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The Impact of Unbundling

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Howard Higgins presents at the Vienna Forum on European Energy Law, 2013

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The Impact of Unbundling

  1. 1. MACQUARIE INFRASTRUCTURE AND REAL ASSETS The impact of unbundling – who can invest in what in the future 8 March 2013- Howard Higgins
  2. 2. STRICTLY CONFIDENTIAL 2 Macquarie, The global leader in infrastructure with €78bn of assets under management South Africa  N3 Toll Concessions  Bakwena Platinum Corridor  Trans African Concessions  Neotel  Kelvin Power Station Nigeria  Lekki Concession Company USA  Dulles Greenway  Indiana Toll Road  Chicago Skyway  Icon Parking  Total Terminals International  Smarte Carte  Penn Terminals  Airport Services (fixed base operations)  Waste Industries  Global Tower Partners  Aquarion Company  Broadrock Renewables  Puget Energy  District Energy  Duquesne Light  The Gas Company  Bulk Liquid Storage Terminal Business Canada  Edmonton Ring Road  A-25  AltaLink  Cardinal (power station)  Whitecourt (biomass facility)  Chapais (biomass facility)  Erie Shores Wind Farm  Hydro Power Business  Halterm Limited (port)  Fraser Surrey Docks UK  M6 Toll  Bristol Airport  Wales & West Utilities  Thames Water  Combined Landfill Projects Envirogas  Energy Power Resources  Arqiva  Airwave  Condor Group (ferry services)  National Car Parks  Wightlink (ferry services) Belgium  Brussels Airport Denmark  Copenhagen Airports) China  Changshu Xinghua Port  Hua Nan Expressway Taiwan  Miaoli Windpower France  Autoroutes Paris- Rhin-Rhône  Trois Sources & Lomont Windfarms  Compteurs Farnier (water metering)  EPR France (wind farm)  RES (wind farm)  Pisto SAS (oil storage and distribution)Germany  Warnow Tunnel  GWE (heat & power)  Techem (submetering)  Thyssengas  TanQuid (tank storage business) Poland  DCT Gdansk (container terminal) Spain  Asset Energia Solar  Solpex Energia Solar Sweden  EPR Sweden (wind farm)  District Heating operation  Arlanda Express Japan  Hanjin Pacific Corporation (Tokyo, Osaka) Australia  Dampier to Bunbury Natural Gas Pipeline  Multinet Gas Holdings  United Energy Distribution  AlintaGas Networks  Hobart International Airport United Arab Emirates  Al Ain Industrial City  Industrial City of Abu Dhabi  ICAD Effluent Treatment Plant Represents businesses and assets which Macquarie Infrastructure and Real Assets manages on behalf of investors with various direct percentage stakes held in each. Mexico Decarred (highways) South Korea  Baekyang Tunnel  Cheonan-Nonsan Expressway  Incheon International Airport Expressway  Gwangju 2nd Beltway Section 1 & 3-1  Machang Bridge  Soojungsan Tunnel  Daegu 4th Beltway East  Incheon Grand Bridge  Seoul Chuncheon Expressway  Woomyunsan Tunnel  Yongin-Seoul Expressway  C&M  West Sea Power/West Sea Water  Hanjin Pacific Corporation (ports)  Busan New Port Phase 2-3  Seoul Subway Line 9, Section 1  North East Chemical  Roads  Airports  Utilities  Communications  Other Transportation  Other MIRA manages 95 infrastructure businesses in 23 countries India  Viom Networks  Adhunik Power and Natural Resources  MB Power Czech Republic  CRa Russia  Brunswick Rail
  3. 3. STRICTLY CONFIDENTIAL The Infrastructure Investment Challenge  Over the last 18 years $36 trillion was invested globally in infrastructure.  Over the next 18 years OECD estimate the required investment will be $67 trillion (asset investments to GDP ratio of 70%)  This excludes social infrastructure – schools, hospitals & housing, and does not address backlogs on the renewal of aging assets. —Constrained public sector budgets —Balance sheet pressures for most major strategic investors —Material reduction in the availability of commercial debt 3 The Global economies face unprecedented challenges to fund infrastructure investments So what’s changed?
  4. 4. STRICTLY CONFIDENTIAL Sources of Infrastructure Funding  Governments are looking to pension funds for the future funding of infrastructure investment.  The OECD estimate pension funds are holding US $65 trillion of assets  But <5% will be allocated to “alternatives” which includes infrastructure  Very few Pension Funds invest directly. They use fund managers  Competence and origin of the investor continues to be a concern.  Investment capital is mobile and will migrate to geographies where the risk/return balance is optimised  Green field or investments with high capex requirements are generally unattractive because of yield requirements  The lack of liquidity is a major concern for many investors. 4 Where will the funding come from? Is European energy infrastructure investment attractive?
  5. 5. STRICTLY CONFIDENTIAL Conclusions – What can Macquarie invest in?  Overall we see unbundling as a very positive development and we will continue to deploy capital – assuming we can achieve our target returns  Political and regulatory stability and transparency is a key consideration.  The way the law has been drafted may unintentionally prevent the Macquarie from investing  The law needs to recognise there is a fundamental difference between the governance arrangements and strategic intent of a strategic v fund manager Fund managers are either separate or “ring fenced” within their parent organisations Fund investments are discrete and don't seek synergies or economies of scale across assets Large investments are normally consortium based Any related party transactions are subject to oversight by investors 5

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