A proposed £5bn merger between infrastructure investment trusts HICL and The Renewables Infrastructure Group (TRIG) has been abandoned after key shareholders raised concerns over the deal’s risk profile and valuation.
The two London-listed funds, which announced plans to combine on 17 November, confirmed they will no longer proceed after HICL investors pushed back against the structure and strategic implications of the transaction.
According to Reuters, the deal would have involved the voluntary winding up of TRIG, with its assets transferred into HICL in exchange for HICL shares and a £350M liquidity package. The terms would have given TRIG shareholders a cash-out option that was not available to HICL investors, leading to unease over what was seen as an imbalance in benefits between the two sides.
The merger would have created one of the largest infrastructure investment trusts in the UK market, but institutional investors – including CG Asset Management, which holds nearly 1% of HICL – questioned the valuation and strategic fit. HICL shareholders highlighted that TRIG’s portfolio sits in a different asset class, with a higher risk-return profile than HICL’s existing holdings.
HICL’s portfolio is weighted towards lower-risk public-private partnership (PPP) and core infrastructure assets, many of which are classed as Critical National Infrastructure. Its UK holdings include London St Pancras high-speed station, the Hornsea 2 offshore wind farm, the M1-A1 Link Road and the M80 motorway, reflecting a focus on long-term, contracted cashflows.
By contrast, TRIG specialises in renewable energy infrastructure and targets higher-yielding but more volatile assets. Its strategy is exposed to power price movements and policy shifts, particularly in subsidy regimes, which has contributed to a different risk profile from HICL’s more traditional infrastructure base.
HICL investors were understood to be reluctant to take on this additional exposure to renewables risk. Following engagement with shareholders, the HICL board concluded it could not move forward without a substantial majority of its own investors backing the deal and therefore decided not to progress the transaction.
For TRIG investors, a key factor behind the trust’s lower valuation relative to HICL has been uncertainty around the UK subsidy framework for renewables. FT Adviser has reported that government consultation on changing indexation for older schemes, combined with higher interest rates and volatile power prices, has weighed on sentiment and depressed trading levels across renewable investment trusts.
TRIG’s board said it regretted that its shareholders would not have the chance to vote on the creation of what was billed as the largest listed UK infrastructure investment company. However, it confirmed the trust will now continue as a standalone vehicle, pursuing its existing strategy in the renewables and energy storage markets.
TRIG chair Richard Morse said the board’s focus now returns to delivering the company’s standalone plan, underpinned by a portfolio of high-quality assets, a competitive pipeline and specialist expertise in renewables and storage. He added that TRIG is well placed to benefit from growing demand for low-carbon, reliable power as the UK and European economies electrify and decarbonise, and that the trust will continue to engage with shareholders on its future direction.
