HICL Infrastructure PLC (HICL) Earnings Call Transcript & Summary

Good morning, everyone, and welcome to HICL's Interim results presentation for the period ended 30th of September 2025. Usual housekeeping applies. We're not expecting a fire alarm. So if it does go off, please do follow the fire marshal out of the building and into the blizzard outside. We expect the presentation to last about 30 minutes, following which we'll take questions from the room and then from those online. I'll now hand over to Ed Hunt and Mark Tiner to take us through the formal presentation.

Thanks, Mo. Good morning, and welcome to this set of interim results for HICL Infrastructure PLC. A busy week for the company, recognizing Monday's announcement regarding the proposed combination of HICL and TRIG. That announcement and the investor presentation is on the website. And clearly, we're getting around to speak to investors in the market. Notwithstanding that exciting development and that it remains subject to a shareholder vote, the focus today will be on HICL's results as a stand-alone, reflecting the performance for the 6 months to 30 September. So starting on Slide 4 with HICL's core proposition. This is a reminder of HICL's differentiated and straightforward purpose, one that has underpinned the company's investment proposition for almost 20 years. HICL sources and executes high-quality infrastructure investments in private markets, constructs a well-balanced and diversified portfolio and offers that to investors in a liquid vehicle. Each and every asset is actively managed to realize its inherent value and to perform its specific role in the overall portfolio, utilizing InfraRed's 25-year plus track record as a specialist infrastructure investor. All up, a defensive platform positioned for growth, and this is evident throughout this set of results. Starting on Slide 5. This is a robust interim result underpinned by a strong operating performance. HICL remains on the front foot, meeting the key milestones that we set out to the market at the beginning of the financial year. This starts on the left of the slide, the company's approach to portfolio rotation. In August, HICL announced the sale of 7 U.K. PPP assets for around GBP 225 million, in line with our March 31 valuation. This exceeded the GBP 200 million disposal target for the year, and HICL has now delivered on over GBP 730 million of divestments over the last 24 months at strong valuations. This divestment activity is supportive to long-term portfolio construction, enables capital recycling for accretive investment and importantly, provides an engine for growth. And this growth is clear, turning to the middle column. The company's NAV per share increased by 2.9p over the period to 156p, primarily driven by a strong operational performance from HICL's growth assets, which saw a combined 7% EBITDA uplift period-on-period. HICL's yield assets complemented this outperformance with pleasing cash generation, bringing the underlying portfolio return to 10.3% on an annualized basis. As you can see on the right of the slide, the strong operational performance puts HICL on track to meet its cash generation targets. So cash cover for the 6 months reached that important 1.1x threshold, an uplift from the 1.07x at the full year. HICL remains on track to deliver its 1.1x for the full year, excluding profits on disposal. This growing cover ratio speaks to the quality of the underlying cash generation, notwithstanding the significant reinvestment of cash at asset level into growth CapEx. If we were to gross up the dividend cash cover for that CapEx, the dividend cover would increase to in excess of 1.5x or a payout ratio of around 65%, ensuring significant compounding of free cash. This cash generation also supports HICL's progressive dividend with the Board reaffirming the existing guidance of 8.35p to March '26 and the 8.5p for the year March '27 on a stand-alone basis. Together with the 3 columns on this page showcase HICL's compelling total return proposition. Organic growth at asset level, fueled by disciplined CapEx at portfolio level through accretive asset rotation and that strong and growing income that we associate with high-quality infrastructure, a defensive platform positioned for growth. Further metrics for the 6-month period are set out on Slide 6. Top left, we highlight the NAV growth of 1.9% over the period to 1.56.0p, contributing to a strong 9.5% annualized NAV return for the period set out on the top right. That's a result of a strong performance from HICL's growth assets with EBITDA growth of 7% period-on-period, bottom left. And bottom right then looks at the discount rate or the expected returns from the portfolio. So 8.4% is the weighted average discount rate and the expected gross return if you buy the portfolio at NAV. That translates to 10% net return if you buy at Friday's share price. As active managers, we seek to deliver over and above those expected returns as we have done in this period. On Slide 7, the now very familiar yielders and growers slide, a useful tool to articulate strategic portfolio construction. The yielders in the light purple, HICL's PPP investments with an average life of 13 years, yielding strongly at around 11% cash yield, balanced with HICL's growers, longer life assets, extending cash flows beyond the maturing yielders, compounding free cash back into growth CapEx and providing that long-term earnings base that underpins long-term dividend and NAV growth. The design here is straightforward. The yielders will continue to mature and eventually be handed back. The growers will continue their growth CapEx and then start their yielding phase. And as active managers, our job is to continue to stoke and balance both sides of this equation to solve for a compelling total return for shareholders. Note that this chart assumes all cash is paid out. The reality is the dividend cash cover, that element above 1x cover will be reinvested, providing a valuable source of funding for organic growth. Passing over now to Mark for the financial results.

Thank you, Ed, and good morning, everyone. I'm pleased to present to you today the review of HICL's financial performance for the first 6 months of the year. Taking Slide 9. We touched on HICL's strong disposal track record at the beginning. So before we review the NAV bridge for the period, I would like to take a closer look at August's portfolio sale to APG, the manager of Europe's largest pension fund. Beyond meeting the FY '26 disposal target well ahead of the end of the financial year, the transaction has several strategic benefits for the company. From a portfolio construction perspective, this sale continues our portfolio rotation efforts and improves key portfolio construction metrics, including reducing HICL's exposure to short-duration assets and life cycle risk while continuing to rightsize exposure to health care assets. On valuation, the disposals are in line with our 31 March 2025 valuation, providing an important transactional data point along with net proceeds that support the growth of the company. The sale also establishes a new partnership framework with APG, which creates opportunities for future divestments and potential co-investments as attractive opportunities arise. And finally, to reiterate that disposal proceeds now total in excess of GBP 730 million over the past 24 months, the highest in the sector at an average premium to NAV of 7%. We expect this transaction to close in the next few weeks. On Slide 10, we show the NAV per share bridge for the period to 30 September 2025. Starting with opening NAV per share of 153.1p, the portfolio generated 7.2p of value accretion in the year. 6.2p of this arose from the unwind of the weighted average discount rate, which was unchanged in the 6 months at 8.4%. While government bond yields rose slightly in the period, the transactional evidence we saw, including our own disposal of assets at March NAV did not point to an increase in discount rates from the March level. And as a result, we have maintained a weighted average discount rate at 8.4%. We are pleased by an extra $0.01 of NAV accretion coming from outperformance of the portfolio. This was driven by higher-than-expected inflation in our countries of operation, particularly the U.K. and the effect in the period of the investment managers value enhancement initiatives, particularly at the growth assets. Changes in forecast economic assumptions used in the portfolio valuation models contributed a further 0.1p. And the company's share buyback program, which was renewed in March, targeting a further GBP 100 million of buybacks over the course of the year, contributed NAV accretion in the period of 0.9p or 1.8p since the beginning of the program in May 2024. A total of 116 million shares have been bought back at an average price of 118.8p. Fund expenses of 1.5p per share include the management fee, which was calculated on the new reduced basis for 3 months of the period. A small foreign exchange gain of 0.4p after hedging and the 4.2p of dividends paid in the year, reflecting the full year target of 8.35p completes the bridge to our 30 September NAV per share of 156p. Turning to the right side of the slide. The operating expense ratio was 1.04% by annualizing the 6-month costs. On a pro forma basis, assuming that management fee reduction is in place for the whole year, the OCR is 1.0%, a 10 bps decrease from the prior year. Net debt at the end of the period was GBP 142.2 million, a GBP 40 million increase over the 6 months, arising from liquidity deployed into the buyback program over the period. HICL's net debt principally comprises GBP 30 million of drawn RCF and GBP 150 million of private placement notes, offset by GBP 38 million of cash and led to a fund gearing percentage of 8%, marginally up over the period from 7.4%. And finally, available liquidity available to the company at the end of the period, including undrawn RCF amounts, was GBP 402 million. Turning to Slide 11. Here, we take a look at the portfolio level debt profile and key portfolio valuation sensitivities. On the left, you can see from the doughnuts that 84% of the debt is concession project finance, amortizing debt with no refinancing requirements. Only 16% of portfolio level debt has any refinancing requirements. And of that amount, only 1% falls due in the next 2 years. HICL's portfolio gearing is 65% overall on a nonrecourse basis, and the average gearing of those assets that do have refinancing risk is lower, as you would expect, at 50%. On the right, we present key portfolio sensitivities. While the weighted average discount rate has not changed in the period, if it were to increase by 0.5%, for example, there will be a 7.3p negative effect on NAV per share. Due to the nature of the long-term contracts in our portfolio, higher inflation has a positive correlation to NAV, reflecting the portfolio's 0.7x inflation correlation. We also note the slight positive overall correlation of the NAV to interest rates. This reflects the large interest-earning cash balances in the PPP portfolio, especially and the fact that practically all interest payable on the portfolio debt is fixed in nature. Turning to Slide 12. Here, we refresh the cash generation analysis presented at full year. The cash flows after the 6-month period and show the relative contribution of the yielders and growers, each now 50% of the portfolio to cash generation. In the period, yielders contributed GBP 86 million after debt amortization and life cycle costs. And the growers generated EBITDA of GBP 131 million in the period, a strong 7% increase on the prior comparable period. And after payment of interest, tax and CapEx contributed GBP 28 million to dividend cover. At fund level in the central box, total distributions of GBP 114 million cover finance costs of GBP 6 million and operating costs of GBP 19 million, resulting in GBP 89 million to cover the 2 quarters' dividends 1.1x. Dividend is also covered 1.42x by earnings, demonstrating the ability of the NAV to grow over time. Turning to Slide 13. We would expect this sustainable NAV growth to be supported by a dividend cash cover target of 1.1x or more in future years. We are keen to maintain a balance between a progressive dividend well covered and the ability to redeploy surplus cash into the portfolio to generate future returns through growth CapEx, reinvestment or bolt-on acquisitions where appropriate. This is why we are targeting a minimum of 1.1x dividend cover to give shareholders comfort that the dividend is suitably covered and within the portfolio to make the most efficient use of remaining capital. Finally, on a stand-alone basis, we reaffirm the dividend guidance of 8.5p for FY '27. We turn to Slide 15. Before moving into portfolio performance, it's worth revisiting here the company's market positioning, which you can see here on Page 15. HICL is a core infrastructure investor. All of our assets are positioned towards the lower end of the infrastructure risk spectrum and benefit from 3 key characteristics: high cash flow quality through contracts, entrenched demand or regulated revenues, defensive market positioning where there are high barriers to entry and low competition and criticality, essential assets that form the foundation of modern society. This framework guides our approach to new acquisitions and also describes the existing portfolio, which is summarized on the next page. So you'll be familiar with the charts on this slide, which really underscore the diversification of HICL's portfolio across sectors, geographies and revenue types. Our active approach to portfolio construction remains central to the company's business model with the agreed sale of 7 U.K. PPP assets in the period expected to further enhance key metrics and diversify risk. For example, the company's exposure to health assets reduces from 22% to 16% with PMP and Southmead Hospitals now falling outside the top 10. And the top 10 percentage increases due to the sale, partly because of the denominator effect, but also through outperformance. For example, Affinity steps up to 12%. The following pages provide the usual performance updates for HICL's largest holdings. So I'll hand you back to Ed, who will take you through these.

Thanks, Mark. And turning now to Slide 17. Affinity Water remains HICL's largest investment at over 12% of the portfolio by value. The business delivered solid operational performance, achieving material EBITDA growth in line with forecasts. Ofwat's recent performance report highlighted Affinity as a strong performer in several areas and a top performer in supply interruptions for a second year. Affinity was ranked within the average band with only 1 company above and 5 in the category below. Day-to-day operations are supported by a robust capital structure. Credit ratings are 2 notches above Ofwat's requirements. There's very little holdco debt and no refinancing is needed until 2033. A valuation uplift was recorded to reflect a small increase to future WACC. Other regulatory developments included the Cunliffe review, which included a proposal to streamline the regulatory regime, developments welcomed by HICL. HICL is on track to deliver its GBP 50 million investment into Affinity Water by 31 March '26, supporting substantial RCV growth and expects dividends from the business to resume this financial year. And finally, to note, CEO, Keith Haslett, will be moving across to Pennon and remains in post supporting the appointment of a new CEO. Moving across to T&T. Operational performance of this asset remains strong with both networks, Cross Texas Transmission and One Nevada Transmission achieving 100% availability over the period. Shortly after period end, Cross Texas Transmission concluded its latest regulatory settlement and was granted an allowed return on equity in line with HICL's valuation, providing greater clarity on future returns. In the near term, Cross Texas is experiencing strong demand for transmission capacity driven by renewables developers accelerating projects ahead of federal tax credit expirations. Additionally, a refreshed study of CTT's long-term growth outlook confirmed that total future energy demand is expected to be higher than previously assumed. Both factors contribute to increased reinvestment of free cash into CapEx earlier than assumed, expanding the company's asset base and future earnings potential. Over on Slide 18, we offer an overview of HICL's largest demand-based assets, starting with the A63. Traffic for both light and heavy vehicles continues to grow, though numbers were marginally below HICL's forecast due to fewer summer holiday journeys. We're closely monitoring France's political environment, which remains unsettled after recent government changes. There has been no material impact on A63's performance, highlighting its strategic role as a trans-European transport corridor. Moving to London St. Pancras HighSpeed, again, formerly known as High Speed 1. Internationally, the chart shows Eurostar bookings for the period surpassed our valuation assumptions, buoyed by higher-than-expected spot bids from Eurostar. These bookings averaged 99% of pre-COVID levels, supporting EBITDA in line with HICL's assumptions. Domestic bookings remained below the contractual revenue underpinned from the DfT, but it's positive that future December '25 to May '26 timetables included over 400 more parts than previously assumed. Although pre-COVID levels are not anticipated until 2028, this suggests that the government-run Southeastern operator is responding to underlying demand for extra parts. A key announcement was made after the period. The U.K. rail regulator approved Virgin Trains' application for access to the Temple Mills depot. This is a major milestone for introducing a second operator for the cross-channel services and a major growth driver for London St. Pancras HighSpeed. On Slide 19, we cover HICL's 2 large digital infrastructure assets, starting with Fortysouth. Fortysouth's revenues are secured by an availability-based anchor tenancy agreement with One New Zealand, supporting financial performance and providing the foundation for the 11% EBITDA growth period-on-period, which exceeded HICL's valuation assumption. The management team has focused on enhancing earnings growth by securing additional colocations, mainly from public sector clients, and that's largely offset softer demand from the mobile network operators. Since HICL's 2022 acquisition, 104 new agreements have been signed with efforts underway to reduce the commissioning lead time and accelerate revenues from those new colocations. The core tower deployment program remains on track to reach nearly 300 new towers by 2027, supporting New Zealand's 5G expansion. Tower upgrades were marginally behind schedule year-to-date, but are expected to accelerate over New Zealand's summer months to meet the March 2026 target. Finally, last week, Infratil announced a conditional agreement to sell its 20% stake in Fortysouth to an investor managed by InfraRed, giving Infrared managed investors a combined 60% stake in the asset and improving asset level governance. And finally, Altitude Infra, which is now HICL's sixth largest asset at approximately 3.5% of total portfolio by value. As a reminder, this asset benefits from France's favorable rural market framework, concession-based regional monopolies and supported by a national deployment target. The company earns inflation-linked wholesale revenues from all the major Internet service providers under a regulated tariff. Since acquisition, management has prioritized the rollout of the network across the 27 concessions. By September, this was over 97% complete with the focus now on migrating customers onto Altitude's network. Fiber take-up currently stands at 59% on a blended basis, matching our valuation assumption. Our forecast assumes a long-term fiber penetration of 89%, in line with current broadband penetration with the existing copper network set for decommissioning by 2030. More broadly, the management team continues to explore new growth opportunities through the outright acquisition of networks, acquiring neighboring networks or indeed by developing new networks in new markets, capitalizing on Altitude's in-house construction and operations expertise. On Slide 20, we cover the PPPs, which now make up 52% of the portfolio by value. These assets benefit from availability-based revenues, inflation linked and long-term fixed rate debt. Operationally, the vast majority of the PPP portfolio performed well in the year, aggregate availability exceeding 99%. Notwithstanding the contracted revenues, Infra takes a very active approach to managing the PPP portfolio, both at asset level and through its leadership role within the public sector and the association of investors in PPPs. The portfolio sale in the period further reduced HICL's exposure to U.K. health care and life cycle delivery. This transaction is another example of HICL's ongoing portfolio rotation strategy, strengthening portfolio construction and better positioning the company to protect and create value going forward. Turning now to market and outlook on Slide 22. Here, we consider market activity across HICL's key sectors and geographies. Deal flow remains below historic averages, mostly due to ongoing macroeconomic and political volatility. However, it also remains clear that there is a healthy liquid market for high-quality infrastructure assets, demonstrating the through-cycle appeal to a range of investor types. And clearly, HICL's own disposal activity speaks to that. Our own observations are that following a period of transition in the rate environment, we're now seeing valuations stabilize as with HICL in this period, along with increased institutional interest in core infrastructure, given its attractive risk/reward profile, for example, the transaction with APG. On this basis, we expect further uplift in market activity going forward. The fundamental drivers of infrastructure development, decarbonization, digitalization, demographic change continue to offer strong long-term growth prospects for the asset class. HICL is well positioned to benefit from these trends, and we discuss that on the next slide. On Slide 23, we set out HICL's long-term self-sustaining model. Key to HICL's investment proposition is that its portfolio is self-sustaining and self-funded, and we see that here on the slide. There are 3 key enablers. Firstly, surplus cash flow, driving free cash over and above the dividend through active management of the assets. This is evident through the increase in cash generation and the dividend cover to 1.1x in the period. This is over and above the substantial asset level growth CapEx itself and investment in future cash generation. Secondly, asset rotation, strategically divesting assets to improve portfolio construction and generate additional cash flows through profits on disposal. Over GBP 200 million of disposals have been made in the financial year, over GBP 730 million of disposals delivered over the last 24 months at strong valuations and with profits reinvested into assets and buybacks. And then thirdly, accretive reinvestment. This includes share repurchases and additional investments where these advance HICL's strategy at attractive risk-adjusted returns. To date, the buyback program continues, and we continue to evaluate investment opportunities on a highly selective basis. The market for investment remains attractive with variable conditions presenting opportunities for outsized returns. Finally, as we think about the outlook for the company, I would like to talk about Monday's announcement and how this fits with and enhances HICL's strategy. Slide 24 sets out the key highlights from the proposed transaction, but I want to specifically address why this transaction is the right thing for HICL's strategy and the right thing for HICL shareholders. There are 3 key reasons. Firstly, it expedites growth. TRIG's portfolio is the most diversified of its peer group. It is the most contracted of its peer group. Over 70% of its revenues over the next 10 years are contracted. These assets generate huge levels of cash, and it's that cash that provides the foundation from which HICL can transition to a higher total return strategy. one that pays a higher dividend from day 1, delivers more cash cover and reinvestment in support of long-term growth. Secondly, it precipitates a re-rating. To re-rate the shares, HICL needs to attract new buyers and appeal to a global investor base. The prerequisites to achieve that are a compelling total return strategy and scale. This combination is more likely to lead to a re-rating of HICL shares, all things considered than HICL stand-alone. Finally, it follows the assets. It updates the investment focus to reflect the evolution of the infrastructure market where traditional core infrastructure and the energy transition are converging. This is where the growth is, and successful investors will be those that position their mandates to fully benefit from these powerful tailwinds. Our job as manager is to look around the corner. HICL has evolved before and the time is right that it evolves again. I greatly appreciate your time this morning and now very happy to open up to questions, starting with those in the room. Alex?

Alex Wheeler, RBC. Two for me, please. Just firstly, on the growers, the over 13% annualized return that you mentioned this morning in the RNS, I'd just be interested in how much of that has come from valuation uplifts in the period and how much of it is from the strong organic growth that you're seeing in those assets and the EBITDA growth that's coming through. I think you mentioned that Affinity had a valuation uplift. So any color there and elsewhere would be great. And then just secondly, on the PP -- you've obviously been through a number of disposals. You've lowered your health care exposure. Just interested to get your thoughts on whether you're happy with the balance of that now or whether you'd be looking to do any more selective disposals in the future?

Yes. Thanks, Alex. I'll take the PPP and the divestment one first, and then Mark will come in on the EBITDA. So yes, I mean, to reiterate, we continue to have an active approach to portfolio rotation. And as I mentioned in the presentation, it's really finding that balance between the yielders and growers. There's a few ingredients that go into that. One, the desire for dividend growth; and b, the right level of reinvestment. So we need to balance the cash. It's also dependent on the evolution of the growers and how much cash they start generating or indeed reinvesting. So on the one hand, you have an asset like Affinity that's gone from a non-yielding phase into a yielding phase. You also have assets like Texas Nevada Transmission that are actually seeing more growth on their networks and actually reinvesting more cash than previously assumed. So we take a view on that balance period-to-period, but we absolutely expect to continue to rotate assets, and we'll do that where it makes sense for long-term portfolio construction and getting the balance right in terms of sector exposures and indeed that balance between yields and growth.

Taking your first question, the 13% composition, so that's the gross return for the growers. Inflation obviously plays a key part. The portfolio is quite strongly correlated. And of the penny of outperformance, about half of that comes from actual inflation. So that's us forecasting inflation forward. The actual outturn is higher than we expect, particularly in the U.K. So we update our models and that increases DtF valuation. Secondly, in terms of performance, the EBITDA performance of the growers on average 7% 6 months on 6 months. We're very pleased with that. We think that's very good for assets of these kinds. Where that's higher than the assumptions that we've included in our valuation models, we obviously update and that assumption flows through forward because you're starting from a higher base of earnings as you go forward. So that feeds through to valuations. And some assets like primarily Affinity, also Fortysouth and Altitude have seen really strong EBITDA performances. And then you have valuation movements that you referred to. Affinity, for example, after the final determination was passed by the regulator, we very slightly increased the WACC there in line with that determination. With TNT, they have brought forward CapEx on building out their network, as Ed described. And so that has a valuation impact as well. It's pretty strongly accretive. And so there are movements of those kinds as well that are feeding through, again, as you would expect for assets of this kind. And then finally, we had a bit of a tailwind in these 6 months, not very large, but modest from FX, particularly strengthening of the euro against sterling.

Just a few for me. Could you remind me the RCV multiple you've got in for Affinity as it stands today? And I was quite interested if you can talk a little bit about the APG relationship or any similar relationships of that in the context of your disposal programs, et cetera? And thirdly, just on CapEx, you on the growers have spent GBP 50 million in the period. Can you give a sense for what you expect that to be over the full year? And in that same context, the current facilities at the company level that will support that, just again, taking that in context of your disposal targets and meeting that balance, what's funded and what might you need to fund?

Yes, sure. So in relation to the RCV multiple, we don't disclose it publicly. You can work it out though in the public information, it's between 1.2 and 1.25. In relation to relationships for divestments. So you mentioned the APG relationship. So I mean this is an important feature. We know that the market is not as competitive as it was 3 years ago and bringing relationships to bear to acquire assets is a key strength of InfraReds in order to rotate assets. In this case, APG is an example of that. There's an ongoing relationship between HICL, InfraRed and APG in respect of future potential divestments for the and indeed future partnerships for acquisitions. So we see relationships like that as a very key strength in being able to continue to execute the type of portfolio rotation that we'd like. APG is one example. There will be others in due course, I'm sure. In relation to CapEx, Mark might have the figures to hand, but it's fairly linear. If you think about the biggest CapEx developers, it's Affinity towards the others and also things like Fortysouth, where it's a pretty linear deployment over the next 6 months to year. But Mark, I don't know whether you want to comment on that.

Yes, sure. That's correct. And as you can expect with businesses that are CapEx heavy CapEx plans, there's sometimes a bit of a lag and then it falls into the previous year. So that sort of happens year after year. So the linear approach is it would be a good assumption. In terms of the funding and the facilities available, taking Affinity Water, first of all, we said back in May that, that took its regulatory determination and went out and got fully refinanced. So that has no refinancing obligation until 2033. It raised a large bond at tighter spreads than the rest of its debt. So that business is fully funded. All the CapEx is fully funded either through free cash flow or the financing. So that's a comment on the financing of the CapEx there. Fortysouth, we mentioned that that's exploring an early refinancing. That's been an independent business for nearly 3 years since its carve-out. It's got a bit of a track record to show some lending banks. And so we would expect a refinancing there to in anticipation of the continuing CapEx plans that are driving really great EBITDA growth there. And obviously, that company generates an awful lot of free cash flow, which at the moment is being prioritized towards tower build-outs and connections. And then finally, Altitude as well. Altitude has just refinanced its mezz debt. It's a very large business of which HICL owns 6% and Infrared funds own about 20%, and that is fully funded for the remainder of its build-out program, which is now drawing to a close. So there isn't a very large CapEx requirement on existing plans there.

It's Ashley Thomas from Winterflood. Just on the PPP portfolio, could you perhaps give us a bit of additional color on the situation at the Lewisham Hospital and the higher risk of performance deductions and potentially sort of a rough quantum of the increase in the discount rate and the cash provision?

Yes, happy to do that. So we highlight in the annual -- actually referring to comments that we made in the report itself regarding Lewisham. I think the first point to make out that in any PPP relationship, it's a long marriage, often 25, 30 years and you have ups and downs. On that particular asset, we have identified some need for service improvements in respect of the FM and the SPV management. We are working through that with the client, but we do foresee a slightly higher risk of deductions in the short term. So we've made some adjustments to cash flow to potentially reflect that. And we've also increased the discount rate in respect of that asset. Overall, Lewisham is not a large asset in the portfolio, less than 1%. So very quarantined and not a key feature of the valuation story today. So significant portfolio level.

It's Iain Scouller from Stifel. Just in terms of the cash coming back from the PPPs, can you just sort of talk a bit about the pipeline, any sort of sectors you're particularly focused on? And also, I mean, on pricing of transactions, I think you're sort of indicating that they're actually holding up relatively well despite the bond yield being relatively high. So I was wondering if you just talk a bit about that in a bit more detail.

Iain, do you mind just clarifying the first -- cash from PPPs, do you mean in terms of divestments? Or do you mean...

I mean, you've got this cash coming back in. I mean, the over GBP 200 million. So I mean, how quickly are you intending to invest that in the pipeline? And if you just talk a bit about the pipeline?

Yes, absolutely. So yes, I mean, in terms of the sort of weighted average asset life of the PPP portfolio more generally, it's still about 13 years. So there are certainly examples of PPPs that are rolling off sooner than that, and there are examples of PPPs that roll off much further than that. In respect of cash that comes off the portfolio in the next 5 years, then that provides an opportunity for us to deploy using capital allocation discipline that we've showed thus far. That's been a balance of investments back into assets, be it incremental investment in A63 or an incremental investment in Affinity Water, so opportunities through the existing portfolio or to pick up additional stakes, but also in respect of buybacks and debt reduction on the balance sheet. So it's a quantum that drips in over the coming years rather than a big lump, but we'll continue to use the same capital allocation discipline to direct that cash. In respect of transaction data, I mean, I made the point in the presentation, but I'll let Mark speak to this as well. So we recognize that conditions are still somewhat variable, but they are starting to settle. So what we've noticed as a house is this increase in institutional interest in at the core end of the infrastructure risk spectrum, recognizing that valuations have taken their mark-to-market. Discount rates across the sector have increased between 140, 180 basis points. HICL's own has done the same. and at those new discount rates and valuations, that's quite a compelling risk-adjusted return. So we're working carefully and constructively with institutional partners to develop and harvest those relationships where appropriate on behalf of HICL, and we see more activity there. But in carefully structured processes, it's clear that you can attract NAV for a group of assets. These 7 assets are pretty bog standard PPP assets. The U.K., they're health. They've got life cycle, but they are very much representative of the broader PPP portfolio in many respects, and we've attracted a strong valuation for them. So we think that valuations can hold up. The caveat to that is what we're seeing elsewhere in the market is where someone says, we have to sell all our assets tomorrow, puts up the for sale sign runs a process and the valuations are soft, and that's absolutely what you would expect in this type of market, running a process of that type. So it's about InfraRed's ability to leverage relationships, find the right buyers for the right assets and do it in a sensible way.

Discount rates. Obviously, bond yields did rise slightly between March and September. And of those fairly modest rises cut at 30 September, the most marked was in the U.K. really. And that was the jurisdiction, of course, where we sold nearly 15% of the portfolio, the PPP portfolio at NAV. And so it didn't seem in the context of that, that there was a compelling argument to put the discount rates up at half year. And bond yields since then have remained a little bit volatile, but they haven't particularly shot up.

So I think for those online, we've got one more in the room, and then we'll start taking questions from the...