The Pipeline: GIP eyes digital infra, India’s privatisation plans, Brookfield’s persistence pays off

GIP explores digital infra entry, India plans privatisation spree and Brookfield prevails in tug of war. Welcome to The Pipeline, the start-the-week briefing for our valued subscribers only.

First look

GIP en route to the digital party
Conspicuous by its absence in the thriving sector, Global Infrastructure Partners is preparing to make its mark in the digital infrastructure world, The Pipeline understands. GIP is believed to be analysing opportunities across digital infrastructure and has added to its team to address these opportunities. This includes the hiring last year of managing director Andre Burba, who is responsible for GIP’s digital infrastructure coverage alongside its credit platforms.

It is understood GIP is planning to partner with a strategic in the sector to execute on such deals, as it has done in the offshore wind space with investments alongside Danish giant Orsted in the UK’s Hornsea 1 project and in Germany’s Gode Wind I and Borkum Riffgrund 2 sites.

If its other agreed deals this year – the $4.6 billion Signature Aviation and €8 billion New Suez transactions – are anything to go by, GIP’s entry will be more than just dipping its toes in the water.

Reason Foundation’s $131bn reasoning for US airports leasing
The US could generate $131 billion if it decided to privatise 31 large and medium-sized airports, Reason Foundation has concluded in a study released last week.

“Under federal airport regulations, governmental airport owners are not allowed to receive any of an airport’s net revenue; all such revenues must be kept on the airport and used for airport purposes,” stated Robert Poole, director of transportation policy at the non-profit group.

However, Poole argued that if state and local governments were to privatise some of their airports – Los Angeles International, San Francisco International and Dallas/Fort Worth International were among the sites considered in the study – they could invest the proceeds in required infrastructure, pay down debt or reduce unfunded pension liabilities in their respective jurisdictions.

Should Poole’s proposal be adopted, we’re certain there will be a long queue of capital at the boarding gate. US airport privatisation, though, is easier said than done.

India set for $81bn privatisation plan
The Indian government is aiming to monetise as much as $81 billion in state assets over the next four years under a programme initially unveiled in its 2021-22 budget, which intends to bump up infrastructure spending, according to a Reuters report.

Under the programme, the government will lease operational infrastructure assets to the private sector on a long-term basis in the hope of collecting as much as 1.6 trillion rupees ($21.6 billion; €18.4 billion) from the road sector, 1.52 trillion rupees from railway assets, 452 billion rupees from power transmission lines, 398.3 billion rupees from natural gas assets and 351 billion rupees from telecommunications projects.

Although the government appears to view the move as a surefire way to boost economic growth – much needed for India, which posted a record fiscal deficit in the year to March – it remains to be seen what investors will make of it.

Grapevine

“I believe passionately that I would be betraying future generations by remaining silent on the fact that blue hydrogen is at best an expensive distraction, and at worst a lock-in for continued fossil fuel use that guarantees we will fail to meet our decarbonisation goals”

Chris Jackson steps down as chair of the UK’s Hydrogen and Fuel Cell Association following the UK government’s release of its hydrogen strategy, focusing initially on blue hydrogen production.

Who’s hiring

Multicoloured journey
Although it may be an “expensive distraction” for Jackson, blue hydrogen is the name of the game for Gary Mazzotti, who has been appointed as chief executive of EP Infrastructure, the Czech Republic-based energy infrastructure utility that is 31 percent owned by Macquarie’s European Infrastructure Fund 5.

“Ultimately, as a company with significant gas infrastructure, the most logical question is how we transition from natural gas to the end point of green hydrogen by 2050,” he told The Pipeline. “The most obvious, first transition, will be to blue hydrogen. Blue hydrogen will partially replace the natural gas we’re distributing, transiting or storing.” He added that turquoise and pink hydrogen would also be included in the transition before green.

As for the future of EP Infrastructure, Macquarie’s 2016 investment could be coming to an end, with the company announcing a strategic review last month.

“My strategy is to position ourselves at the centre of the hydrogen story,” Mazzotti said. “The strategic review is I know what my mission is: what is the best place to be?”

Deals

If at first, you don’t succeed…
Come up with a better offer. At least that’s what Brookfield Infrastructure Partners did, finally bringing round the board of directors at Inter Pipeline, the Calgary-based company for which BIP had submitted an unsolicited bid in February.

Inter Pipeline, listed on the Toronto Stock Exchange, kept declining Brookfield’s overtures, favouring a friendly takeover bid from Pembina Pipeline, another Canadian company. It wasn’t until late last month that Inter Pipeline chose to walk away from Pembina, paying a C$350 million ($276 million; €235 million) breakup fee, to pursue an C$8.5 billion offer from Brookfield.

Last week, Brookfield succeeded in acquiring 73 percent of Inter Pipeline’s common shares, offering shareholders C$20 per share or 0.25 of a Brookfield Infrastructure share, compared with its original offer of C$16.50 and 0.206, respectively.

Brookfield, which now owns a 73 percent share in the company it plans to take private, has extended its offer to remaining shareholders until this Friday.


Today’s letter was prepared by Zak Bentley. Kalliope Gourntis and Tharshini Ashokan also contributed

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