Perpetual and Infrastructure Partnerships Australia have released the first Australian Infrastructure Investment Report, which benchmarks the views, sentiments and appetites of major infrastructure investors.
The research finds that Australia remains globally attractive - but that investors see 'political risk' as their top challenge in the Australian market. The study is based on an initial survey of 22 major institutional and sovereign investors - with around half with an Australian head office and the other half international. The initial survey was supported by detailed qualitative interviews with five of the participants. The 22 investors collectively own or manage circa $150 billion of infrastructure globally.
From an energy perspective, there are some very interesting findings. While 41% of investors currently own renewable energy generation assets, only 36% of investors are considering future renewable energy generation opportunities. The Figures taken from the report show the full spectrum of assets for contrast. These numbers are puzzling given the RET requires investment in the equivalent of around 5,000 MW of new wind capacity. New renewable energy investment ranks behind rail, roads and airports.
In my view investors are still trying to work out how to structure investments in a market that is fundamentally changing. With technology innovation well and truly underway in the third most capital intensive industry in the world, traditional financing techniques such as one entity taking all market disruption risk over 15 years will no longer be acceptable to providers of debt and equity.
New techniques which diversify risks/returns across participants will be required. For example, shorter tenor agreements that match financier preferences with future renegotiation parameters. In other words, financing innovation must keep pace with market, regulatory and technology innovation.