A leading Canadian pension fund is prioritising Asian digital infrastructure and renewables, while a report by Australian super fund-owned IFM Investors places the two sectors at the heart of future Asian demand.
On May 9, Omers Infrastructure bought the mobile tower assets of Australia’s TPG Telecom for A$950 million ($660 million), creating the largest independent tower company in Australia, with a total of 1,230 sites.
“In the broad sector of communications infrastructure, we are keen to emulate the success Omers Infrastructure has had in Europe, in Asia Pacific (Apac),” Prateek Maheshwari, Omers Infrastructure’s London-based Asia head, told AsianInvestor.
The division had been looking to expand its digital infrastructure allocation into Asia for some time, either through data centres, fibre, or communications towers, with the purchase of a single platform that could be subsequently expanded through organic growth.
“Such platforms could expand across borders within the region,” Christopher Curtain, the division’s head of Apac in Sydney, told AsianInvestor, adding that the division continued to see opportunities in Australia and the broader Apac region.
It is the company’s first investment in Asia’s digital infrastructure sector and its fourth in Australia, where it also owns Port of Melbourne, Transgrid, and renewable energy developer FRV Australia. The company owns two other infrastructure assets, both in Europe.
Meanwhile, in November 2021, IFM invested €900 million ($949 million) as part of a joint venture with Deutsche Telekom in Germany, called GlasfaserPlus, to deliver fibre-based home broadband to more than 4 million German homes by 2028. Since 2019, it has owned XP Fibre in France.
As part of the deal, Omers-owned TPG has signed a 20-year contract for the use of its towers. In this way, the deal exhibits Omers Infrastructure’s favoured partnership approach, which it also follows when investing in renewables, the second pillar of its Asian investment strategy. “Investing with like-minded partners is important to us. We have multiple strategic partners as well as other pension funds and GPs [general partners],” said Curtain.
The acquisition will help the company towards its target of increasing its allocation in Apac to between 10% and 20% of total infrastructure allocation by 2026, up from its previous target of between 5% and 15% in August 2020.
In April 2020, Omers Infrastructure was unsuccessful in its bid for Australia data centre platform AirTrunk, which was bought instead by Macquarie Infrastructure and Real Assets for $1.9 billion.
An April report by IFM Investors, the Melbourne-based global fund manager owned by 20, mainly Australian, pension funds that manages A$155 billion ($120 billion), said that digital infrastructure and the development and deployment of renewable energy comprised the two key structural drivers of infrastructure demand over the coming years.
It singled out the same three subsectors targeted by Omers Infrastructure. “IFM expects digital infrastructure across the telecommunication towers, data centres and fibre networks segments will face greater demand and continue to attract interest from infrastructure investors,” the report noted.
“Some of the features are typical to core traditional infrastructure investing, such as essentiality, high barriers to entry, cash-flow stability, and limited technology risk.”
Within digital infrastructure, the report, titled Resilience and Transition, identified three drivers of computing power and data traffic: internet video and entertainment; big data, AI and the internet of things; and the widespread adoption of automated and connected vehicles.
The IFM report also highlighted the growing role of renewable energy, as countries and companies seek to decarbonise and seek out alternative energy sources. It pointed to important indirect dimensions of this trend, including the expansion and improvement of electricity grids, the reduction of emissions in business and industry, more efficient heating, and the growth in electric vehicles. “Decarbonisation will continue to accelerate, with the energy transition driving greater investment in emission reduction programs,” it noted.
FOCUS ON ASIA
Michael Kelly, chief legal and corporate affairs officer at Omers, highlighted the potential of renewables in Asia given that, in some countries, power generation may be less developed than in Europe and North America.
“[Renewables] are poised to leap forward. Like the telco infrastructure skipping the landline, something like that could happen in energy, which helps speed up and simplify the rapid adoption of renewables. There are huge opportunities,” he told AsianInvestor.
Co-investment has been a key plank of Omers Infrastructure’s extensive renewables investments in Asia to date.
In October 2021, it bought a 49% stake in an Australian renewable energy platform managed by FRV, a global renewable energy developer majority-owned by Abdul Latif Jameel, a Saudi-headquartered conglomerate.
In August 2021, it purchased 19% of Indian renewables company Azure Power, in which Canadian pension fund Caisse de dépôt et placement du Québec (CDPQ) has a large share.
In July 2020, it acquired 20% of Transgrid, the Australian electricity grid company, which it also owns alongside CDPQ. Its first Australian infrastructure asset, Ports of Melbourne, is owned alongside Australia’s sovereign Future Fund, QIC, the Queensland state investment fund, and infrastructure fund Global Infrastructure Partners (GIP).
Indian toll road owner Indinfravit Trust, of which Omers bought a 22% share in 2019, is co-owned by Canada Pension Plan Investment Board (CPPIB), Allianz, and Indian company Larsen & Toubro.
In Asia, as throughout its global portfolio, Omers insists on a high level of involvement with running companies it owns. “Governance is important to us. We work actively with management,” said Curtain.
This approach contrasts with Omers’ private equity division, which has a history of direct control buyouts – including all or nearly all of equity. Where Omers Infrastructure does own all of an asset, such as Teranet, the Ontario land registry provider, it is typically in a Canadian-based firm, operating in a highly regulated sector and with steady income streams.