With Laurent's segal and from London and Gerard read from Berlin, this is redefining energy minutes Lauran, where'd you get that funny music from? Do we not have nice bonging bells beforehand? It's because of my wife Sandra. She's doing the text. And then after a while I had put specially in Pumpkins behind and said, Ahna, I don't like this, so she gave me that all songs of the late seventies and in School Driver's Seat by Sniff and the
Tears. I think it's much better, and I can't criticize because she is doing the text. Not so lam you turn this week number a week? What is it? Twenty eight billion dollar? That could be the market cap of a company that could give me at least a clue of that is infrastructure. Oh, that must be somebody's infrastructure fond or something like that. Some exactly exactly it's from who is it? Brookfield? Yeah, the Kings, the Kings of infrastructure, right, and it's the mammoth fund that they're raised
into twenty three it's called the Brookfield number five. And guess what it is? Half of all the money raised in infrastructure into twenty three. Amazing, amazing. It's really a paradox that the year where you have the biggest ever fund raised, it's the raised are at the lowest in seven or eight years. If you look at years like twenty to twenty one, they were above one hundred billion raised for infrastructure, and the peak was one hundred and fifty
billion into twenty one. And that's compared to thirty billion into twelve. So the industry had incredible drive during the last decade, but last year was a bit of a disaster. Ah. Now, you just picked that number deliberately because you knew we were going to talk about infrastructure today, right, and that's your speciality. I do have lots of questions for you actually actually start with that. Why do you think that happened? Is just because the interest
rates have gone up at this point in time? That is that what's driving that? Or is there something? Is there something I'm missing? Yeah, so I think interest rates are a huge factor. Now, let's face it, when we talk about infrastructure investing, it's not just renewables. We're talking about energy in general, oil pipelines, but all supports, airports, motorways. I mean, this is everything that's big, and there's not enough public
money to finance all the needed infrastructure. So that's why got some funds or really big specialized infrastructure investing. And we're going to talk about the phenomenon which is happening right now, which is a consolidation of the sector. But if we put a bit of the number in perspective, you know, last week we talked about clintech and in clin tech, if you have one billion clint tech fund, wow, you're the biggest in the room. Whereas here the
tickets are twenty billion, fifty billion, one hundred billions. So it's a totally different magnitude compared to the VC universe. Of course, and liesten, let's be really clear, if we talk about renewables in this area that we're in, it's a critical part of it because at the end of the day, all the financing is coming from you know whatever, ten fifteen percent equity and the rest is debt. So these funds are really really great. And
can I ask these equity funds or dead funds are mixes? Yeah, it's not very clear because some people report just equity, but generally those very big asset managers. We're going to talk about. They have a mix, so they do both equity and that. But yeah, of course it's started as equity and you have dead funds, but it's it's mostly in the US. In Europe you still have banks doing the financing, but apparently it's coming to Europe as well. Anyway, I'm going to make it very simple. It's
probably over simplified, but that's going to give you an idea. Let's go back, say four or five years ago. You have government bonds would deliver you one percent interest rate, and let's say you have an infrastat project of say one hundred million, would delivers four percent. You would put fifty percent
of debt at two percent, so the equity would deliver six percent. Okay, you know four percent for the total, two percent for the dead, six percent for the equity, which was five hundred business point above government bond. Okay. Now government bonds are at five percent, yeah, five percent, so then what happens The cost of your debt is probably at six so
you will ask equity to deliver ten percent. And by the way, Macquarie just closed the funder this week and they say we'll deliver double digit returns, which mean that your project of one hundred million, who used to be a built to deliver four percent, now needs to deliver eight percent. So basically you need to double the economic performance of the project, which is difficult.
That it very simplictly explain what's going on in the infrastructure world. Can I take this a little bit back to renewables, because okay, what you're saying
is the cost of capital is basically double. So if we take an offshore win project, on shore wind projects solar, I'm going to add another thing to it, which is I would see this a lot of risk increasing in and around those projects, risks of just you know, deliveries don't happen, that you don't get a feed entra for a government grant more and also capture
price risk. So you would expect then that actually the cost the capital for rens go even higher, which is not good for renewable built dot com forward. Yeah, it means people have less money to invest in a moment where the price of goods has been eat by inflation. So there's a bit of a squeeze here. There's a bit of a squeeze here, and at the same time we've got stock markets hitting all time highs. It's listen. Can I ask another thing, which is it is? It's an interesting thing.
We had a brief conversation about this recently, and I think it's important to dig into it, which is what you're saying is significant consolidation in and around infrastructure films. Right, I think I seen black Rock going to the market. Aquila, whose sponsors our podcast being Bock on commerce Bank, tell me why you think that's happening. As you know, consididation tends to open at
the bottom of the cycle, and you're right. The big news was black Rock, as everybody knows, is the world's biggest asset manager with ten trillion. I mean ten trillion. It's like half of the usg it's mad. But their infrastructure bucket is only fifty billion, which looks enormous, but it's like zero point five percent of the asset they manage. So they bought Global Infrastucture Partner, which was an independent infrastructure investor who was managing one hundred billion.
So now Combine is one hundred and fifty. You almost reach Macquarie, who is number one. And the very interesting thing is if the black Rock guys gave the key to the Global infrastructure partner's guy, so they're going to run the combined division. And all of a sudden and Valentine Andrews, who was global head of Infrastructure and Allaysted in black Rock, has resigned because she has a new boss and apparently it's a bit tough for her. Right.
Do you see this consolidation then continuing, yeah, yeah, we saw General Atlantic buying Actists. So Actiss twelve billion a UM, as you said,
Aquila seventy five percent is going to be acquired by Commerce Bank. And if you look back the past two years, were the Shroders buying Greencoat green Coat at ten billion under management, a CVC acquiring Deef sixteen billion under management, Searchlight Capital buying Gresham House same ten billion under management, New Veen buying Glenmont and Aartmond and so all those mid size asset manager and those people are very
successful, their technical, great teams, but the moment they reached this ten to twenty billion zone, they become very interesting targets for much bigger guys and much more diversified. It's almost impossible to create an infrastruture business out of thin air, like it was the case fifteen years ago. The amount of infrastructure infrastructure you need in order to run infrastuctual funds, financial, technical, legal, you need to buy those companies. You just count hire two or three
guys and you think you got it. It also shows you the power of these huge financial institutions, right, the financial asset manners. At the end of the day. The reason they're buying these businesses because they believe, hey, listen, we've got the capabilities to ramp that business up even quicker and
more assets under management. So that which of course is very good for we're talking about here, which is the whole clean energy space which needs increasing amounts of capital going forward if we are to move towards a net zero world. Right, it's excellent. And I can even give you the name of funds which are perfect targets. So you know they've been managed for the past ten fifteen years by independent teams and I guess those guys want to catch out,
which is fair. So you know Copenhagun Infrastual Partners twenty five billion dollar management, very good team in honorable win Ontime Partners. Those are very up just target and I'm sure there are a lot of discussion happening already and acquire us can be the Blackstone who already manage forty billion in infrastructure EQT same managing forty billion. So yeah, it's pretty obvious that this movement is going to continue. Just my friend, very good. God for well, I've learned something
new today from you, Thank you very much. But we will discuss that together in Berlin during the PEI conference end of March. I think the twenty or twenty first of March. Infrastructure so much, isn't it. Yeah, yeah, yeah, yeah yeah. I will put the link in the show notes. That's for those who don't know. That's where the infrastructure fund managers meet their investors. Actually, what it's about. Lots of very good contact content and good people there. Looking forward to Okay, Joe, I'll talk
to you next week, look forward. Thank you for listening to Redefining Energy. Don't forget to rate the show and subscribe on Apple Podcast, Spotify, or the platform of your choice