[Interview] IFM Investors eyes Europe’s energy projects, debt refinancing

Energy projects and debt refinancing and secondary market deals are expected to create new investment opportunities in Europe, said an executive of Australia-based infrastructure investment company IFM Investors.

To meet the long-term 2050 greenhouse gas reductions target, the European Union is encouraging private investment in new pipelines, electricity networks and low-carbon technology such as solar and wind power generation.

“That (decarbonization) agenda is also creating opportunities in other sectors including electricity grid improvements, interconnectors, energy storage and wider green initiatives intended to reduce energy demand. … we expect it to continue to provide good investment opportunities over the foreseeable future,” David Cooper, regional head of EMEA at IFM Investors, said in a recent written interview with the Korean Investors.

He is responsible for infrastructure debt investments.

“In these markets not only are there opportunities to fund new projects, but arguably even greater opportunities to refinance existing debt and purchase existing debt and equity exposure via the secondary market,” he said, without elaborating further.

Cooper expects that demand for high-quality infrastructure will rise in most of Europe with high incomes, adding that he is looking for key transport links and other infrastructure assets which tend to have higher recovery rates on defaulted loans.

IFM Investors has about A$103 billion assets under management. Its global infrastructure debt portfolio stood at $4.6 billion as of end-May 2018, compared with $27 billion of its global infrastructure equity investments.

KOREAN MONEY IN BRITAIN

Among European countries, a low regulatory barrier and a large pool of investible assets in Britain are likely to continue to attract South Korean institutional investors in search of stable yields over the long term, Cooper said.

South Korean institutional investors led by the National Pension Service had poured about $1.3 billion into key UK infrastructure facilities between 2017 and early 2018.

Their investments include equity stakes in the UK’s only high-speed rail line, High Speed 1; the operator of London Orbital Motorway, the M25; and the gas distribution networks of National Grid Plc.

“With Brexit around the corner the UK is obviously very focused on attracting non-UK investors into infrastructure on both the debt and equity side. As such the depth and volume of support that Korean investors are able to bring to deals is particularly valued,” he noted.

“The UK is arguably the most open and …. also provides a large pool of investible opportunities that other markets do not currently provide. … For now the UK is, I suspect, just an intrinsically easier place to invest.”

South Korean pension funds and insurance companies are stepping up project-based investments in the UK, supported by loosened domestic regulations such as lowered loss reserves required for insurers’ infrastructure investment in developed countries.

Attractive valuations and the pound’s decline since the 2016 Brexit decision also have been behind their aggressive investments in landmark office buildings in London.

IFM Investors has recently executed investments for the $140 million global infrastructure debt fund, the first in the series launched for South Korean institutional investors.

The fund was raised jointly with KDB Infrastructure Investments Asset Management Co. Ltd., part of a state-run South Korean bank, in December 2016.

It is preparing to launch its second fund of the global infrastructure debt fund series for South Korean institutional investors.

It opened its Seoul office in November 2017.

daepun@hankyung.com