Speaker 1Hi, I'm Bruno Alves, Editor-in-Chief of Infrastructure Investor, and welcome to the Infrastructure Investor Podcast. In today's episode, I sit down with America's editor, Zach Bentley, to go over our main takeaways from the Infrastructure Investor Network's Global Summit, recently held in Berlin. Zach and I talk about artificial intelligence, investors craving for certainty in the midst of geopolitical upheaval, regulation, LP appetite for mid-market products, and much more. Hey, Zach, good to see you. Hi, Bruno. So, a few weeks ago, we hosted the Infrastructure Investor Network's Global Summit in Berlin. It took place from the 17th of March to the 20th this year. This is our annual infrastructure jamboree. Also happens to be the. Industry's biggest event, and I'm not just saying that because we host it. It's actually true. We had over 3,000 members attending this year, and that included 800-plus LPs. So, you know, a lot of networking, a lot of discussion in those four days, a lot of caffeine. Zach and I have been back. We were at the event. We've been back for a few weeks now, so we've decaffeinated a little bit compared to those four days, or at least I did.
Speaker 2We've now had a chance to sleep as well.
Speaker 1Some sleep is in the mix. That's right. And I think we're in a good position to do a bit of a debrief. Now, we're actually a little bit late here because there have been, I felt, countless takeaways posted on social media and across other channels. So, I think the pressure is on us now to deliver a little bit, Zach. So, before we went, I wrote a letter sort of jokingly predicting that there were going to be two big talking points at the conference. One of them would be artificial intelligence. No big news here because we've been talking about it for ages now. And the other one would be that geopolitics would be up there for Mindshare. So, maybe let's start with AI. I feel the AI takeaway, if you want to call it, panned out. It was a huge discussion point at the conference. And actually, it became one just from the get-go. Zach, you did a keynote on the very first day with Bayo Ngolezi, the legendary founder, chairman, CEO of Global Infrastructure Partners, now a part of BlackRock. And then subsequently, there was an announcement also about. What GIP's new $30 billion AI infrastructure fund, how it was going to look like. So, maybe we can start there. You know, it's interesting because GIP, it's fair to say, was not in the lead in embracing digital infrastructure. They are now at the very kind of front of the pack on trying to come up with solutions to fund big hyperscale AI data centers. So, maybe let's start there, Zach. What do you make of the announcement of the AI partnership, the latest developments? What do you think?
Speaker 2Firstly, I think Bayo spoke on stage about trying to sort of revolutionize or change the way data centers are financed. And I think this fund that they're launching, what we know to be an open-end fund with an initial $30 billion target, it really is very much a big change in the way we've seen things done before, which is usually sort of closed-end funds buying large data center platforms. So, in that sense, it's already quite different. And this is bringing the tech players into the financial game. Which is also really interesting. So, you have NVIDIA, you have Microsoft, you have XAI. And bringing all those players in as GPs, it really brings a total different paradigm to what we've seen before.
Speaker 1I think there's quite a few interesting things to unpick there. One is the open-ended nature of the fund. I mean, open-ended infrastructure funds are still atypical. This is kind of a recognition that they want to hold on to those assets, I think, to a certain extent. Or certainly they are not in a rush to sell them. And some of this. The index. There's a lot of industrial partnerships that you've highlighted here. On the one hand, it's GIP, right? This is what they do. And on the other hand, it's kind of interesting to see all of these names, including the likes of Microsoft, right, going into something that's going to fund data centers for everyone. Because this isn't just about funding Microsoft data centers, right?
Speaker 2Yeah. And that's really interesting that if you have skin in this game, you need everyone who has skin to basically be doing well. Otherwise, this thematic that we're talking about doesn't reach the height that we all envisage it to become. Yeah. As you say, GIP were relatively late to the data center game, the digital infrastructure game at large. But, you know, what they do bring is also a huge expertise in power as well, which we know to be the big bottleneck and which came up plenty of times during the Global Summit.
Speaker 1I think you're right. I think power had been well established as the bottleneck when it comes to data center development in general, and then in particular, AI data center development. And I think that panned out. Lots of interesting takeaways around power. I found marketing. Mark Gansi's comments, Mark Gansi, the CEO of DigitalBridge, you know, about his quest for sort of grid independence. Very interesting how they, you know, they have a couple of microgrids in Brazil and in the US. And you can see that they're really just trying not to get caught up in the grid bottleneck, isn't it?
Speaker 2Yeah. And I think Mark Gansi spoke on the first panel of the Global Summit on the Tuesday. He spoke about the shortfall or the lack of correlation between the amount of data center capacity being built versus the amount of data center capacity being built. And I think Mark Gansi spoke about the shortfall or the lack of correlation between the amount of data center capacity being built versus the amount of power capacity being built. And already at this, I guess, relatively early stage in this game, we're at this surplus. It seems like it's only going to grow.
Speaker 1Yeah, I think so. So that's an interesting thing. I think the power bottleneck is kind of front and center. People are talking about it, etc. Mark also and some others spoke about another bottleneck, which I don't think is maybe quite front and center, but it's kind of up there, which is supply chain hangups, which are now becoming more visible. And of course, now the situation. Geopolitically and in terms of trade has just changed dramatically. And so this might actually exacerbate. But my feeling was power is still the one bottleneck that's in everyone's minds. Supply chains, maybe not so much. Did you get a similar feeling from the conference?
Speaker 2Yeah, but I don't think people weren't worrying about supply chains. I think that that is a front of mind concern for everyone building these things out. And I think Mark Gansi spoke about this as well on that panel. The question of can you deliver? Deliver to the hyperscale of the data center that you promised. And actually, he was saying it's more than just buying some dirt in the ground and then turning up to Microsoft saying we have this. And he was saying the difficulties in building this out means that there's really only a few players who can really deliver at the highest level in this game.
Speaker 1And actually, you're touching on something I want to jump into next, which is certainty, because I think that's another broad theme. But this notion that this is especially at the large end of the scale, a game where only a few people will eventually be able to. It is quite interesting, and especially at a time when you hear more and more talk, which I don't think this was maybe so front and center at the event, but certainly it's ongoing now, where there's talk that maybe there's overbuild of data centers. And of course, you have Alibaba Group's chairman, Joe Tsai, who famously said recently, we may be in the beginnings of a data center bubble relative to what AI applications actually exist. I don't feel that that came up a bit. Then it does tie into that point, doesn't it? Because if you can't navigate these adjustments and potential oversupply, then you're not going to be in a good place.
Speaker 2I think there's a nuanced view of that in the sense that we may be building out a large amount of data centers. And the worry is that if the business case for AI doesn't quite exist as we believe it to be right now, then you have a large amount of oversupply. I think maybe the conversation about AI has maybe clouded our view, pun not intended, that actually the case for cloud computing. Yeah, I think that is a fair point.
Speaker 1And something we wrote about recently, actually, on Infrastructure Investor, that there's a clear need for data centers, even if the AI data center story doesn't quite pan out as some people expect. So let's go into certainty. I think we've discussed this between us. It felt like a bit of a broad, overarching theme across the four days, right? You mentioned Mark's comments, but there were others. There's Wright, who also brought this up.
Speaker 2Yeah, this really felt, coming out of four days, that this was top of mind for everyone, which I guess is better to come out of an infrastructure investment conference talking about certainty than maybe in previous years coming out of an infrastructure investment conference talking about hydrogen. But we have discussed extensively so far the AI debates. But obviously, there's so much uncertainty in the broader geopolitical world that certainty really was top of mind for everyone. And I think this is borne out in a number of panels. Where on the North American panel, Scott Jacobs of Generate Capital, he said that what he really looks for in investments is some TLC, which he described as transparent, long-term, and certain policy. Which I think kind of sums it up quite well, the uncertainty that is clouding everyone at the moment. I think everyone needs a bit of TLC.
Speaker 1Yes, even if it's kind of feeling like a wish list item. I mean, hopefully not, but it really is these days.
Speaker 2Well, we speak the day after Liberation Day for our listeners.
Speaker 1Yes. We should be pointing out we are, you know, in the aftermath of a barrage of tariffs. I also found interesting, I think, was it Jim Hughes' comments from ANCAP when he was talking about a potential IRA repeal and essentially kind of asking for the administration to either do it or don't do it. And again, pointing out that the uncertainty is a killer. So I found that very interesting also. And that captures a mood.
Speaker 2Yeah, I found that a theme across a number of North American energy investors of if the administration is going to do something, can it please just let everyone know? And then we can all adapt and I think this also came on one of the panels, you know, unless you are investing in very sort of speculative projects, your renewable projects in the US are probably quite economical, regardless of IRA subsidies. So just the certainty of knowing what you're dealing with is actually on the wish list rather than subsidies itself.
Speaker 1Yeah, absolutely. And I just want to do make a quick aside, because I think we should segue into regulation now that we're talking about policy, because I think that was the theme of the conference. But I want to just do a quick aside, because you made a little bit of a joke about hydrogen. And I thought one of the most interesting takeaways I heard was from the keynote session with Francesco Sarace, who's a partner at EQT, and he's obviously the former CEO of Italian utility Enel. And he was quite, I don't know if you recall this, but it was quite interesting, because towards the end of his talk, he sort of acknowledged there was a moment of extreme hype around hydrogen. Now, it's kind of back to planet Earth, more or less, he felt. And then he openly questioned, will hydrogen make it? And he kind of said, we really need to watch out for it. over the next three to five years, because if it doesn't, then we have to look elsewhere. It's not the end of the world. And it was quite, quite a change, again, in mood, wasn't it, towards hydrogen, especially coming from a European, because it's a big thing in Europe, right?
Speaker 2Yeah. And Francesco speaks from an absolute wealth of experience. And he did point to the old days of solar thermal, which if people don't remember, were those kind of long reflection, weird looking solar plants, which especially got damaged in the whole Spanish retroactive cuts. He was saying that billions was poured into that industry. And eventually, the realization came that these don't work in the way that the industry will quite like it to. And the industry learned to move on and stick to solar PV. And I think that's the point he was making about hydrogen is, let's have a look at this. Let's see what we can do with it over the next three to five years. But if by then it's not working, we need to know to walk away.
Speaker 1Yeah. And I think there's an obvious warning contained in that for the hydrogen bulls in the industry. I think regulation is something we have to touch on. I think this wouldn't have been a global summit if there hadn't been some kind of talk on regulation. So this in a way was to be expected. But when I was doing my onstage keynote interview with Lee Harrison, and he's Macquarie Asset Management's head of real assets, I think it struck me and I know it struck some of us how committed he was to the UK water sector. He, I think, viewed the regulatory prospects slightly better in a way, but he just viewed the need for investment as something that was there and people were coming around to it. And he seemed very committed to it, even though there are obvious challenges to this sector. And then as we speak, KKR is actually the preferred bidder to take over Thames Water and do a bit of an equity rescue. So I want to pick your brain there, Zach. How did you feel about this particular comments on UK water regulation?
Speaker 2Well, I think the most pointed thing about Lee's comments, I think I counted, three, maybe four times, he said to you that he believes in the medium and long term future of UK regulated assets, which is a striking omission of the words short term. And I think if you say it three or four times on stage, that becomes deliberate. And it's largely reflective of the mood. And we heard it from other investors in the room over the few days, Alina Osorio from Fiera, also an investor in Thames Water. That this strive to have lower bills and improved outcomes hasn't worked. And the regulator needs to find a different way. No, I'm not sure that's coming in the next five years, given the regime that's been published. But it was striking how Lee was optimistic, but not right now.
Speaker 1Yeah, I think that's a really good point also, because and this is a question I raised on stage with Lee. And it's also a question that I will be curious to see which vehicle KKR ends up putting, Thames Water in. Certainly on the Macquarie side, Southern Water, which is the investment that brought them back to the UK water sector, that is in their super core fund. I mean, they originally invested 1.1 billion in Southern Water, Sterling, followed by a 550 million top up in 2023. They're currently spearheading a 900 million equity raise. So, you know, a lot of work, what some people might even call a turnaround job is, you know, being put into Southern. Certainly what KKR is going to do with Thames Water, I think is going to be a turnaround job. So it's interesting. I mean, Lee had a good response in terms of saying, well, these aren't buy it and forget it assets, you have to roll up your sleeves. But from a risk return perspective, I find it fascinating the amount of work that is going into these regulated assets now, versus the vehicles they are often housed in and the idea around them of what they should be delivering from a risk return perspective.
Speaker 2Yeah, well, I think Lee joked to you that it's too late now. And I think it's a good idea to do that. I think it's a good idea to do that. I think it's a good to change course on the fact that Southern Water is in a super core vehicle. But I guess it turns the clock back a little bit because these assets weren't considered super core as such when people were first investing in them. We've pointed out in the past the returns that Macquarie have made on their initial investment in Thames Water. And those aren't super core returns that that was a reasonable rate of return for what an infrastructure investor could expect at that point. So maybe we're just winding the clock back a little bit going to what it used to be. And maybe that's not the worst thing.
Speaker 1And this also brings to mind a very interesting comment from Louis Roche-Bourgard, who's co-head of equity for French manager Infrany, but obviously he was at for quite a long time. And he made it quite clear that he felt regulation had been highly supportive in the recent past. And we needed to think that states and governments are constrained in different ways nowadays, and that regulation is bound to become less supportive. And if you're kind of not on top of it, you end up exposed to huge risks. And I think that was a very good summary, right, of what the landscape looks like.
Speaker 2Yeah. And I think it was also someone from Swiss Life summed it up very well, saying that.
Speaker 1Oh, yes. Gabriele.
Speaker 2Yes, yes. Sorry. That regulation is a double-edged sword. And maybe we haven't quite figured that out before when investing in regulated assets until now.
Speaker 1Absolutely. What else caught your ear at the conference?
Speaker 2Just to add on the regulation front, it was day four in the afternoon. So maybe people who actually missed it. But it was Mark McAllister, who's chair of Ofgem, the UK energy regulator, who made a pointed reference when he was on stage, essentially saying that we're not off what we haven't made the same strives for lower returns and lower bills in the same way that they have, and was actually really talking a lot about innovation, which maybe you don't expect from a regulator, or we've come not to expect. But it was really interesting. He was talking about the innovations being made in pumped hydro storage, and actually, maybe, obviously, this is geographic specific, but maybe this would come to do a better job than battery storage would do in the coming years.
Speaker 1That's a very good point. Yeah. What else, Zach? What else was interesting from your point of view?
Speaker 2This wasn't necessarily something that was coming up on stage a lot, but it was coming up a lot in my sideline conversations with a number of LPs. It seems that the desire for mid-market products from LPs was stronger than ever. And I think that's a really good point. I think that's a really good point. And, you know, this is anecdotal, but it did seem that so many LPs I was speaking to stated their desire for more mid-market products, and whether that's LPs who are already invested with large cap funds and want to diversify their portfolio, or whether that's more immature LPs trying to find their way into the market and thinking mid-market is a good first way to go. It was interesting just how much this was coming up.
Speaker 1Good point. I think one thing that I also noticed, and I don't know how much of a difference this is really going to make, but it seemed to me that maybe this year there was a little bit more willingness to really talk about risk. And I mean risks in so-called emerging markets or growth markets versus, you know, OECD markets. There was a bit more of a willingness to kind of point to the asset level. I think this was kind of evident on the first day when we had our emerging markets forum. But somehow it felt a little bit different to me that maybe people had more of a point, given all that's going on on OECD nowadays and risk, that you really have to pay attention to the assets and the risks that come with them and not get sort of hung up on labels or take some kind of false comfort. But then again, it does feel we've discussed all of this before. So I'm not sure it's going to move the needle and people are going to all of a sudden start pouring money into these markets. But that's how it felt to me. I wonder how that came across to you.
Speaker 2Yeah, it's hard not to feel that some of this sentiment is just an immediate reaction to certain geopolitical events going on. And you might want to remember that some of the investments have four-year terms. So sort of shifting your entire perception of risk, depending on something going on right now, isn't necessarily the best thing. But I would refer listeners to Infrastructure Investor's April cover story for a more in-depth look at what risk looks like in 2025.
Speaker 1Absolutely. And I think from my end, there's one sort of last takeaway I picked up also. I know that one of our friends at the event also picked it up on his takeaway. I'm actually talking about Aaron Vandenberg. Who most recently led the Infrastructure Client Solutions Team for CBRE Investment Management. He's now independent. He did what I thought was a great takeaway from the event. And in it, he highlighted, you know, the Maple Lake model of the big Canadian pension funds going direct, being it's sort of a crossroads. That's, by the way, something we spoke about, direct investment, and wrote about in our February cover story, not just in relation to Canada, but just in general. But I did pick it up on the sideline of the event. on the Sideline Conversations, people question questioning whether these portfolios were really going to do well, or if they were going to have issues. And Aaron picked up on that. I don't know if you picked up on that. I'm just Yeah, I thought that was interesting that that's coming up more in conversation.
Speaker 2Yeah. And I think it was on the final day that it was actually OTPP said, at least on the private equity side, they would be looking at making less direct investments and more fund or partnership level investments. And you referred to our February cover story, I think this came up a bit where people were talking more, but just asking the question whether we should be seeing more of this kind of strategy from direct investors.
Speaker 1Yeah, Zach, any last takeaways? We could really, I think, do a three hour podcast on this. We're not going to but what would you end on any any last thoughts? Well, I
Speaker 2think a three hour podcast on this would actually be considered day five of the global summit.
Speaker 1That's true. So
Speaker 2So I'm not going to subject listeners to that. I would just leave listeners with the idea of let's not be hasty. I think I would echo what Bill Green of climate adaptive infrastructure said on one of the panels of put your phones down and listen to what's actually going on around you and ignore the noise. And actually, what's going on around you does sometimes look different to what you're seeing on your phone.
Speaker 1And not to you know, over egg on an asset class cliche, but this is a long term asset class. And it can be easy to get caught up in the moment. But we are really talking about long term investments, long term trends and riding them. And so it's in the midst of the chaos and the noise. It's sometimes you know, you kind of lose sight of that, right. So I think that's a good note to end on. We have a new venue for next year, we are actually going to move the conference from the Berlin Hilton where we've done it for many, many years now into a venue called the station, which is kind of a very interesting venue. And we're going to move the conference from the Berlin infrastructure sounding name. So watch out for that. You will be able to get more information in the coming months. Zach, thank you very much for your insights. And I will speak to you soon.
Speaker 2Thank you. See ya.
Speaker 1That, again, was America's editor Zach Bentley. Infrastructure Investor Network members already feeling the need to connect further should keep our upcoming investor forum in mind. Taking place in London on the 9th and 10th of September, it'll gather 300 plus industry leaders, including over 150 LPs. We've included a link with more information alongside this podcast. Also, to hear more of our episodes, head over to infrastructureinvestor.com forward slash podcast, or you can search and subscribe to the Infrastructure Investor Podcast wherever you like to listen. Registration is now
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