Globally, institutional investors have been mobilising progressively more private infrastructure investments. While these investment models have traditionally structured themselves around the conventional private equity mechanism, these institutional investment fund models have in recent times evolved their investment mandates to reflect the assets they are looking to hold. Increasingly, institutional investors are looking for direct investments in the underlying assets, allowing for better returns, lower fees, and better control of their investments. These investment models have further evolved to proffer additional exit strategy options, further increasing institutional uptake. This investment model is well established through infrastructure real estate investment trusts in territories such as Canada, Asia and Australia. GAIA Infrastructure Capital is pioneering the listed infrastructure space in South Africa.
The status of South Africa as the “spring board” into Africa for global investors necessitates good quality road, rail, seaport, and airport infrastructure. Improved transport infrastructure will promote transport and trade in goods and services, improve tourism, facilitate a productive transactional environment, while improving the standard of living. South Africa has publicly disclosed some of its required transport related strategic investment projects, numerous water and sanitation related infrastructure funding opportunities that run into trillions of Rands over the next coming years.
The South African energy sector presents a particular opportunity for discerning long term investors. Currently, energy and electricity supply is widely regarded as South Africa’s preeminent infrastructure challenge. Investment in assets that fall under the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) also have clear linkage to the greening of the economy, job creation, social upliftment and rural development, all of which are important elements for institutional and retail investors to consider in their responsible investment strategies. Sustainable development translates directly into development of skills in the local labour market and improved employment opportunities.
The above factors are important elements in providing liability matched income streams to institutional investors that are pursuing liability driven investment strategies, such as pension funds. With energy infrastructure, the opportunities originate through new generation capacity and the replacement capacity. From an investment perspective, a great opportunity exists in both the primary and, potentially, the secondary buy and lease back refinancing market.
Investments in infrastructure in general and renewable energy assets in particular have various advantages for institutional and retail investors. The financial returns of the assets are attractive due to the following factors:
- cash flows are contracted over a long term, being 20 years in the case of assets falling under the REIPPPP
- returns are in the form of cash distributions
- returns are explicitly linked to CPI
The Board is accountable for the conceptualisation and implementation of the Company’s objectives, business and investment strategies. The Board has delegated certain of the Company's functions to the Executive directors. GAIA Infrastructure Capital has access to extensive expertise and experience in the management of investments in infrastructure assets.