Infrastructure Dialogue & Spotlight on PPGM Investments: How to invest in infrastructure in times of high prices and strong competition
In terms of regions we are now active in: Europe including UK and Australia
The following sectors are of interest to us: Transport (road, rail, airports), regulated utilities, PPP and renewables. In addition we look to GP/LP funds that are in exit modus.
2) DC: What are the main projects you are involved with? Why is the topic “moving away from core” in general of interest to you?
In terms of projects: This year we closed a few successful transactions. Amongst others were the acquisition of the gas distribution network Madrilena Red de Gas in Madrid (bought from Morgan Stanley in Spain); the acquisition of the offshore windfarm Baltic II (ENBW project in Germany); the acquisition of a significant stake in the French toll road motorway A28 from Bouygues; the acquisition of a significant stake in Global Via sold by Spanish contractor FCC and Spanish bank Bankia (Global Via is a road and rail platform that owns 21 projects in Latin American countries and in Southern European countries); the increase of our contribution to the BAM PGGM PPP joint venture. In addition we sold one asset: Our participation in Eversholt, the UK rolling stock leasing company to CKI. Currently we are involved in a few other ongoing processes and transactions.
Regarding moving away from core: There is a lot of capital in the market and there are only a limited number of investment opportunities. We therefore see strong competition for core infrastructure with high acquisition prices being paid. As a consequence of this you see investors trying to distinguish themselves through different strategies. Examples include expanding the geographical focus to emerging markets, considering early stage projects ranging from development phase to construction projects as well as investing in core + infrastructure.
Within PGGM we have separate private market teams focusing on infrastructure, private equity and private real estate. In order to have a better focus on opportunities in the non-core infrastructure, we are currently in the process of securing a separate investment mandate for what we call “Infrastructure +”. This sets out to encompass the investment area in between infrastructure, private equity and private real estate.
3) DC: How do you rate the investment/lending climate in the regions that you are active in general? And what is your outlook?
Investment/lending climate: Due to the monetary policy of central banks there is a lot of liquidity in the market. This has several effects:
- It drives prices for new acquisitions to high levels by investors with deep pockets.
- For investors with existing assets the lending climate creates a lot of interesting refinancing opportunities for existing assets. In addition the current low interest rate climate artificially increases the prices of the existing portfolio of infrastructure assets. This is however a temporarily effect as investors need to take a long term view on the performance of an asset.
I would expect the current low interest rate environment to remain for quite some time.