Borealis Infrastructure, the infrastructure investment arm of the Ontario Municipal Employees Retirement System (OMERS), and Ontario Teachers’ Pension Plan have agreed to sell HS1 Ltd, the owner and operator of High Speed 1, a U.K. high-speed rail system. No financial terms were released. The buyer is a consortium led by InfraRed Capital Partners and Equitix Investment Management. Borealis and Ontario Teachers’ bought the 30-year concession for the HS1 network in 2010 for £2.1 billion ($3.5 billion). The network connects London St Pancras International station with the Channel Tunnel.
Strategic Review Concludes with Sale of High Speed 1
July 14, 2017
LONDON–(BUSINESS WIRE)–Borealis Infrastructure (“Borealis”), the infrastructure investment manager of OMERS, and Ontario Teachers’ Pension Plan (“Ontario Teachers’”) announce they have entered into a definitive agreement to sell High Speed 1 (“HS1”) to a consortium comprising funds advised and managed by InfraRed Capital Partners Limited (“InfraRed”) and Equitix Investment Management Limited (“Equitix”) (together, the “Consortium”).
As part of this transaction, InfraRed is advising third party funds including HICL Infrastructure Company Limited (“HICL”) and the National Pension Service of the Republic of Korea (“NPS”). The members of the Consortium will acquire interests in HS1 pro rata by reference to their respective shareholdings, with HICL and the Equitix funds acquiring 35% each, and the NPS funds managed by InfraRed acquiring the balance of 30%.
HS1 operates the 109km high-speed rail line connecting London St Pancras International station with the Channel Tunnel, under a 30-year concession agreement with the U.K. Secretary of State, signed in 2010. HS1 is responsible for the operations, maintenance, and renewal of the track and associated infrastructure, as well as the four stations served by the route: St Pancras International; Stratford International; Ebbsfleet International; and Ashford International. The rail line is predominantly a high-speed passenger railway, providing track access to domestic commuter services throughout Kent and international services to destinations in Europe such as Paris and Brussels via the Channel Tunnel. In 2016, HS1 handled over 75,000 train services and its principal customers, London and South Eastern Railway and Eurostar, carried over 20 million passengers.
The Consortium is committed to ensuring HS1 continues to serve all stakeholders well. Each of the Consortium members has a proven track record of owning and managing UK infrastructure businesses and collectively bring significant financial and operational expertise to HS1.
Jo Taylor, Senior Managing Director of Ontario Teachers, said: “HS1 has delivered significant economic benefits to the UK and has enabled the regeneration of a number of areas along the route. We are confident that HS1 will continue to prosper under its new ownership, while Ontario Teachers’ remain committed to the UK as an attractive destination for future investment. The Government’s approach to the concession agreement partnership with the international investment community reflects an excellent model for infrastructure opportunities moving forward.”
Ralph Berg, Executive Vice President & Global Head of Infrastructure, OMERS Private Markets, said: “We are proud of the successes that HS1 has achieved since our acquisition in 2010. The business has become a reference point for the quality and reliability of its service. We are confident that HS1 will continue to excel under its new ownership. We remain strongly committed to the UK and continue to see opportunities to invest in infrastructure assets — whether in the UK, or in other key markets.”
Ben Loomes, Managing Partner and Head of Infrastructure, InfraRed, said: “We are very pleased to be investing in HS1, a strategically important and core UK infrastructure asset. We look forward to working with the management team and our partners to further build on the success that the business has enjoyed to date and facilitate the continued delivery of a high-quality service for passengers.”
Hugh Crossley, Chief Investment Officer, Equitix, said: “We are delighted to acquire the high quality UK PPP asset which is attractive to our underlying Limited Partners and we expect to remain invested in it for the full duration of the concession.”
About High Speed 1
HS1 is a modern high-speed rail line allowing speeds of up to 300 kph and 230 kph for international services and domestic services, respectively. HS1 connects at several points to the classic rail network and provides passenger connectivity with other public transport options.
Domestic passenger services are operated by London and South Eastern Railway Limited, which currently holds the South Eastern franchise. LSER has delivered >10% passenger growth since the start of high speed domestic operations in December 2009. International passenger services have been operated by Eurostar International Limited for over 20 years with 10 million passengers p.a. on its two core routes to and from Paris and Brussels, which account for 97% of passenger demand. Newer routes include Marseilles (launched May 2015) and Amsterdam (launching December 2017).
HS1’s four rail stations generate income through the provision of unregulated activities, comprising retail leases and car parking facilities. St Pancras, located in Central London, is the flagship station generating 98% of the Company’s total retail income. St Pancras has 108,100 sq. ft. of prime retail space and attracts c.50million visitors a year.
About InfraRed Capital Partners
InfraRed Capital Partners (“InfraRed”) is a leading international investment manager focused on infrastructure and real estate. It operates worldwide from offices in London, Hong Kong, New York, Seoul and Sydney. With over 120 professionals it manages in excess of US$9bn of equity capital in multiple private and listed funds, primarily for institutional investors across the globe.
Since its inception, InfraRed has launched 17 funds, including two companies listed on the London Stock Exchange: HICL Infrastructure Company Limited and The Renewables Infrastructure Group (TRIG), both of which are members of the FTSE 250. To date, InfraRed has realised six funds, demonstrating its ability to create real value for its stakeholders.
InfraRed has been investing in the Infrastructure market for over 20 years and is one of world’s largest managers of social and transportation infrastructure projects. InfraRed has evolved its business from principally managing PPP projects at its inception to a diversified and international investment business, with around 60 infrastructure investment professionals, managing over 200 investments in PPP projects, renewable energy, regulated and economic infrastructure businesses.
InfraRed implements best-in-class practices to underpin asset management and investment decisions, promotes ethical behaviour and has established community engagement initiatives to support good causes in the wider community. InfraRed is a signatory of the Principles of Responsible Investment and its infrastructure business has been awarded the highest rating. Further details can be found on InfraRed’s website, www.ircp.com/ .
Equitix is a leading developer, investor and long-term fund manager of core infrastructure assets, predominately in the UK. It has over £2billion of equity under management and invests for the long-term in investments with stable, predictable yields.
OMERS Private Markets (Borealis Infrastructure and OMERS Private Equity) invests globally in infrastructure and private equity assets on behalf of OMERS, the pension plan for Ontario’s municipal employees. Investments are aimed at steady returns to help deliver strong and sustainable pensions to OMERS members. OPM’s diversified portfolio of large-scale infrastructure assets exhibits stability and strong cash flows, in sectors including energy, transportation and government-regulated services. OPM has offices in Toronto, New York, London and Sydney. OMERS is one of Canada’s largest pension funds with net assets of more than C$85 billion. Visit www.omers.com or www.omersprivatemarkets.com
About Ontario Teachers’
The Ontario Teachers’ Pension Plan (Ontario Teachers’) is Canada’s largest single-profession pension plan, with $175.6 billion in net assets at December 31, 2016. It holds a diverse global portfolio of assets, approximately 80% of which is managed in-house, and has earned an average annualized rate of return of 10.1% since the plan’s founding in 1990. Ontario Teachers’ is an independent organization headquartered in Toronto. Its Asia-Pacific region office is located in Hong Kong and its Europe, Middle East & Africa region office is in London. The defined-benefit plan, which is fully funded, invests and administers the pensions of the province of Ontario’s 318,000 active and retired teachers. For more information, visit otpp.com and follow us on Twitter @OtppInfo.
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Photo courtesy of HS1 Ltd