Borealis Infrastructure, the infrastructure investment manager of OMERS, and Ontario Teachers' Pension Plan have announced 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 and Equitix Investment Management.

As part of this transaction, InfraRed is advising third party funds including HICL Infrastructure (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%.

HICL's share of the consideration amounts to up to £320 million (US$418 million). The investment will be funded using HICL's existing cash resources and drawings from its revolving credit facility. Following completion of the acquisition, and on the basis that HICL has brought in co-investment of up to £120 million of its equity interest, HICL will have a net funding requirement of approximately £140 million.

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."

Harry Seekings, Director (Infrastructure) at InfraRed Capital Partners Limited, said:

"HS1 is a strategically important, core UK infrastructure asset and InfraRed is delighted to have secured this opportunity for HICL. The investment is in line with HICL's stated acquisition strategy and is expected to be accretive to the existing portfolio, in particular with regard to yield and inflation correlation.

Following the completion and finalisation of co-investment, approximately 16 per cent of the HICL portfolio will be invested in demand-based assets with returns that are correlated to wider economic activity.  This remains within the Company's 20 per cent limit for investments of this nature.

HS1 has a strong track record, which is underpinned by operational excellence, and we look forward to working with the management team to support the continued delivery of a high-quality service for HS1's customers."