HICL to sell down £25m from Affinity Water buy

A group of UK local authority pension funds will acquire the stake in a planned deal which could sow the seeds for future transactions.

London-listed infrastructure fund HICL is set to sell a 3.4 percent share of its ownership in Affinity Water to a group of UK local authority pension funds, just three weeks after its initial investment.

The deal will reap the firm £25 million ($32.4 million; €28.9 million) when it completes in the next few weeks, with talks currently at an advanced negotiation stage. It will dilute HICL’s share from 36.6 percent to 33.2 percent.

HICL declined to reveal the identity of the pension funds but said the transaction was planned when it paid approximately £230 million for its share in the water firm at the beginning of this month. The company agreed a £687 million deal alongside Allianz Capital Partners and DIF Infrastructure IV for Affinity Water, buying out Morgan Stanley Infrastructure and Infracapital from their five-year ownership.

“These investors have an aligned appetite with HICL for this type of asset on a buy-and-hold basis,” HICL director Harry Seekings told Infrastructure Investor. “We're trying to facilitate these co-investment relationships and it gives us options for partnering up on larger transactions.”

HICL today announced a £176.8 million profit before tax for 2016/17 and a 4.8 percent rise in NAV per share to 149p. It also revealed its intention to raise about £205 million via a new tap issuance, a figure that could rise to £260 million, to fund its current investment pipeline. The firm completed its first open offer since 2013 in March, raising £260 million and above its original £205 million target.