HICL sees 34% portfolio valuation increase

The London-listed infrastructure fund manager saw the value of its portfolio rise from just over £673m to £902m between March 2011 and March 2012. Announcing its annual results, the firm revealed it had negotiated a fee reduction from its investment adviser, InfraRed Capital Partners.

HICL Infrastructure Company (HICL), the London-listed public-private partnership (PPP) and Private Finance Initiative (PFI) specialist, saw the value of its portfolio increase from £673.1 million (€836.5 million; $1.1 billion) to £902.0 million in the year to 31 March 2012. The firm also revealed a negotiated reduction in management fees and said it was continuing to look at ways of meeting the UK government’s “value for money” agenda.

HICL – which raised £325.9 million before expenses during the course of the year and invested almost £237 million – delivered a net asset value (NAV) per ordinary share post-distribution of 112.8 pence compared with 109.7 pence a year earlier – an increase of 2.8 percent. It made total distributions of 6.85 pence – an increase of 2.2 percent – and said it was targeting a 7.0 pence per share distribution for the year to 31 March 2013.

“Last year was a busy year with a large number of new assets acquired and a lot of capital raised,” Tony Roper, director of InfraRed Capital Partners – which advises HICL – told Infrastructure Investor. “Demand continues to be strong from investors who want yield and capital preservation.”

In the announcement, HICL revealed that it had agreed with investment adviser InfraRed Capital Partners a step down in the fee taper when assets under management exceed £1.5 billion. The fee will drop to 0.9 percent per annum from the 1.0 percent applicable to assets above £750 million and will take effect from 1 July 2012.

“The fee taper was raised by the board, there was nothing pre-agreed,” said Roper. “It was a mutual agreement. HICL has very transparent fees and some of the best in the space. This is important because investors are looking very carefully at fee models.”

Roper said that HICL was continuing to look at ways of maximising value for money for public sector clients following the UK government’s criticism of the PFI model and the Treasury’s call in July last year for £1.5 billion of savings to be found from England’s operational PFI projects, which numbered 495 at the time.

“We are seeking to maximise the return for our investors but we also have a duty to our public sector clients to find efficiencies,” acknowledged Roper. “We have sought to deliver savings and that will continue this year. In the UK, we offer meetings to our public sector clients and some of them want to engage while some don’t.”

In its results announcement, HICL provides five examples of projects where it has implemented “contract variations”. These include Central Middlesex Hospital, where an interest rate basis swap was introduced, with the effect of reducing senior debt interest costs on the project by about 0.4 percent per annum over a five-year period. The cost savings are being shared 50:50 with the NHS Trust.