Involved in the biosynthesis of the hopanoid precursor squalene (SQ) from farnesyl diphosphate (FPP). Catalyzes the second step, the conversion of presqualene diphosphate (PSPP) to hydroxysqualene (HSQ). H2O + presqualene diphosphate = diphosphate + hydroxysqualene Secondary metabolite biosynthesis; hopanoid biosynthesis. Belongs to the phytoene/squalene synthase family. HpnC subfamily.