March 2019 | infrastructureinvestor.com FOR THE WORLD’S INFRASTRUCTURE MARKETS
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Infrastructure’s biggest year
the biggest categories we award, the ISSN 1759-9539 MARCH 2019 EDITOR’S LETTER New-York based manager did well after a productive 2018, which saw Senior Editor Bruno Alves BRUNO ALVES it not only close one of the biggest +44 207 167 2031 INFRASTRUCTURE INVESTOR vehicles of the year but also clinch [email protected] SENIOR EDITOR News Editor a number of deals across the globe. Kalliope Gourntis Antin, GIP and Macquarie were +30 6937 230 121 [email protected] some of the other names that did Senior Reporters WHAT a year infrastructure has well in this bumper year. Zak Bentley had! After a steady rise over the But fundraising was not the only +44 20 3862 7497 [email protected] past decade, 2018 will probably be big theme coming out of 2018. Start- Jordan Stutts remembered as the year the asset ing on p. 6, you can read about some +1 646 214 4851 class really took off. of last year’s most pressing trends, [email protected] With over $80 billion raised last from the opportunity offered by Reporters Eduard Fernández year for closed-ended funds, as digital infrastructure, to the regu- +852 6996 4355 you can see in our p. 56 report, the latory headwinds which are making [email protected] Daniel Kemp asset class is front and centre for foreign investment that little bit +61 452 300 346 many a limited partner. What’s harder, the growing importance of [email protected] more, 2019 is threatening to be diversity in asset management and Marketing Solutions Manager Around 27 Hywel Grimmett an even bigger year, with $100 the energy transition’s resiliency in +44 20 7566 5474 percent of LPs billion in fundraising suddenly the face of political setbacks. [email protected] queried plan to looking like a very achievable As is customary in our Annual Production Editor Julia Lee increase their milestone, considering all the Review, we also have several contri- +44 20 7167 2030 marquee names currently in butions from the market. On p. 46, [email protected] exposure to market. Hermes Investment Management Design and Production Manager infrastructure Carmen Graham over the next In fact, as our p. 49 LP Per- warns that infrastructure investors +44 20 7167 2036 spectives survey demonstrates, could face a “legitimacy challenge” [email protected] 12 months” Subscriptions and reprints around 27 percent of LPs if they don’t improve some of their Ian Gallagher (Americas) queried plan to increase their practices in this age of populism and +1 646 619 8131 [email protected] exposure to infrastructure over the protectionism. Wilmington Trust, Daniele Lorusso (EMEA) next 12 months – that’s the highest on p. 16, dives into the some of the +44 207 566 5432 allocation intention among all the opportunities offered by the digital [email protected] alternative asset classes, bar private revolution, from data centres to 5G. Sigi Fung (Asia-Pacific) +852 2153 3140 debt at 28 percent. However, with And Pacific Equity Partners makes [email protected] 38 percent of investors questioned a strong case, on p. 42, for the ben- Director, Digital Product Development Amanda Janis, [email protected] still not committed to the asset class efits of bringing a PE approach to Editorial Director – this time, the highest percentage Australasian infrastructure. Philip Borel, [email protected] amongst all the alternative asset Head of Research & Analytics classes – there is still plenty of room Enjoy this celebratory issue, Dan Gunner, [email protected] Publishing Director for growth. Paul McLean, [email protected] It is against this jubilant back- Chief Executive drop that we are celebrating our Tim McLoughlin, [email protected] 10th global award winners, starting Managing Director – Americas Colm Gilmore, [email protected] on p. 19. Much like in 2015, follow- Managing Director – Asia ing the close of its debut infrastruc- Bruno Alves Chris Petersen, [email protected] ture fund, this year is very much I Squared Capital’s year. With six tro- For subscription information visit e: [email protected] www.infrastructureinvestor.com phies to its name, including some of
ANNUAL REVIEW INFRASTRUCTURE INVESTOR 1 Infrastucture Investor Annual Review
THEMES OF THE YEAR 14. Asia becomes a renewables 46. Infrastructure investors’ hotspot legitimacy challenge 4. Fundraising’s big bang Higher returns and fast growth Hermes explores how populism LPs loved infra last year, and rates are drawing investors to and protectionism could hurt 2019 is poised to be even the region private sector investment bigger AWARDS 52. Keeping it clean 6. Digital goes mainstream 20. The roll of honour From subsidy-free renewables The sector is growing rapidly All of 2018’s winners listed to the rise of corporate PPAs, and there are pools of capital (together with those from the Deutsche Bank Corporate Trust ready to invest previous year) discusses the latest trends 8. Diversity’s growing 22. I Squared sweeps the board momentum The fund manager triumphed BEST OF KEYNOTES The #MeToo movement gave across a range of regions and a new urgency to diversity, 44. Direct speech sectors fuelling a conversation that Every month, Infrastructure grew increasingly louder in Investor profiles some of the 24. Awards summaries 2018 industry’s most prominent Read all about the winning figures for our keynote outcomes in our awards 10. Making the free market a interview series. We bring you categories little less free some of the best answers we The West has long distrusted MARKET VIEW got in 2018 Chinese investment in infrastructure, but in 2018 this 16. From data centres to the DATA began to extend beyond the dawn of 5G country Wilmington Trust discusses 49. What LPs think how tech advancements are Our survey of investor attitudes 12. Political setbacks can’t hold transforming infrastructure to the asset class shows that back energy transition opportunities few think they are overexposed Countries such as the US and Australia are failing to 42. Bringing a PE approach to 56. Fundraising overview encourage clean energy Australasian infra With over $80bn raised, 2018 investment but the sector has Pacific Equity Partners discusses was the biggest fundraising boomed. Is it finally coming of its first infra vehicle and what year for the asset class age? sets it apart from traditional infra investing
NEW YORK Infrastructure Investor is published 10 times a year every effort has been made to ensure its accuracy, the by PEI. publisher and contributors accept no responsibility for 130 W 42nd Street, Suite 450, New York, NY 10036 To find out more about PEI please visit: the accuracy of the content in this magazine. Readers T: +1 212 633 1919 F: +1 212 633 2904 www.thisisPEI.com should also be aware that external contributors may represent firms that may have an interest in companies Printed by Stephens & George Ltd. and/or their securities mentioned in their contributions LONDON www.stephensandgeorge.co.uk herein. 100 Wood St, London EC2V 7AN © PEI 2019 T: +44 20 7566 5444 F: +44 20 7566 5455 No statement in this magazine is to be construed as a Cancellation policy: you can cancel your recommendation to buy or sell securities. Neither this subscription at any time during the first three months publication nor any part of it may be reproduced or of subscribing and you will receive a refund of 70 per HONG KONG transmitted in any form or by any means, electronic cent of the total annual subscription fee. Thereafter, 19F On Hing Building, 1 On Hing Terrace, Central, or mechanical, including photocopying, recording, no refund is available. Any cancellation request needs to be sent in writing (fax, mail or email) to the Hong Kong or by any information storage or retrieval system, without the prior permission of the publisher. Whilst subscriptions departments in either our London or T: +852 2153 3240 F: +852 2110 0372 New York offices. Annonce Awards 205 x 270_02-19.qxp_Mise en page 1 11/02/2019 18:18 Page1
finding value in the european infrastructure market Equity Fundraising of the year Europe
Since 2008, we have invested in more than 25 companies across Europe that we are seeking to develop as sizeable infrastructure platforms.
www.infraviacapital.com THEME OF THE YEAR
Fundraising’s big bang
More than $80bn was raised for pure-play infrastructure strategies last year, but 2019 threatens to be even bigger, Bruno Alves finds
n (almost) the words of the Considering the two ‘big beasts’ of the dollars – for infrastructure investment A-Team’s legendary Colonel John industry – Global Infrastructure Partners across the globe’s economies, from OECD ‘Hannibal’ Smith: “We love it when and Brookfield Asset Management – are stalwarts such as the US and Canada to a plan comes together.” in the market with their next flagship developing markets like India and many IIn September, we wrote that 2018 was funds alongside several other premier countries in South-East Asia, offering already the asset class’s biggest fundrais- managers – think MIRA, EQT, Antin, investors a wide risk-return spectrum. ing year on record, with just over $68 Ardian and AMP Capital – that looks very We say ‘in theory’ because, as is well billion raised by 43 funds. We predicted plausible indeed. known, there is a vast gap between the the year would end with unlisted, closed- demand for infrastructure and the ended fundraising at or above the $80 LPs LOVE INFRA number of assets on offer that fit insti- billion mark. When we looked at the final Importantly, LP appetite for the asset class tutional investors’ requirements. We’re figures earlier this year, we had our edu- is showing no sign of petering out. In our not too pessimistic about the size of this cated guess confirmed: a smidgen over recent LP Perspectives survey (p. 49), in gap, considering the amount of dealflow $80 billion was raised by 53 vehicles in which we polled 101 LPs on their inten- already generated by decarbonisation of 2018 (see p. 56 for complete figures). tions for the coming year, 27 percent and the planet and the growing need for digi- Emboldened by our predictive abili- 61 percent said they would increase and tal infrastructure. In addition, there are ties, we are now fairly confident 2018 will maintain their exposure to the asset class, other promising sectors, such as health- be remembered as the start of a rapid respectively. And why wouldn’t they, con- care, where growth is also expected to expansion in the asset class’s fundrais- sidering infrastructure has outperformed be strong. ing prowess. As outlined in our Welcome its benchmark for more than 51 percent Still, we shouldn’t completely disre- to the Golden Age of Fundraising presenta- of respondents, with 40 percent-plus gard the asset class’s supply-demand gap, tion, there is a very good chance 2019 saying it met their benchmark. particularly when heightened competi- will see $100 billion raised for unlisted To top it all off, there is a well-doc- tion in some sectors and markets has led infrastructure. umented, vast need – in the trillions of to marked returns compression. It’s also causing a lively debate on what constitutes meaningful expansion of the asset class’s A RECORD YEAR boundaries versus strategy drift, as firms With over $80bn raised for closed-ended funds, 2018 was the biggest fundraising year for the asset class increasingly look off the beaten path. Finally, there’s the highly charged 90 110 political environment in which every-
80 98 one is having to operate, with growing restrictions on foreign investment creep- 70 86 ing up across the globe and the threat of 60 73 nationalisation in countries such as the 50 61 UK – even if it is true that a lot of these
40 49 themes have already been playing out for several years. 30 37
CAPITAL RAISED ($ bn ) CAPITAL In the end, though, none of this can 20 24 NUMBER OF FUNDS CLOSED take away from the asset class’s large 10 12 strides into the mainstream of institu- 39.32 48.63 60.32 64.74 64.05 68.31 80.39 0 0 tional investment. Ten years after the 2012 2013 2014 2015 2016 2017 2018 financial crisis, infrastructure has well Source: Infrastructure Investor and truly arrived. n
4 INFRASTRUCTURE INVESTOR ANNUAL REVIEW Private Funds Group
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[email protected] THEME OF THE YEAR
Digital goes mainstream
The sector is growing rapidly and there are pools of capital ready to invest, Jordan Stutts reports
Considering fund managers raised just over $80 billion by the end of 2018, it’s not hard to expect more deals like this in 2019. Smaller funds that specialise in digital infrastructure will also be something to watch. These vehicles are becoming more common in the industry, partly because digital infrastructure is new compared with other assets, and expertise in the sector can help fashion a specialised offering. SDC Capital Partners – a US-based pri- vate equity firm that raised $400 million for its first fund this year – is one company following this strategy. According to Jeff Plugged in: data centres are on the up Eaton, of Eaton Partners, which was place- ment agent for the fundraising, expect to see more of these vehicles. igital infrastructure has taken that will be needed to support this growth is, “You are seeing some of those big gen- off as the asset class’s hot new arguably, comparable to the capital needed eralist funds do data and IT infrastructure, sector. With demand increas- to decarbonise the world’s economies. but we think it’s an area that’s ripe for ing for data centres and tel- And after a fast-paced fundraising season more specialised managers,” Eaton tells Decom towers – and fund managers sitting on last year, 2019 could see investments in the us. “A lot of investors are seeing this is a big large pools of capital – digital infrastructure sector reach new heights. part of our economy and they don’t have is poised to officially enter the big time. exposure to it. They are starting to look At its simplest, digital infrastructure is DEVELOPING REACH for best-in-class investment opportunities.” the assets underpinning an increasingly con- An interesting trend to watch will be the Other funds are being raised by both nected world. Billions of dollars are needed amount of investments that come with infrastructure and real estate managers, in the coming years to support the move- development commitments, similar to the underscoring the broad appeal of the ment of data to cloud storage and econo- build-out of renewable energy portfolios. investment opportunity. mies that operate through the internet. Take KKR, which raised the larg- Digital Colony, for example, was cre- According to financial services firm est infrastructure fund of 2018, closing ated as a partnership between real estate JLL, the cloud-managed services market Global Infrastructure Investors III on $7.4 firm Colony Capital and telecoms com- will surge from $35.5 billion in 2016 to billion. In June, the firm bought a 49 per- pany Digital Bridge. The joint venture’s $76.7 billion in 2021. Data collected by IHS cent stake in a telecom tower portfolio inaugural fund has raised more than $3 Markit show the number of internet-capable in France from Dutch company Altice. billion and has already made a handful of devices growing from 15.4 billion in 2015 to Beyond the 10,000 assets KKR acquired, investments, including the full acquisition 75.4 billion in 2025. And between 2016 and it pledged to help develop 1,200 more. In of Finnish broadcast company Digita Oy 2021, global wireless growth is expected to July, CDPQ Infra and AMP Capital part- and Stratto, a UK company developing jump from 96 to 278 exabytes per month. nered for another development opportu- small mobile network services. While telecom towers, data centres and nity. CDPQ committed $300 million and A lot of capital is likely to be invested fibre-optic networks have appeared in the AMP Capital $200 million to US telecoms in all types of infrastructure across the portfolios of infrastructure managers for company Tillman Infrastructure, giving world in 2019. Don’t be surprised to see more than a decade, demand for such assets the investors a stake in a 1,500-tower port- a sizeable portion of that going to digital is reaching an all-time high. The investment folio to be built in the US. assets. n
6 INFRASTRUCTURE INVESTOR ANNUAL REVIEW Antin Infrastructure Partners is a leading private equity firm focused on infrastructure investments.
This advert is issued by Antin Infrastructure Partners and is produced for information purpose only. This document does not constitute an offer to sell, purchase subscribe for or otherwise invest in units or shares of any fund managed or advised by Antin Infrastructure Partners, nor shall it form the basis of or be relied upon in connection with any contract or commitment whatsoever or be taken as investment advice. antin-ip.com
1404_AIP_Advert_2017_205x270_v3_AW.indd 1 02/02/2017 10:26 THEME OF THE YEAR
Diversity’s growing momentum
The #MeToo movement fuelled the conversation around diversity and inclusiveness in 2018. Don’t expect a change of topic in 2019, Kalliope Gourntis warns
s 2018 drew to a close, sexual fund manager for a $50 million infrastruc- women fit comfortably into the board envi- harassment in the workplace ture commitment, citing those firms’ lack of ronment” to “we have one woman already was still making headlines, not diversity as a factor in the decision. on the board, so we are done”. just in Hollywood but at the big Shortly afterwards, on the other side of The picture in the US isn’t much prettier, Afour accounting firms. Deloitte was the first the world, a group of GPs and superfunds according to McKinsey. The consulting firm, to take the bold step in early December of banded together to launch the Future IM/ in partnership with LeanIn.org, conducted admitting it had fired 20 UK partners for Pact initiative in Sydney to improve gender its annual Women in the Workplace study and sexual harassment and bullying in the past diversity among investment managers. found that, while companies say they are four years. EY, PwC and KPMG soon followed More recently, in November, four indus- “highly committed” to gender diversity, suit, announcing they had dismissed 17 over try professionals who spoke to us on the “the proportion of women at every level in the same period and for the same reasons. sidelines of our Women in Infrastructure corporate America has hardly changed” in The timing seems fitting as it ends a year summit in London agreed that diversity the four years since the study was launched. in which the conversation on diversity and is increasingly becoming not just a topic As various sources from the GP and LP inclusion in the workplace became louder of conversation but also a factor affecting side tell us, firms and organisations have and more urgent across a wide range of investment decisions. made varying levels of progress. We have industries, including private equity. witnessed this first-hand, speaking with Our coverage is testament to that. In WAITING FOR CHANGE industry insiders who are willing to provide June, we spoke with Matina Papathanasiou, These demonstrate that increased aware- an in-depth look at how their firms operate QIC Global Infrastructure’s co-founder, who ness around diversity and inclusiveness is and those who “cannot speak about this at discussed the importance of having a diverse translating into action. But there is still a this point” or who “are not allowed to talk workforce, her views on achieving that goal long way to go. about gender diversity”. and the efforts being made in her native Take, for instance, the Hampton-Alex- Maybe those that are reluctant to speak Australia and at QIC. Many of her views – ander Review, commissioned by the UK are waiting for the topic of conversation to including that change must start at the top government’s Department of Business, change? That seems unlikely. But we hope it – were echoed in McKinsey & Company’s Energy and Industrial Strategy that looked will become a broader discussion that begins January report Delivering through Diversity. at gender representation at UK-listed com- to address ethnicity, race and social back- The same month, we reported the $10.8 panies. Asked why women were under-repre- ground, so that fund managers, institutional billion Chicago Teachers’ Pension Fund had sented on their respective boards, FTSE350 investors and the companies they invest in decided to pass on Blackstone and Brook- senior executives offered some embarrassing will accurately represent the societies in field Asset Management when selecting a explanations ranging from “I don’t think which they operate and ultimately serve. n
Full spectrum: fund managers need to better represent the societies they operate in and serve
8 INFRASTRUCTURE INVESTOR ANNUAL REVIEW Meridiam Awards-2019 hdvec.indd 1 14/02/2019 16:53 THEME OF THE YEAR
Making the free market a little less free
The West has long distrusted Chinese investment in infrastructure, but in 2018 this began to extend beyond the country as part of a worrying trend, Zak Bentley finds
calls in parliament to keep Radius in Danish hands. “Of course, we consider that a company in which the state is a major shareholder does not want to sell vital infrastructure to a buyer we are uncertain of,” he said. “I have great confidence in both the executive board and the board of directors in Orsted. I’m sure they have a very sensible sense of politics for what will be a problematic sale.” The issue also reared its head in one of Knock-on effects: trade war impacts are felt everywhere the industry’s largest deals. Spanish toll road operator Abertis was the subject of a bidding e shouldn’t be surprised to do this in a more straightforward manner. war in 2017 between compatriot ACS and by politics anymore. After The German government subsequently Italy’s Atlantia. The two eventually combined all, polarisation and reduced the threshold for scrutinising invest- amid government fears that Abertis could fringe leaders have risen ments to 10 percent from 25 percent. end up in the hands of foreign owners. Wto try to topple the world order. Yet 2018 Germany was indeed ramping up action Looking ahead, 2019 is likely to see the still managed to surprise us. on rhetoric that had included voices from privatisation of France’s Groupe ADP, with After several months of claiming it was the EU. In late 2017, European Commis- industry sources believing the government powerless to stop China State Grid from sion president Jean-Claude Juncker said “we is unlikely to contemplate offers that don’t investing in regional transmission system are not naive free-traders” when introducing involve domestic investment. operator 50Hertz, the German govern- laws designed to restrict investments from Also in Europe, Italy’s relatively new gov- ment went the long way around. Persuad- government-linked non-EU investors. ernment is looking to give Britain’s Jeremy ing majority-owner Elia to once again But Germany’s actions took place against Corbyn a run for his money by floating exercise pre-emption rights to block the a backdrop that is no longer just about Chi- proposals to nationalise the country’s fibre Chinese, Germany then used state develop- nese investment. Years of sell offs to the high- network, in part to exclude foreign investors. ment bank KfW to buy a 20 percent share est bidder are now being replaced by a desire There is a potentially worrying trend being sold by IFM Investors on “national to protect infrastructure assets from foreign here. Countries like the US and Australia security grounds”. For what it’s worth, investment, arguably in general. have long had varied forms of opposition KfW said it “does not assume any entre- In Denmark, Orsted was looking to to foreign investment, largely explained on preneurial or strategic responsibility for sell power distribution subsidiary Radius. the grounds of “national security”. But now the transaction”. Reported Chinese interest raised eyebrows, it feels different. Some European countries, Here was one of the world’s leading but so did the scrutiny of potential Canadian despite being part of one of the world’s larg- nations effectively circumventing free-mar- and European investors. est free trade blocs, are making clear they ket rules to ensure China State Grid did Orsted eventually cancelled the sale fol- welcome neither investments from China not gain a minority share in its electricity lowing the political pressure, weeks after nor some from their immediate neighbours. transmission system – and in the process, finance minister Kristian Jensen issued a The free market in which infrastructure recognising its own laws were inadequate thinly veiled warning to the company amid investment thrives seems under threat. n
10 INFRASTRUCTURE INVESTOR ANNUAL REVIEW Personality of the year Global
Equity Fundraising of the year Global Fund Manager of the year Global
Energy Investor of the year North America Fund Manager of the year North America Transport Investor of the year Global
Hong Kong | London | Miami | New Delhi | New York | Singapore
Infrastructure Investor 2019 (newest.indd 1 2/19/19 5:07 PM THEME OF THE YEAR
Political setbacks can’t hold back energy transition
Countries such as the US and Australia are failing to encourage clean energy investment, but the sector has boomed. Daniel Kemp explores whether it is finally coming of age
ustralia in 2018 was a shining new renewable-energy projects were under Crudine Ridge project, while steel company example of how not to create a construction in December, with more than BlueScope signed in June what it called “the stable investment environment 80 wind or solar farms either under or about largest corporate PPA announced with a for new clean-energy projects. to begin construction. solar farm in Australia” for 66 percent of AThe government began the year working The total value of projects under way the output of the 133MW Finley Solar Farm. through the details of its flagship policy, the was double that at the end of 2017, adding A group of large corporations, including National Energy Guarantee, which had the up to a record year for investment and Telstra, ANZ and Coca-Cola Amatil, signed ambitious aim of increasing reliability and construction. a PPA with the Murra Warra scheme last reducing prices while lowering emissions. There were several significant deals and December, before Partners Group acquired Businesses were broadly behind it, despite fundraisings in the sector, too. Partners it. its flaws, with one investor telling us that it Group launched a push into Australian On the fundraising front, Infrastructure would “probably be good enough”. renewables in May, with a A$700 million Capital Group raised further capital for its But Prime Minister Malcolm Turnbull ($498 million; €437 million) investment to third renewables vehicle and is looking to was ousted in August by his own party, osten- establish Grassroots Renewable Energy, a hit A$1 billion in 2019. A few other smaller sibly over the NEG’s emissions-reduction platform it co-owns with CWP Renewables. funds have also been in the market this year, component, leaving federal energy policy In addition, Partners Group bought the first with several individual assets up for sale. in a state of limbo, where it remains. stage of the Murra Warra Wind Farm, out- This activity has come despite a leader- Investment in renewable energy flour- side the GRE portfolio. ship vacuum at the federal level, with state ished Down Under in 2018 despite the Corporate PPAs are becoming increas- governments pushing renewable-energy political headwinds. Figures published by ingly common, too, with Sydney Airport targets that have fostered investment and the Clean Energy Council, the industry signing an agreement to take 75 percent corporations showing an increasing willing- body in Australia, showed that 14.6GW of of its energy needs from Partners Group’s ness to sign direct offtake agreements. This pattern is replicated in the US, where states have taken the lead in the absence of any federal will to create sig- nificant incentives around renewables. California, to take one example, has set a mandate to have 100 percent clean-energy generation by 2045, which will undoubtedly spur investment. And beyond the OECD markets, renewa- bles show no sign of slowing down either. Asia represents a huge opportunity for those willing or able to make the leap (see p. 14). So, despite the absence of leadership from many politicians, the need for cleaner energy is clear to many. Smart investors have recognised that and have been able to take advantage – and the sector shows little sign Renewables break through government inaction of slowing down. n
12 INFRASTRUCTURE INVESTOR ANNUAL REVIEW
A LEADER IN Infrastructure Investing
Brookfield is a leading global alternative asset manager, focused on investing in long-life, high-quality assets across real estate, infrastructure and private equity. We are one of the world’s largest investors, owners and operators of infrastructure assets globally across the utilities, transport, energy, data infrastructure and sustainable resources sectors. Our businesses are among those that form the backbone of the global economy, supporting the endeavors of individuals, corporations and governments worldwide.
We are pleased to receive the 2018 Infrastructure Investor award for Debt Fundraising of the Year, Global, and the 2018 Private Debt Investor award for Infrastructure Debt Fund Manager of the Year, Americas.
brookfield.com THEME OF THE YEAR
Asia becomes a renewables hotspot
Higher returns and fast growth rates are drawing investors to the region, making it one of the most attractive for clean energy investment, Eduard Fernández reports
Taiwan as the stepping stone into Asia and probably the brighter spot outside Europe.” But a proposal by the government in December to reduce feed-in-tariffs for off- shore wind PPAs had the industry up in arms, and hints at a rockier year ahead. Japan, where renewable energy has been on investors’ radars since the Fukushima nuclear disaster in 2011, has continued to attract major players, with a consortium led Heating up: the continent is on the rise by GIP snapping up a 610MW solar power portfolio, and SPARX and GE EFS raising funds focused on brownfield and greenfield enewables in Asia prob- Andrew Affleck, founder and managing projects in the country. ably offer the biggest partner of Singapore-based Armstrong Asset Korea also started to attract investors in [investment] oppor- Management, told us in May. renewables and energy storage. In May, the tunity globally,” John Fund managers have started to expand government said it would open up state- “RWalker, vice-chairman for Asia at Macquarie their teams to have a stronger presence in owned property to boost the development Capital, told us in an interview in May. the region, with BlackRock creating a new of solar power in the country, with Canadian Indeed, the continent saw increased position focused on renewables in Asia- Solar then acquiring the exclusive rights to investment activity in renewables in 2018, Pacific, and Macquarie’s Green Investment develop an 8MW solar farm. Local public offering investors more competitive returns Group acquiring a solar development port- pensions, such as the National Pension than those in developed markets. folio from Conergy Asia and ME that also System, are also willing to bet on renewables. Interest shifting towards the region included 88 professionals. India’s thriving renewables space simi- became apparent early in the year, with the In 2018, there was a rush of international larly continued to attract investors such as sale of Equis Energy’s portfolio for $5 billion developers and fund managers landing in GIC, Canada Pension Plan Investment Board to a consortium formed by Global Infrastruc- Taiwan to develop offshore wind projects. and the Abu Dhabi Investment Authority. ture Partners, Canada’s PSP Investments and To meet its ambitious energy transition tar- The outlook remained mixed for emerg- China Investment Corporation. gets, the government allocated a whopping ing markets in South-East Asia, where inves- The deal included 1.9GW of operational, 5.5GW of offshore wind capacity during the tors still see too many risks and little banka- construction and shovel-ready onshore wind first half of the year, with developers such bility. “Markets are more difficult, they aren’t and solar assets across the region – includ- as Orsted, wpd and Northland Power, and as mature, and you have more offtake and ing Australia, Japan, India, Indonesia, the fund managers such as Copenhagen Infra- finance risk,” Nate Franklin, chief executive Philippines and Thailand – and a 115-strong structure Partners, rushing into the market. of Pacifico Energy, told us. development pipeline with a 9.1GW capacity. “It’s incredible the pace at which the Despite this, nobody doubts that one “The awareness created from the Equis European strategics have entered the of the world’s fastest-growing regions will transaction has led other investors to explore local market,” Andrew Kwok, senior vice- continue to offer plenty of opportunities. if this business model can be replicated with president of private infrastructure, Asia, at As Franklin told us: “Looking globally, Asia other established development teams look- Partners Group, told Infrastructure Investor is where you have to be – that’s where the ing to scale their business in the region,” after the auction process started. “They see growth is.” n
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From data centres to the dawn of 5G
Will Marder, Wilmington Trust’s head of project finance, discusses how tech advancements are transforming infrastructure opportunities
What changes have you providers of capital are not banks, they Q observed in the way that may not have the requisite internal capa- infrastructure assets are being bilities or licences to handle collateral or funded? to open bank accounts. Wilmington Trust WM: There was a real shift coming out can come into transactions as a neutral of the financial crisis. We started to see third-party service provider. Since we’re less capital coming from the commer- not a lender in the sector, we are not a cial banks and more capital coming competitive threat – we are more of an from institutional investors. That led to outsourcing solution. Similarly, lenders a new style of hybrid transaction where may find it too time consuming to serve the two groups began playing more as an administrative agent, and they closely together. The banks looked after would prefer to outsource that function the shorter term construction and mini- to someone else. From our perspective, perm financings, which corresponded it frees their teams up to focus on the with where they wanted to be in terms origination, structuring and closing of of tenor post-crisis. And the institutional new deals, while at the same time pro- investors focused on the longer dated, viding risk mitigation. fixed-rate capital, providing the overall tenor that the borrowers wanted to see. What impact are data centres The two pieces really came together in There was a Q having on the industry? a meaningful way and I think that still considerable WM: Data centres represent an inter- continues to this day. esting new asset class that only really But now we have seen another shift slowdown following emerged in the past 18 months. I am sure – the huge influx of capital from infra- the credit crunch they were being financed prior to that, but structure debt funds. These are special- not through the project finance market. ised funds working across a whole range driven by a lack This is an industry that is being driven of sectors, but especially visible in the of liquidity in the by the tremendous advancements in energy industry, encompassing everything the infrastructure that underpins the from renewables to conventional power market. Now we internet, namely all of these streaming and midstream oil and gas assets. These are seeing the very services that people are using – Netflix, funds are also evident in emerging sectors Amazon, online gaming. Data, such as such as data centres and telecoms, nascent opposite of that” emails, photos, music and video, are also industries that are increasingly popping increasingly moving into the cloud. We up on our radar. are no longer storing things locally on our computers and phones. As a third-party agent, how are All this means there is a fast-growing Q you working with these various need for more and more processing, sources of capital? and more and more storage. These data WM: As a number of the emerging centres are being built around the world
16 INFRASTRUCTURE INVESTOR ANNUAL REVIEW Around here,
guides everything we do.
A leading provider of project finance agency services.
Corporate Trust No matter the type of project, you need an experienced team Services Provider lobal that can provide holistic corporate trust and agency services support for all aspects of the transaction. At Wilmington Trust, our keen understanding of transaction structures is supported by specific experience in executing every aspect of a deal with expertise and efficiency. Our full-service, relationship-driven approach is why we’ve been at the table on some of the largest DOUG LAVELLE [email protected] transactions in recent history, and our team stands ready to craft +1 212.941.4426 a customized approach and solution for you.
For more insight on how we’ve successfully supported clients on project finance transactions, contact one of our experienced professionals or visit wilmingtontrust.com/projectfinance.
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19387 GCM19 Project Finance_IJ Global.indd 1 2/8/2019 1:40:16 PM TECHNOLOGY
to provide that. Interestingly, it is really What are your views on the level conflicts of interest. From our perspective, important that this storage is in the right Q of leverage in the infrastructure an abundance of capital from a multitude place to serve different markets. ecosystem? Is it concerning? of different players creates a favourable Companies like Netflix are getting WM: There clearly is an abundance of environment. really smart about the demand for data capital in the market right now. From a and when they roll out a popular new lender’s perspective, pricing has definitely How has the growing complexity show – like The Queen, for example – been compressed and there is a high level Q of the lender universe, and the they know that on a Friday night people of competition to finance assets, especially other trends you have talked about, in Asia are going to start downloading those that are fully contracted with good changed your role as a corporate trust first and then demand for the show will sponsors. provider? literally roll west across the globe. They WM: I would say the rise of banks and forecast demand and use data centres institutional investors working together, in the appropriate locations. Internet and the advent of additional capital from service providers are becoming more infrastructure funds, have both proved sophisticated in their modelling, which Internet service positive for us. Those models really require is driving demand for location-specific providers are a third-party agent to come in and play a co- data centres to ensure seamless service. ordinating role, providing back- and mid- becoming more dle-office support on these transactions. And presumably, the demand sophisticated in Q for data centres is also creating What key macro events or trends additional demand for energy? their modelling, Q do you think are going to have WM: From a project finance perspective, which is driving the biggest impact on infrastructure I think that is one of the most interesting going forward? implications of the growth in data cen- demand for WM: I think demand for energy and tres. These data centres use a tremen- location-specific infrastructure around the world is pretty dous amount of power. There is a keen stable. There are movements up and down, interest in the sector to try and pair up data centres” sometimes driven by regulatory issues, tax data centres with sources of renewable regimes or other incentive programmes, energy in order to be more environmen- Conversely, it is a very good time to be coupled with the availability of capital. tally responsible. a borrower because there is a lot of capital There was a considerable slowdown follow- If some of that increased demand can available from many different providers. It ing the credit crunch driven by a lack of be moved away from conventional fossil- is relatively easy to find someone willing to liquidity in the market. Now we are seeing fired power, that can have a really positive lend – at the right tenor and right terms – the very opposite of that. effect on carbon emissions. I definitely to match the needs of your project. We also see infrastructure shifts emerge think a knock-on effect of the demand From our perspective as a third-party driven by specific events – the move away for data centres around the world will provider of trust and agency services, from nuclear power following the Fuku- be that we will also see some additional strong availability of capital is a good shima disaster in Japan, for example. But renewables development. thing because there are so many sources overall it is clear that infrastructure every- of capital that we can potentially partner where continues to require upgrades and In what other ways is technology with as an independent third party, provid- improvements; power plants continue Q impacting infrastructure? ing many different services and potentially to need to be developed and economies WM: What we see now is that the telecoms playing multiple roles on the same deal. around the world continue to move away industry is moving from 4G to 5G. As that We can be an administrative agent, from coal-fired generation and towards technology rolls out globally, we will see or facility agent, on a commercial bank renewable sources. These are long-term a tremendous uptick in demand for new tranche. We can be a bond trustee, or a trends that are here to stay. n telecoms equipment to support that. That note holder’s representative, on a bond shift in cellular telecoms and the growth tranche. We can hold collateral and of data centres represent the two biggest reserve accounts and we can serve as an SPONSORED BY areas where technology is really making intercreditor agent. We can do all this on WILMINGTON TRUST itself felt. the same transaction without having any
18 INFRASTRUCTURE INVESTOR ANNUAL REVIEW 8
THE WINNERS AWARDS
The roll of honour
Category 2018 winner 2017 winner
Personality of the Year, Global Sadek Wahba (I Squared Capital) Justin Trudeau (Canadian prime minister)
Fund Manager of the Year, Global I Squared Capital Global Infrastructure Partners
Fund Manager of the Year, Europe Antin Infrastructure Partners Infracapital
Fund Manager of the Year, North America I Squared Capital I Squared Capital
Fund Manager of the Year, Asia-Pacific Equis I Squared Capital
Fund Manager of the Year, Middle East & Africa Meridiam Meridiam
Institutional Investor of the Year, Global Ontario Teachers’ Pension Plan Ontario Teachers’ Pension Plan
Equity Fundraising of the Year, Global I Squared Capital Global Infrastructure Partners
Equity Fundraising of the Year, Europe InfraVia Capital Partners iCON Infrastructure Partners
Equity Fundraising of the Year, North America Stonepeak Infrastructure Partners Global Infrastructure Partners
Equity Fundraising of the Year, Asia-Pacific Macquarie Infrastructure and Real Assets Global Infrastructure Partners
Debt Fundraising of the Year, Global Brookfield Asset Management Mizuho Global Alternative Investments
Institutional Debt Provider of the Year, Global Allianz Global Investors Allianz Global Investors
Deal of the Year, Global Equis Energy (GIP, PSP Investments, CIC) Hutchison Global Communications (I Squared Capital)
Deal of the Year, Europe Idex (Antin Infrastructure Partners) DIF II (APG)
Deal of the Year, North America Calpine Corporation (Energy Capital Partners) TerraForm Power (Brookfield Asset Management)
Deal of the Year, Asia-Pacific Equis Energy (GIP, PSP Investments, CIC) Hutchison Global Communications (I Squared Capital) Deal of the Year, Latin America InterGen (Actis) Odebrecht Ambiental (Brookfield Business Partners, Sumitomo Corporation) Deal of the Year, Middle East & Africa Taiba N’Diaye wind farm (Lekela Power) Madagascar airport expansion (Meridiam, Bouygues, Colas) PPP Deal of the Year, Global Melbourne Metro Tunnel & Stations PPP I-66 Outside the Beltway (Cintra, Meridiam, (Bouygues, Lend Lease, John Holland, Capella John Laing, APG) Capital, John Laing)
PPP Deal of the Year, Europe Landmark Blankenburg Connection (Macquarie Pedemontana-Veneta Highway (Sacyr) Capital, Ballast Nedam, DEME)
20 INFRASTRUCTURE INVESTOR ANNUAL REVIEW AWARDS
Category 2018 winner 2017 winner
PPP Deal of the Year, North America LAX Integrated Express Solutions (Fluor, Balfour I-66 Outside the Beltway (Cintra, Meridiam, Beatty, ACS, Bombardier) John Laing, APG)
PPP Deal of the Year, Asia-Pacific Melbourne Metro Tunnel & Stations PPP New Grafton Correctional Centre (Serco, John (Bouygues, Lend Lease, John Holland, Capella Laing, John Holland, Macquarie Capital) Capital, John Laing)
PPP Deal of the Year, Latin America Guayaquil Port Terminal (DP World) Line 1 of the Lima Metro expansion (Graña y Montero/Ferrovias)
Developer of the Year, Global VINCI Airports VINCI
Energy Investor of the Year, Global Global Infrastructure Partners Global Infrastructure Partners
Energy Investor of the Year, Europe Antin Infrastructure Partners Macquarie Group
Energy Investor of the Year, North America I Squared Capital Global Infrastructure Partners
Energy Investor of the Year, Asia-Pacific Global Infrastructure Partners Macquarie Infrastructure and Real Assets
Transport Investor of the Year, Global I Squared Capital Meridiam
Transport Investor of the Year, Europe AMP Capital KKR
Transport Investor of the Year, North America Ontario Teachers’ Pension Plan Meridiam
Transport Investor of the Year, Asia-Pacific Macquarie Infrastructure and Real Assets I Squared Capital
Telecoms and Broadband Investor of the Year, AMP Capital KKR Global Telecoms and Broadband Investor of the Year, Antin Infrastructure Partners Infracapital Europe
Telecoms and Broadband Investor of the Year, AMP Capital Stonepeak Infrastructure Partners North America
Telecoms and Broadband Investor of the Year, Palisade Investment Partners I Squared Capital Asia-Pacific
Placement Agent of the Year, Global Evercore Private Funds Group Evercore Private Funds Group
Bank of the Year, Global Crédit Agricole BNP Paribas
Law Firm of the Year, Global Clifford Chance Herbert Smith Freehills
Corporate Trust Services Provider of the Year, Wilmington Trust Deutsche Bank Corporate Trust Global
ANNUAL REVIEW INFRASTRUCTURE INVESTOR 21 AWARDS
I Squared sweeps the board
The fund manager triumphed across a range of regions and sectors, not to mention our global fundraising and fund manager categories. Antin, GIP and Macquarie are some of the other stand- outs of our 10th global awards
Squared Capital, it’s fair to say, is renewables deal – it wasn’t unexpected to not exactly going out of its way to see GIP pick up Deal of the Year gongs In fundraising court media attention (the last for Global and Asia-Pacific categories. time we had founder and Person- Nor was it a surprise to see it crowned years, I Squared alityI of the Year winner Sadek Wahba on Energy Investor of the Year, Global and tends to win big. the cover he was still at Morgan Stanley). Asia-Pacific. But in fundraising years, I Squared Energy also propelled Antin to awards It was the same in tends to win big. It was the same in our glory, with its Idex acquisition landing our 2015 awards, 2015 awards, when it picked up six gongs it Deal of the Year, Europe and Energy following the close of its debut $3 billion Investor of the Year, Europe. Its telecoms when it picked infrastructure fund and it’s happened efforts did not go unnoticed, with it again up six gongs, again in our 2018 edition, following the picking up that trophy for Europe. Due raise of its $7 billion second vehicle, to its well-rounded performance, Fund and it’s happened where it again swept the board, taking Manager of the Year, Europe seemed a again in our home six awards. The latter include some fitting win too. of the most coveted categories on offer – As usual with our awards, there are 2018 edition” including Personality of the Year, Global; plenty of other stories here, from Stone- Fund Manager of the Year, Global; and peak Infrastructure Partners’ and Mac- Equity Fundraising of the Year, Global – as quarie Infrastructure and Real Assets’ well as several key sector categories across fundraising successes in North America geographies. and Asia, respectively, to Allianz Global It’s a strong showing from one of the Investors’ continued grip on our Institu- market’s most respected outfits and a sign tional Debt Provider of the Year, Global the industry is following – and approves category. of – the New York firm’s progress. Some notable firsts too, such as Brook- I Squared, however, isn’t the only firm field Asset Management’s win in our Debt to rack up a respectable tally: Global Infra- Fundraising of the Year, Global award, on structure Partners, on the same side of the back of its inaugural debt vehicle, and the Atlantic, and Antin Infrastructure InfraVia Capital Partners’ Equity Fund- Partners, on the opposite side, both got raising of the Year, Europe following the a very respectable four wins. close of its third European fund. Considering it was the driving force So, without further ado, we invite you behind the landmark Equis Energy acqui- to turn to p. 24 and read all about 2018’s sition – at $5 billion, still the largest ever winners. n
22 INFRASTRUCTURE INVESTOR ANNUAL REVIEW your global partner in the Infrastructure Sector
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www.ca-cib.com Crédit Agricole Corporate and Investment Bank is authorised by the Autorité de Contrôle Prudentiel et de Résolution (ACPR) and supervised by the European Central Bank (ECB), the ACPR and the Autorité des Marchés Financiers (AMF) in France and subject to limited regulation by the Financial Conduct Authority and the Prudential Regulation Authority. Details about the extent of our regulation by the Financial Authority. Authority and the Prudential Regulation Conduct and subject to limited regulation by the Financial (AMF) in France Autorité des Marchés Financiers ACPR and the the Autorité de Contrôle Prudentiel et Résolution (ACPR) and supervised by the European Central Bank (ECB), Agricole Corporate and Investment Bank is authorised by the Crédit EC2A 2DA. London, Appold Street, 5 Broadwalk House, Registered office: BR 1975. Branch No. FC008194. Registered number: Wales. with limited liability and registered in England & Agricole Corporate and Investment Bank is incorporated in France Crédit Agricole Corporate and Investment Bank London branch on request. Authority are available from Crédit Authority and the Prudential Regulation Conduct AWARDS
and Canada; the second-largest telecom $5 billion, collecting commitments from PERSONALITY OF THE YEAR, fibre network in Hong Kong; and nearly more than 100 institutional investors in GLOBAL 3,400MW of power generation in nine North America, Europe, Asia, Australia countries across Latin America,” Wahba and elsewhere. 1. Sadek Wahba (I Squared Capital) said when Fund II closed. It lost little time in investing that nice 2. David Russell (Equis) Not bad for a firm that had started off chunk of change, with 24 percent of the 3. Angela Miller-May (Chicago Teachers’ Pension by raising one of the largest debut funds vehicle already deployed by the time of Fund) in the history of the asset class, when it its September final close. Fund II deals closed 2015’s $3 billion ISQ Global Infra- include the acquisition of TIP Trailer Ser- To appreciate the full extent of I Squared structure Fund. For ex-Morgan Stanley vices, a European and Canadian trailer Capital founder and managing partner executive Wahba, it’s very much a job leasing and services company; some Sadek Wahba’s achievement, you have to well done. 3,000MW of power-generation assets in remember the firm didn’t exist six years ago. nine countries across Latin America; Fast-forward to 2018, and I Squared Hong Kong-based fibre internet com- is managing a tidy $13 billion in assets FUND MANAGER OF THE YEAR, pany HGC Global Communications, the under management, employing 110 GLOBAL territory’s second largest; and US-based people in seven offices across the globe. Pinnacle Midstream. What’s more, with its recently closed 1. I Squared Capital The stage is set for a busy 2019. $7 billion second infrastructure fund, I 2. Macquarie Infrastructure and Real Assets Squared managed to clinch one of the 3. Partners Group biggest fundraisings of 2018, closing well FUND MANAGER OF THE YEAR, above its original $5 billion target. No surprises here, really, considering EUROPE “The fund is already 24 percent that I Squared was responsible for one invested with portfolio companies in the of the biggest fundraises of 2018 with 1. Antin Infrastructure Partners US midstream sector; the leading trailer its $7 billion sophomore infrastructure 2. InfraVia Capital Partners and trailer services provider in Europe vehicle. The latter beat its initial target of 3. Macquarie Infrastructure and Real Assets
If, as many claim, fibre broadband is the most up-and-coming sector in the infra- structure market, then Antin has it cov- ered. While its first deal in the sector saw it make its debut investment in the US, it also completed deals in the UK and Spain for CityFibre and Ufinet respectively. The French manager, though, was far from done. It swooped in on the domes- tic district heating market to buy Idex from Cube Infrastructure, fending off competition from a host of rival manag- ers. Salmon transportation was the next on its list in September, when the man- ager bought Norway’s Solvtrans from Oaktree. It also finally won its battle against the Spanish government against the cuts made to its solar investments from its first fund, which in the words of one limited partner, “shows the benefits of having a capable GP with enough resources to Light up: I Squared’s deals include a Hong Kong-based fibre internet company fight back”.
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leading renewable energy platforms in the region, with a best in class business model, a high quality asset portfolio and an outstanding management team,” said GIP chairman Adebayo Ogunlesi, after closing the deal to acquire Equis Energy. We couldn’t sum it up better.
FUND MANAGER OF THE YEAR, MIDDLE EAST & AFRICA
1. Meridiam 2. Investec 3. African Infrastructure Investment Managers
Meridiam retains its crown as the Fund Manager of the Year, Middle East and Africa, after dethroning Actis in 2017 fol- lowing the latter’s five straight victories. Equis Energy: Still the largest renewables deal in history The biggest deal it closed last year was its acquisition of a majority stake in Air- port International Group, the holding will be in OECD markets, though a third company behind Queen Alia Interna- FUND MANAGER OF THE YEAR, can be invested elsewhere. tional Airport in Amman, Jordan – Merid- NORTH AMERICA iam’s first investment in that country. It acquired the stake alongside partners 1. I Squared Capital FUND MANAGER OF THE YEAR, Groupe ADP and ASMA Capital Part- 2. Stonepeak Infrastructure Partners ASIA-PACIFIC ners, the latter acting on behalf of IDB 3. Macquarie Infrastructure and Real Assets Infrastructure Fund II, which it manages. 1. Equis As well as this big move in the Middle I Squared Capital celebrated the $7 bil- 2. Global Infrastructure Partners East, Meridiam continued to deploy its lion final close of its second fundraise in 3. Macquarie Infrastructure and Real Assets Africa fund throughout the year with September, more than doubling the com- investments in Gabon and Nigeria, mitments it received during its last effort. The $5 billion Equis Energy deal sent a among others, in the energy and ports However, its rise to the top is not jolt across the Asia-Pacific region. Chief sectors. due to fundraising alone; it’s also about executive David Russell and his team It also re-opened that vehicle late in how the firm is already investing its capi- spent five years painstakingly putting 2018 with a €300 million target to fund tal. Around 24 percent of the fund had together a 180-strong operational and further investments, cementing its com- been deployed at final close into assets under-development renewables portfo- mitment to the continent. including US midstream company Pin- lio, operated through 15 offices across nacle, which operates oil and natural gas the region. gathering and processing assets in the Its success in exiting this portfolio – INSTITUTIONAL INVESTOR OF THE Deleware portion of the Permian Basin the largest renewables deal ever – speaks YEAR, GLOBAL in west Texas. volumes about the opportunities available The firm will look to stick closely to in Asia-Pacific, especially for those fund 1. Ontario Teachers’ Pension Plan that strategy for investments to come. I managers willing to roll up their sleeves 2. Canada Pension Plan Investment Board Squared invests in mid-market operating and invest time and resources scouting 3. CDPQ Infra assets in the energy, transportation, utili- the market for valuable deals. ties and telecom sectors. Most investments “Equis Energy has become one of the A year of change for OTPP, with new head
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of infrastructure Dale Burgess, who has ($140 million), the Washington State spent 22 years on the Canadian retire- EQUITY FUNDRAISING OF THE Investment Board ($250 million) and ment fund’s investment team, officially YEAR, GLOBAL the Texas Municipal Retirement System becoming head of infrastructure and nat- ($150 million). ural resources in May after taking over 1. I Squared Capital Asia was another market from which interim duties for the group in Febru- 2. Stonepeak Infrastructure Partners I Squared saw greater interest, Rah- ary 2018. 3. KKR mathulla pointed out. Burgess took the reins of an infrastruc- All seems set fair for Fund III then. ture portfolio worth C$17.2 billion ($12.9 It’s not by accident that the ‘Holy Trinity’ billion; €11.5 billion), amounting to 9 of managers – 2018’s $7 billion club – percent of the Canadian pension fund’s make up the positions for our Equity Fun- EQUITY FUNDRAISING OF THE C$193.9 billion as of 30 June 2018. draising of the Year, Global category. Yet YEAR, EUROPE With new leadership in place, two the market chose to reward I Squared’s stand-out deals are worth mentioning. In second vehicle as the year’s fundraise. 1. InfraVia Capital Partners late May, shortly after Burgess’s official The final close arrived 16 months after 2. Macquarie Infrastructure and Real Assets appointment, OTPP teamed up with Part- the New York-based firm launched ISQ 3. Copenhagen Infrastructure Partners ners Group and CDPQ to buy German Global Infrastructure Fund II. I Squared energy metering group Techem from beat its initial target of $5 billion, collect- Coinciding with its 10th anniversary, Macquarie, in a deal with an enterprise ing commitments from more than 100 InfraVia closed its fourth fund on €2 value of €4.6 billion. institutional investors in North America, billion, exactly double the size of its The following month, the pension Europe, Asia, Australia and elsewhere. previous attempt. Not only did the fund sold a 37.5 percent stake in GCT Global Founding partner Adil Rahmathulla achieve a 100 percent re-up rate, it also Container Terminals to IFM Investors and told us at the time the firm garnered boosted the share of its non-European a 25 percent stake to British Columbia much interest from US LPs, adding “US investors to just over a quarter of the Investment Management Corporation, investors are getting much more com- fund. forming a management partnership with fortable investing in infrastructure”. US While non-European institutions them and keeping a 37.5 percent stake investors committed to the fund include made up 16 percent of InfraVia’s third for itself. the North Dakota State Investment Board fund two years before, this time Asian investors alone comprised 14 percent. The Paris-based manager retains the European focus of its fund but has sub- stantially expanded its global client base. The demand is what sets InfraVia ahead of the pack. While some exalt the merits of a global core-plus pro- gramme, the firm’s focus on core Euro- pean infrastructure is still desired by many investors.
EQUITY FUNDRAISING OF THE YEAR, NORTH AMERICA
1. Stonepeak Infrastructure Partners 2. Blackstone 3. Ardian
Stonepeak Infrastructure Partners was voted North America’s top fundraiser US: Investors are getting more comfortable investing in infra of the year. The firm closed Stonepeak
28 INFRASTRUCTURE INVESTOR ANNUAL REVIEW Women in Real Assets Forum
20 June 2019 | Park Hyatt, Melbourne
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For programme information: For sponsorship opportunities: James Taylor Sponsorship Team [email protected] [email protected] AWARDS
attractive investment opportunities across diverse sectors,” David Luboff, chief exec- utive of MAIF fund series, said at the time of the close.(Luboff has now jumped ship to KKR). Despite its size, it seems that the firm will not have problems deploying it: by April, more than $1.7 billion of the new vehicle had already been committed to toll roads, renewables and petrochemical storage assets in India, the Philippines, Singapore and China.
DEBT FUNDRAISING OF THE YEAR, GLOBAL
1. Brookfield Asset Management 2. Macquarie Infrastructure Debt Investment Solutions 3. Schroders India: a package of nine highways is one of the investments from MAIF II Third time’s a charm? Try first. That’s the story of Brookfield’s first debt vehicle – Infrastructure Fund III on $7.2 billion a midstream joint venture with Targa The Brookfield Infrastructure Debt Fund last July after bumping up its hard-cap Resources Corporation. I – which held a final close on $885 million by $200 million to cater for last-minute last January, backed by a diverse group of commitments. Overall, fundraising drew institutions including pension funds and over 100 commitments from investors EQUITY FUNDRAISING OF THE financial groups. seeking exposure to a North America- YEAR, ASIA-PACIFIC Launched in 2016 with a $700 million focused infrastructure strategy. target, the debut fund will focus on mez- Stonepeak hopes to deliver a strat- 1. Macquarie Infrastructure and Real zanine debt investments in core infrastruc- egy targeting investments in power, Assets ture assets, primarily in North America, water, energy, communications and 2. National Investment and Infrastructure Fund but will also invest in South America, Aus- transportation. 3. SPARX Group tralia and Europe. Documents published by Stonepeak By final close, the fund had already investors show the firm’s fundraise offered Macquarie’s win in this category should made several investments in infrastruc- a 20 percent carry (15 percent for first- come as no surprise. After all, the firm ture debt covering transportation, renew- close investors), an 8 percent hurdle and last year managed to raise the largest Asia- able power and energy worth about $200 a 12 percent net internal rate of return focused infrastructure fund ever – Mac- million. target, inclusive of a 4 percent cash yield. quarie Asia Infrastructure Fund II – on “We are pleased to leverage our exten- Fund III more than doubles Stonepeak’s its $3.3 billion hard-cap. sive infrastructure and credit expertise second fundraise, which closed on $3.5 More than 20 returning and new LPs into high quality infrastructure debt billion in January 2016. Like Fund II, the from Asia-Pacific, North America, the investments that offer attractive, risk- firm will use its newest vehicle to target Middle East and Europe rushed to commit adjusted returns,” Sam Pollock, senior deal opportunities between $100 million to the new vehicle, hungry for the higher managing partner and head of Brook- and $1 billion. returns available in Asia’s infrastructure field’s Infrastructure Group, said at the So far, investments from Fund III markets. time. include $500 million in a US-based trans- “The Asian infrastructure market This award shows the market is also portation company and the creation of is maturing and continues to provide pleased with Brookfield’s debt efforts.
30 INFRASTRUCTURE INVESTOR ANNUAL REVIEW Connecting global infrastructure with Asian capital Save the date: 12-14 November 2019 Established as the premier outbound infrastructure investment conference in the region, the 7th annual Infrastructure Investor Hong Kong Summit will take place on 12-14 November 2019. With a US$1.7 trillion annual estimated funding gap, Asia has cemented itself as the market of the future over the past 18 months. North Asian LPs continue to allocate capital across the globe while a steady stream of deals, often with potential for double figure returns, continues to flow through developed and emerging markets in the region.
Key attendee demographics
By seniority Regional breakdown Director 34% President, Founder, Principal, Partner 24% Hong Kong 30% Head of Department APAC ex. Hong Kong or Region 17% 39% Senior Manager, Europe, Middle East, Consultant 9% Africa 24% CEO, CIO, CFO, COO Americas 7% 8% Other 8%
Excellent content and networking opportunities. I was impressed “ that most attendees were serious about their participation. ” Ben Simpfendorfer, Silk Road Associates
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category. Not only did it attract attention for its hefty $5 billion price tag, it also cast the spotlight on Asia’s renewables sector, which John Walker, Macquarie Capital’s vice-chairman for Asia, described as the “investment opportunity of the century”. The transaction gave Global Infrastruc- ture Partners, PSP Investments and China Investment Corporation a major footprint in the region, thanks to the more than 180 assets totalling 11.1GW in generating capacity that span seven countries. Since the sale, Equis has been re- grouping. In October, it hired Damian Secen from Macquarie Infrastructure and Real Assets, appointing him to a newly created role where he is responsi- ble for origination, investment and asset management.
Idex: fierce competition for the French district-heating asset DEAL OF THE YEAR, EUROPE
Encino-La Laguna gas pipeline in Mexico 1. Idex (Antin Infrastructure Partners) INSTITUTIONAL DEBT PROVIDER and then participating in the refinancing 2. Abertis (ACS, Hochtief, Atlantia) OF THE YEAR, GLOBAL of two solar PV plants in Uruguay – El 3. John Laing Infrastructure Fund (Dalmore Naranjal and Del Litoral – owned by Atlas Capital, Equitix) 1. Allianz Global Investors Renewable Energy. 2. MetLife These deals brought AllianzGI’s infra- Idex’s chief executive Thierry Franck de 3. CDPQ structure debt investments in the Ameri- Préaumont hailed Antin as “the right part- cas to more than $4.2 billion, with the ner for the next stage of growth” after a Once again, AllianzGI finds itself the firm promising that “more are expected deal thought to be worth about €1.2 bil- winner in this category after a year filled to follow”. lion was agreed for the French district with milestones. More recently, in September, the firm heating company. Antin had a right to It completed the first four transac- added Portugal’s largest telecom towers feel rather pleased with itself. tions from its Resilient Credit strategy, a company to its Resilient Credit portfolio, True to form, there was heated com- medium-term secured-lending play the investing €150 million in debt. petition to buy the company from Cube firm launched in 2017 that is “more suited Infrastructure, with Antin beating some to shorter investment horizons”. of the largest investors in the infrastruc- Those four transactions – across a DEAL OF THE YEAR, GLOBAL ture fund market and the French energy number of sectors, including water, oil industry to agree the deal valued at about storage and airport services – helped the 1. Equis Energy (GIP, PSP Investments, CIC) 15 times EBITDA. Frankfurt-based investment manager 2. TDC (MIRA, PFA, PKA, ATP) Antin’s acquisition saw it gain control reach another milestone as it has sealed 3. WestConnex (Transurban, AustralianSuper, of the company with the third largest 50 infrastructure debt deals, totalling CPPIB, Tawreed Investments) market share of the French district heat- €11.1 billion, since launching the plat- ing network, although it also sees signifi- form in 2012. Billed as “the largest renewable energy cant expansion for the company in other Around the same time, in July 2018, generation acquisition in history”, it’s markets such as the UK and Germany. the firm also expanded into Latin Amer- probably no surprise that Equis Energy There’s certainly more heat left in the ica, first by investing in the Fermaca El emerged as the clear winner in this pipeline for this one.
32 INFRASTRUCTURE INVESTOR ANNUAL REVIEW AWARDS
before, Equis spent five years painstakingly 2.2GW portfolio of power assets, including DEAL OF THE YEAR, NORTH putting together a 180-strong operational six combined-cycle natural gas facilities AMERICA and under-development renewables port- and a stake in a 155MW wind project. The folio, operated through 15 offices across firm has signalled the portfolio, which it 1. Calpine Corporation (Energy Capital the region. rebranded as Saavi Energia, cements its Partners) At the same time, observers will appre- commitment to the Mexican power sector 2. Enbridge (CPPIB) ciate GIP’s leadership in putting together and will serve as the firm’s platform for 3. Autoroute 25 (Transurban) a consortium with Canada’s PSP Invest- the region. ments and China Investment Corporation InterGen was previously co-owned North America’s deal of the year is a $5.6 to write a $5 billion cheque for what is still by Canadian retirement system Ontario billion shake-up in the market’s natural gas the industry’s largest-ever renewables deal. Teachers’ Pension Plan and the China industry. Energy Capital Partners acquired Huaneng Group. US-listed Calpine Corporation for what Actis invested through its fourth energy came out to be a deal worth $15.25 per DEAL OF THE YEAR, LATIN fund, which closed in 2017 on $2.75 bil- share. It led a group of investors including AMERICA lion. The fund’s strategy is to acquire large Canada Pension Plan Investment Board stakes in electricity generation and distri- to buy out the Houston-based company. 1. InterGen (Actis) bution businesses in Latin America, Africa Calpine is one of the largest natural 2. Enel Renewables (CDPQ Infra, CKD and Asia. gas power generators in the US. The com- Infraestructura México) pany has 80 power plants in operation or 3. Spence Desalination Plant (Mitsui, ACS) under construction and a 26GW genera- DEAL OF THE YEAR, MIDDLE EAST tion capacity. Its portfolio also includes Actis has made investing in Latin America AND AFRICA electricity distribution company Noble its speciality. The firm’s largest deal ever Americas Energy Solutions, which it pur- for InterGen’s Mexico power portfolio 1. Taiba N’Diaye wind farm (Lekela Power) chased for $900 million in 2016. has made it as the region’s deal of the 2. Route 2020 Dubai metro extension (Alstom, The deal is symbolic of the transition year for 2018. Acciona, Gulermak) the US natural gas market is experienc- The $1.26 billion deal landed Actis a 3. Sakaka solar project (ACWA Power, AlGihaz) ing. Expanding production, declining prices and the proliferation of renewable energy have led a wave of natural gas gen- erators to seek consolidation or backing from investors. Energy Capital held financial close on the Calpine deal in March 2018.
DEAL OF THE YEAR, ASIA-PACIFIC
1. Equis Energy (GIP, PSP Investments, CIC) 2. WestConnex (Transurban, AustralianSuper, CPPIB, Tawreed Investments) 3. Safeway Concessions (MIRA)
It’s not by chance that the Equis Energy deal reigns supreme in this year’s awards. From a regional perspective, the much-dis- cussed sale of the 11.1 GW portfolio under- lines the size of the opportunity offered by Asia-Pacific, and its growing appeal to international investors. As mentioned Africa: Lekela helped finance Senegal’s first wind farm
ANNUAL REVIEW INFRASTRUCTURE INVESTOR 33 AWARDS
Actis-backed renewable power developer a landmark project for the West African will deliver a new rail line across Mel- Lekela received more than $250 million nation. It adds to Lekela’s portfolio on bourne central business district, featur- from the Overseas Private Investment Cor- the continent, as the company also has ing two 9km tunnels and five new under- poration, the US government’s develop- projects in Egypt, Ghana and South Africa. ground stations under an availability- ment finance institution, to finance Sen- based PPP model. It is the centrepiece egal’s first 159MW wind farm, backed by a of the Melbourne Metro project, which Multilateral Investment Guarantee Agency PPP DEAL OF THE YEAR, GLOBAL is estimated to cost A$11 billion. political risk insurance guarantee. It seems fitting that an Australian rail The scheme reached financial close in 1. Melbourne Metro Tunnel & Stations PPP project would win this year’s distinction August 2018 and construction is underway, (Bouygues, Lend Lease, John Holland, since, according to Infrastructure Partner- with a targeted opening date of Novem- Capella Capital, John Laing) ships Australia, major rail projects out- ber 2019. 2. LAX Integrated Express Solutions (Fluor, numbered road projects last year, “reflect- The farm, located 70 kilometers north Balfour Beatty, ACS, Bombardier) ing a broader shift in governments’ pref- of Dakar, will boost Senegal’s grid-con- 3. Navi Mumbai Airport (GVK Power and erence for public transport investment”. nected capacity by 15 percent and has Infrastructure) The project marks the first step towards a 20-year power-purchase agreement in creating a metro-style network in Mel- place with state utility Senelec. Roughly two-and-a-half years after then- bourne and is on track to be completed United States Agency for International Victoria Premier Daniel Andrews kick- by the end of 2025. Development’s Power Africa initiative also started the “largest public transport pro- provided support for the scheme, with ject” in the state, the Cross Yarra Partner- Danish export credit agency EKF commit- ship reached financial close on the pro- PPP DEAL OF THE YEAR, EUROPE ting to a €140 million export loan with a ject, which includes a 25-year concession, tenor of 17 years as well. in December 2017. 1. Landmark Blankenburg Connection Taiba N’Diaye is Senegal’s first util- The A$6 billion ($4.3 billion; €3.8 bil- (Macquarie Capital, Ballast Nedam, ity-scale wind generation project and is lion) Melbourne Metro Tunnel Project DEME) 2. Rv 3/Rv 25 road (Skanska) 3. A10/A24 Neuruppin to Pankow road (BAM- PGGM, HABAU)
In October 2018, a consortium of Mac- quarie Capital (70 percent), Ballast Nedam (15 percent) and DEME (15 per- cent) reached financial close on the €1 billion Landmark Blankenburg Connec- tion, a major road scheme in Rotterdam. The PPP is for the design, build, finance and maintenance of a new highway con- nection of approximately 4km linking two roads to the west of Rotterdam, including two tunnels, two new flyovers and the wid- ening of the existing A20 road. The deal is one of the largest PPP con- tracts awarded in the Netherlands and included €900 million of debt financing arranged by Macquarie Capital. Construction began right after finan- cial close was achieved, with the sheer size and complexity of the scheme making it stand out as our PPP Deal of the Year, Melbourne Metro: ‘largest public transport project’ in Victoria Europe.
34 INFRASTRUCTURE INVESTOR ANNUAL REVIEW AWARDS
PPP DEAL OF THE YEAR, NORTH AMERICA
1. LAX Integrated Solutions (Fluor, Balfour Beatty, ACS, Bombardier) 2. Gordie Howe Bridge (Fluor, Aecon, ACS) 3. Purdue University Student Housing (Plenary Properties Purdue)
It seems fitting that readers voted North America’s largest public-private partner- ship to reach financial close in 2018 as the year’s best PPP deal. LAX Integrated Solutions won the honour after raising $1.3 billion in pri- vate activity bonds to finance a $4.9 bil- lion project at Los Angeles International Airport. It will build and maintain a rail system under a 30-year contract. Con- struction and engineering firms Fluor, Airports: VINCI has landed some big deals Balfour Beatty, ACS and Bombardier linked up to secure the bid. Their pro- posal, which was approved by Los Ange- construction of twin 9km rail tunnels and around $377 million of project financing les City Council, had the highest tech- five stations in Melbourne. to develop a deep-water multi-purpose nical score and lowest cost proposal out The PPP deal is the main bundle of a port terminal in Ecuador that will be man- of three teams competing in the bid series of concessions aimed at forming the aged through a 50-year PPP agreement. process. largest public transport scheme ever in Vic- Financing lined up includes backers like Now, they will build an elevated 2.25- toria, costing a total of A$11 billion . the Inter-American Investment Corpora- mile track, six train stations and a moving To win the contract, Cross Yarra had tion, German finance institution DEG and walkway. The planned people mover is to fend off competition from consortiums French development agency PROPARCO. expected to have 10,000 passengers an including the likes of Macquarie Capital, The overall investment is expected to be hour and will support up to 87.7 million Ferrovial Agroman and CPB Contractors. $1.2 billion. passengers a year. DP World will construct, operate and maintain the port terminal, which will be PPP DEAL OF THE YEAR, LATIN capable of handling containers with an esti- PPP DEAL OF THE YEAR, ASIA- AMERICA mated volume of 800,000 TEUs (20-foot PACIFIC equivalent units). The project includes con- 1. Guayaquil port terminal (DP World) struction of a 20km access road to the port 1. Melbourne Metro Tunnel & Stations 2. Ruta del Cacao (Ferrovial, Ashmore Group, and the dredging of a new 16-metre deep PPP (Bouygues, Lendlease, John Mercantil Colpatria) access channel. Holland, Capella Capital, John Laing) 3. Autopista al Mar 2 (China Harbour Engineering 2. Fukuoka Airport (Fukuoka Airport Holding, Company) Changi Airports, Nishi-Nippon Railroad, DEVELOPER OF THE YEAR, GLOBAL Mitsubishi Corporation and Kyushu Electric Infrastructure development across Latin Power) America is booming, and a lot of that is 1. VINCI Airports 3. Western Roads Upgrade (Plenary, Cintra) focused on transportation. No surprise, this 2. Orsted year’s PPP deal of the year, Latin America 3. Lightsource BP The Lendlease-led Cross Yarra Partner- falls in that category. ship has been moving forward with the Global port operator DP World secured The past year saw the French airport devel-
ANNUAL REVIEW INFRASTRUCTURE INVESTOR 35 AWARDS
offshore wind farm” that is being built 120km off the English coast in the North Sea. When completed in 2020, the project will span 407 square km. The £4.5 billion ($5.9 billion; €5.2 bil- lion) deal covers GIP’s acquisition of a 50 percent stake as well as funding 50 percent of the EPC contract to develop it.
ENERGY INVESTOR OF THE YEAR, EUROPE
1. Antin Infrastructure Partners 2. iCON Infrastructure 3. Partners Group
Antin emerged victorious in one of the big- gest and most high-profile auctions for a European energy asset in the last few years, fighting off some of the sector’s biggest Pipeline: joint venture will manage 1.4 million cubic feet a day of processing capacity players to acquire French district heating group Idex. The transaction saw Antin pay around €1.2 billion to Cube Infrastructure Man- oper grow its European portfolio again, ENERGY INVESTOR OF THE YEAR, agers for the company, which operates 41 first when it was chosen as the preferred GLOBAL district heating and cooling networks in bidder for the Nikola Tesla Airport tender Paris, 13 energy-from-waste facilities and in Serbia, concluding a process that lasted 1. Global Infrastructure Partners a portfolio of energy services contracts. nearly a year. The country’s procuring 2. Partners Group The acquisition, including debt, rep- agency repeatedly extended the deadline, 3. Copenhagen Infrastructure Partners resented around a 15 times EBITDA mul- needing more time to whittle down a list tiple – enough to beat interest from play- of 27 bidders. When talking about GIP and the energy ers thought to include Ardian, Partners Under the agreement, the developer sector, it’s difficult not to mention the New Group, JPMorgan and IFM Investors, will pay €501 million for the concession York fund manager’s leading role in the $5 among others. and invest €732 million over the course of billion Equis Energy deal, which saw GIP With such illustrious competition, the the 25-year contract. The deal covers the and consortium partners PSP Investments move cements Antin’s position as one of financing, operation, maintenance, expan- and CIC acquire a renewables platform Europe’s leading energy investors and is sion and renovation of the existing airport with a significant Asia-Pacific presence. But enough for it to take home the crown in terminal and runway system. there’s a lot more to GIP’s activity in 2018 2018. Four months later, in April, it acquired that merits mentioning. Ontario Municipal Employees Retirement Last February, GIP agreed to pay $1.4 System’s stake in Airports Worldwide, billion for NRG Energy’s US renewable ENERGY INVESTOR OF THE YEAR, which added nine new hubs and three par- energy business, including its controlling NORTH AMERICA tial management contracts to its portfolio, stake and 46 percent economic interest including a 100 percent stake in Belfast in NRG Yield, as well as NRG’s renewable 1. I Squared Capital International Airport, a 90.1 percent stake energy O&M and development businesses. 2. AMP Capital in Sweden’s Skvasta Airport and 100 per- More recently, in September, GIP 3. Energy Capital Partners cent of the concession to operate Florida’s acquired a 50 percent stake in the 1.2GW Orlando Sanford Airport, its first US asset. Hornsea 1 project, the “world’s largest I Squared Capital won the award for
36 INFRASTRUCTURE INVESTOR ANNUAL REVIEW AWARDS
Energy Investor of the Year, North America, to a consortium led by Japanese industrial but this one is really about the partnership. TRANSPORT INVESTOR OF THE conglomerate Mitsubishi Corporation. But The firm committed $500 million in cash YEAR, GLOBAL the sale is no indication I Squared is retreat- to enter a venture alongside private equity ing from India’s transport sector. Earlier firm Blackstone and energy company Eagle- 1. I Squared Capital this year, Infrastructure Investor reported that Claw Midstream. 2. Macquarie Infrastructure and Real Assets the fund manager was one of several mar- Now, EagleClaw will operate close to 3. IFM Investors quee names in pre-bid talks with the Air- 1,000 miles of natural gas, crude and water port Authority of India for six airports the gathering pipelines. It will be manage over Raising one of the largest infrastructure country is looking to privatise. 1.4 billion cubic feet a day of processing funds in 2018 was just one of several high- capacity and has nearly half a million acres lights punctuating the firm’s activity in the in the southern Delaware Basin where it can past year. Another worth noting – which is TRANSPORT INVESTOR OF THE build out midstream services. probably responsible for not only landing YEAR, EUROPE In addition to its cash investment, I the firm in the top spot in this category Squared committed its portfolio company but its significant lead over the runner-up, 1. AMP Capital Delaware Basin Midstream to help develop was the acquisition of TIP Trailer Services 2. Global Infrastructure Partners the Permian Highway Pipeline Project. – a Netherlands-based company focusing 3. Mirova EagleClaw is a 50 percent partner on the on trailer leasing, rental, maintenance and $2 billion pipeline development. repair. The deal was the sixth investment Brexit, of course, is casting something of a Outside midstream, I Squared pur- the firm made through its $7 billion second cloud over potential investment in UK infra- chased a 3.4GW portfolio of Latin American fund, which, at time of final close, was 24 structure at the moment. So, bravo to Aus- and Caribbean assets, including hydroelec- percent committed. tralian fund manager AMP Capital, which tric, wind and thermal generation plants. The past year also saw I Squared sell a shrugged off the uncertainty to acquire a 20 percent stake in Cube Highways and 49 percent stake in London’s Luton Air- Infrastructure, the India-focused toll road port in 2018. ENERGY INVESTOR OF THE YEAR, operator it launched alongside IFC in 2014, Luton is the UK’s fifth-largest airport ASIA-PACIFIC
1. Global Infrastructure Partners 2. Partners Group 3. Brookfield Asset Management
If Equis has been rewarded in other cat- egories for crafting a unique renewables portfolio across Asia-Pacific, GIP is recog- nised here as Energy Investor of the Year, Asia-Pacific for its boldness and clear vision regarding the region’s future. The $5 billion Equis Energy deal gives the New York-based manager a strong foot- hold in “one of the most promising renew- able energy markets in the world,” chair- man Adebayo Ogunlesi said at the time. With projects still in development, the Equis Energy story is growth: in February, the newly acquired firm reached financial close on the 127MW Tailem Bend solar pro- ject in South Australia and was on track to build over A$1 billion ($716 million; €630 million) of new projects in the near future. Trailer leasing: I Squared is venturing into new transportation sectors
ANNUAL REVIEW INFRASTRUCTURE INVESTOR 37 AWARDS
and the fastest-growing in the lucrative diversified its stake in Vancouver-based expanding its presence in some of Asia- London market, with AMP Capital jump- GCT Global Container Terminals, sell- Pacific’s more ‘emerging markets’, like ing at the rare opportunity to gain expo- ing 37.5 percent to IFM Investors and 25 India. Last March, the firm’s Macquarie sure to it. percent to British Columbia Investment Asia Infrastructure Fund 2 snapped up the The price tag was $500 million, pur- Management Corporation. GCT is a lead- 30-year concession for nine tolled high- chased from French fund manager Ardian, ing container terminal operator in North ways in India for a whopping $1.49 billion, and sees Luton become the sixth airport America, managing assets in New York’s almost 50 percent higher than the original in AMP Capital’s portfolio, alongside two Staten Island, New Jersey, Vancouver and base price asked by Delhi. others in the UK and three in its native British Columbia. MIRA’s bid reportedly defeated other country. The move is the second time in the past infrastructure heavyweights like Canadian The firm has a strong track record of two years OTPP has divested a portion of fund manager Brookfield, as well as a joint successfully managing airport assets in its an infrastructure asset in its portfolio – venture between PSP Investments’ road various funds and the move for Luton gives favouring forming partnerships with like- platform Roadis Infrastructure and India’s it the foothold in London that it would minded, long-term investors. In November National Infrastructure Investment Fund. have craved, despite all the potential head- 2017, the Canadian pension sold 30 per- MIRA certainly can’t be faulted for winds that Brexit may bring. cent of its stake in two UK airports – Bris- its timing: a second bundle of eight toll tol and Birmingham – to Australian inves- roads auctioned by Delhi at the end of tors New South Wales Treasury Corpora- 2018 failed to attract any bid matching its TRANSPORT INVESTOR OF THE tion and Sunsuper Superannuation Fund. initial price. YEAR, NORTH AMERICA
1. Ontario Teachers’ Pension Plan TRANSPORT INVESTOR OF THE TELECOMS AND BROADBAND 2. VINCI (tie) YEAR, ASIA-PACIFIC INVESTOR OF THE YEAR, GLOBAL 2. CDPQ Infra (tie) 1. Macquarie Infrastructure and Real Assets 1. AMP Capital Readers have awarded North America’s 2. Transurban 2. Macquarie Infrastructure and Real Assets transport investor of the year to an organi- 3. Mitsubishi 3. Digital Colony sation that pulled off a savvy sale, not a suc- cessfully completed mega-deal. Macquarie’s experience in the trans- After picking up bronze in the first edition Ontario Teachers’ Pension Plan port sector has allowed the firm to keep of this category last year, AMP Capital has propelled itself to the top spot following a year in the sector marked by investments from three different streams. It began in March by reportedly invest- ing more than $200 million in equity in Ohio-based fibre network operator Ever- stream Solutions, designed to serve as a platform for future acquisitions and to fund organic growth and development. Next up was AMP’s debt platform. Its third fund, working alongside CDPQ, pro- vided $200 million to New York-based Till- man Infrastructure, a cellular tower and telecoms company planning an expansion across the US. A short swim across the Atlantic also saw the AMP-managed Irish Infrastructure Fund take full control of enet, the largest telecoms network operator in Ireland. The Everstream Solutions: a platform for future acquisitions October acquisition of the 22 percent stake
38 INFRASTRUCTURE INVESTOR ANNUAL REVIEW AWARDS
followed the fund’s 78 percent purchase in July 2017.
TELECOMS AND BROADBAND INVESTOR OF THE YEAR, EUROPE
1. Antin Infrastructure Partners 2. Arcus Infrastructure Partners 3. Macquarie Infrastructure and Real Assets
Antin Infrastructure Partners had a busy year on the telecoms front, securing two significant deals that highlight its strength in this sector in Europe. First, in April, it partnered with Gold- man Sachs to lead a consortium in a suc- cessful £538 million ($702 million; €618 Trans Adriatic Pipeline: the largest European project finance of 2018 million) take-private bid for the UK-based fibre broadband group CityFibre. Then in July, it followed that by acquir- The firm committed more than $200 investment this year with the acquisition ing the Spanish operations of Ufinet from million in equity to fully acquire Ever- of “a significant ownership stake” in the private equity group Cinven for an undis- stream Solutions, a regional service pro- Hawaiki submarine cable, a critical piece of closed sum through its €3.6 billion Antin vider focusing on developing fibre net- infrastructure connecting the US, Australia Infrastructure Partners III. works in the US Midwest. AMP bought the and New Zealand. With more than 43 tera- There’s obvious synergy between the company from M/C Partners, a telecoms bits of data capacity, it is the “fastest and deals: Spain’s fibre-to-home ratio stands and IT-focused private equity firm. Ever- largest” link between the three countries at around 34 percent, while the UK’s was stream has built and operated more than and holds capacity contracts with users like 1 percent at the time of the Ufinet deal. 10,000 route miles of fibre-optic cables Amazon Web Services. Antin clearly sees a chance to leverage Ufi- throughout the Midwestern US, a network “Data usage is growing generally and net’s experience as CityFibre positions itself originally built and partially financed using in Australia, and the physical infrastruc- for the rollout of fibre-to-home in the UK. government grants. ture that underpins that is becoming more The acquisitions position Antin as a AMP also provided $200 million from and more important,” Palisade investment major player in the European broadband its third infrastructure debt fund to New director Mike Reynolds told Infrastructure space, particularly in the UK and Spain, for York-based cellular tower and telecoms Investor. the near future. infrastructure company Tillman Infrastruc- As Palisade’s understanding of the ture. The commitment will allow Tillman sector grows, it could well turn into a to finance and construct approximately growth driver for the firm, much as renew- TELECOMS AND BROADBAND 1,500 new telecom towers. ables have done. INVESTOR, NORTH AMERICA
1. AMP Capital TELECOMS AND BROADBAND PLACEMENT AGENT OF THE YEAR, 2. Brookfield Asset Management INVESTOR OF THE YEAR, ASIA- GLOBAL 3. John Hancock Life Insurance Company PACIFIC 1. Evercore Private Funds Group Australian fund manager AMP Capital won 1. Palisade Investment Partners 2. Campbell Lutyens investor of the year for telecoms and broad- 2. Next Capital 3. Capstone Partners band, possibly infrastructure’s fastest grow- 3. Digital Realty ing sector. For AMP, 2018 brought its two Last year, we fathomed a guess that Ever- first telecoms deals. Palisade made its maiden telecoms core helping to close one of the asset class’s
ANNUAL REVIEW INFRASTRUCTURE INVESTOR 39 AWARDS
As well as advising GIP and Macquarie on Asian investments Equis Energy and Formosa 1, the law firm also took on some of Europe’s largest challenges with the same clients. Clifford Chance advised GIP on its £4.5 billion ($5.9 billion; €5.2 billion) investment in the Hornsea 1 off- shore wind farm in the UK, set to be the largest in the world. It also advised the Macquarie-led consortium on the acquisi- tion financing for its $6.7 billion takeover of Danish telecoms group TDC. Elsewhere, Clifford Chance was the advisor on the secondaries process for Meridiam’s first European fund, where investors sold 25 percent of interests in Hornsea 1: Clifford Chance advised on the world’s largest offshore wind farm the vehicle, while it also advised Capital Dynamics’s $1.2 billion Clean Energy Infrastructure VIII fund. leading funds would help propel it to new Crédit Agricole was present. That is, at least, heights. It appears we were right, with the what it feels like after a successful year for placement agent landing in first place for a the French bank. CORPORATE TRUST SERVICES second year in a row. The New York-based The $5 billion GIP-led purchase of PROVIDER, GLOBAL firm served as exclusive global placement Equis Energy, the largest ever acquisition agent for I Squared Capital, helping the of a renewables portfolio, was one instance 1. Wilmington Trust infrastructure fund manager raise $7 billion where the bank flexed its financial mus- 2. Deutsche Bank Corporate Trust for its sophomore fund. ISQ Global Infra- cles. Staying with Asian renewables, Crédit structure Fund II, which was more than Agricole was one of 11 banks which took Truly the end of an era, as Deutsche double the size of its predecessor, beat its part in financing Formosa 1, Taiwan’s first Bank’s eight-year grip on the award initial hard-cap of $6.5 billion, becoming offshore wind farm. comes to an end. It was usurped by last one of the three largest infrastructure funds The same sector – on a different conti- year’s third place, Wilmington Trust. raised last year. nent – saw Crédit Agricole become one of The Delaware-based firm powered itself Evercore also helped LS Power Equity five lenders in the €1 billion refinancing of to the top spot, almost literally, following a Advisors beat its original $2 billion target EF Solare’s Italian photovoltaic fleet, the successful year in the conventional power, for its fourth North America-focused power largest refinancing in the space. The Italian power transmission and renewable sectors. fund, raising $2.25 billion within eight link remained strong until the end of 2018 It also made substantial progress on tel- months since its launch. when the bank helped close the €3.9 bil- ecoms deals. From data centres for CIM With its track record in infrastructure lion Trans Adriatic Pipeline, said to be the Group to renewables for Capital Dynamics fundraising gaining momentum, it’ll be largest European project finance of 2018. and to midstream investments for OMERS, interesting to follow Evercore’s course in Wilmington had the market covered. the coming year. The deals worked on by Wilmington LAW FIRM OF THE YEAR, GLOBAL ranged in size from about $250 million to $1.5 billion, with the group performing a BANK OF THE YEAR, GLOBAL 1. Clifford Chance variety of roles including administrative 2. Linklaters agent, intercreditor agent, collateral agent 1. Crédit Agricole 3. Norton Rose Fulbright and depositary agent. Wilmington also 2. BNP Paribas focused on developing deeper relation- 3. Sumitomo Mitsui Banking Corporation Be it M&A, project finance or fund advisory, ships with infrastructure debt funds and Clifford Chance was right in the thick of the institutional investors, diversifying from Big deal in infrastructure in 2018? It’s likely action in infrastructure in 2018. a traditional base of banking clients. n
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Bringing a PE approach to Australasian infra
MDs Andrew Charlier and Paul Foster discuss Pacific Equity Partners’ first infra vehicle, what sets it apart from traditional infra investing and where the best opportunities are likely to be found
Why is there an opportunity for Why is PEP’s approach Q a strategy like the Secure Assets Q different from other ‘hands-on’ Fund? infrastructure managers? PF: If you take all the infrastructure PF: It’s in the DNA of the firm. We play transactions that have occurred in the an important role in finding the right Australia-New Zealand market over the management team, supporting them to last five years, the vast majority of those, the outcomes that we sign up to when we by number, have actually been in the mid- build our business plan, and incentivising market, in businesses and assets with an them accordingly. Origination of invest- enterprise value of less than A$1 billion ment opportunities and management ($711 million; €626 million). When you teams leverage the individual and corpo- overlay that with the fact that most of the rate networks of the entire PEP investment traditional infrastructure managers in Aus- platform, built up over 20 years of success- tralia now have a global reach and increas- ful Australasian LBO investing. ingly focus on large-cap transactions, it cre- I would suggest that’s a little bit differ- ates an interesting space for us to pursue. ent from the experience, approach and We’re not looking for traditional core skillsets that a lot of infrastructure man- infrastructure assets: we’re looking for agers possess when looking to execute on middle-market businesses that must have these sorts of investments. two ingredients, and each of those is as When we look at About 40 percent of our LBO deals important as the other. infrastructure, we have been corporate carve-outs. They Firstly, the businesses must have a set are complex and require you to set up of very secure earnings that we can under- see a lot of funds new business systems and management write to a normal core infrastructure-type investing in the core teams from scratch. Having done 14 such return. deals over the 20 years of PEP’s history, Secondly, and just as importantly, there space without the we have a well-developed approach and must be an opportunity to transform the focus on operational methodology to originate and execute operational capability and performance of these opportunities. Charlier the businesses in a way that moves returns improvement” We also want to work with the best man- from the underwritten secure level up to agement teams, so we will pay them private the mid-teens returns that we’re seeking. equity-style incentives. We find that is very Both sides of the coin must be present or the leveraged buyout business for more good at focusing management teams to it’s not going to be an opportunity for us than 20 years. deliver performance above and beyond to pursue with this pool of capital. When we look at infrastructure, we the status quo. AC: When we invest in a business, we spend see a lot of funds investing in the core a lot of time looking at the thesis and how space without the focus on operational What has the response been we are going to be able to transform it improvement. It’s that value-add approach Q like from limited partners to the such that you can achieve a higher return. that we’re applying to infrastructure and Secure Assets Fund strategy? We’ve been doing that across industries in infrastructure-like assets. AC: We’re getting interest across the board
42 INFRASTRUCTURE INVESTOR ANNUAL REVIEW AUSTRALASIA
and there’s been a pleasing crossover of market opportunity to get further growth demand from the existing PEP client base, on top of that by servicing other retailers, with increased interest from Australian and and the business has already added Red New Zealand investors. Energy and Simply Energy as customers. PF: A big part of our proposition to our Beyond that, we see a lot of opportuni- LP base is that, both historically on the ties to roll out smart gas meters and smart LBO side and on the Secure Assets Fund water meters as well as create value for net- side to date, we’ve been able to deliver work owners and retailers and their end substantial co-investment opportunities. customers through the development of That’s attractive to many of our investors value-added data products. for whom co-investment is a core part of We average about four bolt-ons per the structuring of their portfolios. portfolio investment that we make across buyouts, and we’ve done three to date for What type of infrastructure intelliHUB, so we would anticipate more Q assets are you seeking, and do occurring. It’s a growing field with benefits you anticipate coming up against to scale. traditional infrastructure investors? PF: We’re pursuing a range of assets so What are the next steps for the we’ll be targeting all the sectors that a Q Fund and for PEP’s infrastructure diversified infrastructure strategy would About 40% of our strategy? be looking at. We are, however, looking LBO deals have been PF: The intelliHUB acquisition is a good for businesses within those sectors that example of our investment strategy across have a different sort of profile from ones corporate carve-outs” sectors. We identify a market-leading plat- Foster that would be targeted in a core or even form opportunity, like the Acumen busi- traditional core-plus portfolio. ness merged with the intelliHUB business, We expect the portfolio to end up with and then seek to use that platform to con- between six and eight investments in it, would entail a significant amount of capital solidate other businesses in the sector by with an average Fund equity cheque of deployment. We were also aware, through finding attractive bolt-ons such as Metrix, around A$100 million, plus co-investment discussions with the major energy retail- the smart metering arm of Mercury NZ from our LPs. ers, that they were going to sell these busi- Limited acquired in December 2018. AC: We’ve also made a very deliberate nesses because of those capital demands We think that strategy is just as execut- choice in that it’s Australia and New Zea- and because the businesses were non-core able in the infrastructure space as it is in land-focused. This is where our network for them. So we engaged Origin Energy, the LBO space. is and it’s where our management team which kick-started a process for the sale The pipeline is full and encouraging. relationships are. of Acumen, its smart metering business. We’re looking at deals across a range of We’ll invest to gain control of assets, We were then looking for an opera- different sectors and we’ve been spend- given the amount of operational change tional partner so had a series of conver- ing time recently on opportunities in the that we want to drive. We’re not a small sations with Landis+Gyr, as they owned a transport and logistics space, as well as minority or large consortium kind of smart metering business in Australia called other interesting areas such as parking investor. intelliHUB. That gave us a substantial head and other parts of the energy sector. We start on the bid for Acumen and we were believe there are plenty of opportunities Talk us through the strategy able to create operational efficiencies by for us to pursue and it’s about trying to Q behind the intelliHUB purchase, merging it with the intelliHUB business find the most attractive combination of the first investment made on behalf at acquisition. secure cashflows alongside the operational of the Secure Assets Fund, and the Those operational efficiencies are mate- improvements that we seek to realise. n subsequent bolt-on acquisitions. Can rial enough to boost the base return, but we expect to see more bolt-on activity? the real value is in what you grow it into. AC: We were aware that the Australian gov- IntelliHUB’s got a long-term set of cash- SPONSORED BY ernment was about to mandate the use flows that extend to 30 years with Origin PACIFIC EQUITY PARTNERS of smart meters, and we knew that these and other smaller retailers. There’s a big
ANNUAL REVIEW INFRASTRUCTURE INVESTOR 43 BEST OF KEYNOTES
Direct speech
Every month, Infrastructure Investor profiles some of the industry’s most prominent figures for our keynote interview series. We bring you some of the best answers we got in 2018
Matina Papathanasiou, co- founder & deputy head, Martin Stanley, global head, Macquarie Trent Vichie (left), Mike Dorrell, co-founders, QIC Global Infrastructure Infrastructure and Real Assets Stonepeak Infrastructure Partners
ON DIVERSITY: ON REGIONAL STRATEGY ON THE JOYS OF HAVING A GOOD “We are infrastructure investors and we “Having a one-size-fits-all approach may be TRACK RECORD serve communities that are half-female. a way of raising a very large fund, but it’s “Fund I, you’re in a nightclub looking Also, when you’re hiring, why would you less likely to deliver a sustainable, long-term like Zach Galifianakis; Fund III, you’re exclude half the pool of candidates by secure future for the investor base” Brad Pitt” excluding women?” ON NATIONALISATION ON STONEPEAK’S INVESTMENT ON FUND I’S HYBRID STRUCTURE “I think a nationalisation agenda is pretty PROCESS “We found clients generally don’t want unlikely. However, I think there are some “We want to hear the opinions of the most to sell assets. At the same time, there elements of the discussion that are actually senior person on the deal to the most were quite a few open-ended structures legitimate and intelligent. At the heart of junior. We can say anything to each other around, but they are open in perpetu- it is the question of whether private own- and there’s no offence. We’re just trying ity, which creates a challenge around ership has delivered real value. That is a to find the facts and the truth” valuations” legitimate question we should not be afraid of answering” ON US AIRPORTS OPPORTUNITY ON SOCIAL LICENCE TO OPERATE “Clearly, there’s a lot of private capital “We are long-term owners of privileged ON PRODUCT DEVELOPMENT ready to go into airports, and there’s a lot assets, so you need to maintain your social “Our job is to meet the customer’s needs of benefit for the country from finding a licence to operate and be good stewards – not to push products on them. If they do way for that to happen” of those assts. That’s a different mindset” well, we do well – not the other way around”
44 INFRASTRUCTURE INVESTOR ANNUAL REVIEW BEST OF KEYNOTES
David Ridley, founder, managing director, Mark Hector, infrastructure portfolio manager, Raj Agrawal, global head of infrastructure, KKR Westbourne Capital First State Super
ON SUB DEBT VS EQUITY ON BEING FIRST ON INVESTMENT PRE-2008 “I don’t see subordinated debt replacing “Being bold is something the investment “Everyone thought they were buying low- equity, I see it as a complementary asset class team is proud of. We’re not afraid to be risk investments. Some firms were able for those investing in the equity market” a market leader and take the first steps in to survive that. Other firms weren’t able certain aspects of the market” to because they actually had high-risk ON DEPLOYMENT PACE investments” “We’ve historically been pretty conserva- ON ATTRACTING TALENT tive around deployment pace. Obviously, “We don’t remunerate like fund manag- ON KKR’S INFRA APPROACH it’s a consideration for investors, but at the ers, so in that sense it’s harder to attract “It’s about not having significant mess- same time we want to invest those funds certain types of personalities that are ups. It’s about sticking to your strategy, wisely, and so three years is the guidance particularly interested in focusing more hitting singles and doubles, not having we provide” on finances. But we do offer, generally, a a lot of volatility in returns. Consistency better work-life balance” is a big part of what we’re trying to do” ON THE INSURER OPPORTUNITY “Insurance companies are seeking to replace ON GREENFIELD ON ASIAN OPPORTUNITY lower returning government bonds for their “It’s hard to justify the time and effort “If you are looking three or four decades fixed-income portfolios. So I think there’s towards making pure direct investments down the road, and you want to be in just going to be a growing demand from into greenfield PPPs, so we’ll look to the infrastructure business, you have to those insurance-company-type investors as use more partnership arrangements be in Asia” n we go further” there”
ANNUAL REVIEW INFRASTRUCTURE INVESTOR 45 RESPONSIBLE INVESTMENT
Infrastructure investors’ legitimacy challenge
Hermes head of infrastructure Peter Hofbauer explores how populism and protectionism could hurt private sector investment unless the infrastructure industry embraces change
Which sectors do you currently of foreign direct investment. If a region is Q believe to be the most exciting in not welcoming to foreign investors or doesn’t Europe? require FDI to meet its needs, then in the PH: As an infrastructure investor, excite- medium- to long-term that could represent ment is not the first thing we look for. We increased risk for an institutional financial are focused on identifying opportunities that investor, given the duration of some of our deliver our clients their desired investment investments. So, it doesn’t necessarily come outcomes. Our clients are typically looking down to the highest returning markets. It is for stable, long-duration, yielding invest- about the markets that offer the best risk- ments that provide some inflation protection adjusted returns. and attractive risk-adjusted returns. So, that’s the opposite end of the spectrum to exciting. What are your views on the In terms of where capital deployment is Qemerging hybrid sectors that we needed across Europe, however, clearly the are seeing, driven by advancements decarbonisation agenda is key – so, renew- in technology, such as data centres, able energy. It’s not only decarbonisation, electric cars and battery storage? it’s the energy security objectives of various PH: There’s an old saying that pioneers get governments. Then there is the EU 2020 shot at. Those types of asset do not fall in our strategy, improving transport networks to current definition of infrastructure. Invest- enhance carbon reduction and stimulate ment in those sectors would not be mandate- economic growth and productivity by reduc- There’s an old compliant and would represent strategy drift ing congestion as certain regions become saying that pioneers and increased risk for our current mandates. more urbanised. That may not be true of every manager, The broader reconfiguration of Euro- get shot at” Hofbauer depending on what has been agreed with pean energy networks to accommodate an clients. But we are fairly prudent and risk- increased level of distributed generation averse, and these new hybrid asset classes that flowing from renewables, and the transi- we can invest in all of the major developed straddle the private equity and infrastructure tion to a pan-European smart grid to drive markets – the UK, continental Europe, the industries are not our key focus. efficiency in terms of usage of energy, are US and selectively in other OECD countries. also important. We tend to look at opportunities in those How is technology impacting In addition to those policy drivers, there countries that have really high standards Qareas that you do focus on? is still a significant amount of investment of governance, because when you make PH: Our view is that technology advance- required in existing networks, such as water, infrastructure investments you are invest- ment is going to have a material impact on to meet the needs of growing populations ing for a very long time. Obviously, rule of the infrastructure industry. In some cases that and to increase efficiency. law, political stability and economic stability, may be disruptive, in other cases it may be and the appropriate level of growth, are all productivity enhancing. Which geographies do you important. There is an argument that technology Qconsider to be most attractive? On top of that, we are also increasingly is already disrupting, with regulated utili- PH: Under our current client mandates, looking for jurisdictions that are accepting ties feeling the indirect impact of improved
46 INFRASTRUCTURE INVESTOR ANNUAL REVIEW Our aim: Superior Risk-Adjusted Returns
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service standards offered by other indus- years. There is clearly mission creep in tioned before, mean that some regulated tries post-digitisation. Consumers expect that. companies are facing challenges associ- higher levels of customer service – around On the equity side, it is more challeng- ated with resetting and right-sizing their personalised communication and connec- ing to determine whether or not returns businesses to meet the requirements of tivity via smartphones, for example – and are too low and pricing too high. All asset those stakeholders. some utilities have found it challenging classes have seen a significant rise in value We are working very closely with them to embrace those developments. and significant drop in returns, driven to help them meet those demands. We do On the flipside, there is no doubt by central bank liquidity. On a relative that firstly by looking at ensuring appro- innovation will bring huge opportunities, basis, infrastructure is generating the priate governance frameworks are in whether that be from a technical perspec- place. These businesses are in some cases tive, in terms of engineering process or intergenerational – change and challenge simply digitisation. Because of the scale will therefore inevitably confront them at and breadth of infrastructure, how many In order to positively some point. Putting in place a fit-for-pur- people it touches and how it impacts you pose governance framework enables them daily, the upside must be significant. influence other to address those challenges effectively, as people, private and when they arrive. Secondly, ensur- What are the biggest challenges ing those companies attract and retain Q facing infrastructure investors sector investors best-in-class management talent within a right now? must genuinely fit for purpose governance structure is a PH: I think the biggest challenge for relatively powerful formula for ensuring private sector investors in infrastructure embrace responsible businesses perform in way that is respon- globally is the uncertainty brought about investment practices” sible and delivers acceptable returns to by the increasingly volatile political land- our clients for the long term. Hofbauer scape. There is ever more protectionism and increasingly interventionist policies What do you think will be the being introduced in response to popu- same margins to the risk-free rate that it Q most significant evolution in list public opinion. At the same time, the did say 10 years ago. But on an absolute the infrastructure space over the next need for new infrastructure investment basis, clearly returns have dropped in line few years? has never been greater and governments’ with reduced risk-free rates. We are cau- PH: I really think it will be this issue of the capacity to invest remains constrained. tious about valuations and only pursue legitimacy of private sector capital invest- There has been questioning – and in opportunities where we have significant ing in public service infrastructure. It is a some cases not unreasonable question- conviction. debate that has to be had and it is appro- ing – as to the legitimacy of private sector priate that it is. I hope it can be done ownership of critical infrastructure. The What is your approach to rationally. But in order to positively influ- commitment to long-term stewardship Q dealing with challenges that ence other people, private sector inves- and constructive engagement with all key come the way of assets you are tors must genuinely embrace responsible stakeholders is more pressing today than invested in? investment practices and demonstrate ever. How the industry responds to these PH: We focus on preserving capital, first to other stakeholders that they are trust- challenges to its legitimacy will be critical and foremost, through looking extremely worthy stewards of society’s critical infra- to the future role for private capital. closely at downside risk mitigation. We structure. If those standards are adopted, carry out pre-mortems rather than post- then I think there will be ongoing broad What about concerns regarding mortems and we constantly and proac- acceptance of private sector investment in Q overheating in the market? tively engage with portfolio companies, essential infrastructure assets. But if they PH: On the debt front, we have seen co-shareholders and stakeholders when are ignored, I think people could possibly lenders become more borrower friendly managing our investments. look for a different model. n in recent years, in terms of covenants and I think we are clearly at a point in the margins and more recently even leverage regulatory cycle where a combination of levels, particularly in relation to structur- low interest rates, a lagging regulatory SPONSORED BY ally subordinated debt. That is far more review process and some of the legitimacy HERMES ASSET MANAGEMENT prominent now than it has been for many and customer service questions I men-
48 INFRASTRUCTURE INVESTOR ANNUAL REVIEW SURVEY
What LPs think
A comprehensive survey of investor attitudes to the asset class shows few think they are overexposed
LP Perspectives is an annual survey of institu- invest and performance predictions. It is a Investor’s Research & Analytics team surveyed tional investors’ approach to alternative asset global study, reflected in the question set 101 institutional investors with allocations classes. It aims to provide a granular view of and the respondents, which allows for mean- across private equity, private real estate, infra- the alternatives market by gathering insight ingful global views and cross-regional com- structure and private debt. Fieldwork was on investors’ asset allocation, propensity to parisons. For the 2019 edition, Infrastructure carried out from August to October 2018.
REGIONAL BREAKDOWN BASED ON INSTITUTION HEADQUARTERS
Central/Eastern Europe Asia-Pacific Western Europe 1% 45% 19% North America 29%
Middle East/ Africa 5%
Latin America 2%
$73.3m 27% 26.6% Average fund commitment Percentage of respondents that believe Percentage of respondents who to infrastructure their target allocation to infrastructure thought regulatory risks were the will increase over the next 12 months biggest threat to their performance
ANNUAL REVIEW INFRASTRUCTURE INVESTOR 49 SURVEY
REGIONAL BREAKDOWN BASED ON INSTITUTION HEADQUARTERS
19.3% 14.5% 14.5% 14.5% 13.3% 10.8% 4.8% 2.4% 2.4% 1.2% 2.4%
Public Fund of Private Bank/ Family office or Insurance Corporate Consultant Sovereign Endowment Other pension funds pension financial high-net-worth company wealth fund or foundation fund fund services individual
INVESTMENT PORTFOLIO ALLOCATION FOR ALTERNATIVE ASSETS
5.1% 4.0%
22.2% 31.6% 37.9% 5.3% 36.2% 7.4% 10.6% 18.9%
26.3% 27.7%
57.6% 34.7% 23.2% 22.3% 5.3% 11.1% 9.5% 3.2% Infrastructure Private equity Private real estate Private debt
Over allocated At target allocation Under allocated Invest opportunistically (no set allocation) Do not invest
TARGET ALLOCATION PLANS TO INFRASTRUCTURE STRATEGIES OVER THE NEXT 12 MONTHS
8% 8.3% 8.5% 13% 13.7%
61.3% 61% 68.1% 71.2% 76.1%
26% 30.7% 23.6% 15.1% 15.5%
Core Core plus Value-add Opportunistic Infrastructure debt
Increase target allocation Keep target allocation the same Decrease target allocation
50 INFRASTRUCTURE INVESTOR ANNUAL REVIEW SURVEY
THE MAJORITY OF INVESTORS BELIEVE THEIR THE MAJORITY OF INVESTORS PLACE SOME MOST INVESTORS BELIEVE GPS’ INVEST- INFRASTRUCTURE INVESTMENTS WILL MEET LEVEL OF EMPHASIS ON ESG ISSUES WHEN IT MENTS REFLECT THEIR ESG POLICY TO OR EXCEED BENCHMARKS COMES TO FUND DUE DILIGENCE SOME EXTENT
5.3% 17.3% 20.3% 8%
34.6%
40.6% 18.7%
68%
39.1% 48.1%
Exceeded benchmark ESG is a major consideration GP’s investments somewhat reflect my ESG policies Met benchmark ESG is a minor consideration GP’s investments strongly reflect my ESG policies Fell below benchmark ESG is not a consideration GP’s investments hardly reflect my ESG policies GP’s investments do not reflect my ESG policies at all
THINKING OF YOUR PRIVATE MARKETS PORTFOLIO, WHICH THREE FACTORS WILL HAVE THE GREATEST IMPACT ON PERFORMANCE OVER THE NEXT 12 MONTHS?
Extreme market valuations 66.3%
Rising interest rates 56.1%
US / China trade war 33.7%
Access to top-choice PE funds 32.7%
Availability of leverage in alternative 19.4% investment markets
Fee levels 18.4%
Foreign exchange rates 18.4%
Commodity price volatility 12.2%
Impact of the UK’s exit from the 9.2% European Union
Natural disasters 4.1%
Cybersecurity threat 3.1%
Source: Infrastructure Investor
ANNUAL REVIEW INFRASTRUCTURE INVESTOR 51 RENEWABLES
Keeping it clean
From subsidy-free renewables to the rise of corporate PPAs, Deutsche Bank Corporate Trust’s Dean Kennedy and Thalia Delahayes discuss the latest trends in clean energy investment
What are the big emerging although not new for Europe at all, is Q trends in energy infrastructure? offshore wind. European countries TD: There has been a lot of interest have installed a total of offshore wind in battery storage in the US, driven by capacity of 18,500MW compared to legislation and a number of incentive 30MW installed in the US. The first US programmes. In terms of technology, offshore wind deal was done in 2016, in lithium-ion has been the main focus and Block Island, and we are now seeing a the decrease in battery costs is pushing big push with six states having committed this new asset class forward. Energy stor- to deploy more than 15GW of offshore age has an important role to play, espe- wind along the Atlantic coast. There is cially with the growth of renewable assets, a lot of expectation for this market in power intermittence and grid manage- the US and we are seeing a number of ment. We have worked on a few trans- European developers coming over and actions already. From a project finance bringing their experience with them. perspective, those have been fairly small. DK: Wind remains key in Europe as But we see great potential and a lot of well. The UK clearly represented the interest from infrastructure players. lion’s share of the market last year, with DK: We saw at least one battery storage well over £10 billion ($13 billion; €11 project financing in Europe last year, billion) of debt raised for greenfield pro- although it was bilateral in nature and rel- jects or refinancings. That’s before you atively small. We still keep our eyes open even start to look at the next offshore for bankable projects going forward and We are seeing transmission grouping and contracts for expect to see more activity in this space institutional difference auction expecting to produce this year. There are a number of special- 6GW, two-thirds of which are going to ist battery storage funds that are crop- investors really be wind projects, that we are going to ping up now, as well as dedicated electric come into play in be seeing soon. vehicle and other sub-sector funds. That There has been a lot of refinancing reflects an asset class’s coming of age. both Europe and activity around existing German wind- Those are predominantly UK-focused the US” Kennedy farms as well. And we have also been in funds, which makes sense given the UK involved in some acquisition-style financ- government’s targets for reducing CO2 ings, where developers are getting to the levels by 2025. stage where they are nearing completion TD: I would agree that there is a lot of of the wind farm and are looking to divest interest in electric vehicles and related to other players, in particular large infra- infrastructure. Just think about how many structure funds. We have helped those gas stations there are. With the expected funds by supporting the finance of these growth in EV, the scale of infrastructure deals. required for charging stations will be vast. I would agree with Thalia that a number of European players are look- What about developments in ing at opportunities in the US – some of Q wind and solar? the big oil names that are focusing on TD: Something that is new for the US, becoming cleaner, for example. We have
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seen a number of transactions where plans have driven renewable invest- those corporates are looking to co-invest ments for many years and resulted in the alongside players that have been in the predominant role of tax equity in the market for some time. financing of renewable energy projects. And we expect a short-term rush in wind Are you seeing more corporate and solar in the US as the production Q involvement in terms of PPAs? tax credit and the investment tax credit DK: Yes, we are. We were involved in are respectively set to expire and step a greenfield onshore wind financing down starting in 2020. in the Nordics last year and are about to close on a second. Both of those What are your thoughts on were backed by corporate PPAs. We Q subsidy-free renewables? are expecting to see similar deals in DK: It is a dominant theme. We have Ireland, which is targeting 40 percent seen the issues there have been with of renewables electricity generation by tariffs, in Spain for example. We have 2020, ramping up by another 15 percent come through that and there are rigor- by 2030. There are some very big-name ous targets to be met with new entrants corporates coming in as offtakers with and re-entrants to the market. There has long-term contracts. I think that trend been a lot of refinancing over the past is going to accelerate in other countries few years and now we are seeing a lot of as well. greenfield opportunities, particularly in TD: Corporate PPAs have been prolif- southern Europe, with schemes in the erating in the US for a few years now. Of the 13.4GW of Netherlands on the horizon. According to a recent Bloomberg New clean energy deals We expect to continue to see subsidy- Energy Finance report, of the 13.4GW free opportunities and to continue to of clean energy deals signed by corpora- signed through PPAs see the costs of building renewable pro- tions around the world through PPAs last year, 8.5GW of jects, such as solar and wind, coming last year, 8.5GW of those were signed down. Obviously, technology is improv- by US companies. Traditionally, these those were signed by ing as well. corporate PPAs have involved large US companies” TD: Rapid cost declines made unsub- tech and industrial companies. Now Delahayes sidised onshore wind and utility-scale we are seeing universities and hospital solar cheaper than coal in many parts complexes get involved and there is an of the US and even competitive with expectation that smaller businesses will combined-cycle natural gas on a lev- become more active in the future too. the public bond space in Europe with elised level. The growth of renewable spreads volatile. There has been very energy is going to continue as costs con- Are there key differences in limited use of the publically offered tinue to decrease and innovation – such Q the way European and US bonds we used to see pre-crisis, with as bifacial panels, battery storage and industries are evolving? the monoline wraps. In general, though, larger wind turbines – will help accel- DK: I think the two geographies are there is increasing alignment between erate the transition. At the same time, becoming more similar. We are seeing the US and Europe in terms of the way given the challenge of climate change, institutional investors really come into deals are structured and the nature of the continuity of renewable subsidies play in both Europe and the US, work- players lining up for these deals. (or alternatively, a carbon tax) is still ing alongside some of the banks. The TD: I would agree that it has definitely an important question. n challenges are also pretty similar in become a very global market. There terms of what we have seen in the UK is a lot of European and Asian money with PFI. We know the PF2 scheme has coming to the US. But there are still finished now and P3 has its challenges. always local differences and local legisla- SPONSORED BY Obviously, there are political differ- tion which impacts financing structures. DEUTSCHE BANK CORPORATE TRUST ences. We also don’t see so much in For example, in the US, tax incentive
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Fundraising overview
With over $80bn raised for closed-ended funds, 2018 was the biggest fundraising year for the asset class
Year-on-year fundraising
90 120 More than $80 billion was raised by infrastructure funds in 2018, a record 80 107 for the asset class, surpassing the previous peak in 2017, Infrastructure 70 93 Investor data show. Infrastructure is generating ever 60 80 more interest from investors, so it’s no 50 67 surprise managers are flocking back $bn to market. With firms such as Global 40 53
Infrastructure Partners and Brook- Number of funds field Asset Management currently 30 40 seeking capital for their respective funds, and Blackstone out to raise $40 20 27 billion for its open-ended behemoth, 10 13 2019 is set for yet another record year.
0 0 Capital raised ($bn) Number of funds closed 2012 2013 2014 2015 2016 2017 2018
Year-on-year fundraising for sector-specific funds
20
18
16
14
10 $bn 8
6
4
2
Energy Renewables 0 Energy & renewables Other 2012 2013 2014 2015 2016 2017 2018
56 INFRASTRUCTURE INVESTOR ANNUAL REVIEW REPORT
2018 fundraising strategy breakdown
1%
86% 6% 7% Capital raised Capital
66% 15% 11% 6% 2% Funds closed Funds
Diversified Energy Energy & renewables Renewables Telecoms
Largest fund closes, 2018
KKR Global Infrastructure Investors III ISQ Global Infrastructure Fund II Digital Colony Partners Macquarie Asia $7.40bn $7.00bn $4.00bn Infrastructure Fund II $3.30bn
F2i III $4.12bn Macquarie Super Core Infracapital Infrastructure Fund Partners III Stonepeak Infrastructure Fund III $2.86bn $2.50bn $7.20bn
Copenhagen Infrastructure Partners III $4.01bn Partners Group Direct Infrastructure 2016 $2.52bn
Q1 Q2 Q3 Q4
ANNUAL REVIEW INFRASTRUCTURE INVESTOR 57 REPORT
Regional focus of capital raised in 2018
Europe $22.99bn North America $17.89bn
Asia-Pacific $4.18bn
*Rest of the Multi-regional World $35.02bn $0.3bn
*Rest of the World: Latin America, Africa, Middle East
Regional focus of capital
90
80
70
60
50 $bn 40
30
20
10
0
2014 2015 2016 2017 2018
Multi-regional North America Europe Asia-Pacific Rest of the World
58 INFRASTRUCTURE INVESTOR ANNUAL REVIEW REPORT
Europe-focused fundraising
24 24
22 22
20 20
18 18
16 16
12 12
($bn) 10 10
8 $bn 8 Number of funds closed
6 6
4 4
2 2
0 0
2012 2013 2014 2015 2016 2017 2018
Capital raised ($bn) Number of funds closed
Largest managers by capital raised for Europe-focused funds, 2012-18
Macquarie Infrastructure and Real Assets 12.69 Antin Infrastructure Partners 6.60 Infracapital 6.26 F2i 5.49 Ardian 5.42 Hermes GPE 5.31
InfraVia Capital Partners 4.10 Dalmore Capital 3.84 Partners Group 3.15 Meridiam Infrastructure 3.11 Equitix 3.03 Colonial First State 2.40 DWS 2.04 Arcus Infrastructure Partners 1.80 UBS Asset Management 1.77 Green Investment Group 1.45 Mirova Environment and Infrastructure 1.43 BlackRock 1.38 AMP Capital 1.18 SUSI Partners 1.01
Capital targeted ($bn)
Source: Infrastructure Investor
ANNUAL REVIEW INFRASTRUCTURE INVESTOR 59 QUOTABLES
Year in review
A look back at some notable quotes on the ups and downs of the global debt market from the past 12 months
“Blackstone and Brookfield are still “What is quite amazing is that pro- challenged with some diversity issues. ject bonds have been a more common And while they’re working on it, they’re instrument in Europe and North Amer- just not there yet” ica but less so in Asia” Angela Miller-May, CIO, Chicago Teach- Ray Tay, senior credit analyst, Moody’s ers’ Pension Fund “PFI has been a fraud on the people” “Renewables are probably the biggest Sir Howard Davies, chairman, Royal infrastructure opportunity in Asia, and Bank of Scotland probably for Asia, the biggest opportu- nity of the century” “Society is demanding that companies, John Walker, vice-chairman, Asia, Mac- both public and private, serve a social quarie Capital purpose” Larry Fink, chief executive, BlackRock “I get a lot of emails from GPs all over the world suggesting a phone call. We “It does not really much matter who don’t like phone calls. Having a phone owns the water companies and hence call in English for shy people [like us] it is not worth bothering to change it” is very tough” Dieter Helm, professor, Oxford Jake Jong-Kwan Lee, head of infrastruc- University ture, Hyundai Insurance The yieldco, at its pinnacle, was buying assets at such high Fund I, you’re prices that it was in a nightclub squeezing private looking like Zach equity out of the market. That’s Galifianakis; now flipped Fund III, you’re completely the Brad Pitt” other way” Mike Dorrell, co-founder, Stonepeak John Breckenridge, head of energy Infrastructure Parnters infrastructure, Capital Dynamics
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