Watch it

Start investing in battery storage now
Transitioning from subsidised renewables to increased merchant risk is one of several challenges investors in energy transition are facing; another is the need to connect the power produced to the consumer and the grid more efficiently. Part of the answer is battery storage, one of the topics discussed in detail on the last day of our Global Summit Online.

Laurent Segalen, managing partner at Megawatt-X, treated delegates to a short presentation, outlining the rapid development of grid-scale batteries. Citing data from automotive expert Sandy Munro, Segalen said the cost of batteries could drop as low as $61/kWh by 2022, from around $108 currently.

As a result, he warned interested investors to get in on the sector now. “This is happening, so you should start investing now and learn because there’s a lot of learning to be done,” he urged. “If you wait three, four or five years until everything is mature, the catch-up will be too big.”

He also encouraged them to take a holistic approach. “People who want to invest in [energy storage] infrastructure, here you get the hardware, the software, the trading techniques,” Segalen said, referring to Siemens’ energy storage subsidiary Fluence acquiring AMS Software.

There are a lot of other insights that were shared during this info-packed session, which we urge you to watch (or revisit) here.

Grapevine

“Something in our model just broke because we didn’t anticipate negative prices”

Conquest’s Frederic Palanque on the challenges posed by negative power prices

Talking points

Time is on listed infra’s side
From privatisations to recent calls to embrace the IFM Investors model, Australia has often laid out the infrastructure path for others to follow. And once again, that seems to be the case for LPs allocating to listed infrastructure.

Or at least that’s the belief of David Bentley, partner at Atlas Infrastructure, the listed manager backed by partners at GIP, when asked to assess why Australian investors are also ahead on this particular curve.

“Mid-tier European pensions have had infrastructure as an allocation for the best part of five years,” he said. “You allocate to infrastructure, build a private markets portfolio, realise it’s quite challenging to deploy and then wonder how to fill the gaps. The listed infrastructure market becomes one of the obvious options that can attend to those needs. It’s almost a matter of time before people realise.”

Time and a bit of education, according to Peter Hobbs, managing director at bfinance, who added that pensions in some countries “have a view that because it’s listed, it can’t be in our [infrastructure] allocation”.

Co-invest your way to better ESG outcomes
Investor interest in co-investment opportunities is another trend in infrastructure that the pandemic has accelerated, attendees heard yesterday.

“Our portfolio target is 50 percent funds, 50 percent co-investments,” Howard Stern, managing director for infrastructure finance at Northwestern Mutual Capital, told the audience. “But if the ratio was 90 percent co-investments, I don’t think anyone on the investment team would mind.”

”What’s driving the interest? Primarily the capability to actively manage assets in an increasingly complex world,” added Jerry Divoky, vice-president of infrastructure and renewable resources at the British Columbia Investment Management Corporation.

And in 2020, one of the key benefits of actively managing investments is aligning ESG mandates, he said. “We can have active roles being good stewards and pursuing our clients’ ESG priorities,” he added.

A tale of two digital regulatory regimes
Regulating the fast-growing digital infrastructure landscape has created a tale of two markets, panellists described yesterday.

The UK, for example, has a single dominant broadband provider, along with a “vibrant community” of start-up companies vying for digital infrastructure market share, according to Simon Wilde, a senior financial advisor at UK watchdog Ofgem.

To create that community, price regulation is a “last resort”, Wilde explained, with the default position being to encourage price competition, “the first best solution”.

“Only if we think there is a clear natural monopoly do we move as a regulator,” he added.

It’s a different story in Israel, Darren Glatt, a partner at Searchlight Capital Partners, told attendees. Despite Israel being at the forefront of developing technology, the country’s internet infrastructure and fibre penetration is comparable to third-world standards, Glatt said.

“Why? The single reason is regulation. The regulator wanted to create an equal playing field in the market,” he explained.

No wonder regulation continues to be front of mind for most infrastructure investors.

What’s next

Europe’s largest diversity event focused on private markets is going virtual in November. Join the industry at this crucial time to hear how private markets are faring in the current downturn, what industry leaders are doing to address diversity, raising funds remotely, investor perspectives and much more.

This year’s Women in Infrastructure Forum will again be co-located with the Women in Private Equity, Women in Real Estate and Women in Private Debt Forums. All registered attendees will have access to the four forums allowing you to build your network across alternative asset classes.

For more information, click here.

Today’s letter was prepared by Bruno Alves. Zak Bentley, Kalliope Gourntis and Jordan Stutts also contributed

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