UPDATE 2-HSBC Infrastructure ups dividend as profits rise

* H1 pre-tax profit up 89 pct to 8.5 mln pounds

* Interim dividend at 3.2 pence, up 2.4 pct

* Could raise up to 80 mln pounds in share issue

* Shares close down 0.85 pct

(Adds adviser, analyst comments, share offer details)

By Greg Roumeliotis

AMSTERDAM, Nov 12 (Reuters) - HSBC Infrastructure (HICL) (HICL.L), the banking group's listed infrastructure fund, on Thursday posted a sharp rise in first-half profits and hiked its interim dividend as portfolio performance improved.

The fund also said in a statement after market close on Thursday that the C share issue it had already announced earlier this month would involve placing up to 80 million new shares at 1 pound each, raising 80 million pounds.

Pre-tax profit for the six months to end-September rose 89 percent to 8.5 million pounds ($14 million) helped by favourable interest rate swap, inflation swap and bond indexation movements.

The fund, which earlier this month announced plans to raise new capital to pay down debt and help fund deals, said it would press on with expanding its portfolio to 500 million pounds and beyond. It valued it at 464.5 million pounds as of Sept. 30.

"In contrast to the continuing low bank deposit rates available to investors, we continue to offer our shareholders a growing yield with a resilient net asset valuation," HICL chairman Graham Picken said in a statement.

HICL's shares closed down 1.54 percent to 115.2 pence.

HICL's board has declared an interim distribution of 3.2 pence per share, up 2.4 percent, with a scrip alternative. It said its goal was to achieve a distribution of 7 pence per share by the year to end-March 2013.

LOWER RISK

Tony Roper, a director at HICL's investment adviser, said its fund, which competes in Europe with rival listed funds 3i Infrastructure (3IN.L) and International Public Partnerships (INPP.L), had consistently traded at a premium to its net asset value.

"The market has always perceived us as a low-risk, stable-yield fund. Clearly our return expectations are lower than others such as 3i, that is targeting 12 percent, but we do very well for our risk profile," Roper said.

The fund plans to use the proceeds of the share issue to first repay a five-year 200 million pound revolving loan, from which it had drawn down 54.7 million pounds as of the end of September, Roper added.

"With the new share raising and undrawn debt capacity, the fund has a lot of dry powder to invest at his time and the potential pipeline of deals reflects the work they are doing in this area," Liberum Capital analysts wrote in a note.

The infrastructure fund, which invests in social infrastructure public-private partnership projects such as schools and hospitals, said its adviser was negotiating further investments with a value in excess of 100 million pounds.

Roper said he hoped the fund could make an investment of around 24 million pounds to one of eight opportunities on offer before the closing of the share issue, which is scheduled for Dec 10.

"The infrastructure market is more of a buyer's market than a seller's market now," said Roper, adding that the fund is looking at opportunities in Europe and also in Australia and Canada, and that it usually invests post-construction.

Earlier this year it raised 38.8 million pounds in net proceeds by block listing 35.1 million shares. ($1=.6033 Pound) (Editing by Joel Dimmock)