Table Of ContentFuture of Business and Finance
Stefano Gatti
Carlo Chiarella Editors
Disruption in
the Infrastructure
Sector
Challenges and Opportunities
for Developers, Investors and Asset
Managers
With Forewords by
Mark Crosbie, Alain Rauscher and
Angelika Schöchlin
Future of Business and Finance
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Stefano Gatti Carlo Chiarella
Editors
Disruption in the
Infrastructure Sector
Challenges and Opportunities
for Developers, Investors and Asset
Managers
Editors
StefanoGatti CarloChiarella
DepartmentofFinance CUNEF(ColegioUniversitariodeEstudios
BocconiUniversity Financieros)
Milano,Italy Madrid,Spain
ISSN2662-2467 ISSN2662-2475 (electronic)
FutureofBusinessandFinance
ISBN978-3-030-44666-6 ISBN978-3-030-44667-3 (eBook)
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Foreword
Thisisaverytimelybook.Overthepastdecade,wehaveseenastrongincreasein
boththedemandforandsupplyofinfrastructureinvestments.Althoughinfrastruc-
tureremainsarelativelyyoungassetclass,investorsare“sold”onitskeyfeaturesof
resilienceandcashgenerationwithamoderateriskprofile.
At Antin, we eagerly supported the research that constituted the basis for this
book.Wefeelitisagoodmomenttoprovideanswerstosomeofthekeyquestions
theindustryisfacingtoday.Whatarethekeydriversofinfrastructure?Whatarethe
long-term trends? And most importantly: what are the key challenges of the asset
class? Whilst we would havesome answers from a day-to-day perspective, we felt
nobody was better placed than the renowned team at Bocconi to find answers to
thesequestionslookingdecadesaheadintothefuture.
Disruptionisakeytopicwehavebeenobservingininfrastructureinrecentyears.
Whereas 15 years ago it was a safe “bet” to invest into car park, the arrival of
driverlessvehicles,agenerationinwhichsharingcountsmuchmorethanownership
andanincreasedawarenessofenvironmentalmattersallcombinetochangetoday’s
equation.Long-heldtruthsof“safe”assetscansuddenlybecome“strandedassets”.
Wefeelitiskeytothoroughlyunderstandthechangingmarketenvironmentwelive
intodayanditsimplicationsforinvestingininfrastructure.
This publication fills a gap both for practitioners in the field and for future
infrastructure professionals. We hope that the interest in the asset class will persist
andthatitwillcontinuetoattractbrightstudentsashumancapitalismoreimportant
thanever.
From a personal perspective, I would like to thank Prof. Gatti for leading this
researchandforthevaluablecontributionsheandhisteamofresearchersaremaking
to the infrastructure industry in general and to the Investment Team at Antin in
particular.
AntinInfrastructurePartners AngelikaSchöchlin
Paris,France
vv
Foreword
Autonomous vehicles. Beyond Meat. Bitcoin. Drones. 3D printing. Netflix. Smart
homes. The Green Revolution. Uber. Universal Basic Income. These are all
examples of technologies, companies and concepts which have only very recently
become mainstream. If we look back only a decade ago, these were very much
nascentconcepts,someofwhichwouldhavebeeninconceivable.
The world population is forecast to reach over ten billion by 2057.1 Global
temperatures are rising and an overall two degrees Celsius increase by 2050 is
forecast.2 Studies predict that 47 per cent of occupations in advanced economies
areathighriskofbeingautomatedby2034.3Ourworld’spaceofdevelopmenthas
increasedexponentially.
Wherewillwebein20years’time?Whataretheunknownunknownsthatwill
dominate our world? How should investors assess and monetise these risks and
opportunities? Professor Gatti’s book is timely. Disruption is a prevalent theme in
the wider economy and in particular infrastructure with the advent of new
technologiesalliedwithchanginghabitscreatingbothnewrisksandnewinvestment
opportunities.
At Antin, we like to say that there were no airports before airplanes were
invented. Infrastructure businesses play a key role in enabling many of the trends
outlinedabove.Wefocusoninfrastructurebusinesseswhereweseeanopportunity
to create value during our ownership by transforming and growing our portfolio
companies. To create value you need to understand what is important for
stakeholders, both today and, more importantly, tomorrow. We typically hold
businesses for 7 years andwill then sell to new ownerswith atleast a similar time
horizon. A lot can change in this kind of time period. Therefore, we pay close
attentiontodisruptivetrendsandaimtopredicthowaparticularindustrymightlook
10–15 years from now. Many of the chapters in this book delve further into these
themes.
1https://www.worldometers.info/world-population/
2https://www.un.org/en/sections/issues-depth/climate-change/
3Thefutureofemployment:howsusceptiblearejobstoComputerisation?CarlBenediktFrey&
MichaelA.Osborne,OxfordMartinSchool,UniversityofOxford,September2013.
vii
viii Foreword
Transport, the exchange of data and the food supply chain are all areas of
infrastructure where we have seen disruption in recent times, and this is the heart
of our Investment Committee’s debates. For example, travel retail is an interesting
transport infrastructure sector which is growing strongly due to an ever-growing
trend,partlylinkedtourbanisationandthedeclineofcarusageincities.Consumers
havemovedawayfromtheoldmodelofdrivingtoalargeout-of-townhypermarket
everyfewweeksinfavourofsmallerscalebutmoreregular“shopping-on-the-go”in
placesliketrainstations,enroutetoorfromtheworkplace.In2016,Antininvested
inGrandi StazioniRetail, whichoperatesthelong-termleasehold providing exclu-
siverightstothecommercialleasingandadvertisingspacesofthe14largestItalian
railwaystations,serving750millionvisitorsperyear.4Havingstudiedtheshopping
trendsandtheincreasingpassengerflowsduetoimprovementsinhigh-speedrailin
Italy,wedecidedthatitrepresentedanattractiveinvestmentopportunity.Disruption
in the transport infrastructure sector is further explored by Oliviero Baccelli in
Chap.3.
Theexponentialincreaseindataflowsaroundtheworldneedstobesupportedby
certain infrastructures such as fibre-optic cable. Fibre is disrupting the old copper
technologyandthuswehavebackedthetrendbyinvestinginfourfibreproviders,
serving both businesses and providing fibre to the home across the Netherlands,
Belgium,France,Spain,theUKandtheUSA.Thealmostlimitlesscapacityoffibre
makesitparticularlysuitedtosupportinglargedataflowsandenablingthetake-upof
5Gtechnologies.
The transition to clean energy, explored by Di Castelnuovo and Biancardi in
Chap.2,isatrendwehavefocusedonforalongtime.Wemadeaninitialacquisition
with our 2018 acquisition of Idex in France and then followed up with our 2019
acquisition of Veolia’s District Energy business in the USA. These companies
provide district heating and cooling and are well-placed to benefit from the strong
trendtowardscleanenergy.
In the media we often read about different demographic groups, such as baby
boomers, Generation X and Millennials. Each of these groups has different needs
andwantswhichcreatebothchallengesandopportunities.Inthesocialinfrastructure
realm,weexpecttoseeanincreaseddemandforservicesrelatedtooldagesuchas
elderly care and the prevalence of particular diseases and more chronic conditions
duetotheageingpopulation.
Antin hasdeveloped strong links with Bocconi University since its inceptionin
2007.Wehavenumerouscolleagues who studied atBocconi andhavesincemade
important contributions to our firm. In 2018, we started sponsoring the Antin IP
AssociateProfessorshipinInfrastructureFinance,heldbyProfessorGatti.Asafirm
we benefit from the academic research led by Professor Gatti and his world-class
team,whilstinthespiritofknowledge-sharing,mostoftheAntinPartnerteamhas
lectured to students at the university. Allying with one of the world’s leading
4GSRestimate
Foreword ix
universities enables us to maintain an edge, by benefiting from the results of
research,gettingaccessandexchangingviews.
Wehopeyouenjoythisinsightfulpublicationwhichservesasausefulcompen-
diumforthechallengesandopportunitiescreatedbydisruptionintheinfrastructure
sector.
AntinInfrastructurePartners AlainRauscher
Paris,France
AntinInfrastructurePartners MarkCrosbie
Paris,France
Contents
1 Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
StefanoGattiandCarloChiarella
2 TheFutureofEnergyInfrastructure. . . . . . . . . . . . . . . . . . . . . . . . 5
MatteoDiCastelnuovoandAndreaBiancardi
2.1 Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.2 AnOverviewoftheGlobalEnergyBalance. . . . . . . . . . . . . . . . . 6
2.2.1 Oil. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.2.2 NaturalGas. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.2.3 Renewables. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.2.4 Electricity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.3 KeyTrendsintheElectricityIndustry. . . . . . . . . . . . . . . . . . . . . 15
2.3.1 Decarbonization. . . .. . . .. . . .. . . .. . .. . . .. . . .. . . .. 16
2.3.2 Electrification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
2.3.3 Decentralization. .. . . . . . .. . . . . . .. . . . . . . .. . . . . . .. 21
2.3.4 CustomerActivation. . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
2.3.5 Digitalization. . . .. . . . . .. . . . . .. . . . .. . . . . .. . . . . .. 23
2.3.6 ConvergenceofIndustries. . . . . . . . . . . . . . . . . . . . . . . . 24
2.4 TheEconomicsBehindtheR-Evolution. . . . . . . . . . . . . . . . . . . . 26
2.4.1 TheCompetitivenessofRenewables. . . . . . . . . . . . . . . . . 26
2.4.2 TheMeritOrderEffect. . . . .. . . . . . . . . .. . . . . . . . . .. . 29
2.4.3 NegativePrices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
2.5 SomeTrendstoLookOutfor,intheComingYears. . . . . . . . . . . 33
2.5.1 WatchthisSpace:OffshoreWind. . . . . . . . . . . . . . . . . . . 34
2.5.2 TheNeedforFlexibility:Storage. . . . . . . . . . . . . . . . . . . 35
2.5.3 EnergyNetworksasBothEnablersandConstraints. . . . . . 36
2.6 TheImpactoftheR-EvolutiononEuropeanUtilities. . . . . . . . . . 38
2.6.1 Utilities’RevenueModel. . . . . . . . . . . . . . . . . . . . . . . . . 38
2.6.2 Utilities’FinancialPerformance. . . . . . . . . . . . . . . . . . . . 40
2.7 Conclusions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
References. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
xi
