Data on the Data
Episode 7: Infrastructure's big investment opportunities
In this week’s episode of Data on the Data, Refinitiv’s David Craig and Darrenth Hawken discuss the key investment trends within the infrastructure space and how these trends can be followed on Refinitiv’s Infrastructure 360 App. Darrenth outlines the need to be able to access and analyze the data in a sector that has historically been hard to follow. Infrastructure investment is a megatrend that will become an increasingly important destination for investment capital in the coming years.
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Roger [00:00:06] The recovery from the pandemic is being led by a combination of fiscal and monetary support, which in the U.S. alone is running into the many trillions of dollars. Fiscal support has prevented a wave of bankruptcies that followed previous recessions, and households have been seeing a record build-up in their savings. While some of this could go towards repairing balance sheets, this also represents significant pent-up demand that could support an extended period of above average spending. And a significant factor in all of this is going to be a massive investment in infrastructure as governments seek to kick start their recoveries and create jobs. And we're clearly seeing this rising interest in the surging demand for Refinitiv infrastructure data where there's been a bias towards renewable power projects. Refinitiv's David Craig and Darrenth Hawken discuss the opportunities for investors in this sector.
David [00:00:53] Darrenth, just how big is this trend, and is it truly global?
Darrenth [00:00:57] Thanks for having me, David. Yes, I think it is. The two trillion dollar plan that the Biden administration announced has definitely bought project finance into focus. But the market has been expanding for a number of years now. Most people feel that the Belt and Road initiative was that first global scale. But in many markets, such as Australia, infrastructure and private finance participation in that market has gone on for years. Recently in the United Kingdom and Taiwan, we've seen major expansions of the offshore wind power markets, and South Korea and Japan have also launched even bigger plans in the last nine months. The pace of announcements has continued, with Saudi Arabia announcing a three gigawatt solar farm.
David [00:01:44] It is that why there's so much excitement about this huge wave of infrastructure projects? Infrastructure isn't new, we've been tracking it for 30 years, but what's really causing that right now?
Darrenth [00:01:56] I think right now we're seeing a confluence of issues to the market. I think political will, we're definitely seeing a theme from most governments, 'build it back better', we're seeing obviously alongside the Biden administration and Belt and Road, the European Union and India recently announced a plan to invest in infrastructure also. I think climate change and the Paris Accord is also driving a lot of what we are seeing in infrastructure with a view to cutting CO2 emissions. I also think the economic impact of the Covid virus and the subsequent requirement of governments to reinflate their economy as another driving force. And then also, and most importantly, investor demand for these type of assets. We need long-dated structured assets with a stable cash flow for financing our pension needs as a population and these assets seem to suggest that.
David [00:02:53] One concern I hear time and time again, actually, even the F.T. reported on this, is investors are worried that they can actually tap into this infrastructure opportunity. They struggle to find projects that they say are investable. Why is it so difficult for investors to take advantage?
Darrenth [00:03:10] Yes, I mean, the asset class is definitely opaque. And for private investors to become part of this market, they always need some main pillars, liquidity, obviously being one, transparency and for this market, political stability is also a real need. We also need to keep in mind that these investments are definitely unlisted and bespoke and there are many, many different levels of risk within a project's lifecycle. Most projects will last for around 25 years and you have a very different level of risk vis-a-vis the long dated operation of the project versus the construction risk side.
David [00:03:53] Interesting, and Darrenth you've been putting a lot of time into a very unique solution to all of this for investors. Could you explain a little bit about that?
Darrenth [00:04:02] Yeah, we have indeed. The solution that we've launched really brings together a detailed view of the infrastructure project markets. We are combining ownership data with financing information and real-time news on market developments and sentiment within the space. With over 25 years and 55,000 projects within that historical view, we can offer users a global view of the market that they find investable from their institutions needs.
David [00:04:33] You've been working in infrastructure for many years, but what's happening right now that really excites you in this space?
Darrenth [00:04:41] So I think there's a lot to be excited about at the moment. I think first and foremost, much of the work we're seeing in infrastructure is around power generation, and that will have direct climate positivity impact. And so I guess saving the planet. I don't think there's many things in finance nowadays where you can get to such a great story. But banks and funds more and more are targeting that space. But I also think innovation, both at a financial level, this market is very opaque and it does need to come into the light. We at Refinitiv have a great experience of bringing that transparency, that workflow, that process, both at the origination of a project and through that long-tail portfolio process. But then also at a personal level, I find the technology that's being developed around this market very interesting. The ability of battery storage is probably the next potential that markets are tapping into. And the idea that a battery could drive a city's electrical consumption is pretty, pretty crazy to me.
Roger [00:05:45] For investors, there's nothing worse than missing investment opportunities because you simply can't get the information or the data to make an informed decision. Refinitiv's new Infrastructure 360 App gives investors bespoke access to thousands of projects which can be analyzed by region, by sector, by size, and in fact, by many other different criteria. Investors can drill down to deal sheets on individual projects or zoom out to study country specific risks that are key inputs when evaluating projects. The 360 App is therefore a one-stop shop for data that provides the transparency that investors need to make informed decisions on a sector which has historically been relatively hard to analyze.