Direct investments - Core
Anglian Water Group (AWG) - Water utility
AWG is the dominant water provider in East Anglia and is led by a proven, high-quality management team.
We participated in a consortium investment in 2007 and made a follow on investment in 2011. Since our initial investment, the asset has generated attractive inflation linked returns and cash yields.
ASG I and II - Solar energy generation
Two rooftop solar power portfolios were acquired from the UK business A Shade Greener (ASG), most recently on 31 January 2014. Both were acquired without the use of third party leverage and aim to generate a strong, stable cash yield directly linked to RPI movements with limited volatility.
Approximately half of the electricity generated is used by the on-site domestic home owner, with the rest of the power exported for use by the national grid. The installed capacity of the ASG (F2, F8 and ECS) asset amounts to c.35 megawatts.
As beneficiaries of the UK's feed-in-tariff regime, both portfolios earn a fixed price for electricity generated, which is inflation linked and without any direct electricity price risk.
Braes of Doune - Wind energy generation
The wind farm, near Stirling, has an installed capacity of 72 megawatts and has been operational since 2007. The wind farm is forecast to generate enough clean energy to offset c.70,000 tonnes of CO2 emissions per annum.
We acquired a 50% interest in June 2013 without the use of third party leverage and have secured a long-term purchase agreement for 100% of the farm's energy. The investment is forecast to generate a solid cash yield and RPI-linked earnings based on its proven wind resource over its five-year operational period.
Fallago Rig - Wind energy generation
We acquired a majority interest in the Scottish wind farm, the fifth-largest in the UK at acquisition date, on 6 December 2013 in conjunction with other Hermes managed funds. It is estimated to generate about 446 gigawatt hours of clean energy each year and could offset close to 190,000 tonnes of carbon-dioxide emissions annually.
Energy utility EDF is our partner in a long-term agreement to purchase 50% of the farm's output. With no third party leverage and a strong, stable cash yield, we forecast strong inflation linked returns.
Direct investments - Value Added
Eurostar 2013 International high speed rail
We acquired a 10% stake in Eurostar, the sole provider of passenger rail services through the Channel Tunnel in May 2015. Hermes Infrastructure has appointed a Director to the Board of Eurostar and will be actively involved in the governance of the business going forward.
Southern Water - Water utility
The dominant water provider in south England delivers predictable revenue streams and opportunities to capture incremental returns from capital expenditure programmes.
We invested in 2007 and are involved in deleveraging and recapitalising the company. Since much of the overall future return is likely to be sourced from growth, rather than yield, we consider this to be a value-added asset.
We have two investments in PPI/PFI funds within the Core portfolio, providing additional diversification and strong yield with inflation linkage and two diversified pooled investment funds within the Value Added portfolio. The funds were acquired as secondary transactions and are currently or will be shortly divesting assets and are likely to be realised within the Fund's investment period.
Past performance is not a reliable indicator of future results and targets are not guaranteed. The above information does not constitute a solicitation or offer to any person to buy or sell any related securities or financial instruments. It does not represent all of the securities bought or sold in the portfolio and that it should not be assumed that the above securities were or will be profitable. A list of all purchases and sales is available upon request. References to future expectations cannot be guaranteed. The above information is at 30 June 2015.