different regulatory frameworks to consider. Financing situa- tions are also broad. You associate infrastructure with project finance, with new assets, but pension funds want yield on day one. There is, therefore, a lot of refinancing and acquisition finance we extend for assets in operation.
An important point is that you can have various horizons in terms of the tenor of the debt. Equally, you can be at different levels of the capital structure from senior investment-grade debt to BB-rated junior debt, whilst still bringing strong resil- ient infrastructure assets to our investors. There is, therefore, significant diversification in this asset class.
Michael, in the conversations you are having, what do institu- tional investors want from this asset class? Michael Ebner: Inflation linkage, long-term exposure and impact investments, which is why we concentrate on the energy tran- sition. Investors have been used to secure structures, to feed-in
tariffs and regulated assets, but this world has gone, especially in the renewable space. Infrastructure investors now have to take some merchant risk.
Of course, you can hedge your exposure by contracting your generation, but there is a shift in the infrastructure sector from a conservative inflation-linked exposure to a more merchant exposure. That makes sense, given the turmoil we are seeing in the industry. We have seen problems in the equity and fixed interest mar- kets, but infrastructure has been stable. That’s especially true for renewable energy, where we are seeing higher valuations compared to pre-crisis levels as a result of it serving the pub- lic’s needs and rising energy prices. We can answer concerns from investors by showing that investments in renewables have proven strong in a regulated case 10 years ago, in a secure environment five years ago and during a crisis in the last three years.
December – January 2023 portfolio institutional roundtable: Infrastructure 9
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