 8.7 | 29.9 |
| Infrastructure Investments (A63) Holdings Limited |
Level 7 One Bartholomew Close, Barts Square, London, United Kingdom, EC1A 7BL |
100% | 100% | 31 Mar '20 | 8.5 | 127.2 |
| Infrastructure Investments (Affinity) Limited |
Level 7 One Bartholomew Close, Barts Square, London, United Kingdom, EC1A 7BL |
90% | 90% | 31 Mar '20 | -35.9 | 205.9 |
| Infrastructure Investments (Australia) LLP |
Level 7 One Bartholomew Close, Barts Square, London, United Kingdom, EC1A 7BL |
100% | 100% | N/A2 | N/A2 | N/A2 |
| Infrastructure Investments (Bond) Holdings LLP |
Level 7 One Bartholomew Close, Barts Square, London, United Kingdom, EC1A 7BL |
100% | 100% | N/A2 | N/A2 | N/A2 |
| Infrastructure Investments (Bond) LLP |
Level 7 One Bartholomew Close, Barts Square, London, United Kingdom, EC1A 7BL |
100% | 100% | N/A2 | N/A2 | N/A2 |
| Infrastructure Investments (Colorado) Limited |
Level 7 One Bartholomew Close, Barts Square, London, United Kingdom, EC1A 7BL |
100% | 100% | 31 Mar '20 | 0.2 | 126.5 |
| Infrastructure Investments (Defence) Limited |
Level 7 One Bartholomew Close, Barts Square, London, United Kingdom, EC1A 7BL |
100% | 100% | N/A2 | N/A2 | N/A2 |
| Infrastructure Investments (Health) Limited |
Level 7 One Bartholomew Close, Barts Square, London, United Kingdom, EC1A 7BL |
100% | 100% | N/A2 | N/A2 | N/A2 |
| Infrastructure Investments (HSL ZUID) Limited |
Level 7 One Bartholomew Close, Barts Square, London, United Kingdom, EC1A 7BL |
100% | 100% | 31 Mar '20 | 4.7 | 41.1 |
| Infrastructure Investments (No 7) Limited |
Level 7 One Bartholomew Close, Barts Square, London, United Kingdom, EC1A 7BL |
100% | 100% | N/A2 | N/A2 | N/A2 |
| Infrastructure Investments (No 8) Limited |
Level 7 One Bartholomew Close, Barts Square, London, United Kingdom, EC1A 7BL |
100% | 100% | N/A2 | N/A2 | N/A2 |
| Infrastructure Investments (OFTO 1) Limited |
Level 7 One Bartholomew Close, Barts Square, London, United Kingdom, EC1A 7BL |
100% | 100% | N/A2 | N/A2 | N/A2 |
| Infrastructure Investments (Portal) GP Limited |
Level 7 One Bartholomew Close, Barts Square, London, United Kingdom, EC1A 7BL |
100% | 100% | N/A2 | N/A2 | N/A2 |
| Infrastructure Investments (Portal) Limited |
Level 7 One Bartholomew Close, Barts Square, London, United Kingdom, EC1A 7BL |
100% | 100% | N/A2 | N/A2 | N/A2 |
| Infrastructure Investments (Portal) Limited Partnership |
Level 7 One Bartholomew Close, Barts Square, London, United Kingdom, EC1A 7BL |
100% | 100% | 31 Mar '20 | 3.1 | 49.3 |
| Infrastructure Investments (Portsmouth) Limited |
Level 7 One Bartholomew Close, Barts Square, London, United Kingdom, EC1A 7BL |
100% | 100% | 31 Mar '20 | 4.5 | 64.4 |
| Infrastructure Investments (Roads) Limited |
Level 7 One Bartholomew Close, Barts Square, London, United Kingdom, EC1A 7BL |
100% | 100% | N/A2 | N/A2 | N/A2 |
| Infrastructure Investments Betjeman (Holdco) Limited |
Level 7 One Bartholomew Close, Barts Square, London, United Kingdom, EC1A 7BL |
100% | 100% | 31 Mar '20 | -40.1 | 39.0 |
| Infrastructure Investments Betjeman Limited |
Level 7 One Bartholomew Close, Barts Square, London, United Kingdom, EC1A 7BL |
62% | 62% | 31 Mar '20 | -63.3 | 82.8 |
| Infrastructure Investments Holdings Limited |
Level 7 One Bartholomew Close, Barts Square, London, United Kingdom, EC1A 7BL |
100% | 100% | 31 Mar '20 | -22.8 | 512.1 |
| Infrastructure Investments NWP (US) LLC |
3701 Northwest Parkway, Broomfield, CO 80023, USA | 100% | 100% | 31 Dec '20 | -3.2 | 89.5 |
| Shareholding | Profit / | Aggregate Capital & |
||||
|---|---|---|---|---|---|---|
| Entity | Registered address | 31-Mar 2021 |
31-Mar 2020 |
Year end |
(Loss) £m |
Reserves £m |
| Infrastructure Investments Trafalgar Limited |
Level 7 One Bartholomew Close, Barts Square, London, United Kingdom, EC1A 7BL |
100% | 100% | 31 Mar '20 | -17.5 | 959.2 |
| Integrated Bradford Hold Co Two Limited |
Chancery Exchange, 10 Furnival Street, London, United Kingdom, EC4A 1AB |
34% | 34% | N/A2 | N/A2 | N/A2 |
| Integrated Bradford Holdco One Limited |
Chancery Exchange, 10 Furnival Street, London, United Kingdom, EC4A 1AB |
29% | 29% | N/A2 | N/A2 | N/A2 |
| Integrated Bradford SPV One Limited | Chancery Exchange, 10 Furnival Street, London, United Kingdom, EC4A 1AB |
29% | 29% | N/A2 | N/A2 | N/A2 |
| Integrated Bradford SPV Two Limited | Chancery Exchange, 10 Furnival Street, London, United Kingdom, EC4A 1AB |
34% | 34% | N/A2 | N/A2 | N/A2 |
| Ivywood College Holdings Limited | 7 Queens Road, Belfast, United Kingdom, BT3 9DT | 75% | 75% | N/A2 | N/A2 | N/A2 |
| Ivywood College Limited | 7 Queens Road, Belfast, United Kingdom, BT3 9DT | 75% | 75% | N/A2 | N/A2 | N/A2 |
| Ivywood Colleges Parking Limited | 7 Queens Road, Belfast, United Kingdom, BT3 9DT | 75% | 75% | N/A2 | N/A2 | N/A2 |
| IXAS Zuid-Oost B.V (Incorporated in Holland) |
Langbroekdreef 18, 1108 EB, Amsterdam | 20% | 20% | N/A2 | N/A2 | N/A2 |
| Kajima Darlington Schools Holding Limited |
10 St. Giles Square, London, United Kingdom, WC2H 8AP | 50% | 50% | N/A2 | N/A2 | N/A2 |
| Kajima Darlington Schools Limited | 10 St. Giles Square, London, United Kingdom, WC2H 8AP | 50% | 50% | N/A2 | N/A2 | N/A2 |
| Kajima Haverstock Holding Limited | 10 St. Giles Square, London, United Kingdom, WC2H 8AP | 50% | 50% | N/A2 | N/A2 | N/A2 |
| Kajima Haverstock Limited | 10 St. Giles Square, London, United Kingdom, WC2H 8AP | 50% | 50% | N/A2 | N/A2 | N/A2 |
| Kajima Newcastle Libraries Holdings Limited |
10 St. Giles Square, London, United Kingdom, WC2H 8AP | 50% | 50% | N/A2 | N/A2 | N/A2 |
| Kajima Newcastle Libraries Limited | 10 St. Giles Square, London, United Kingdom, WC2H 8AP | 50% | 50% | N/A2 | N/A2 | N/A2 |
| Kajima North Tyneside Holdings Limited |
10 St. Giles Square, London, United Kingdom, WC2H 8AP | 50% | 50% | N/A2 | N/A2 | N/A2 |
| Kajima North Tyneside Limited | 10 St. Giles Square, London, United Kingdom, WC2H 8AP | 50% | 50% | N/A2 | N/A2 | N/A2 |
| Kent Education Partnership (Holdings) Limited |
Part First Floor, 1 Grenfell Road, Maidenhead, Berkshire, United Kingdom, SL6 1HN |
50% | 50% | N/A2 | N/A2 | N/A2 |
| Kent Education Partnership Limited | Part First Floor, 1 Grenfell Road, Maidenhead, Berkshire, United Kingdom, SL6 1HN |
50% | 50% | N/A2 | N/A2 | N/A2 |
| Kluster (Incorporated in France) | 1 avenue Eugène Freyssinet, 78280 Guyancourt, France | 85% | 85% | 31 Dec 20 | 0.0 | 50.3 |
| Liaison Infrastructure Routiere Investissement (Incorporated in France) |
91, rue du Faubourg Saint-Honoré, 75008 Paris | 100% | 100% | N/A2 | N/A2 | N/A2 |
| Manchester Housing (MP Equity) Limited |
Level 7 One Bartholomew Close, Barts Square, London, United Kingdom, EC1A 7BL |
100% | 100% | N/A2 | N/A2 | N/A2 |
| Manchester Housing (MP Subdebt) Limited |
Level 7 One Bartholomew Close, Barts Square, London, United Kingdom, EC1A 7BL |
100% | 100% | N/A2 | N/A2 | N/A2 |
| Manchester Housing (MP TopCo) Limited |
Level 7 One Bartholomew Close, Barts Square, London, United Kingdom, EC1A 7BL |
100% | 100% | N/A2 | N/A2 | N/A2 |
| Manchester School Services Holdings Limited |
Cannon Place, 78 Cannon Street, London, United Kingdom, EC4N 6AF |
76% | 76% | N/A2 | N/A2 | N/A2 |
| Manchester School Services Limited | Cannon Place, 78 Cannon Street, London, United Kingdom, EC4N 6AF |
76% | 76% | N/A2 | N/A2 | N/A2 |
| Medway Fundco (Canterbury Street) Limited |
55 Station Road, Beaconsfield, Buckinghamshire, United Kingdom, HP9 1QL |
60% | 60% | N/A2 | N/A2 | N/A2 |
| Medway Fundco Limited | 55 Station Road, Beaconsfield, Buckinghamshire, United Kingdom, HP9 1QL |
60% | 60% | N/A2 | N/A2 | N/A2 |
| Medway Fundco Two Limited | 55 Station Road, Beaconsfield, Buckinghamshire, United Kingdom, HP9 1QL |
60% | 60% | N/A2 | N/A2 | N/A2 |
| Shareholding | Profit / | Aggregate Capital & |
||||
|---|---|---|---|---|---|---|
| 31-Mar | 31-Mar | Year | (Loss) | Reserves | ||
| Entity Metier Healthcare Limited |
Registered address 4 Estates Yard, Wellhouse Lane, Barnet, Hertfordshire, United Kingdom, EN5 3DG |
2021 100% |
2020 100% |
end N/A2 |
£m N/A2 |
£m N/A2 |
| Metier Holdings Limited | 4 Estates Yard, Wellhouse Lane, Barnet, Hertfordshire, United Kingdom, EN5 3DG |
100% | 100% | N/A2 | N/A2 | N/A2 |
| Minerva Education and Training (Holdings) Limited |
C/O Albany Spc Services Limited 3rd Floor, 3-5 Charlotte Street, Manchester, England, M1 4HB |
45% | 45% | N/A2 | N/A2 | N/A2 |
| Minerva Education and Training Limited |
C/O Albany Spc Services Limited 3rd Floor, 3-5 Charlotte Street, Manchester, England, M1 4HB |
45% | 45% | N/A2 | N/A2 | N/A2 |
| New Intermediate Care Limited | Level 7 One Bartholomew Close, Barts Square, London, United Kingdom, EC1A 7BL |
100% | 100% | N/A2 | N/A2 | N/A2 |
| New Schools Investment Company Limited |
Level 7 One Bartholomew Close, Barts Square, London, United Kingdom, EC1A 7BL |
100% | 100% | N/A2 | N/A2 | N/A2 |
| Newham Learning Partnership (Hold Co) Limited |
Third Floor Broad Quay House, Prince Street, Bristol, United Kingdom, BS1 4DJ |
80% | 80% | N/A2 | N/A2 | N/A2 |
| Newham Learning Partnership (Project Co) Limited |
Third Floor Broad Quay House, Prince Street, Bristol, United Kingdom, BS1 4DJ |
80% | 80% | N/A2 | N/A2 | N/A2 |
| Newham Learning Partnership (PSP) Limited |
Level 7 One Bartholomew Close, Barts Square, London, United Kingdom, EC1A 7BL |
100% | 100% | N/A2 | N/A2 | N/A2 |
| Newham Transformation Partnership Limited |
Third Floor Broad Quay House, Prince Street, Bristol, United Kingdom, BS1 4DJ |
80% | 80% | N/A2 | N/A2 | N/A2 |
| Newport School Solutions Limited | Astral House, Imperial Way, Watford, Hertfordshire, United Kingdom, WD24 4WW |
100% | 100% | N/A2 | N/A2 | N/A2 |
| Newport Schools Solutions (Holdings) Limited |
Astral House, Imperial Way, Watford, Hertfordshire, United Kingdom, WD24 4WW |
100% | 100% | N/A2 | N/A2 | N/A2 |
| Newton Abbot Health Holdings Limited |
Unit 18 Riversway Business Village Navigation Way, Ashton On-Ribble, Preston, United Kingdom, PR2 2YP |
100% | 100% | N/A2 | N/A2 | N/A2 |
| Newton Abbot Health Limited | Unit 18 Riversway Business Village Navigation Way, Ashton On-Ribble, Preston, United Kingdom, PR2 2YP |
100% | 100% | N/A2 | N/A2 | N/A2 |
| Northwest Connect General Partnership (Incorporated in Canada) |
1321 Blanshard St., Suite 301, Victoria BC, V8W 0B6, Canada |
50% | 50% | 31 Dec '20 | 4.5 | -32.3 |
| Northwest Connect Holdings Inc. (Incorporated in Canada) |
1321 Blanshard St., Suite 301, Victoria BC, V8W 0B6, Canada |
50% | 50% | 31 Dec '20 | 2.0 | -37.8 |
| Northwest Connect Inc. (Incorporated in Canada) |
1321 Blanshard St., Suite 301, Victoria BC, V8W 0B6, Canada |
50% | 50% | N/A2 | N/A2 | N/A2 |
| Northwest Connect Investment Inc. (Incorporated in Canada) |
1321 Blanshard St., Suite 301, Victoria BC, V8W 0B6, Canada |
50% | 50% | N/A2 | N/A2 | N/A2 |
| Northwest Parkway LLC | 3701 Northwest Parkway, Broomfield, CO 80023, USA | 33% | 33% | N/A2 | N/A2 | N/A2 |
| NWP Holdco LLC | 3701 Northwest Parkway, Broomfield, CO 80023, USA | 33% | 33% | 31 Dec '20 | -9.5 | 268.6 |
| Ochre Solutions (Holdings) Limited | Third Floor Broad Quay House, Prince Street, Bristol, United Kingdom, BS1 4DJ |
40% | 40% | N/A2 | N/A2 | N/A2 |
| Ochre Solutions Limited | Third Floor Broad Quay House, Prince Street, Bristol, United Kingdom, BS1 4DJ |
40% | 40% | 31 Dec 19 | -2.6 | -73.8 |
| Paradigm (Sheffield BSF) Holdings Limited |
Third Floor Broad Quay House, Prince Street, Bristol, United Kingdom, BS1 4DJ |
59% | 59% | N/A2 | N/A2 | N/A2 |
| Paradigm (Sheffield BSF) Limited | Third Floor Broad Quay House, Prince Street, Bristol, United Kingdom, BS1 4DJ |
59% | 59% | N/A2 | N/A2 | N/A2 |
| PFF (Dorset) Limited | Unit 18 Riversway Business Village Navigation Way, Ashton On-Ribble, Preston, United Kingdom, PR2 2YP |
100% | 100% | N/A2 | N/A2 | N/A2 |
| Pi2 B.V (Incorporated in Holland) | c/o BAM PPP Nederland B.V., Runnenburg 9, 3981 AZ Bunnik, Netherlands |
100% | 100% | N/A2 | N/A2 | N/A2 |
| Pi2 Holding B.V (Incorporated in Holland) |
c/o BAM PPP Nederland B.V., Runnenburg 9, 3981 AZ Bunnik, Netherlands |
100% | 100% | N/A2 | N/A2 | N/A2 |
| Shareholding | Profit / | Aggregate Capital & |
||||
|---|---|---|---|---|---|---|
| 31-Mar | 31-Mar | Year | (Loss) | Reserves | ||
| Entity PIP Infrastructure Investments (Southmead) Ltd |
Registered address Cannon Place, 78 Cannon Street, London, United Kingdom, EC4N 6AF |
2021 25% |
2020 25% |
end N/A2 |
£m N/A2 |
£m N/A2 |
| Playton- Saclay | 1 Avenue Eugène Freyssinet, 78280 Guyancourt, France | 85% | 85% | 31 Mar '20 | – | 37.8 |
| PPP Services (North Ayrshire) Holdings Limited |
Infrastructure Managers Limited, 2nd Floor, 11 Thistle Street, Edinburgh, EH2 1DF |
26% | 26% | N/A2 | N/A2 | N/A2 |
| PPP Services (North Ayrshire) Limited | Infrastructure Managers Limited, 2nd Floor, 11 Thistle Street, Edinburgh, EH2 1DF |
26% | 26% | N/A2 | N/A2 | N/A2 |
| Prima 200 Fundco No 1 Limited | 5 The Triangle, Wildwood Drive, Worcester, Worcestershire, United Kingdom, WR5 2QX |
60% | 60% | N/A2 | N/A2 | N/A2 |
| Prima 200 Fundco No 2 Limited | 5 The Triangle, Wildwood Drive, Worcester, Worcestershire, United Kingdom, WR5 2QX |
60% | 60% | N/A2 | N/A2 | N/A2 |
| Prima 200 Fundco No 3 Limited | 5 The Triangle, Wildwood Drive, Worcester, Worcestershire, United Kingdom, WR5 2QX |
60% | 60% | N/A2 | N/A2 | N/A2 |
| Prima 200 Limited | 5 The Triangle, Wildwood Drive, Worcester, Worcestershire, United Kingdom, WR5 2QX |
60% | 60% | N/A2 | N/A2 | N/A2 |
| Prime Infrastructure Investments Limited |
5 The Triangle, Wildwood Drive, Worcester, Worcestershire, United Kingdom, WR5 2QX |
50% | 50% | N/A2 | N/A2 | N/A2 |
| Prime LIFT Investments | 5 The Triangle, Wildwood Drive, Worcester, Worcestershire, United Kingdom, WR5 2QX |
100% | 100% | N/A2 | N/A2 | N/A2 |
| Prisma 21 (Incorporated in France) | 1 avenue Eugène Freyssinet, 78280 Guyancourt, France | 85% | 85% | N/A2 | N/A2 | N/A2 |
| Prospect Healthcare (Hinchingbrooke) Holdings Limited |
8 White Oak Square, London Road, Swanley, Kent, United Kingdom, BR8 7AG |
75% | 75% | N/A2 | N/A2 | N/A2 |
| Prospect Healthcare (Hinchingbrooke) Limited |
8 White Oak Square, London Road, Swanley, Kent, United Kingdom, BR8 7AG |
75% | 75% | N/A2 | N/A2 | N/A2 |
| Ravensbourne Health Services Holdings Limited |
Cannon Place, 78 Cannon Street, London, United Kingdom, EC4N 6AF |
100% | 100% | N/A2 | N/A2 | N/A2 |
| Ravensbourne Health Services Limited |
Cannon Place, 78 Cannon Street, London, United Kingdom, EC4N 6AF |
100% | 100% | N/A2 | N/A2 | N/A2 |
| RBLH Limited | Level 7 One Bartholomew Close, Barts Square, London, United Kingdom, EC1A 7BL |
100% | 100% | N/A2 | N/A2 | N/A2 |
| RBLH Medway Investment Company Limited |
Level 7 One Bartholomew Close, Barts Square, London, United Kingdom, EC1A 7BL |
100% | 100% | N/A2 | N/A2 | N/A2 |
| RBLH RWF Investment Company Limited |
Level 7 One Bartholomew Close, Barts Square, London, United Kingdom, EC1A 7BL |
100% | 100% | N/A2 | N/A2 | N/A2 |
| Redwood Partnership Ventures 2 Limited |
10 St. Giles Square, London, United Kingdom, WC2H 8AP | 75% | 75% | 31 Dec 19 | -3.8 | 30.9 |
| Redwood Partnership Ventures 3 Limited |
10 St. Giles Square, London, United Kingdom, WC2H 8AP | 100% | 100% | N/A2 | N/A2 | N/A2 |
| Redwood Partnership Ventures Limited |
10 St. Giles Square, London, United Kingdom, WC2H 8AP | 50% | 50% | 31 Dec 19 | 1.7 | -38.9 |
| Renaissance Miles Platting Holding Company Limited |
Third Floor Broad Quay House, Prince Street, Bristol, United Kingdom, BS1 4DJ |
50% | 50% | N/A2 | N/A2 | N/A2 |
| Renaissance Miles Platting Limited | Third Floor Broad Quay House, Prince Street, Bristol, United Kingdom, BS1 4DJ |
50% | 50% | N/A2 | N/A2 | N/A2 |
| RL Investment Limited | Level 7 One Bartholomew Close, Barts Square, London, United Kingdom, EC1A 7BL |
100% | 100% | N/A2 | N/A2 | N/A2 |
| Road Infrastructure (Ireland) Limited | Level 7 One Bartholomew Close, Barts Square, London, United Kingdom, EC1A 7BL |
100% | 100% | N/A2 | N/A2 | N/A2 |
| RSP (Holdings) Limited | Precision House, Mcneil Drive, Motherwell, United Kingdom, ML1 4UR |
30% | 30% | N/A2 | N/A2 | N/A2 |
| RWF Health and Community Developers (Tranche 1) Limited |
55 Station Road, Beaconsfield, Buckinghamshire, United Kingdom, HP9 1QL |
60% | 60% | N/A2 | N/A2 | N/A2 |
| Shareholding | Profit / | Aggregate Capital & |
|||||
|---|---|---|---|---|---|---|---|
| 31-Mar | 31-Mar | Year | (Loss) | Reserves | |||
| Entity RWF Health and Community Developers Limited |
Registered address 55 Station Road, Beaconsfield, Buckinghamshire, United Kingdom, HP9 1QL |
2021 60% |
2020 60% |
end N/A2 |
£m N/A2 |
£m N/A2 |
|
| S&W (Hold Co Two) Limited | Second Floor, 46 Charles Street, Cardiff, United Kingdom, CF10 2GE |
80% | 80% | N/A2 | N/A2 | N/A2 | |
| S&W (Hold Co) One Limited | Second Floor, 46 Charles Street, Cardiff, United Kingdom, CF10 2GE |
80% | 80% | N/A2 | N/A2 | N/A2 | |
| S&W TLP (Project Co One) Limited | Second Floor, 46 Charles Street, Cardiff, United Kingdom, CF10 2GE |
80% | 80% | N/A2 | N/A2 | N/A2 | |
| S&W TLP (Project Co Two) Limited | Second Floor, 46 Charles Street, Cardiff, United Kingdom, CF10 2GE |
80% | 80% | N/A2 | N/A2 | N/A2 | |
| S&W TLP (PSP One) Limited | Level 7 One Bartholomew Close, Barts Square, London, United Kingdom, EC1A 7BL |
100% | 100% | N/A2 | N/A2 | N/A2 | |
| S&W TLP (PSP Three) Limited | Level 7 One Bartholomew Close, Barts Square, London, United Kingdom, EC1A 7BL |
100% | 100% | N/A2 | N/A2 | N/A2 | |
| S&W TLP (PSP Two) Limited | Level 7 One Bartholomew Close, Barts Square, London, United Kingdom, EC1A 7BL |
100% | 100% | N/A2 | N/A2 | N/A2 | |
| S&W TLP Education Partnership Limited |
Second Floor, 46 Charles Street, Cardiff, United Kingdom, CF10 2GE |
80% | 80% | N/A2 | N/A2 | N/A2 | |
| Salford Schools Solutions Holdings Limited |
Third Floor Broad Quay House, Prince Street, Bristol, United Kingdom, BS1 4DJ |
26% | 26% | N/A2 | N/A2 | N/A2 | |
| Salford Schools Solutions Limited | Third Floor Broad Quay House, Prince Street, Bristol, United Kingdom, BS1 4DJ |
26% | 26% | N/A2 | N/A2 | N/A2 | |
| Schools Capital Ltd | Cannon Place, 78 Cannon Street, London, United Kingdom, EC4N 6AF |
51% | 51% | N/A2 | N/A2 | N/A2 | |
| Schools Investment Company (Irl) Limited |
Level 7 One Bartholomew Close, Barts Square, London, United Kingdom, EC1A 7BL |
100% | 100% | N/A2 | N/A2 | N/A2 | |
| Schools Public / Private Partnership (Ireland) Limited |
Suite 54, Morrison Chambers, 32 Nassau Street, Dublin 2, Ireland |
50% | 50% | N/A2 | N/A2 | N/A2 | |
| Services Support (Cleveland) Holdings Limited |
8 White Oak Square, London Road, Swanley, Kent, United Kingdom, BR8 7AG |
100% | 100% | N/A2 | N/A2 | N/A2 | |
| Services Support (Cleveland) Limited | 8 White Oak Square, London Road, Swanley, Kent, United Kingdom, BR8 7AG |
100% | 100% | N/A2 | N/A2 | N/A2 | |
| Services Support (Gravesend) Holdings Limited |
8 White Oak Square, London Road, Swanley, Kent, United Kingdom, BR8 7AG |
73% | 73% | N/A2 | N/A2 | N/A2 | |
| Services Support (Gravesend) Limited |
8 White Oak Square, London Road, Swanley, Kent, United Kingdom, BR8 7AG |
73% | 73% | N/A2 | N/A2 | N/A2 | |
| Services Support (Manchester) Holdings Limited |
8 White Oak Square, London Road, Swanley, Kent, United Kingdom, BR8 7AG |
73% | 73% | N/A2 | N/A2 | N/A2 | |
| Services Support (Manchester) Limited |
8 White Oak Square, London Road, Swanley, Kent, BR8 7AG |
73% | 73% | N/A2 | N/A2 | N/A2 | |
| Services Support (Manchester) Limited |
8 White Oak Square, London Road, Swanley, Kent, BR8 7AG |
73% | 73% | 31 Dec '19 | N/A2 | N/A2 | |
| Services Support (SEL) Holdings Limited |
8 White Oak Square, London Road, Swanley, Kent, United Kingdom, BR8 7AG |
50% | 50% | N/A2 | N/A2 | N/A2 | |
| Services Support (SEL) Limited | 8 White Oak Square, London Road, Swanley, Kent, United Kingdom, BR8 7AG |
50% | 50% | N/A2 | N/A2 | N/A2 | |
| Sheffield Limited Education Partnership Limited (LEP) |
Unit 18 Riversway Business Village Navigation Way, Ashton On-Ribble, Preston, United Kingdom, PR2 2YP |
50% | 50% | N/A2 | N/A2 | N/A2 | |
| Sheffield Schools Topco Limited | 10 St. Giles Square, London, United Kingdom, WC2H 8AP | 75% | 50% | N/A2 | N/A2 | N/A2 |
| Shareholding | Profit / | Aggregate Capital & |
||||
|---|---|---|---|---|---|---|
| Entity | Registered address | 31-Mar 2021 |
31-Mar 2020 |
Year end |
(Loss) £m |
Reserves £m |
| Sheppey Route (Holdings) Limited | Cannon Place, 78 Cannon Street, London, United Kingdom, EC4N |
50% | 50% | 31 Dec '19 | 1.6 | -41.9 |
| Sheppey Route Limited | Cannon Place, 78 Cannon Street, London, United Kingdom, EC4N 6AF |
50% | 50% | N/A2 | N/A2 | N/A2 |
| Sussex Custodial Services (Holdings) Limited |
Unit 18 Riversway Business Village Navigation Way, Ashton On-Ribble, Preston, United Kingdom, PR2 2YP |
100% | 100% | N/A2 | N/A2 | N/A2 |
| Sussex Custodial Services Limited | Unit 18 Riversway Business Village Navigation Way, Ashton On-Ribble, Preston, United Kingdom, PR2 2YP |
100% | 100% | N/A2 | N/A2 | N/A2 |
| The Hospital Company (Oxford John Radcliffe) Holdings Limited |
2 Hunting Gate, Hitchin, Hertfordshire, United Kingdom, SG4 0TJ |
100% | 100% | N/A2 | N/A2 | N/A2 |
| The Hospital Company (Oxford John Radcliffe) Limited |
2 Hunting Gate, Hitchin, Hertfordshire, United Kingdom, SG4 0TJ |
100% | 100% | 31 Dec '19 | -19.4 | -90.3 |
| The Hospital Company (QAH Portsmouth) Holdings Limited |
2 Hunting Gate, Hitchin, Hertfordshire, United Kingdom, SG4 0TJ |
100% | 100% | N/A2 | N/A2 | N/A2 |
| The Hospital Company (QAH Portsmouth) Limited |
2 Hunting Gate, Hitchin, Hertfordshire, United Kingdom, SG4 0TJ |
100% | 100% | N/A2 | N/A2 | N/A2 |
| The Hospital Company (Southmead) Limited |
8 White Oak Square, London Road, Swanley, England, BR8 7AG |
63% | 63% | N/A2 | N/A2 | N/A2 |
| The Hospital Company (Southmead) Holdings Limited |
8 White Oak Square, London Road, Swanley, Kent, United Kingdom, BR8 7AG |
63% | 63% | N/A2 | N/A2 | N/A2 |
| The Renfrewshire Schools Partnership Limited |
Precision House, Mcneil Drive, Motherwell, United Kingdom, ML1 4UR |
30% | 30% | N/A2 | N/A2 | N/A2 |
| Transpark Highway Finance Inc. (Incorporated in Canada) |
1321 Blanshard St., Suite 301, Victoria BC, V8W 0B6, Canada |
50% | 50% | N/A2 | N/A2 | N/A2 |
| Transpark Highway General Partnership (Incorporated in Canada) |
1321 Blanshard St., Suite 301, Victoria BC, V8W 0B6, Canada |
50% | 50% | N/A2 | N/A2 | N/A2 |
| Transpark Highway Holdings Inc. (Incorporated in Canada) |
1321 Blanshard St., Suite 301, Victoria BC, V8W 0B6, Canada |
50% | 50% | N/A2 | N/A2 | N/A2 |
| Transpark Highway Inc. (Incorporated in Canada) |
1321 Blanshard St., Suite 301, Victoria BC, V8W 0B6, Canada |
50% | 50% | N/A2 | N/A2 | N/A2 |
| Transpark Highway Investment Inc. (Incorporated in Canada) |
1321 Blanshard St., Suite 301, Victoria BC, V8W 0B6, Canada |
50% | 50% | N/A2 | N/A2 | N/A2 |
| TW Accommodation Limited | Cannon Place, 78 Cannon Street, London, United Kingdom, EC4N 6AF |
100% | 100% | N/A2 | N/A2 | N/A2 |
| TW Accommodation Services (Holdings) Limited |
Cannon Place, 78 Cannon Street, London, United Kingdom, EC4N 6AF |
100% | 100% | N/A2 | N/A2 | N/A2 |
| UK GDN Investments Holdco Ltd | Level 7 One Bartholomew Close, Barts Square, London, United Kingdom, EC1A 7BL |
100% | 100% | N/A2 | N/A2 | N/A2 |
| UK GDN Investments Ltd | Level 7 One Bartholomew Close, Barts Square, London, United Kingdom, EC1A 7BL |
100% | 100% | N/A2 | N/A2 | N/A2 |
| UK GDN Investments Topco Ltd | Level 7 One Bartholomew Close, Barts Square, London, United Kingdom, EC1A 7BL |
100% | 100% | N/A2 | N/A2 | N/A2 |
| Willcare (MIM) Limited | 128 Buckingham Palace Road, London, United Kingdom, SW1W 9SA |
100% | 100% | N/A2 | N/A2 | N/A2 |
| Willcare Holdings Limited | 128 Buckingham Palace Road, London, United Kingdom, SW1W 9SA |
100% | 100% | N/A2 | N/A2 | N/A2 |
| Wooldale Partnerships Holdings Limited |
10 St. Giles Square, London, United Kingdom, WC2H 8AP | 50% | 50% | N/A2 | N/A2 | N/A2 |
| Wooldale Partnerships Limited | 10 St. Giles Square, London, United Kingdom, WC2H 8AP | 50% | 50% | N/A2 | N/A2 | N/A2 |
| Shareholding | Profit / | Aggregate Capital & |
||||
|---|---|---|---|---|---|---|
| Entity | Registered address | 31-Mar 2021 |
31-Mar 2020 |
Year end |
(Loss) £m |
Reserves £m |
| Yorker Holdings PKR Limited | Level 7 One Bartholomew Close, Barts Square, London, United Kingdom, EC1A 7BL |
100% | 100% | 31 Dec 19 | -1.0 | -86.2 |
| Zealburg Holdings Limited | Level 7 One Bartholomew Close, Barts Square, London, United Kingdom, EC1A 7BL |
100% | 100% | N/A2 | N/A2 | N/A2 |
1 Denotes a direct shareholding
2 In line with Companies Act requirements, no disclosure has been made where capital and reserves and profit or loss amounts are not considered to be material
| Item | Definition |
|---|---|
| Acquisition Strategy | This identifies the scope for current acquisitions, further details can be found in Section 2.2 – HICL's Business Model & Strategy |
| 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 United Kingdom trade association for the closed-ended investment company industry |
| AIC Code | The 2019 AIC Code of Corporate Governance |
| AMP7 | The UK water industry regulatory period from 2020 to 2025 |
| 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. See Section 2.3 – The Infrastructure Market |
| Corporate Group | Refers to HICL and its Corporate Subsidiaries |
| Corporate Subsidiaries | The Luxembourg subsidiaries and the English limited partnership (the "Partnership"), being HICL Infrastructure 1 S.a.r.l, HICL Infrastructure 2 S.a.r.l and Infrastructure Investments Limited Partnership until 12 March 2020, and HICL Infrastructure 2 S.a.r.l and Infrastructure Investments Limited Partnership thereafter |
| Demand-based assets | Infrastructure assets with revenues linked to the usage of the underlying assets. See Section 2.3 – The Infrastructure Market |
| Directors' Valuation | Fair market valuation of HICL's investments, further details can be found in Section 3.2 – Valuation of the Portfolio |
| 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 |
| Item | Definition |
|---|---|
| Investment Policy | HICL's Investment Policy has not materially changed since IPO and can be found on the website at https://www.hicl.com/about-us/strategy-investment-policy/ |
| 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, being 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 the share price is known as the discount or premium |
| Ofwat | The Water Services Regulation Authority |
| Ongoing charges | A measure of the regular, recurring costs of running an investment company, expressed as a percentage of NAV |
| Operating company | A company that owns and operates infrastructure assets |
| Partnership | Infrastructure Investments Limited Partnership |
| Portfolio company | Project Companies and Operating Companies to HICL 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 or agencies usually in return for an availability payment. See Section 2.3 – The Infrastructure Market |
| PR19 | Ofwat's final methodology for the 2019 Price Review, covering the regulatory period from 2020 to 2025 ("AMP7") |
| PRI | Principles for Responsible Investment |
| Project company | An infrastructure project or concession with a defined expiry date, including a special purpose company (or other 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. See Section 2.3 – The Infrastructure Market |
| Revolving Credit Facility | An acquisition facility provided by lenders, held via a Corporate Subsidiary and expiring in May 2023. See Section 3.1 – Financial Review and Note 16 to the financial statements |
| 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 SDG | United Nations' Sustainable Development Goals |
Ian Russell, CBE (Chairman) Rita Akushie Mike Bane Frances Davies Susie Farnon Simon Holden Frank Nelson Kenneth D. Reid
One Bartholomew Close Barts Square London EC1A 7BL
Link Asset Services The Registry 34 Beckenham Road Beckenham Kent BR3 4T Helpline: 0871 664 0300
Aztec Financial Services (UK) Limited Forum 4, Solent Business Park Parkway South Whiteley Fareham PO15 7AD
One Bartholomew Close Barts Square London EC1A 7BL +44 (0)20 7484 1800
Teneo Strategy Limited 5th Floor 6 More London Place London SE1 2DA
KPMG LLP 15 Canada Square London E14 5GL
Investec Bank plc 30 Gresham Street London EC2V 7QP
RBC Capital Markets 2 Swan Lane London EC4R 3BF
HICL Infrastructure PLC 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.
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.
Aztec Financial Services (UK) Limited
£3.0bn as at 31 March 2021
Market Capitalisation £3.2bn as at 31 March 2021
1.1% per annum of the Adjusted Gross Asset Value1 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).
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.
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.
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.
HICL has registered for FATCA and has GIIN number E6TB47.99999.SL.826
HICL's Investment Policy is set out in Section 3.8 – Strategic Report Disclosures of the Company's 2021 Annual Report and can be found in full on the website at www.hicl.com
ISIN: GB00BJLP1Y77
SEDOL: BJLP1Y7
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)
One Bartholomew Close Barts Square London EC1A 7BL
T +44 (0)203 818 0246
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