HICL Infrastructure Regulatory News (HICL)

7 October 2010

HSBC Infrastructure Company Limited

HICL signs contract to acquire investments in four PFI/P3 projects for £65.9 million

HSBC Infrastructure Company Limited ("HICL" or the "Company", and together with its subsidiaries the "Group"), the listed infrastructure investment company, announces today that the Group has signed a binding conditional agreement to acquire an interest in two UK PFI and in two Canadian P3 projects from subsidiaries of Bilfinger Berger AG ("Bilfinger Berger"). Total consideration, including deferred investment subscription obligations of approximately £46.1 million, is approximately £65.9 million at current exchange rates.

The four interests are:

·; a 50% interest in the Kent Schools PFI project ("Kent Schools PFI"),

·; a 41.6% indirect interest in the M80 motorway DBFO project currently under construction in Scotland (the "M80 DBFO Project"). Through the future exercise of options rights over minority interests, this interest will increase to 49.9%,

·; a 50% interest in the North-West Anthony Henday ring road P3 project currently in construction in Alberta, Canada ("North-West Anthony Henday P3"), and

·; a 50% interest in the Kicking Horse Canyon Transit P3 project in British Columbia, Canada ("Kicking Horse P3"), part of the Trans-Canada Highway.

Completion of the acquisition of these assets is expected to occur by the end of the year once certain conditions have been met and third party approvals have been obtained.

The price paid is in line with the valuation of similar PFI and PPP investments in the Company's current portfolio, and in line with current valuations in the Canadian P3 market.

The acquisition of equity and loan notes will be funded from the Group's existing cash resources and debt facility. It takes the number of infrastructure investments in HICL's portfolio to 38.

Werner von Guionneau, Director, HSBC Specialist Fund Management Limited, HICL's Investment Adviser, said: "The team is pleased to have acquired these investments in these high quality PFI/P3 assets. The acquisitions are in line with the Group's strategy to seek quality PFI/PPP/P3 infrastructure assets in the UK and in countries with developed PPP programmes such as Canada. The acquisition of investments in the M80 DBFO project and the North-West Anthony Henday P3 fits the Company's strategy of having a small number of assets in construction, which are able to deliver NAV uplift once they become fully operational.

We look forward to working with our partner, Bilfinger Berger, and all stakeholders to ensure that these projects are well-managed and successful. These new investments are an excellent addition to the existing portfolio and increase its diversity in terms of both geography and project phase."

-ends-

HSBC Infrastructure Company Limited

The Company is a long term investor in infrastructure projects which are predominantly in their operating phase and yielding steady returns. Once these acquisitions are completed, the Company will own a portfolio of 38 infrastructure projects of which 35 will be operational. Based on the 31 March 2010 Directors' valuation plus subsequent acquisitions at cost, on completion of these acquisitions, around 10% of the portfolio by value will be projects under construction.

The Company is seeking further suitable investment opportunities in line with its strategy set out most recently in the Company's results announced on 25 May 2010, and its Investor Update RNS of 23 September 2010.

Further details of the Company can be found on its web site www.hicl.hsbc.com

Investment Adviser

The Investment Adviser to the Company is HSBC Specialist Fund Management Limited, the infrastructure investment team of which has successfully invested in infrastructure projects since 1997 and which is part of HSBC Specialist Investments, the infrastructure and real estate investment arm of the HSBC Group. It was announced on 4 June 2010 that heads of terms had been agreed with HSBC for the business to become an affiliate of HSBC (from its current status of a 100% owned subsidiary). HSBC Specialist Fund Management Limited is authorised and regulated by the Financial Services Authority.

Further information on the four new Projects

The M80 DBFO Project, between Stepps and Haggs in Scotland, involves the upgrade of a ten kilometre stretch of the existing M80, as well as a new eight kilometre section of motorway, seven new junctions and 60 additional structures. The project is currently 18 months into a three year construction period, with works being performed under a Bilfinger Berger UK, Northstone (NI) Ltd ("Northstone") and John Graham (Dromore) Ltd ("John Graham") joint venture. The project is on schedule to complete in December 2011 and will operate under a 30 year concession contract thereafter. Once operational the project will be paid an Availability revenue stream. The motorway is to be operated and maintained by BEAR Scotland Ltd under a long-term services agreement. The Company will be taking a minority stake alongside Bilfinger Berger, Northstone and John Graham.

The Kent Schools PFI project has been operational since June 2007 and involves the ongoing operation and maintenance of six secondary schools in Kent. The revenue is based on the Availability revenue model. The schools were constructed by Costain Ltd and William Verry Ltd and benefit from a long-term facilities management agreement with Mitie PFI Ltd. The concession contract expires in 2035.

The North-West Anthony Henday P3 in Alberta, Canada comprises the design, build, financing and ongoing operation of a 21 kilometre stretch of the four and six lane ring-road surrounding the city of Edmonton. The project is currently under construction, with operations scheduled to begin in November 2011. Construction is being carried out by a joint venture comprising Flatiron Constructors Canada Limited, Parsons Overseas Company of Canada Ltd and Graham Infrastructure, itself a JV between Graham Infrastructure LP and Jardeg Construction Service LP. The project has an Availability revenue stream once operational. The ongoing operations and maintenance will be carried out by Carmacks Maintenance Services Ltd, under a long-term services agreement. The concession contract lasts for 30 years from the beginning of operations, expiring no later than November 2041.

Finally, the Kicking Horse P3 project forms part of the Trans-Canada Highway, extending through the Canadian Rocky Mountains between British Columbia and Alberta. The project comprised the upgrading of approximately six kilometres of highway and the operation and maintenance of a 26 kilometre stretch of highway in total. The key feature is a 400m four-lane bridge across Kicking Horse Canyon. Construction works were carried out by Trans-Park Highway Constructors, a joint venture comprising Flatiron Constructors Canada Ltd and Parsons Overseas Company of Canada Ltd. Revenue on the project is dependent on traffic volumes in different tariff bands. Traffic volumes are currently above the highest band, thus generating the maximum annual revenue. The revenue is relatively insensitive to changes in traffic volumes due to the banding structure. In other respects the revenue is similar to an Availability Revenue stream in that it is paid by the public sector client rather than by drivers of vehicles using the road. Operations began in March 2008 with operations and maintenance services being performed by HMC Services Inc. The concession runs to 2037.