HICL Infrastructure investments recovering in line with forecasts

The FTSE 250 company said the investment manager's activity during the period was focussed on the “continued and active support” of public sector clients and portfolio companies, as they adjusted to post Covid-19 operational requirements.

It said its demand-based investments, which represented 19% of portfolio value on 31 March, saw an easing of restrictions on movement in the UK, Europe and the United States, which had been positive for traffic performance on its GDP-correlated assets.

Traffic performance on the A63 motorway in France was in line with expectations, with revenues over the last four weeks at 96% of pre-Covid levels.

The Northwest Parkway in the US had continued its recovery, with traffic volumes “slightly ahead” of the forecast assumptions built into the March, valuation and equivalent to 77% of pre-Covid levels over the last four weeks.

Looking at High Speed 1 (HS1), which links the Channel Tunnel with London via Kent, HICL reported that domestic train path bookings had been pre-booked until May 2022 at reduced levels, and were “almost entirely” supported by an underpin from the Department for Transport.

International train paths were currently running at 15% of pre-Covid levels, which was “broadly in line” with expectations.

The recovery of international train path revenue remained dependent on the further easing of international travel restrictions, and an increase in cross border passenger demand between the UK and France, Belgium and the Netherlands.

It noted that, as highlighted by the recent continuation of quarantine for fully vaccinated travellers arriving from France, risk remained around the recovery of international train paths over the summer months, with associated increased pressure on the financial covenants of the company's debt facilities.

Discussions with key stakeholders, in particular the project lenders, were ongoing and remained “constructive”.

Finally, regulated assets, which represented 10% of portfolio value as at 31 March, saw Affinity Water publish its annual accounts alongside a strategic direction statement following consultation with key stakeholders including communities and customers.

HICL said Affinity was focusing on network resilience, environmental protection and consumer affordability.

As it said in its 2021 annual report, the investment manager had been “actively participating” in a pilot transition project to support the Infrastructure and Project Authority's initiative to coordinate a “smooth transition” from LIBOR to SONIA in the PPP market.

The pilot project transition had now been agreed with lenders, subject to client approval, and would form the basis of the rest of the portfolio transition.

InfraRed had also coordinated an industry response to the Financial Conduct Authority (FCA) consultation on the proposed use of synthetic LIBOR powers within the period.

Looking ahead, HICL said its portfolio was still demonstrating its resilience, with the toll road assets impacted by Covid-19 continuing to recover “broadly in line” with forecasts.

Active asset management was focussed on HS1 in particular, while each of HICL's three larger demand-based assets enjoyed “strong strategic positioning”, and were “well-placed” to continue to benefit from the broader economic recovery.

“Within our PPP investments, the focus is on actively supporting public sector clients as they adjust to post-pandemic requirements,” said chairman Ian Russell.

“Traffic on the company's toll roads is recovering in line with forecast; and, with the ongoing success of vaccination campaigns, we see a path to improved international travel for High Speed 1, albeit recent events have justified our caution in assessing the timing of this.”

Russell said that, as economies began to emerge from the pandemic, the current backdrop was “highly supportive” for infrastructure investment.

“At the same time, institutional investor appetite for core infrastructure continues to be elevated, and thus a structured, disciplined approach to risk and reward remains fundamentally important for HICL.

“The pipeline is healthy, with InfraRed focused on the successful execution of attractive opportunities for the company.”

At 0950 BST, shares in HICL Infrastructure were up 0.24% at 170p.