HICL sees good long-term opportunities

Investor warns of 'muted' second half despite longer term prospects; concerns include UK political uncertainty and profit warnings of contractors and FM providers

Infrastructure investor HICL has suggested that opportunities for new investments will be “muted” over the remainder of its financial year, as it reported a rise in pre-tax profits for the six months to 30 September.

However, the firm is confident that where new opportunities do arise, these will often be in the PPP sphere, while offshore transmission owner (OFTO) contracts in the UK will also continue to provide a steady flow of opportunities.

“Looking further into 2018, we are optimistic that opportunities will arise to add value to the existing portfolio,” said Harry Seekings, director of infrastructure at HICL's investment adviser, InfraRed Capital Partners.

"Investments in PPP projects represent 74% of the portfolio by value as at 30 September 2017, and overall continue to perform well,” he added.

In the longer term, HICL remains confident that the requirements of countries around the world to improve their infrastructure will ensure a steady pipeline of opportunities.

“For the future, we must look squarely at the economics of infrastructure, which provide good reason for optimism around the continuation of the role played by the private sector in the efficient delivery and management of infrastructure assets,” said HICL chairman Ian Russell.

“The board recognises that western economies have ever-pressing financial challenges posed by aging societies, technological change and, in some cases (such as the UK), population growth.”

Russell also highlighted a number of uncertainties in the UK market, not least the “several recent profit warnings from UK-based construction contractors and facilities management service providers”. He said that while the risk is diversified within HICL's portfolio, contingency plans are in place “to ensure continuity of operations if one or more of the group's PPP projects are affected by the failure of a subcontractor”.