Jaime Hector & Louis-Roch Burgard, Co-Heads of Equity at Infranity, an asset management company specialising in infrastructure investments with a clear ESG commitment, speak to Private Equity Wire about the challenges of balancing sustainability goals and investor success within today’s PE landscape…
PEW: How are current economic conditions affecting the private equity market?
Infranity: We observe a de-correlation in the market between the increase of risk-free interest and the discount rates in equity valuation, where the higher rates have yet to be significantly reflected in the valuations. While partly due to the typically long-term valuations model, this is also a sign of the enduring competitive environment in the private equity market.
Nevertheless, the current reduction in dry powder and the slowdown in fundraising are gradually pushing the market towards more cautious valuations. For the past few months, we have observed a decrease in the number of bidders and less aggressive pricing in auctions, with some assets being pulled back and more bilateral negotiations taking place.
PEW: What have been the biggest drivers of growth within your business?
Infranity: As an investor entirely focused on sustainability, we see energy transition and the need to quickly develop alternatives to fossil fuels as an important area of growth, along with the increase of digital infrastructure to respond to emerging trends such as mobile usage, cloud-based computing, and the AI revolution.
The decarbonisation of our economies, be it energy consumption in industries, the tertiary sector, and transport or the EV revolution also creates a multitude of investment opportunities.
PEW: Which are the most significant challenges in the private equity industry right now and how can they be best mitigated?
Infranity: We believe infrastructure managers will need to demonstrate two key things – the resilience of the asset class under inflationary pressures with the characteristic of presenting a “natural hedge” against inflation holding true, and the absence of significant devaluations being justified in this challenging economic environment.
An additional challenge for Infrastructure managers will be to underline the defensive nature of the asset class in the context of the wider PE industry pushing for higher returns.
PEW: What does your company’s focus ESG look like?
Infranity: Infranity was born with sustainability at the heart of our DNA. We are committed to investing sustainably and mobilising capital towards positive impact investments, and this is defined by three principles.
The first is ‘out of conviction’, we need to do our part, especially on the fight against climate change.
The second is ‘out of opportunity’, this is where many of the exciting projects are, largely supported by governments.
And finally, ‘Out of our own volition’, ensuring the downside protection of our investments – the demands on these topics will keep growing in the future; we want to be among the most advanced so our investments will not be at risk when the standards are toughened.
PEW: What opportunities do you see emerging for private equity firms in the near future?
Infranity: There is a lot of great opportunities in the sectors where we are active currently, namely the energy transition, decarbonised mobility, digitalisation, and waste & water. Our role as private equity managers is to select the best ones in terms of economic and sustainability performance for our investors.
Particularly within the energy transition and decarbonised mobility, we see innovative sectors that are developing and that still must find their technical and financial stability such as EV charging, Hydrogen, E-fuels for heavy transport. We monitor development carefully in these fields to identify the future opportunities that are about to emerge.
Jaime Hector Co-Head of Equity, Infinity – From 1993 to 2005, Jaime worked for investment bank Schroders and, after its acquisition by Salomon Smith Barney, (leading to the rebranding to Citigroup) Jamie focused on financing and private M&A in the infrastructure sector. He also analyzed equity investments in infrastructure as principal. Throughout the years 2006 to 2017, Jaime worked as an investment director at EISER, an independent infrastructure equity fund manager (initially part of ABN Amro) in London and became a partner in 2010. He originated and managed investments in gas and electricity networks, renewable energy and transportation. In 2017, Jaime moved from EISER to 3i Investments, where he worked for 18 months as a senior advisor on the origination, execution and asset management of investments for 3i’s infrastructure funds. In 2019 he worked briefly as an independent consultant to Brookfield Infrastructure UK Limited on the strategic, commercial and financial analysis of several assets in the Spanish infrastructure sector. Hector joined Infranity in 2019, first as an investment consultant and was promoted to Managing Director in 2020, leading the equity investment activity. Jaime graduated in Aeronautical Engineering from the Polytechnic University of Madrid and a holds a master’s degree in Business Administration from IESE, University of Navarra.
Louis-Roch Burgard, Co-Head of Equity, Infranity – Louis-Roch started his career in 1998 as a civil servant at the Ministry of Finance, prior to joining the recently created VINCI Group. Within the group, Louis-Roch was successively advisor to the CEO, held various operational management positions at VINCI Energies, and then became the CEO of VINCI Concessions and a member of the Group’s Executive Committee for seven years. Louis-Roch left VINCI in 2014 to join the investment team of privately owned fund manager LBO France for a year, before becoming the CEO of SAUR in 2016. At SAUR, a leader in water and waste municipal services, he finalized the exit from the waste sector, pushed the redevelopment of international activities and led the sale process to a leading Infrastructure fund. In 2020, he became the CEO of CNIM Group, a listed, family-owned business, active in waste management and large industrial components, under restructuring. Louis-Roch brings his wide operational and strategic experience, from successfully managing large infrastructure corporate companies, as well as his deep commitment to ensuring the sustainable development of infrastructure projects to Infranity. A Graduate of Institut d’Etudes Politiques de Paris, Ecole Supérieure de Commerce de Paris (Major Finance), Masters Degree in Public Management from Paris Dauphine University, and graduate from the Ecole Nationale d’Administration as an Inspecteur des Finances