11/08/2021 at 08:39 CET
“Spain is probably one of the most dynamic economies in the European Union. If you look at the world of infrastructure, it is one of the great foci of international funds. We like the fact that Spain is very receptive to foreign investment and has excellent management teams & rdquor ;, argued Adebayo O. Ongulesi, president of the manager Global Infrastructure Partners (GIP), during his speech last week at the XX Congress of Cede. The opinion of this fund, known for having formed alliances with well-known Spanish companies such as ACS and being a Naturgy shareholder, perfectly reflects the commitment of infrastructure funds to Spain, where they have raised their investment during the pandemic to mobilize more than 15.1 billion euros. Infrastructures (telecommunications towers, photovoltaic plants or hospitals, among others) have established themselves as one of the most desired assets by investors around the world in the midst of a pandemic, by showing its resilience in the face of the ups and downs of the global economy. Specifically, they tend to be assets with recurring income over time thanks to long-term contracts, which offer high visibility over future cash flow and which provide greater profitability than other traditional assets such as fixed income, stock exchanges or real estate. Thus, they are able to offer investors returns of between 15 and 20% in the case of greenfield projects (those that are not built) or around 7% in brownfield assets (those that are already in operation). .
In Spain, funds specialized in infrastructures have carried out operations so notorious in recent months such as the takeover bids of MásMóvil, Euskaltel or Solarpack, the purchase of 10.83% of Naturgy, the acquisition of the old Isolux solar business or the purchase of part of the concession business of Acciona or FCC, among others. These investors have seen Spain as one of the best destinations to invest in Europe due to the regulatory stability of the businesses in which they operate, but also to the wide variety of assets that exist in the country: from more mature to projects under development. It’s more, the investment fever for this business has reached such a point that many financial institutions offer it within its portfolio of private banking products, democratizing access to this type of assets to a profile of investors with savings available to invest without having a large equity. Insurers and pension funds around the world are also increasing their contributions to this type of investment, which year after year reaches record figures around the world. This increased competition has, in turn, caused a general rise in the price of the assets they pay, leading to real wars in competitive auctions, especially in certain business niches.
In this sense, in recent years there has been a change in strategy of these investors, who in their early years in Spain focused especially on the toll road business. However, the new road plan proposed by the Government has caused infrastructure investors not to want to participate in projects of these characteristics, considering that they offer too low a profitability (around 2%) to be worthwhile. means. An opinion that is also shared by traditional companies in the construction and infrastructure sector. Faced with this situation, the pandemic has accelerated its commitment to the world of telecommunications and renewables, at a time when the arrival of European funds will promote projects related to new technologies such as 5G or the decarbonization of the economy and for which it will take a lot of private capital to get them going. A clear case is that of MásMóvil or Euskaltel, which thanks to their new owners (KKR, Cinven and Providence) will accelerate the deployment of 5G; or Ence, which, thanks to the sale of 49% of its renewables business to the Ancala fund, will accelerate the development of its clean energy projects.
Telecos, a booming sector
Regarding the world of telecommunications, the experts consulted by ‘El Periódico de España’, affirm that this type of investors can accelerate the concentration of the sector in Spain, a trend that can also be seen in the Old Continent, as demonstrated by the merger of O2 with Virgin Media (Liberty) in the UK. In addition, the growing number of low-cost operators is putting many of the traditional telecommunications companies on the ropes, forcing them to look for alternatives to reduce their debt or to remain competitive. Thus, the forecast of these experts is that partial asset sales transactions (as Telefónica has done in Latin America), the introduction of financial partners for the deployment of new networks (such as Euskaltel) or the creation of telecommunications tower subsidiaries to taking them to the stock market (as planned by Vodafone) or transferring them to a third party will continue to increase in the coming months. At the moment, there are many funds that are already working on operations for the next few months: the entry of a minority partner in Reintel (Red Eléctrica’s fiber), the sale of Lyntia (the former telecommunications subsidiary of Gas Natural) or Avatel (the fifth fiber optic operator in Spain), among others.