There’s so much talk of infrastructure’s supply-demand problem, of a wall of capital chasing too few deals that it’s sometimes easy to forget that there are plenty of opportunities out there – if you’re willing to think outside the box.
This week, we want to focus on two nascent sectors that we believe are going to be increasingly invested in: broadband and healthcare social infrastructure.
Broadband is a great tonic for those looking for greenfield infrastructure opportunities, yet struggling to find them in places like Europe, where the large-scale, traditional PPP programmes of yesteryear have dried up. It’s no coincidence that, in the space of a few days, we found ourselves reporting on two such initiatives: Infracapital taking the lead in broadband provider Gigaclear’s new fundraising round and the European Investment Bank’s (EIB) and the European Commission’s plan to launch a broadband-focused infrastructure fund later this year.
The benefits of high-speed internet access are well known. Economists point out that broadband contributed an estimated 20 percent to Europe’s total productivity growth over the last decade and could add between 0.5 and 1.5 percent to the continent’s annual GDP. Importantly, there is also a clear market opportunity, especially in rural areas.
Gigaclear and Infracapital are targeting that rural market opportunity in the UK. The EIB and the Commission are also eyeing it across continental Europe, employing risk mitigation to make private capital comfortable with investing in what still is a relatively new greenfield sector. If you want a good description of how these investments fit into the greenfield spectrum, Infracapital’s Ed Clarke has you covered: “This has the classic characteristics of a greenfield project – we are laying fibre to connect people's homes and there's a rollout period after which one would expect it to become a long-term operational asset […] akin to a network of pipes for a gas or a water utility.”
Antin Infrastructure Partners’ investment in a network of 10 French psychiatric clinics is perhaps less akin to a traditional infrastructure deal, but no less interesting. Social infrastructure is undergoing a bit of a renaissance, as the sector stretches beyond orthodox PFI-type investments in schools and hospitals to less traditional areas like military and university accommodation – or psychiatric clinics.
At first glance, it might be tempting to dismiss a psychiatric clinic as a non-infrastructure investment – after all, it’s not exactly a hard asset in quite the same way as a fibre optic cable is. What Antin’s latest deal does have is a lot of infrastructure-like characteristics.
As senior partner Angelika Schöchlin told us, INICEA, the private operator of the clinics, is catering to a growing – if unfortunate – need for mental care, widely predicted to become the leading cause of long-term illness. In that sense, INICEA is a provider of what is an increasingly basic healthcare service. But it also shares other infrastructure characteristics, such as high barriers to entry, since you need authorisation to run a psychiatric hospital.
If you like, Antin and other managers that share its philosophy are increasingly looking for infrastructure characteristics in less usual places, whereas the EIB and the Commission are trying to mitigate risk to make sure that a new type of infrastructure asset ends up with the right infrastructure investment characteristics.
Both, in different ways, are expanding the pool of investible assets. In an increasingly competitive market, that can only be a good thing.