Plenary lays the groundwork for UK outpost – exclusive

A number of macroeconomic factors have led the Australian infrastructure developer to enter the European market for the first time since its founding 18 years ago, says CIO Paul Crowe.

Founded in Melbourne in 2004 and establishing a presence in North America the following year, Plenary Group’s activity as infrastructure developer, investor, operator and public-private partnership specialist has historically focused on Asia-Pacific, US and Canada.

Now, however, it has decided the time is right to expand into Europe, a market it has been eyeing for some time, Plenary Group’s chief investment officer Paul Crowe tells Infrastructure Investor.

“We are very interested in the European market, and we have been for some time, though covid did slow down our plans. But we are looking to mobilise on that now,” he says.

When asked why now, Crowe replies: “There are a few macro factors, and I think you’re seeing this with the number of infrastructure funds that are raising European-based capital as well. The view is that within the European market post-covid, there is a need for infrastructure development to be part of governments’ stimulus plans.

“The other thing is that post-GFC, particularly in Europe, a lot of the measures were focused on austerity. So, you’re really coming off a decade of underinvestment in infrastructure.”

The company will focus on greenfield development projects, remaining committed to transportation and social infrastructure – subsectors it has traditionally targeted.

“But we do see opportunities in decarbonisation as well,” Crowe says. “Things like district heating will become a big thematic in Europe, so we’re investigating those opportunities as well.”

At the moment, Plenary has two executives on the ground – Felix Cassel and Joshua Smith – who are “doing the business establishment work right now and we’ll be looking to launch the office later in the year”, according to Crowe.

Once the office is up and running, the plan is to build a team of between six and 10 people, which will include new hires as well as Plenary staff transferring from other parts of the business.

From a geographic perspective, the main jurisdictions Plenary will be looking to invest in for the near term are the UK and Ireland.

“The Irish market is interesting to us for both social infrastructure and transport opportunities. There are opportunities also in Scotland. There are some opportunities in Wales and there are also opportunities within the UK through Ofwat’s DPC [Direct Procurement for Customers] process. That would be something that we could participate in,” Crowe says.

Though Plenary has not been particularly active in water/wastewater, it will consider this sector in the UK. Its sole investment in the sector so far is a drying facility that treats solid waste for Barwon Water in Geelong, Victoria, which it still manages.

Further afield and further down the line, Plenary intends to invest in Eastern Europe and Scandinavia.

“That’s probably over the more medium to long term,” Crowe comments. “But those markets are very open to international investment and international contractors. We see opportunity in those markets, which have varying degrees of infrastructure requirements that will be needed in the next decade.”

‘Model agnostic’

Asked whether the company expects its involvement to be through PPP or PFI projects, Crowe replies: “We take the view of being model agnostic. We look to the fundamentals of the transaction and what the client is trying to achieve, and look for opportunities for long-term investment or long-term partnerships in greenfield infrastructure development, whether that’s with governments, councils or with large institutions like universities.”

That said, Crowe acknowledged that the PPP model is adapting to the needs of the times.

“You’ll see various versions of the model that are dealing with shortcomings that were apparent in previous transactions,” he said. “The good thing about the PPP market and the private sector investment market is that we can innovate around these structures.

“We can work with government and address the issues. It’s not a sort of hold fast to the old model and it must be done that way. I think there’s a lot of innovative thinking around the world around how to improve and address some of the shortcomings that have come out of prior PPP or PFI transactions.”

Plenary’s decision to expand into Europe comes a little more than two years since the company sold its North American operating business alongside a controlling stake in its PPP portfolio to Canadian pension fund CDPQ.

Paul Oppenheim, director and co-founder of Plenary Asia-Pacific, had told Infrastructure Investor at the time that the deal would unlock capital to allow Plenary Asia-Pacific, in which CDPQ holds roughly 20 percent, to pursue further opportunities in its home region. The business continues to operate as Plenary Americas under the Plenary Group banner.

Since then, Oppenheim has assumed the role of chairman at Plenary Funds Management, which Plenary Group launched last June.

The funds management business and the European business will be independent of each other, Crowe explains. “The funds management business will be focused initially on the Australasian market,” he says.

Plenary Funds Management is planning to launch its “Flagship PPP Fund” this year, which will be established with a portfolio of seed assets, according to its website. “The fund will not have other competing funds and clients within PFM,” it said.

Plenary Group currently has 74 assets under management worth more than $46 billion across Australia, Canada and the US.