2 July 2017
In this quarter’s newsletter, we: • comment on the Commonwealth Government’s bank tax announced as part of the budget; • reflect on the opportunities for impact investing through a fixed income lens; and • take an in-depth look at PPP financing through the cycle.
2 April 2017
It’s been a fairly calm quarter in markets (debt and equity) despite ongoing macro uncertainty (Trump, Brexit, US interest rate normalisation). Domestically within infrastructure, energy has dominated the headlines with concerns relating to existing and future policy, renewable targets relative to generation mix. Hazelwood – Australia’s oldest brown coal generation facility commenced shutdown, but at the same time a raft of new energy projects were announced including large scale storage. This month we have three separate and unrelated articles. The first looks at traditional infrastructure lending and the term anomaly available to non-bank institutional investors. The second, provides a brief introduction to a new infrastructure subsector – specialty disability accommodation. The last, builds on the recently announced Snowy Hydro 2.0 pumped hydro storage and looks at generation risk in this new storage environment. Staying with electricity, we finish off with a chart showing the impact of solar on load profiles with an 11 year look-back.
25 December 2016
In writing this introduction it feels like a lot has happened in such a short time. Despite commentators calling for economic armageddon upon a Trump victory, markets rallied. In the days to follow the ‘Trump Reflation’ trade would begin, with the Dow and S&P500 reaching all time highs. For bonds rates, the sell-off has been spectacular – the Aussie 10 year has moved almost 100 bps from 1 October to 16 December. Not even the outcome of the Italian referendum could dent enthusiasm – Deutsche Bank equity has rallied over 60%, despite no significant change in its underlying fundamentals – It’s Christmas and all is well! This quarter has seen a lot of infrastructure transactions in both the debt and equity space. In this quarter’s newsletter we have two articles, the first picks up on the recent moves in base rates and considers the relative sensitives across different infrastructure sub-sectors. The second article looks at asset allocation within Member Investment Choice (MIC) options with a particular focus on conservative options. We’d like to thank all the people that have contributed to the many topics we’ve covered this year – we certainly value and appreciate all views, and to those people who proofed particular topics we’d like to extend an extra big thanks! From the team here at Infradebt, we wish all of you a merry Christmas and a safe, relaxing break ¬ enjoy the good times that this time of year brings!
1 October 2016
Relative to the last two quarters markets have been more subdued. As Ben Hunt (of Epsilon Theory fame) aptly called it, Brexit was more of a Bear Stearns moment rather than a Lehman moment (after the initial shock, markets recovered very quickly), and as we ‘go to print’ Deutsche Bank is creating lots of noise (potentially a Lehman’s moment) and affecting debt markets in subtle, and not so subtle (e.g. Deutsche CDS) ways. The first article of this newsletter looks at the low volatility anomaly, which, whilst not directly related to infrastructure, is highly relevant to the asset class. The second article takes a look at disruption within the electricity sector, and the third provides a contemporary recap of the ports sector over the prior years.
2 July 2016
Costco and Brexit – what a month! The second point you’ll understand, the first however will likely seem strange. See article 1 and all will be explained. On Brexit we won’t try and repeat the reams of analysis that has been circulated before and after last week’s historic vote. In short, our view is that Europe (including the UK) will face a significant overhang of uncertainty over the next couple of years, with the more significant challenges relating to the sustainability of the Euro currency area, rather than the intricacies of the UK exit from the EU and the negotiation of new trade/immigration arrangements. It’s been a challenging year for funds with returns well down on prior years, that said the continued fall in base rates will have helped the performance of each funds’ infrastructure positions. As we’re presently running a winter series, which has a broader fixed income narrative, we’ve kept this quarter’s articles specific to infrastructure debt– one piece looks at the underlying credit quality of infrastructure projects from a debt perspective, the second considers the impact of low base rates on infrastructure equity positions. The only exception to the infrastructure theme is the first short article relating to Costco (the wholesale supermarket chain) which we thought was fascinating and not reported in more mainstream publications.
17 December 2015
Another year draws to a close and at the time of writing markets would appear to getting ‘twitchy’. Still, hopefully any ensuing turmoil will either hold off for the festive season or not be too troublesome. This quarter’s newsletter has a ‘green’ theme as we discuss the outcomes of COP21 and the race to become the world’s first ‘carbon neutral city’ (72% of all carbon emissions emanate from cities) – for infrastructure investors the focus on change, renewal and new technologies gives rise to new investment opportunities (both debt and equity). We also take a look at credit markets more generally with the most recent high yield turmoil and consider some of the implications of rising interest rates for infrastructure assets. From the team here at Infradebt, we wish all of you a merry Christmas and a safe, relaxing break ¬ enjoy the good times that this time of year brings!
30 September 2015
The past three months have seen a sharp shift in credit market conditions – with spreads moving wider in most markets on concerns about the economic outlook. In addition, to our regular features on market conditions and infrastructure transactions – the articles in this quarter’s newsletter looks at developments in the ports sector, the predictive capacity of credit spreads, and China’s progress on rebalancing its economy.
30 June 2015
Another financial year comes to an end! The NSW Government has now passed legislation for the sale of the State’s Transmission and Distribution (Poles and Wires) businesses. With the decision of the Victorian government to delay the sale of the Port of Melbourne until Q1 2016, TransGrid will most likely be the only large asset sale this calendar year. Presumably the sale of partial stakes in AusGrid and Endeavour will follow in short order. With the network businesses in mind, we have two articles that discuss issues investors (debt or equity) may wish to consider. The first article considers the impact of technological disruption in the broader context of infrastructure investment, the second article relates specifically to the impact of solar and storage on network businesses. The final article, discusses the concept of the illiquidity premium and the continuum in which it should be viewed.
31 March 2015
In this issue we provide the usual market update together with two articles, one considering risk versus return, whilst the other article considers interest rate assumptions underpinning infrastructure investment in today’s environment.
18 December 2014
In this quarter’s edition, we have two articles, the first relates to the fall in energy prices and the impact on high yield debt – questioning whether this issue is idiosyncratic to energy or if it will give rise to further issues more broadly across credit markets. Our second article looks at the Australian bond and loan universe – exploring various issues relating to infrastructure debt, in particular: its size, composition, structure and competitive dynamics, together with investment opportunities.
1 October 2014
For our September newsletter we've included our regular news and transaction update, along with two articles. The first compares the risk profile of infrastructure debt and equity. Our second article on the electricity markets is from Cameron O’Reilly, CEO of the Energy Retailers Association and member of the Infradebt Advisory Board – Cameron has extensive energy sector experience and in this article he shares her longer-term, strategic insights into this often controversial asset class.
1 July 2014
For the second instalment of our quarterly newsletter we’ve included our regular news and market commentary update together with one piece questioning the use of leverage in infrastructure investing.
1 April 2014
This is the first Infradebt newsletter. The newsletter provides news relevant to the Australian infrastructure sector, particularly regarding infrastructure debt.