HICL Infrastructure plc (LON:HICL) has announced that the Company has entered into an agreement to invest c.£68 million in Hector Rail AB, the largest private rail freight operator in Scandinavia. HICL is investing alongside other InfraRed-managed funds, which together will acquire 100% of Hector Rail from infrastructure investment manager Ancala.
Key Transaction Highlights
| c.£68 million1 investment in Hector Rail, the largest private sector rail freight operator in Scandinavia, with a fleet of approximately 100 locomotives | |
| HICL’s 42% stake will be acquired alongside other InfraRed-managed funds, which together will own 100% of the company | |
| HICL’s first Enhancer investment, in line with the strategy announced at the Company’s Capital Markets Seminar in July and supporting its 10%+ medium-term total return target | |
| Essential rail freight services supporting a stable and diversified customer base, with opportunities for organic growth through capex deployment and active value creation |
The investment will be funded using available cash on HICL’s balance sheet and is expected to complete by 31 December 2026, subject to customary third-party consents. Following completion, the investment will represent approximately 2.3% of HICL’s portfolio by value2.
Investment Rationale
Hector Rail benefits from a strong position in the Scandinavian rail freight market, with growing operational cashflows and a diversified customer base, underpinned by an average tenure of more than 16 years for the five largest relationships. Its operating licences, specialist workforce, established fleet and operational expertise create meaningful barriers to entry. Revenues are supported by inflation-linked, multi-year contracts, with energy and track-access costs largely passed through to customers. Hector Rail’s revenues are generally based on the number of trips operated as opposed to the volumes of underlying commodities transported.
The business is well positioned for substantial expansion in its target markets, driven by long-term demand from existing and new customers for efficient, lower-carbon freight transport. Revenues have increased by approximately 7% p.a. over the past five years, with clear scope for continued growth, underpinned by the ongoing modal shift from road to rail, greater rail connectivity from Scandinavia to continental Europe, and a supportive policy backdrop for rail freight in the region. Swedish track access charges are set to fall by approximately 20% from 2028 while the cost of road haulage is expected to increase over time. In the medium-term, Hector Rail will benefit from improved connectivity and significantly reduced journey times on its international routes when the Fehmarnbelt Tunnel between Denmark and Germany opens in the early 2030s.
To support further revenue growth and the expansion plans of Hector Rail’s customers, HICL’s investment case assumes the addition of several more locomotives as new customer contracts are secured alongside a planned programme of heavy maintenance, funded by operating cashflows. Working closely with Hector Rail’s experienced management team, InfraRed expects to drive operational enhancements through its active management approach. Together with continued revenue growth, these factors are expected to support double-digit average annual EBITDA growth over the next five years.
The investment improves HICL’s sector and geographic diversification; complements the Company’s existing portfolio of Yielder and Grower investments; and is expected to support its medium-term total return target of over 10% per annum, offering returns materially in excess of the implied return from share buybacks. It also improves HICL’s inflation correlation and offers the prospect of strong operational cashflows for re-investment or distribution.
The acquisition represents HICL’s first Enhancer investment, in line with the revised articulation of the Company’s investment strategy announced on 2 July 2026 and detailed at the Company’s Capital Markets Seminar held on the same day. Acknowledging the evolution of the infrastructure market, investor preferences and the expanding opportunity set created by long-term structural growth trends, the Company has outlined its ambition to deliver total annual returns of 10%+ over the medium term, to be achieved through the selective introduction of Enhancers alongside the Yielder and Grower investments already held by the Company.
The Hector Rail investment would constitute a modest portion of the Company’s anticipated total allocation to Enhancer investments and falls within the ‘more diverse infrastructure investments’ category of 35% permitted under HICL’s Investment Policy. Consistent with the strategy presented at the Company’s Capital Markets Seminar, the Company expects in due course to seek shareholder approval to update its Investment Policy to reflect a clearer and more contemporary articulation of HICL’s investment approach since IPO, including the introduction of a specific limit on the proportion of total assets that may be allocated to Enhancers.
About Hector Rail
Hector Rail was founded in 2004 and is headquartered in Stockholm, Sweden. Having initially operated services between Sweden and Norway, the company has expanded over the past two decades to establish a presence across Sweden, Norway, Denmark and Germany, becoming the largest private rail freight operator in Scandinavia.
The company provides a full-service rail freight offering to a diversified base of blue-chip industrial customers across a range of sectors, including timber, intermodal freight, and energy. Customer relationships are deep and long-standing, with the five largest customers by revenue having an average relationship tenure of more than 16 years. Services include the provision of locomotives and drivers, route planning and timetable management, as well as wagon and shunting services. Hector Rail specialises in operating dedicated block train services for large industrial customers and forms an important part of several critical regional supply chains.
Hector Rail employs approximately 400 people, including around 300 train drivers, and operates a fleet of approximately 100 locomotives, around 75% of which are electric. The company has invested significantly in the development of its modern electric fleet in recent years and has long-standing supply and maintenance agreements in place with experienced counterparties.
The business is led by an experienced management team with a strong operational track record in rail freight. Over the past 20 years, Hector Rail has curated long-term relationships with many of Scandinavia’s leading industrial companies and has established a strong reputation for reliability and service quality across the markets in which it operates.
Edward Hunt, Head of Core Income Funds at InfraRed, said:
“We are delighted to announce HICL’s first Enhancer investment, marking an important milestone in the evolution of the Company’s strategy. Hector Rail is a high-quality infrastructure business with a strong position in the Scandinavian rail freight market, supported by clear opportunities for value creation. The investment demonstrates HICL’s disciplined approach to selectively enhancing returns for shareholders while remaining focused on essential infrastructure.”
1. As at current exchange rates
2. As at 31 March 2026, using the Directors’ Valuation
