HICL Infrastructure Company announced that it had reached agreement to acquire a 36.6% equity interest in the various entities that comprise the Affinity Water Group, including the regulated entity, Affinity Water Limited.
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HICL said it was part of a consortium, alongside DIF Infrastructure and Allianz Capital Partners on behalf of Allianz Group, which agreed to acquire 100% of the equity interest in Affinity Water Acquisitions from Morgan Stanley Infrastructure and Infracapital.
It said the investment was consistent with its strategy of investing in assets that were positioned at the lower end of the risk spectrum in three target market segments - public-private partnerships, regulated assets, and demand-based assets.
HICL claimed Affinity Water was the largest water-only company in England and Wales by revenue and population served, with a regulatory capital value of £1.156bn as at 31 March 2017.
It was licensed under the Water Industry Act 1991 and regulated by Ofwat, and its principal activities were water supply and distribution and the construction and maintenance of water supply infrastructure.
Affinity Water currently served 1.5 million customers across an area of approximately 4,515 square kilometres in the south east of England.
HICL's share of the consideration for the acquisition amounted to approximately £269m, the board said.
That included HICL's share of Topco's commitment to acquire a minority interest in Affinity Water.
The investment would be funded using HICL's cash resources and drawings from its revolving credit facility, and completion was scheduled for later in the month.
HICL said it would have a net funding requirement of around £230m following completion of the acquisition.
If calculated using an asset life of 100 years, the board said the investment extended the weighted average asset life of HICL's portfolio to 32.2 years.
Additionally, the portfolio's inflation correlation would be increased such that a 1% increase in inflation per annum against the base case valuation assumption would result in the total return to HICL's shareholders increasing by 0.8% per annum. ■