HICL Infrastructure (LSE:HICL) — Annual Results for the year ended 31 March 2026

0:02 Good afternoon, and welcome to the HICL INFRASTRUCTURE PLC Annual Results Investor Presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged, and they can be submitted at any time using the q and a tab situated on the right hand corner of your screen. Just simply type in your questions and press send. Before we begin, I would like to submit the following poll. I would now like to hand you over to Ed Hunt, Head of Core Income Funds. Good afternoon to you.

0:28 Thanks very much. Good afternoon and a warm welcome to this set of annual results for HICL INFRASTRUCTURE PLC. Starting on slide four of the presentation deck, an important restatement of HICL's proposition. HICL sources high quality infrastructure assets in private markets and offers them to listed investors in a diversified and liquid vehicle. We focus on core infrastructure, essential assets differentiated by their long term cash flows, inflation protection, barriers to entry, and growth potential. The portfolio is actively managed, ensuring each and every asset plays its role, with value crystallized at the right times through selective asset rotation, and all delivered via INFRASTRUCTURE twenty five year track record as a specialist infrastructure investor, leveraging its international capability across the infrastructure risk spectrum.

1:26 With that as the anchor, slide five puts us into context, with HICL now having delivered for over twenty years for investors. HICL was originally listed in 2006 as the first infrastructure investment company on the main market of the London Stock Exchange, and since then, it's a story of resilience, of consistency, and of evolution. From its pure PPP portfolio in 2006, the decision to extend into broader core infrastructure in 2016, and its roughly 50% allocation to those growth assets now in 2026. Over that twenty years, the company has delivered a NAV return of 8.5% per annum, encompassing almost 150p of dividends and 60p in NAV growth.

2:18 That's through different market cycles and the full spectrum of macroeconomic and geopolitical shocks. These are strong numbers, and they differentiate HICL from its peer group. As well as marking the occasion, this slide reinforces what HICL has been designed to do to provide exposure to resilient long term infrastructure assets at attractive total returns through the cycle, enhanced by active management and importantly, evolving with the underlying infrastructure market. And these attributes are at the heart of HICL's annual result, as set out on the next slide, slide six. This is a strong annual result, underpinned by pleasing operational performance, effective portfolio rotation and enhanced cash generation.

3:09 Moving left to right on the slide. First, on the left, the slide shows a total NAV return of 10.3%, with NAV growth of 7.1p in the period. The return from the underlying portfolio was 12.2%, materially ahead of expectations, and that was driven by an excellent performance from the company's growth portfolio, with EBITDA improving 9% year on year, as well as outperformance from accretive asset sales. This takes us to the middle column with £536,000,000 of accretive asset sales achieved in the year, well in excess of the £200,000,000 target and taking total divestments over the last three years to over £1,000,000,000 with a weighted average premium to NAV of 11%.

4:00 This is almost half HICL's market capitalization, clearly evidencing the quality of the NAV, the importance of asset rotation as part of HICL's business model, and the manager's execution capability. In the year, this activity added 2.2p to outperformance before taking into consideration the effective use of that capital, including the £103,000,000 of share buybacks completed in the year, which takes the overall spend on buybacks to date to a sector leading £189,000,000 Finally, on cash generation, the dividend cash cover target was met with cash cover of 2.38 times including disposals or 1.10 times excluding disposals.

4:49 This was alongside a 1.59 times funds from operations or FFO dividend cover, supporting today's new dividend guidance of 8.65p for FY 'twenty eight and highlighting the healthy level of reinvestment in the underlying portfolio of assets. One point to reemphasize on this slide is that the company's payout and reinvestment settings now consistently support NAV growth. All things being equal, steady state portfolio earnings are now comfortably in excess of the level of the dividend, even before any outperformance. This underpins steady period on period NAV progression, and we'll unpack this and other elements of the result as we step through the slides.

5:36 But the year end summary, selective rotation, strong operational performance and cash flow that supports both continued dividend progression and NAV growth. On slide seven, we set out some further key metrics that illustrate the annual performance. Going clockwise from the top left, we've seen NAV growth of 4.6 in the year to 160.2p. Top right, a total shareholder return of 13.1% in the year as a result of the share price appreciation as well as HICL's strong dividend offering. And since period end, we've seen a further 8% price increase up to Friday and some more this week, particularly today.

6:24 Bottom right, we examine the expected future returns. So the discount rate of 8.5% is the best guide to expected future returns at NAV. But at Friday's discount to NAV, this translates to an expected net return after costs of 10% per annum, with a 6% plus down payment on that total return through the strong dividend yield alone. And finally, bottom left, this net return will only be improved by the continued downward trend in the expenses ratio. This declined to 1.03% in the year due to fee reductions taken last year, And on the basis of the further fee revision announced today, the move to a 100% market cap based fee, it now represents a peer leading pro form a expenses ratio of 90 basis points.

7:19 Moving on now to strategic portfolio construction on Slide eight.

7:24 Slide eight revisits HICL's portfolio construction and the balance that we strike between the company's cash generating and growth oriented assets, adjusting for the recent mix in portfolio composition. At a high level, the story is consistent. HICL seeks to complement its yielders, which are those cash generative, shorter duration assets, with its growers, those earnings generative, longer duration assets, to provide an attractive total return proposition with a meaningful and progressive income component. The slide sets out the characteristics of each of these segments. The yielders are delivering a cash yield of around 11% long term, while the growers delivered EBITDA growth of around 9% year on year with an assumed longer term growth profile of around 6%.

8:15 The design here is straightforward. Yielders will continue to throw off significant cash as they approach maturity, while the growers will continue to compound through growth CapEx and operational delivery. And as they mature, will increasingly contribute to the portfolio's cash generation. As active managers, our job is to continue to balance both sides of this equation through timely disposals and acquisitions to solve for a compelling total return for shareholders long term. Importantly, this chart assumes that all cash is paid out. The reality is the dividend cash cover, that element above one times, will be reinvested, and that provides a valuable source of organic growth and an even stronger long term portfolio valuation versus the line that we set out here on the page.

9:04 That's a good point to pause. I'll now hand over to Mark for the financial results. Thanks, Ed, and good morning, everyone. I'm pleased to present to you the review of HICL's financial performance for the year today. On Slide 10, we present the NAV per share bridge for the year to 03/31/2026. And this year, we have split the movement into three sections to show the different types of return. The grey blocks totaling 1P represents steady state NAV growth generated by HICL's portfolio. This comprises the unwind of the discount rates used to value the portfolio assets, less company expenses and the dividends paid in the course of the year. Absent any outperformance or change in macroeconomic assumptions, investors can expect that the NAV should increase PLAYING year on year as the discount rate unwind covers expenses and the payment of the dividend.

9:57 Next, we have the results of active management by the Board, adding 5.3 p of NAV per share in the year. Share buybacks of GBP 103,000,000 at an average discount to NAV of about 24% added 1.6p to the NAV per share. Value enhancement of 3.7p was driven by Infrared's portfolio management and asset rotation activities. And 2.2p of this was the gain realized on the sale of the A63 Motorway for a 21 premium, 5% premium to carrying value. And finally, the effective changes to macroeconomic assumptions totaled 0.8p. There was no increase in reference discount rates used to value assets in the year. Risk free rates did begin to increase towards the end of March, which placed upward pressure on DICK'S discount rates.

10:47 However, offsetting this was the powerful evidence of asset transactions taking place in our market sector, especially the GBP $536,000,000 of assets sold by HICL in the year at an average 11% premium. Modest net foreign exchange gain after hedging was 0.8p, leading us to the year end NAV per share of 160.2p. On the right hand side, some headline metrics. As Ed mentioned, the pro form a OER has reduced to 90 bps on a go forward basis. Fund level gearing was 7.1% at year end, and net debt was GBP 62,300,000, reflecting the 150,000,000 private placement notes less the cash balance of GBP 87,700,000. Liquidity available to HICL at the year end was GBP $3.00 4,000,000, being Topco cash of GBP 87,700,000 and net disposal proceeds held down in the group GBP $333,000,000, less investment commitments of GBP 117,000,000.

11:46 The RCF remains undrawn with GBP $395,000,000 available. Moving the lens to the company's portfolio during the year, Page 11, and picking out some key movements. Acquisitions of £51,800,000 represent the commitment to acquire a further stake in Cross London Trains, which closed last week. Divestments of 5 and £27,800,000 comprised the sale of seven PPP assets to APG and the sale of the A63 French Motorway. Strong cash distributions from the portfolio of GBP $223,000,000 led to the year's increase in dividend cash cover to 1.1 times. Gross portfolio return of GBP 323,500,000 was 12.2% of the weighted opening portfolio valuation, showing outperformance over the unwind of the weighted average discount rate.

12:40 Finally, we add the net disposal proceeds to retained in the portfolio to get to a total portfolio fair value of GBP 3,100,000,000 or GBP 3,200,000,000 including future commitments. I'll move now to analyze the underlying cash generation of the portfolio and how it supports the company's strategic objectives. As last year, we show here the cash generation of each part of the portfolio. The yielders, which represent 53% of portfolio values and the growers, which represent 47%.

13:12 On the left, the yielders, which largely comprise the PPP portfolio generated GBP 164,000,000 of cash after debt service, tax and life cycle costs paid. On the right, we show the growth portfolio cash flows. EBITDA of GBP $272,000,000 was a 9% increase on the prior year. Deducting debt service, tax and maintenance CapEx, the growth assets generated GBP 139,000,000 of cash before growth CapEx. And together, the owners and growers generated GBP $3.00 3,000,000 operational cash flow for the company. And so on Slide 13, we take this and we present three perspectives on cash cover.

13:57 Firstly, we introduced the funds from operations or FFO metric. This captures cash generation by the portfolio after payment of all obligations, but before capital allocation decisions. To calculate funds from operations, we deduct company expenses to get GBP $256,000,000 available for capital allocation decisions. Portfolio FFO amply covers the dividend 1.59x. Next, we look at traditional dividend cash cover. To calculate this, we take FFO and deduct the growth CapEx deployed in the year, predominantly at Affinity Water, 40 South, Altitude and TNT. This CapEx adds to the portfolio asset base, increasing the revenue that can be earned from it, and hence increasing EBITDA and ultimately yield.

14:48 Deducting the year's growth CapEx of £79,000,000 gives distributable cash from the portfolio of £177,000,000 which covers the annual dividend 1.1 times. Finally, we look at the company's earnings cover. The increase in portfolio value, partly driven by the deployment of growth CapEx in recent years, less company's expenses, results in earnings covering the dividend 1.66 times. Taking just the discount rate unwind minus expenses shows the earnings cover of the dividend is positive at around 1.2 times, indicating that we should expect the NAV to grow each year on a steady state basis.

15:30 Turning now to the divestments in the year. HICL's returns have been underpinned by the active rotation policy operated by the manager. Highly selective divestments based on rigorous disposal criteria have been made at an average premium to NAV of 11%, validating the company's portfolio valuation approach, earning 2.2p of NAV outperformance and creating GBP $536,000,000 of proceeds for redeployment or capital returns. From a portfolio composition and risk perspective, divestments have achieved a couple of targets, reducing the company's exposure to healthcare assets and to lifecycle risk, reducing political risk by selling an asset in France, and improving the portfolio's inflation correlation to 0.8 times.

16:17 Ross will speak in more detail about the disposal of the A63 Motorway shortly. Moving to slide 15. Here, we take a closer look at the portfolio debt profile and a selection of portfolio sensitivities. On the left, all portfolio debt is non recourse to the company. And as you can see from the donut, only 0.6% of the overall balance is due for refinancing in the next two years. Indeed, only 17% of the debt is due to be refinanced at all, as the remainder is fixed term concession debt on the PPP portfolio. As a result of planned debt amortization in the PPP portfolio, gross gearing reduces from 65% today to under 50% in 2040. This effectively matches the average gearing of those assets which do have refinancing requirements, 46% at March 31.

17:09 The year has also seen debt refinancings successfully completed on Affinity Water, TNT, Altitude and Forty South on accretive terms. On the right, we present the key portfolio valuation sensitivities. Due to the nature of the long term contracts in our portfolio, higher inflation has a positive correlation to NAV, increased since the divestments, reflecting the portfolio's 0.8 times inflation correlation and acting as an offset to any increases in the discount rate.

17:41 The other sensitivity I would like to comment on here is the slightly positive correlation of interest rates, considering interest income on cash and interest payable on debt. This reflects the large interest earning cash balances in the PPP portfolio especially, and the fact that practically all interest in the portfolio debt is fixed in nature. With that, I'll hand over to Ross to take you through the portfolio performance section. Thanks very much, Mark. Very good afternoon, everyone. So as usual, I'll start with a reminder of HICL's core infrastructure framework on Slide 17, which sets out the attributes that we're looking for when we make new investments, namely high quality cash flows, defensive market positioning and a strong social license to operate. Ed will come on and talk about our pipeline. When we're looking at new investment opportunities, we're guided by this framework, which applies across different sectors and return profiles.

18:35 Turning to Page 18, you can see the familiar snapshot of HICL's diversified portfolio. The charts have moved a little bit compared with last year as a result of transaction activity, but the geographic split hasn't changed too much with disposals in The UK and France broadly offsetting. The 10 largest assets are around 55% of the portfolio by value, and the weighted average asset life is now up at over thirty four years. So let's dive into the portfolio performance, I'll run through the six largest assets, cover the PPPs as a whole, and then I'll come on and talk about the A63 disposal at the end.

19:10 So starting with Affinity Water on the left hand side of page 19. This is HICL's largest investment at 13.6% of portfolio value. Affinity continues to perform well financially, finishing the first year of its regulatory period with EBITDA slightly ahead of forecast. This solid in year performance is underpinned by a stable and resilient capital structure as well as continued growth in the regulatory capital value of the business, which is indexed to CPI inflation. To support the ambitious AMPAC investment plan, HICL executed its £50,000,000 incremental equity investment during the year. This also set the foundation for the resumption of distributions, with HICL receiving its first dividend from Affinity in over five years, in line with our forecast.

19:56 This was another key milestone for the business, which, following PR24, is now delivering a stable mix of income and capital growth.

20:04 To reflect the improved cash flow certainty, we reduced the discount rate by 10 basis points during the year, which contributed to another increase in valuation. Operational performance is still a key focus for the management team and will continue to be under the leadership of the incoming CEO, Mark Garth, who joins from United Utilities. It was pleasing to see Ofwat recognizing the company as a top performer in several areas during the year, albeit customer experience remains an area of focus. Affinity will draw on Mark's proven track record here at UU.

20:36 More broadly and notwithstanding the potential for political change in The UK, we expect the Cunliffe Review and the subsequent white paper to be broadly supportive. Recent transactions in the sector have also demonstrated that there is investor appetite for water companies in public and private markets, and particularly those that are well performing water owned only companies with clean capital structures. Moving on to Texas Nevada Transmission, and as a reminder, this asset actually comprises two electricity transmission networks, which are co owned and managed by LS Power. Cross Texas Transmission is a regulated utility. One Nevada Transmission has a long term availability contract with NV Energy, an A rated Berkshire Hathaway subsidiary. As you can see, both continue to perform very well operationally.

21:23 In October 25, CTD conducted its regulatory settlement with the Public Utility Commission of Texas. This settlement is a slightly more straightforward exercise than we have in The UK. The regulation operates under a cost of service delivery model, and therefore the key output is the allowed return on equity. And this was confirmed at 9.6, in line with our valuation forecast and demonstrating the need for the regulator to appropriately incentivize investment in the network.

21:51 And this need for investment is only going to get larger. There was the conclusion of a third party study, which was included in the valuation, but more broadly, the regulator is only just starting to come to terms with the expected need for power to fuel AI. In Texas, massive data centers now dominate the interconnection queue, making up over 70% of new requests. It's estimated that by 2028, the state could have 40 gigawatts of data centers and that this could increase by up to 150 gigawatts within the next five years. To put that in context, that's double The UK's total energy generation capacity. For our investment in TNT, this means that the focus is likely to be on growth CapEx for the foreseeable future to support more interconnections and a more resilient network.

22:40 On Page 20, we provide some detail on HICL's two large transport assets. So starting with LSPH, international train path bookings grew by 4% year on year and retail income outperformed our forecast by nine percent. On the domestic side, revenues were still at the contractual underpin level, albeit the level of top up by the DFT is now minimal as southeastern trains continued to add additional services during the year. In fact, from the May 26 timetable, which kicked in a couple of weeks ago, southeastern are now back at the underpin. While this doesn't have a direct valuation impact, it is encouraging to see sustained and growing demand across the user base. This dynamic is important in the context of a second international operator, which is the number one priority to unlock HICL's value of this investment.

23:28 Once again, there has been a lot of good progress in the year, most notably the ORR awarding depot capacity to Virgin Trains in October. This wasn't challenged by Eurostar and was supported by a detailed and credible operating plan. The ruling doesn't preclude other operators launching services. In fact, Trenitalia continues to progress its own plans using existing rolling stock and depots in France. Shortly after the period end, Virgin and LSPH jointly applied to the regulator for approval of framework track access agreement, which would provide Virgin with access rights to the line. This is conditional on ordering rolling stock within the coming months. And as I've always said, this will be the trigger for us to have another look at the valuation rate or forecast. However, we have slightly reduced the discount rate and incorporated the latest estimates for the significant station expansion works required at St Pancras to accommodate a step up in international services.

24:24 Moving on to Cross London Trains, which is now HICL's fifth largest asset if you include the 6.5% stake we acquired in March. Because that transaction completed on the May 20, which is after the year end, the valuation of the new stake is just based on a commitment at the original acquisition cost of just over £50,000,000 At the next reporting period, we intend to revalue that incremental investment in line with the approach taken for the existing stake. This is expected to result in a substantial uplift in NAV per share, adding over a penny and reflecting the off market price achieved for a minority stake and HICL's favorable rights as an existing shareholder. This is an asset we know well and has performed consistently since our first acquisition around four years ago. Cash flow visibility is particularly strong for the next decade, given the availability based contract provided by the Secretary of State for Transport and the fact that maintenance obligations sit with Siemens and are directly contracted with the operator.

25:22 From 2036, the fleet will be re let on commercial terms. Our assumptions are based on a partial inflation catch up and a useful life of forty five years, which we think is reasonable based on historic data and the unique nature of this fleet. Turning over to Slide 21, we cover HICLES two digital assets. So starting with 40 South, where EBITDA grew by over 10% for the second consecutive year and slightly outperformed our valuation assumption. Most of this was driven by CapEx, although the long term anchor tenancy contract also captured the benefits of higher than expected inflation. At the year end, Forty South had delivered over two thirty new towers since the business was carved out of 1NZ, and this demonstrates the successful execution of the build to suit program, under which new towers are first developed to meet 1NZ's specific five gs coverage requirements and then capacity to accommodate additional talents is increased over time.

26:19 Building on this expanded capacity, Forty South signed 60 new colocation agreements during the financial year, around three quarters of which were the New Zealand emergency services network. In March, the management team also reached agreement with Spark on a structured 75 site colocation program to be rolled out over the next five years. Crucially, this deal significantly extends the contract duration and inflation protection of the colocations, which improves revenue quality and supports the long term financeability of the business. Moving on to Altitude INFRAS, where our valuation remained broadly stable over the year despite EBITDA being behind our forecast assumption. This primarily reflected short term softness in the Business Services segment, counterbalanced by supportive guidance, which will enable an increase in access tariffs payable by ISPs.

27:11 And this really highlights the importance of investment discipline in a sector as diverse as fibre to the home. Altitude INFRAS benefits from France's attractive rural market framework, which is underpinned by national deployment targets. The company earns inflation linked wholesale revenues from all the major ISPs under a regulated tariff structure.

27:31 During the year, the company achieved the substantial completion of the rollout of the network, and as a result, the most important long term valuation driver is increasing the take up or penetration of fiber regardless of Internet service provider. This increased to 63% from 56% in the previous year, and this was in line with our forecast, and we expect this to continue to increase over the coming years as the copper network is decommissioned. Turning to Slide 22, we cover the PPPs, which represent 57% of the portfolio by value. These assets benefit from availability based contracted revenues, which tend to be linked to inflation, and fixed rate long term debt structures. From an operational perspective, the vast majority of HICL's PPPs performed in line with our expectations during the year, with aggregate availability above 99%.

28:22 In a portfolio of this size, flare ups do happen from time to time, and we did recognize a provision against Lewisham Hospital during the period to reflect an ongoing contractual dispute with the Trust. More broadly though, this demonstrates the importance of maintaining collaborative working relationships, particularly as assets approach the end of their concession lives. During the year, three assets were successfully returned to public sector ownership, two roads and a police training centre. This provides an excellent model as handbags start to ramp up over the coming years. The clients received the assets in good condition, and HICL slightly outperformed its financial projections. As well as managing the assets themselves, INFRASTRUCTURE continues to manage the composition of the PPP portfolio through active rotation. During the year, HICL sold seven PPP assets for a combined £225,000,000 And as with previous disposals, these assets were targeted. The sale was accretive to key metrics such as inflation correlation and asset life and reduced exposure to UK healthcare.

29:22 It also further reduced the PPP portfolio sensitivities, most notably to life cycle costs, as you can see on the right hand side of the slide. And it would be remiss of me not to mention the other significant disposal in the year. We have a case study on the A63 on page 23. This is an asset which HICL owned for nine years, but INFRASED has been involved with for fifteen. Between 2011 and 2016, INFRASED developed, built, stabilized, refinanced and successfully exited the project, which gave us a unique vantage point to acquire a stake for HICL in 2017 as one of the first non PPP assets in the portfolio. We subsequently took the opportunity to make further incremental investments, leveraging our shareholding position to achieve favorable terms, much like the XLT acquisition this year.

30:13 Traffic has proven to be extremely resilient even in the face of COVID-nineteen. As you can see on the page, it's a steady 1.2% growth per year on average, but when you layer on inflation linked toll increases and value enhancement activities, this results in revenue growing by over 40% over HICL's ownership period. Much like the North West Parkway, this put us in a great position to exit to a strategic buyer, realizing a 14% IRR and 2.2p of NAV outperformance for shareholders. And these are really compelling numbers, but just to finish, I'll try and demonstrate the potential value which can be created by managing assets through their full lifespan. If HICL had bought its 24% stake back in 2011 on the same terms as INFRAS unlisted fund, it would have paid EUR 49,000,000.

31:02 Now looking at the disposal price alone, that equates to a multiple of over seven times. When you include all the distributions we've received, that increases to over 10 times. So on that note, I'll hand back to Ed, who will take you through the outlook. Thanks, Ross. So back to me to round off today's presentation, and I want to do that by providing a little bit of commentary on how we're seeing the infrastructure market today and how we see it developing going forward. As we've highlighted in many of these presentations, we're in the midst of an infrastructure super cycle, and the numbers speak for themselves here on the slide. So over $100,000,000,000,000 of global infrastructure investment is needed by 2,040, spanning transport, energy, communications, social infrastructure, all sectors in which HICL has made investments, and we're seeing this growth come through already in the results.

31:57 We've talked a lot about the key megatrends driving infrastructure development, energy resilience, digitalization, demographic shifts. These drivers are only becoming more acute as energy security takes center stage, as AI transforms the way we live and work, and an aging and increasingly urban populace strains our infrastructure systems. This is not a one cycle story. This is a multi decade tailwind, and HICL is positioned to benefit substantially from it. So let's unpack this a little bit on slide 26. On slide 26, we're stepping back to frame what we see as an evolving infrastructure landscape, a market that's changing in scale, shape, and return characteristics.

32:47 There are four structural elements to highlight. First, the role of the private sector is increasing materially. This is beyond simply funding assets and extends to the increasing role of the private sector in sponsoring and procuring new infrastructure. We see this already in HICL through assets such as Forty South and Texas Nevada transmission. This dynamic materially broadens the infrastructure sponsor landscape versus dealing with a handful of governments alone. Successful investors will be those that can match this across sectors and geographies with an international multi strategy platform with the networks, relationships and expertise to originate across a much broader landscape.

33:34 Second, infrastructure systems are becoming more interconnected as energy and digitalisation are increasingly interdependent and permeate transport utilities and social infrastructure. The energy intensity of digitalisation, the decarbonisation of heat and transport, and the drive for efficiency across utilities are all playing into this. And as these sectors become more intertwined, it reinforces the need for a diversified approach across sectors and systems to fully capture the benefit of the megatrends. Third, the number of investable assets is increasing markedly, with megatrends driving new sectors and asset types. As these sectors mature and derisk, they cascade down the risk spectrum into HICL's investable universe.

34:26 Managers with expertise across the full asset life cycle will be better positioned to have sharpened expertise in these new sectors and to position earlier for assets as they de risk. Both play directly to HICL's construction experience as well as INFRASTRUCTURE's long term track record of delivery, both across core and higher risk infrastructure strategies. And fourth, dynamics within core infrastructure itself are changing. As mature assets are impacted by these megatrends, they're becoming more CapEx intensive, reducing near term yields, but supporting stronger growth and more attractive longer term returns. This increasing complexity demands a more active management approach, playing to HICL's active business model and INFRASTRUCTURE approach, supported by over 160 professionals globally and a large dedicated asset management team.

35:27 So stepping back, these elements point to a broader, more interconnected, more dynamic and more attractive market for infrastructure investment for those managers that have the attributes to capture it. These dynamics play firmly to HICL's and INFRASTRUCTURE PLC's

35:47 profile and total return over time while preserving the portfolio's core attributes. On slide 27, we show really the practical expression of this positioning. We're seeing a large volume of opportunities in the market, but the key point here is around the discipline and selectivity within that. The funnel on the left of the slide sets that out, a broad universe of over 80 opportunities screened recently, narrowed through discipline filtering to a small number that we're actively progressing and ultimately just the one executed across London trains.

36:21 Looking at what we're progressing, the composition here reflects the themes we've discussed. Across sectors with strength in utilities, transport and digital, across geographies with a continued focus on markets that we know well and returns that are accretive to HICL's portfolio on a risk adjusted basis. And that's an important consideration. We're not simply chasing return up the risk spectrum, but we're focusing on particular situations in high quality assets where these offer attractive risk adjusted returns and compare favorably to the ongoing share buyback program. In the current environment, where some dislocation remains in private markets, we are seeing opportunities that meet these criteria more readily, spanning both new investments and more proprietary opportunities such as the Cross London Trains investment.

37:11 And just to reiterate, this is about deploying capital highly selectively, where it enhances the portfolio while maintaining strong investment discipline set against alternative uses of that capital.

37:25 And finally now on slide 28, we bring that positioning together. HICL is designed to capture what we see as a long term structural opportunity in infrastructure, not tactically, but through a consistent and strategic approach. This approach is underpinned by HICL's portfolio construction, yielders and growers, as well as its approach to diversification across regions, sectors and megatrends. The portfolio is positioned to grow with these megatrends, as the £600,000,000 of growth CapEx in the next five years illustrates, as well as the attractive pipeline of opportunities linked to these trends that we see in the market. Of course, disciplined capital allocation remains at the forefront through the continuation of selective asset recycling, a discerning approach to new investments and the continuation of HICL's sector leading buyback programme, where it represents the best use of capital.

38:24 And finally, supported by the platform itself, which provides the capability, the track record to execute and actively manage in a more complex and a more exciting market. And on that note, also to plug that we're lining up a Capital Markets Day for the company in early July, where we can spend more time on this market and HICL's strategy within it. And with that, that concludes the formal presentation, and we're very happy now to take questions from those online. Thank you very much. Starting with a pre submitted question, and Mark will be best placed for this one. While we await to see details, with the chancellor seemingly intent on banning or taxing interest generating investments in ICEs, If that comes to pass, will the company reconsider its dividend plus interest distribution policy?

39:19 Thanks, Mo. So if a policy like that was contemplated in The UK, you know, it is certainly something that we would have a look at to judge the impacts on shareholders and on HICL itself. I mean, HICL, being an investment trust, pays no tax on dividend income or capital gains. And it has the ability, as you know, to stream interest income down to shareholders directly. And we disclose the interest streaming percentage every quarter. HICL, like all of its peers, makes use of loans to fund investments. And part of the reason for doing so is the benefits of the tax deductibility of the interest on those loans down at portfolio level.

40:07 So that's that's by way of a bit of context as to why firms, funds like HICL use loans in order to fund investments. And, yeah, we would certainly be considering the benefits of using loans to fund investments against the impact of the interest streaming not being allowed into an ISA in that situation. That's something that we would certainly look at. Thanks, Mark. A couple of questions on the financials at Affinity. So what contribution did Affinity Water make to the annual return? And what dividend did Affinity Water pay?

40:49 Very happy to take the questions on Affinity. So in terms of the contribution to return, Affinity slightly outperformed our expectations in the period, as I mentioned. There are a couple of contributors to this. Firstly, just EBITDA being slightly ahead of expectations. But also, as I mentioned, we reduced the discount rate of the investment by 10 basis points in the period, reflecting the fact that dividends have commenced. So therefore, an element of the portfolio outperformance, which Mark spoke through, comes from Affinity Water. And then remind me, the second question was on... What dividend did Affinity Water be? Yes. So when we think about the distribution coming from Affinity Water, you don't get the kind of yield that you expect from, for example, a PPP asset, and that's very much by design because there is still an element of the free cash generated by Affinity that's being recycled into the business to fund the investment in the regulatory capital value, and we very much like that. We want Affinity to be an asset that has a degree of income, but also a degree of capital growth. So the distribution that we get from Affinity Water is a slightly more modest level of yield, around 4% to 5% of the investment value, But for us, the important thing is that it's stable over time. So the distribution that Affinity has now made, we expect to be recurring at a similar level for the rest of this control period.

42:15 Thanks, Ross. And then we've had a few questions around the outlook, capital allocation, and strategy, Ed, that would appreciate your responses too. So there are a couple of questions around the buyback hurdle rates and investment decisions and how you think about investments in the context of the return available from buybacks. Yeah, so we use the buyback hurdle as a very clear discipline to judge the appropriate use of capital. We do that using share price and the discount rate sensitivities to derive an effective return hurdle. We also need to consider risk in that you buy the portfolio versus a new investment.

43:01 We use that rigorously, and we discuss that a lot with the board. Ultimately, decisions do go to the board. In terms of capital allocation, more generally, we're looking at not just focusing on one of the levers available, buybacks or investments, but actually looking at all the levers in concert. So be that an increase in the dividend as we've shown today, be that continuation of the sector leading buyback program that we've continued to deliver, or through accretive investments such as across London trains judged against the returns available from other uses. We think that by knitting those three elements together, we've got a stronger, not just tactical approach, but a strategic approach through which to bring new investors in behind the company. That's ultimately what's going to help drive the discount towards

43:56 the NAV. There is very strict investment discipline. There's a lot of board involvement, and we're very mindful of that buyback hurdle as an input to investment decisions. Thanks, Ed. Just as you touched on the discount to NAV, there are a couple of questions on this topic. One, whether you believe that the failed merger with Trig has had any impact on the discount level. And and secondly, what the road map is to decreasing the discount and whether you have a target discount level for the HICL shares. Well, my target level is no discount, and that's, you know, to be clear, been a target for some time now. In terms of, the discount to NAV, the discounts across the sector have broadly been sector wide. HICL has broadly traded in with its peer group over the last three years. We saw a little bit of bouncing around, as you might expect, with some turbulence around the strategic announcements, and that's settled down now.

44:59 Over the year, we've seen the total shareholder return at 13.1%, so that's share price appreciation over the year plus dividends on offer to shareholders. Since period end up to Friday, we saw another 8% share price appreciation. Then yesterday and today, we're looking at another 4% to 5%. We think that the share price is responding to the great work that we're doing on the ground with HICL both in terms of the operational performance of the assets, what we do over and above that with asset rotation and outperformance on particular investments, and more generally the approach to capital allocation, which remains disciplined and effective. So I think you'll see that the discount to NAV has come in quite substantially, and we're very focused on making sure that that trend continues and that we get back to share price.

45:55 Also worth noting today that a new fee basis was announced, which means that the remuneration to the investment manager is based 100% on market capitalisation of the company. So not only are we living and breathing the experience of shareholders through our own holdings in HICL,

46:16 but now through the direct management fee to INFRASTRUCTURE INFRASTRUCTURE So hopefully that's another signal of the alignment and our laser focus on improving the share price rating.

46:30 Thanks, Ed. Ross, another question on Affinity. What accounts for the increased exposure to Affinity Water? Although Affinity Water is a supply only company, is there not the danger that the biggest investment being a water company simply puts off retail investors from investing in HICL, given the general dislike of water companies at the moment in The UK? Yeah. Okay. So a couple of components there. So just firstly, in terms of the exposure to HICL as an investment, you're right to say that this has increased over time. So our portfolio exposure to HICL at the moment is 13.6%. There are a couple of reasons why that's steadily increased. Firstly, because of the divestment activity over the last three years or so. So

47:16 the fact that we've disposed over a billion pounds of investments in the last three years and not fully recycled all of those proceeds into new investments means that all of the remaining investments become slightly larger as a percentage of the portfolio value, so there's a mechanical impact at play. But secondly, and equally importantly, is the fact that the valuation of Affinity Water over the last year or so has grown pretty substantially. And just unpacking that, some of that's to do with the fact that we've injected another £50,000,000 as a new investment into that business to fund growth CapEx, as I mentioned. But also there's been genuine increase in the valuation following the good PR24 final outcome,

47:57 and then also the fact that the discount rate has reduced over the last couple of years, really chipping away at some of the premium we've built in to account for some of the uncertainties around the regulatory process and, for example, the CUNLIFE review, the government white paper. So valuation's pretty substantial now as a percentage, and we're we're happy with where it sits. In terms of the perception of water companies and noting the point that Affinity is a water only company and has no sewage exposure, We are clearly, cognizant that it's a sector that's often in headlights that will continue to attract some news flow. But I think I just draw your attention to, the fact that the successful companies in this space have not struggled to attract investment opportunities.

48:42 In fact, we've seen very recently £800,000,000 of new equity being raised by United Utilities. There is clear investor appetite for well performing companies in the water sector.

48:54 That differentiation between companies, I think, is only becoming more stark. But for us, we have no issues with our position in this company, and we think that the focus that the management team has on the operational performance will continue to be right and put us in good stead going forward.

49:10 Thanks, Ross. And a couple of final questions, Ed, on capital allocation. So there's a couple of questions on the dividend. So the return the dividend growth has been below inflation. How does the board intend to address this outcome so that the dividend each year produces a total return that exceeds the eroding effects of inflation? Yes. So dividends moved up by 0.15p. Dividend policy is that it's a progressive policy, not that it's matched to inflation, and investors shouldn't expect it to go up with inflation. What I mentioned earlier in the presentation is that the payout and reinvestment settings were now appropriate such that the company's earnings were exceeding the level of the dividend. And that meant that investors could rely on, all things being equal, steady state NAV progression period on period.

50:09 And so we make that judgment around getting the balance right between NAV growth and dividend growth. We think it's excellent that we can continue to offer a progressive dividend.

50:20 The dividend yield is very strong, and that's reflected across the peer group. But we also offer a genuine NAV growth story as part of an overall total return package, and that's what investors should expect from HICL.

50:36 Thanks, Ed. Final question. Are you looking at Arkeva, which G9 is looking to divest? No, we are not looking at Arkeva. Brilliant. Look. That's all of the questions that have been submitted online. Thanks again for joining us. And any further questions, you can reach out to the investor relations team. That's great. Thank you all very much indeed for update investors today. Could I please ask investors not to close this session as you now be automatically redirected to provide your feedback, which will help the company better understand your views and expectations. On behalf of the management team, we'd like

51:15 to thank you for attending today's presentation, and good afternoon to you.