HICL Infrastructure Regulatory News (HICL)

05 September 2022

HICL Infrastructure PLC

"HICL" or the "Company" and, together with its subsidiaries, the "Group", the London-listed infrastructure investment company managed by InfraRed Capital Partners Limited ("InfraRed" or the "Investment Manager").

Acquisition Activity

The Board is pleased to announce two prospective acquisitions to the Company's portfolio:

· The acquisition of a significant minority shareholding in Texas Nevada Transmission LLC ("TNT"), a US electricity transmission asset; and

· The award of preferred bidder status for the assets associated with the Hornsea II Offshore Wind Farm offshore transmission link (the "Hornsea II OFTO")

The Company will be hosting a short webcast to discuss the TNT acquisition at 3:00pm UK time today. To register for the call and to submit questions, please email HICL@teneo.com.

US Electricity Transmission Asset - TNT

HICL has agreed to acquire a 45.75% shareholding in Texas Nevada Transmission LLC ("TNT") in the United States, from Manulife Investment Management and John Hancock entities. Following completion of the transaction, TNT will represent approximately 6% of HICL's portfolio, by value1.

Through TNT, HICL is acquiring equity interests in two distinct electric transmission entities:

· A 45.75% indirect shareholding in Cross Texas Transmission LLC ("CTT"), a regulated electric transmission utility in Texas which operates under a cost-of-service recovery model, regulated by the Public Utility Commission of Texas ("PUCT"). It comprises approximately 289 miles of 345 kV transmission lines and four switching stations, the majority of which commenced operations in 2013; and

· A 45.75% indirect shareholding in Great Basin Transmission South LLC ("GBTS"), which owns a 75% interest in the One Nevada Transmission Line ("ON Line"), a 231 mile 500 kV electric transmission line and substation which connects two utility systems in Nevada and receives long-term contracted cash flows under a Transmission Use Agreement with NV Energy, an indirect subsidiary of Berkshire Hathaway Inc. (rated AA by S&P). NV Energy holds the remaining 25% ownership interest in ON Line. ON Line has been operational since 2014.

As an essential energy transmission infrastructure asset, TNT benefits from very long-term, predictable cash flows and high barriers to entry. The acquisition increases HICL's allocation to regulated assets that benefit from perpetual asset lives and structural protections to rising interest rates via the regulated return on equity. The investment is accretive to key portfolio metrics.

TNT's transmission infrastructure is also expected to play a key role in the energy transition as the US build-out of renewables is accelerated. CTT was awarded projects under Texas's Competitive Renewable Energy Zone programme in 2009, a regional transmission expansion plan designed to unlock grid capacity constraints and facilitate the future build of renewable generation in the state. Currently, CTT has over 900 MWs of wind generation connected to its system.

This investment sees HICL partner with LS Power, a leading US electricity system developer and operator who has successfully developed more than 13 GW of power generation and over 660 miles of transmission infrastructure. LS Power has significant indirect shareholdings in both CTT and GBTS.

This is HICL's fifth investment in North America and the investment was led by InfraRed's Americas team, comprising over 25 professionals, active across core and energy infrastructure. The team is headed by Jack Paris who joined InfraRed in 2021 and prior to this was Co-Head of Citi's Global Power & Renewables investment banking business. InfraRed's Asset Management team in the Americas is led by Jay Crawford who joined InfraRed in 2021. Jay has over 20 years of energy and infrastructure experience with senior asset management roles at Cogentrix Energy, Calpine, and Nextera Energy Resources.

Completion of the transaction is subject to regulatory approvals and customary third-party consents and is expected to take place before HICL's 31 March 2023 year end. The investment will be funded from HICL's £730m credit facility, which is currently undrawn.

Edward Hunt, Head of Core Income Funds at InfraRed said:

"InfraRed is delighted to embark on this partnership with LS Power, a pre-eminent electricity system operator in the US. TNT delivers long-term predictable income under regulated and contracted frameworks, while supplying an essential utility, bolstering network resilience and enabling the transition to renewable energy sources in the states of Texas and Nevada. This acquisition fits firmly within HICL's vision to support sustainable modern economies and is another example of InfraRed's international footprint and network enabling HICL to execute its strategic priorities."

Hornsea II OFTO

The Company disclosed in its Annual Report 2022 that it had re-entered its partnership with the Mitsubishi subsidiary, Diamond Transmission Corporation, to bid for the offshore transmission assets associated with the Hornsea II Windfarm (Hornsea II OFTO). This consortium, Diamond Transmission Partners Hornsea Two Limited, has now been selected by Ofgem as the preferred bidder to own and operate the Hornsea II OFTO. The Hornsea II OFTO represents the fifth successful bid by the partnership of HICL and Diamond Transmission Corporation Limited.

The offshore transmission owner regime covers regulated assets, known as OFTOs, which take ownership of an operational transmission asset and receive contractual, availability-based revenues over a 24-year period. This investment does not have exposure to construction risk, electricity production risk or power price risk. 

The consideration for HICL's 75% share of the economic interest in the Hornsea II OFTO is expected to represent approximately 3% of HICL's portfolio by value1. The investment is anticipated to reach financial close in H1 2023 and will be funded at that time from the Company's £730m corporate credit facility.

1. Calculated using a portfolio value of £3,940m, which is determined using the Directors' Valuation of £3,311.0m as at 31 March 2022, less Queen Alexandra Hospital (£107.5m) plus commitments to invest in ADTiM, Aotearoa Towers, Cross London Trains, Texas Nevada Transmission and Hornsea II OFTO

-ends-

Enquiries

InfraRed Capital Partners Limited +44 (0) 20 7484 1800 / info@hicl.com

Edward Hunt

Helen Price

Mohammed Zaheer

Teneo +44 (0) 20 7420 3169/ HICL@teneo.com

Haya Herbert-Burns

Matthew Thomlinson

Investec Bank plc +44 (0) 20 7597 4952

David Yovichic

RBC Capital Markets +44 (0) 20 7653 4000

Matthew Coakes

Aztec Financial Services (UK) Limited +44 (0) 203 818 0246

Chris Copperwaite

Sarah Felmingham

HICL Infrastructure PLC

HICL Infrastructure PLC ("HICL") is a long-term investor in infrastructure assets which are predominantly operational and yielding steady returns. It was the first infrastructure investment company to be listed on the London Stock Exchange.

With a current portfolio of over 100 infrastructure investments, HICL is seeking further suitable opportunities in core infrastructure, which are inherently positioned at the lower end of the risk spectrum.

Further details can be found on the HICL website www.hicl.com.

Investment Manager (InfraRed Capital Partners)

The Investment Manager to HICL is InfraRed Capital Partners Limited ("InfraRed") which has successfully invested in infrastructure projects since 1997. InfraRed is a leading international investment manager, operating worldwide from offices in London, New York, Seoul and Sydney and managing equity capital in multiple private and listed funds, primarily for institutional investors across the globe. InfraRed is authorised and regulated by the Financial Conduct Authority.

The infrastructure investment team at InfraRed consists of over 100 investment professionals, all with an infrastructure investment background and a broad range of relevant skills, including private equity, structured finance, construction, renewable energy and facilities management.

InfraRed implements best-in-class practices to underpin asset management and investment decisions, promotes ethical behaviour and has established community engagement initiatives to support good causes in the wider community. InfraRed is a signatory of the Principles of Responsible Investment.

Further details can be found on InfraRed's website www.ircp.com.