Wednesday 10th April 2019
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Infratil is looking to replicate its investment in US-based renewable energy developer Longroad in Europe, chief commercial officer Jason Boyes told the company's investor day.
Infratil has had a “reasonably chequered” past in offshore investment, particularly with its unfortunate experiments of investing in airports in Europe, Boyes acknowledged.
“It's non-trivial for a New Zealand-based company to execute with assets on the other side of the world,” he said. “You can't be flying in and flying out doing this stuff.”
But Infratil has learned along the way and now the infrastructure investor is looking at the opportunities of using the skills it has built up through investments in Longroad as well as other renewables projects through 65.3 percent-owned Tilt Renewables and 51-percent owned Trustpower, Boyes said.
One of the things Infratil has learned is that it needs a strong local and aligned management team to work with, which will be a requirement for any other offshore investments.
A big advantage with Longroad was that Infratil could start with a small investment and both the Infratil and Longroad teams were able to build confidence as the investment level grew.
Europe “ticks a lot of boxes,” particularly tailwind forecasts which, if anything, look even stronger than in the US.
In late 2018, Markit forecast Europe needs 140 gigawatts of renewables to be built by 2021 compared with 75 gigawatts in the US.
Government support mechanisms, including feed-in tariff and similar mechanisms, are rolling off and that's creating complexity and challenging under-capitalised developers, Boyes said.
He says that's an opportunity for Infratil, which has backed the Longroad team with capital, in conjunction with the New Zealand Superannuation Fund, and so has a track record to point to.
Earlier, chief financial officer Phillippa Harford, told investors Infratil, with gearing at 34 percent at March 31, has $458 million in funds available to invest.
That doesn't include the expected A$162 million proceeds from selling Infratil's interest in Canberra student accommodation which is expected to flow in this month.
Infratil has invested $154 million since it began investing in Longroad and has received $152 million of that capital back and its share of Longroad was worth $128 million at March 31.
Boyes says Infratil still has a lot of opportunity available in the US through Longroad, despite President Donald Trump's refusal to acknowledge climate change. The opposition to reducing carbon emissions at the federal level has resulted in the individual states becoming more encouraging of the development of renewables.
However, there's no question the European Union is providing more regulatory support.
“We think the Longroad structure will suit us,” Boyes said, although he says Infratil probably won't get as lucky with timing as it did in the US so development in Europe is likely to be a lot slower.
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