Registration and networking breakfast
Money managers raised record amounts of capital for investment in infrastructure over the last year before a macro-driven slowdown in fundraising in 2H22. The North American infrastructure and energy markets in 2022 increased 10% YoY in investments value, showing robust dealmaking figures despite global economic uncertainties. Deal value in the US and Canada reached USD 346 bn in 2022 - about 10% less than Europe, where USD 382bn in transactions closed. That was a narrower gap than in 2021, when North America deal activity by value lagged Europe by 24%. M&A deals took the spotlight, accounting for USD 150bn of the total market share, according to Infralogic.
This panel will take a broad look at the landscape for infrastructure investing as funds seek to deploy capital in a competitive and macro-economically fraught environment.
- What does the M&A pipeline hold for investors over the next 12 months?
- What are some of the market high points, and what are areas to steer clear from? Where are current valuation benchmarks?
- How are investors handling the increased cost of acquisition financing? What type of assets can be levered in this environment?
Power, energy, and renewables continue to be areas of extremely high interest for infrastructure investors. But the sector has been on a roller coaster ride over the last year, starting with the debilitating impact of Russia’s war in Ukraine and the US Commerce Department’s solar panel investigation and ending with the passage of the Inflation Reduction Act, a highly celebrated piece of climate legislation.
The energy sector has been the one moving more money in 2022 in North America, with 150+ deals accounting for over USD 105bn. Despite a YoY decrease, LNG projects keep attracting major investments and grasped attention from infrastructure funds.
- Where are the most interesting opportunities for investment in the power and renewables sector, given the macroeconomic backdrop?
- What is the impact of the broader move to energy security following the Ukraine war? What does this mean for infra investors?
- What are investors looking for in these assets?
- How has the regulatory environment impacted investment opportunities?
Morning refreshments and networking break
Digging further into renewables, the M&A market remained hot for the sector for much of 2022. Infrastructure funds and well-capitalized strategics are squaring off in a quest for high-quality renewables assets, keeping valuations high even as they contend with supply chain constraints and higher interest rates. Project finance in the renewables sector decreased in 2022, especially for bond financing. However, more money has been flowing into greenfield financing, where investors found more opportunities in the past year. The top-performing subsector was Solar PV, carried by large transactions such as Gemini Solar + Storage in Nevada, Arica Solar + Storage in California, and Texas Solar Nova 1 and 2 projects.
- How have supply chain issues hampered prospects for investment in renewables?
- Will the Inflation Reduction Act accelerate investment flows into US renewables?
- Has the higher cost of capital from higher interest rates created winners and losers in renewables investment?
- How can returns be made given the unparalleled energy volatility?
Bucking the broader slowdown in dealmaking, fiber-optic and data center assets continued to trade at a healthy pace in 2022. Yet, headwinds remain with the threat of recession and elevated construction costs impacting earnings. In a tougher operating environment, investors are taking a more creative approach to the types of digital assets they buy and develop.
Dealmaking volumes in the digital infrastructure sphere keep growing, highlighting the need for more connectivity across the region. Interesting figures in the data center subsectors show how in 2022 the number of deals have decreased compared to the previous year, but their value has more than doubled. The result is less-but-larger deals.
- What are the pros and cons between acquiring an existing fiber-optics operator or building one from scratch
- How are investors positioning data center assets for growth under a commodity like market structure in North America
- How do capital market and bank lender players view the communications infrastructure sector over the next 12 months?
- What do investors look for in operator management teams when vetting buying opportunities?
Transportation businesses were hot commodities in the first half of 2022 as buyers looked to acquire assets connected to changes in shipping and travel brought about by the COVID-19 pandemic. But as activity starts to return an “old” normal, some funds are taking a more cautious approach to investing in the sector. This panel will examine opportunities in a world facing a potential shipping recession.
Carried by multi-billion dollars deals such as JFK New Terminal One, JFK Terminal 6 redevelopment, Maryland Purple Line, and Pennsylvania Major Bridges program, the transportation sector attracted investments for almost USD 45bn in US and Canada last year. If greenfield financing was the hot market, the same cannot be said by looking at transport’s M&A figures, that decreased heavily YoY. However, a strong and diverse pipeline with 100+ M&A transactions at early stage give more confidence to investors.
- Will ocean carriers continue to dominate auctions for port assets or could a slow down in shipping activity provide an opening to infrastructure funds?
- Is there still room to run in the race to consolidate fixed base operators at airports?
- Several transport assets on the block in 2022 did not find buyers. What concessions do sellers need to make to reach deals in 2023?
- What transportation assets can investors buy with an ESG angle?
Infrastructure and energy issuers did not escape a global surge in interest rates over the past year. Debt financing has become more expensive and less available as lenders become much more selective on what deals they will finance. Big deals are still getting done, though, as shown with Brookfield’s USD 14bn term loan financing for a joint venture with Intel.
Volumes in the bonds market have been the lowest of the past five years, marking a visible trend. In the loan market, on the other hand, dealmaking values have increased heavily, despite a lower amount of transactions. Lenders are therefore looking into new forms of funding. In the US renewable space, for example, it’s clear how tax equity bridge loans figures are tremendously on the rise – as well as tax equity financing - and becoming part of the funding packages for greenfield projects.
- How are investors securing debt financing in a much tighter market?
- What leverage multiples are available for M&A deals? Will the bank market reopen?
- 2022 saw a few notable bankruptcies, including Talen Energy and Compute North. Are more restructurings in store for 2023?
Afternoon refreshments and networking break
Fundraising globally by infrastructure funds slowed dramatically in the third quarter of 2022, falling to just USD 12bn, according to Infralogic data. The drop off followed record fundraising in the first half of the year when USD 122bn was raised. The abrupt halt raises the question of whether the market is simply taking a breather or if fund managers need to prepare for a much tougher environment in 2023.
Total annual capital raised at final close reached a new record of USD 148.75bn accumulated by 59 infrastructure, renewables and energy transition funds in 2022 globally, beating the last record of USD 103bn raised by 54 funds in 2021. GPs and funds have been once again the main investors in the US and Canadian markets in 2022, by a larger margin than the previous year.
- What types of funds are LPs galivanting towards?
- How are LPs looking at energy funds compared to more general infrastructure funds?
- How much of an impact does the so-called denominator effect have on fundraising? Are some LPs willing to exceed allocation caps?
- Several GPs executed secondary deals in 2022 to hold onto assets longer. Are LPs open to more GP-led secondary transactions?
- Are there any openings for new GPs to raise inaugural funds?
Close of conference and cocktail reception
YPI (Young Professionals in Infrastructure) Networking Reception
Join YPI after our forum cocktail for a fun night of networking. This happy hour will take place on April 27th from 6pm at Cassidy's Pub (65 W 55th St, New York, NY 10019).
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