HICL Infrastructure Regulatory News (HICL)

24 July 2015

HICL Infrastructure Company Limited

Quarterly Update Statement

The Board of HICL Infrastructure Company Limited, the listed infrastructure investment company advised by InfraRed Capital Partners Limited, is issuing this Quarterly Update Statement, which relates to the period from 1 April 2015 to 23 July 2015.

Graham Picken, Chairman of HICL Infrastructure Company Limited, said:

"We continue to seek value for shareholders by actively managing the assets in our investment portfolio, and by making off-market, relationship-based acquisitions. In the period, we also made a small disposal; initiated as the Board believed that the price offered was exceptional and the proceeds could be reinvested to achieve a better return.

As expected, the UK market for the type of assets sought by the Group remains highly competitive, with shortage of supply continuing to feed through into pricing. Despite strong investor appetite for exposure to infrastructure generally, and for the Company's equity in particular, the Board and InfraRed Capital Partners believe that investment discipline is key to delivering the long term yield and inflation protection to which we aspire.

We are positive about the prospects for the Company, from a continuation of robust portfolio performance to our ability to source value-accretive acquisitions, both here in the UK and, selectively, overseas. The Board re-affirms the target dividend per share of 7.45p for the current financial year.

Further to the announcement of 14 May 2015 regarding proposed changes to the Board of Directors, the Company is today providing further details of those changes. With effect from 1 March 2016, I shall stand down as Chairman to be succeeded by Ian Russell, who has been a member of the Board for over two years."

Investment Activity and Portfolio Performance

Since 1 April 2015, the Group has invested or committed an aggregate £103.8m in the acquisition of incremental stakes in two existing projects and one new investment. If shareholder approval is given in respect of the conditional acquisition of the RCMP Project (referred to below), this figure would increase to approximately £130m.

The largest investment in the period was a new acquisition, which comprised a 50% stake in Southmead Hospital for £87.8m. The project comprises a £430m, 35 year concession to design, build, finance, operate and maintain an 800-bed acute hospital on a single site at Southmead in North Bristol, on behalf of the North Bristol NHS Trust. The construction of the 102,000m2 new acute hospital building was completed in March 2014 and the hospital is now open for use.

The company has announced the conditional acquisition of the Royal Canadian Mounted Police 'E' Division Headquarters P3 Project in Surrey, British Columbia, Canada (the "RCMP Project") from the InfraRed Infrastructure Fund III, a fund managed by InfraRed Capital Partners Limited, the Company's Investment Adviser. As a matter of good corporate governance, the Board is seeking the approval of shareholders for the proposed acquisition of the RCMP Project at an Extraordinary General Meeting of the Company. A Circular relating to the EGM due to be held on Wednesday 12 August 2015 has been published, which sets out details of the transaction, the process and actions to be taken.

The Group, as part of a consortium, has been selected as preferred bidder to deliver 14 primary care centres across Ireland for Ireland's Health Service Executive with an anticipated equity commitment for the Group of around €10m.

The Company disposed of the Group's 50% interest in the Fife Schools Project in the period, delivering a profit, after costs, of £2.4m over the Directors' valuation of £4.9m as at 31 March 2014.

Construction completion has been achieved on Allenby and Connaught project and on University of Bourgogne Project, taking the proportion of the portfolio by value in construction to under 2%.

Overall, the portfolio continues to perform well with no new material issues affecting investment performance overall. Cash generation is expected to be ahead of the Company's forecasts for the six months to 30 September 2015.

Dividends and Financing

The Company announced a fourth quarterly interim dividend for the financial year ended 31 March 2015 of 1.87 pence per ordinary share (the "Q4 Dividend") on 14 May 2015. The shares went ex-dividend on 28 May 2015 and the Q4 Dividend was paid on 30 June 2015. The take-up of the scrip dividend was approximately 4.82%, resulting in an additional 0.75m ordinary shares being issued on 30 June 2015.

The Company announced a first quarterly interim dividend for the financial year ending 31 March 2016 of 1.86 pence per ordinary share (the "Q1 Dividend") on 22 July 2015. The shares will go ex-dividend on 27 August 2015 and the Q1 Dividend will be paid on 30 September 2015 to shareholders on the register as at the close of business on 28 August 2015.

Following receipt of shareholder approval at the AGM on 22 July 2015, a scrip dividend alternative will operate for the Q1 Dividend and each of the three subsequent quarterly interim dividends for the financial year ending 31 March 2016, full details of which are set out in the 'Scrip Dividend Circular 2015-16' on the 'Investor Relations' part of the Company's website (www.hicl.com).

The Board remains confident that the target aggregate dividend per share of 7.45p for the financial year to 31 March 2016, a 0.15p per share increase on the 2014-15 financial year, can be achieved.

The Board is proposing to raise approximately £48m of new capital imminently, through a tap issuance of new Ordinary Shares. The net proceeds of the issue will be applied in addressing the Company's current net funding requirement. The Directors reserve the right to increase the size of the issue in the event of excess demand for such new Ordinary Shares to meet planned commitments and well advanced pipeline opportunities.

Company and Governance

As at the date of this announcement, the Company's issued share capital consists of 1,268,492,857 ordinary shares of 0.01p each, all of which carry voting rights.

Following a renewal of shareholder approval at the AGM of the Board's authority to issue up to 10% of outstanding shares on a non pre-emptive basis during the next 12 months, the Company's current tap capacity is approximately 110m shares. This figure will be reduced according to the size of the tap issuance referred to above.

As announced earlier today, the Company advises the following changes to the Board of Directors, which will take effect from 1 March 2016:

- Ian Russell will become the Chairman, replacing Graham Picken; and

- Frank Nelson will become the Senior Independent Director, replacing John Hallam.

As communicated on 14 May 2015 (and as set out in the Company's Annual Report and Accounts for the year ended 31 March 2015), Graham and John will continue in their roles as the Chairman and the Senior Independent Director respectively until that date, to allow for an orderly handover of responsibilities. Both intend to stand down from the Board of Directors by no later than 30 June 2016.

In addition to the foregoing, the following changes will occur to the Committees of the Board, effective from 1 August 2015 (unless otherwise stated):

- Sarah Evans will become the Chair of the Audit Committee, replacing John Hallam;

- Sally-Ann Farnon will become the Chair of the Risk Committee, replacing Ian Russell;

- Frank Nelson will become the Chair of the Management Engagement Committee, replacing Sarah Evans; and

- Ian Russell will become the Chair of the Nomination Committee, replacing Graham Picken, effective from 1 March 2016.

Chris Russell will continue as the Chair of the Remuneration Committee and, effective from 1 March 2016, will join the Boards of Managers of the two Luxembourg subsidiaries, replacing Sarah Evans.

Outlook

The Investment Adviser's infrastructure team is active in social and transportation infrastructure across the UK, Europe, USA, Australia and Canada and is confident of sourcing new investments which meet the Group's investment policy and previously communicated strategy.

Market appetite in the UK for the type of secondary infrastructure projects in which the Company invests remains very strong. Demand continues to outstrip supply, resulting in a continuation of the increase in asset prices seen over the last 18 months.

The Group's focus remains finding value from sourcing new investments in less competitive situations and markets.

The Company will not compromise its investment quality standards by acquiring projects which, in the Investment Adviser's view, contain inadequately structured contractual arrangements or necessitate making overly-optimistic assumptions with regard to key revenue and cost variables.

The Company has engaged in consultation with the OECD in respect of its proposed Base Erosion and Profit Shifting (BEPS) project and is monitoring its progress. In September, the OECD is due to publish a number of recommendations on BEPs and, depending on whether and how it is implemented, it could affect the Group's future cashflows.

The next valuation of the Group's portfolio will be as at 30 September 2015, and will be published as part of the Company's interim results in November. The key variable expected to impact this valuation is the continued downward pressure on discount rates reflecting the competitive dynamics seen in the market.

Although foreign asset values and net cashflows will continue to be impacted by the relative strength of UK Sterling, the Company's hedging policy will largely mitigate any adverse consequences for cashflow and the balance sheet.

The Company's NAV as at 30 September 2015 will reflect changes in the value of the Group's portfolio and the accretive tap issues that occur in the period.

Ends

Enquiries

InfraRed Capital Partners Limited +44 (0) 20 7484 1800

Tony Roper

Keith Pickard

Laurence Richardson

Harry Seekings

Tulchan Communications +44 (0) 20 7353 4200

Martha Walsh

Victoria Huxster

Canaccord Genuity Limited +44 (0) 20 7523 8000

David Yovichic

HICL Infrastructure Company Limited

HICL Infrastructure Company Limited ("HICL" or the "Company", and together with its subsidiaries the "Group") is a long term investor in infrastructure projects which are predominantly in their operating phase and yielding steady returns. It was the first infrastructure investment company to be listed on the London Stock Exchange. With a current portfolio of 101 social and transportation infrastructure investments with predominantly availability-based income streams, it is seeking further suitable investment opportunities which fit its stated Investment Strategy.

Further details of the Company can be found on its website www.hicl.com.

This Quarterly Update Statement provides an explanation of material events and transactions that have taken place during the period from 1 April 2015 to 23 July 2015 and their impact on the financial position of the Group. These indications reflect the Investment Adviser's and the Board's current views. They are subject to a number of risks and uncertainties and could change. Factors which could cause or contribute to such differences include, but are not limited to, general economic and market conditions and specific factors affecting the financial prospects or performance of individual investments owned by the Group.

Investment Adviser

The Investment Adviser to HICL is InfraRed Capital Partners Limited ("InfraRed") which has successfully invested in over 160 infrastructure projects since 1997. InfraRed is a leading international investment manager focused on infrastructure and real estate. It operates worldwide from offices in London, Hong Kong, New York, Paris, Seoul and Sydney. With over 100 professionals it manages in excess of USD 8bn of 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 50 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.

Further details of the Investment Adviser can be found on its website www.ircp.com.