Infrastructure Investment Companies

Recent years haven’t been kind to the Infrastructure Investment Companies sector. Share prices have suffered at the hands of higher interest rates, with negative capital returns exacerbated by share price premiums moving to discounts against Net Asset Values (NAV).

Looking back to the late 2010s, companies within the sector offered investors yield, in a low-yield environment, leading to a swath of new public offerings and scaling opportunities for incumbents. Beyond the yield, they also offered access to physical assets with cashflows showing positive correlation to inflation and operating within a regulated framework. There was a lot to like within the sector given the lack of attractive returns on offer within the classical areas of the bond market such as UK government and high-grade corporate bonds.

Unfortunately, 2025 has started poorly, with higher government borrowing costs and other company-specific issues causing share prices to move lower, discounts to NAV widen, and dividend yields to creep into the 8-10% range. Share prices trading at material discounts to the reported NAV per share is a hot topic. With equity-focused investment companies, the NAVs are released daily, making the metric a potentially more robust method when considering the value on offer. With listed infrastructure vehicles, however, the infrequent nature of valuations and complexity in their calculation has led to requests for companies to prove their valuations through selective asset sales. In recent months, HICL, International Public Partnership, and Greencoat UK Wind have all completed sales at or above the most recent valuations. One of the more recent NAV tests came in February with a Canadian pension fund making an all-cash offer for BBGI Global Infrastructure (BBGI) for a 3.4% premium to the estimated end of 2024 NAV.

While the takeover bid for BBGI had a positive impact for the sector, with other core infrastructure funds of HICL and International Public Partnerships moving higher on the news, there’s potential for the event to be an isolated occurrence. BBGI’s portfolio has a healthy weighting to Canadian infrastructure assets such as roads, bridges and hospitals, which have a high crossover to the stated aims of the Canadian pension fund. A second consideration comes in the internally managed structure of BBGI, which removes the challenge of acquirers buying out external management contracts.

Within the renewables infrastructure sector, wind farm owners Greencoat UK Wind (UKW) and The Renewables Infrastructure Group (TRIG) released trading updates in recent weeks, providing colour to the drivers influencing recent share price declines. Both indicated downward revisions to energy yield estimates, causing NAVs to decline. On the positive side, dividend distribution amounts were increased with UKW advancing the dividend 3.5%, in-line with the Retail Price Index rate of inflation, and TRIG by 1.1%. In addition, asset sales are enabling the paying down of debt and repurchasing of shares, which on dividend yields of 8.73% and 9.31% respectively, is an attractive use of capital.

The Infrastructure Investment Companies sector extends beyond the names commented on above, with a myriad of options for investors in different sub-sectors from core to renewable infrastructure. Shareholder patience has been tested, with share price total returns meaningfully deviating from the NAV total returns. The question remains; where do we go from here? High current dividend yields and share buyback programs could reasonably be expected to underpin some attractive forward returns, but consideration remains as to where the marginal buyer of shares will come from.

Please note that this communication is for information only and does not constitute a recommendation to buy or sell the shares of the investments mentioned. Investments and income arising from them can fall as well as rise in value. Past performance and forecasts are not reliable indicators of future results and performance. The information and views were correct at time of publishing but may have changed at point of reading.