Actis’ Post

Transcript

The conversations matter and the insights you need. This is the pulse. I'm Tom Mackenzie in London. Now major investment firms are boosting their exposure to infrastructure and energy. Earlier this year, Global Atlantic agreed to acquire ACTIS, which manages around 12 1/2 billion dollars in assets. Very pleased to say I'm joined now by Toby on Caesar, chairman and senior partner at Axis. So thanks for joining us in this studio. Yeah. Talk to us about math still the the massive spending on infrastructure and energy and whether that's the AI. A data centres and feeding that and supporting that all the renewable energy shift, this is happening at pace. How is ACT is playing a role in that? What, what is, what is your role? The centrality of actors within those shifts? I mean the whole energy transition is of course an absolutely massive colossal challenge, but also an opportunity. And if you think in what we are focusing on, so we focus on the non-us, non EU markets. That's why you have 85% of the world population and we have 2/3 of the opportunity set. In the infrastructure and in energy transition, while you only have 1/3 of the capital chasing it and 2/3 are basically chasing the opportunities in the US and Europe. So that creates, you know, very, very attractive investment proposition for for us in those markets. But clearly energy transition is there and it's just, you know, more important than ever in in the markets where we investing. So you have more space to play, less competition arguably. What are the risks though in investing in some of those environments? How much political assurance do you need before you put capital to play and. How much of that is a question amongst your investor base? I mean, I think that if you look at risk, it's a question of supply and demand, of capital and opportunities. And if you take those stats that I said there, do you want to be in markets where actually the product you're selling, electricity is in short supply? Or you want to be in the market where it's actually an oversupply of electricity and you depend on the regulators to make sure that you have a priority. In our part of the world where we invest, people are desperate to get their hands on the electricity. I mean, I think that's the best risk mitigation of everything. So which? Which parts of this ecosystem, which parts of this sector are providing the most opportunity for actors right now, right. I mean, we are across the whole energy transition, yeah, in digital transformation and supply chain reallocation. But if you're looking at specifically then in the energy transition space, I mean we across the border, we are in that generation side, transmission side and also in the electric distribution side. On the AI story and the data centre story in Bloomberg had a big deep dive on this in terms of the energy need. So here in the UK, energy or UAI is expected to suck up about 500 percent, 500% more energy over the next decade. Yeah, in the US, data centres expects to make up 8% of the total energy needs in the US versus 3% from 2 years ago. So the demand is going to be excessive. How do you think the industry meets that demand? And to what extent is that an opportunity for you? I mean, is it is a massive opportunity, but it's part of the same picture in terms of. Growth, I mean, if you're looking at the growth, I don't know, global basis and looking at the next day 20 years, I mean the electricity demand will somehow double, double. So we need to build another planet, the power plants and all the associated feasible in this environment. I think so. And I mean, but it's a massive, you know, investment challenge and opportunity. But but you think about that and then saying that the electricity system, you know, everything from generation, transmission and distribution as humankind's largest investment ever. And now we're going to do that over the next say 20 years again. And on top of that, the existing planet needs to be decarbonized. So if you add those up, I mean, it's just almost mind boggling top of a size and numbers that that are there. So the question, you know, will all of that come through? What is the pace? But you know, if it comes in and the pace that you know, you, you forecast or not, it doesn't really matter because the opportunities that are that, you know, huge. And in that, as you say, the the AI, you know, is going to pay plain, you know, very important role of that growth. National governments post pandemic, fiscally constrained. Budgets are under pressure. Is that a challenge for you because you need to align with public spending or is it an opportunity? It's clearly an opportunity. I mean, if you're in the the markets, I mean, across Latin America, Africa, Middle East, Eastern Europe, you know, Asia where we we invest and governments, I mean, the priorities of their spending. If private capital is available to help out and invest into the electricity sector and help out, you know, in the energy transition on getting renewables in there, clean, greener energy, I mean, it's great. So it's a win, win from both sides on the risk, going back to the risk story. You got investment, your exposure to India, we've had elections there. You've got exposure in Mexico, We've had elections there as well. There's concern, particularly Mexico about a a tilt towards a government that may be more interested in intervening more in some in some in some spaces, particularly in the private in the private sector. How do you how do you how do you mitigate those those the risk of a government stepping and saying, you know, we're going to set the pricing around energies, utility, we're gonna take over utilities. How do you how do you how do you factor that into your investment decision coming back to the same supply and demand of, of capital and the opportunity set. And even if you're looking at. Inbound now in in Mexico first woman president is great, but if you're thinking about you know, yes is more left wing and and there's some some noises about what that means for the private sector. However, she's been very clear that electricity in making sure that you cover that shortage of electricity needs the private sector to participate. And I know we have invested a lot though to say. So you know, we were concerned about the politics in Mexico right now. I, you know, we are cautious about it, but on the other hand, if you're looking at taking a step back and looking at the big picture, the amount of investments required and if a politician cannot deliver reliable electricity to people, I mean, that is a disaster from a political point of view. So they need and want the private sector to come in, participate, help out and making sure that that deliver delivery of electricity happens. You're in the process of being absorbed by General Atlantic. Where are we in that process? How's the integration going? What does it mean for your business? Yeah, and I mean. That's right. I mean so much looking forward to join forces with building the team at General Atlantic. And you know, we will then through that become a, you know, a stronger platform. You know, we'll continue what we're doing, but you know, we don't can offer solutions to our customers. So if they want growth equity or more venture or if they want credit or tech investment into the climate space or you know, for us, you know what we deliver infrastructure, boring, stable, contracted, you know, cash flows, you know, so that that means that you know, the apps can get an opportunity. You have a variety of risk return. OK. You didn't say you didn't make it sound boring. So, So thank you very much for coming to the studio. We appreciate it. Jawbone Cesar, chairman and senior partner at ACTIS.