Speaker 1What do safety management infrastructure, high-speed rail travel in France, and salmon farming have in common? Well, in their own ways, each demonstrate how following infrastructure megatrends, not least digitalisation and decarbonisation, can unearth exciting investment opportunities, including in some pretty unexpected places. In this special episode, sponsored by Antin Infrastructure Partners, we will discuss these megatrends and their implications. We're joined by Angelica Shoshlin, who is a managing partner at the firm, and by Simon Soda, who is a senior partner and head of a London office. We'll explore everything from hydrogen buses and sustainable aviation fuels to how AI can improve fire safety. Oh, and by the end, you'll never think of salmon the same way again. I'm James Lineker with PEI Group, and this is the Infrastructure Investor Podcast. Transport infrastructure is a sector which has been moving fast. But what's its destination? Angelica Shoshlin has seen the sector perform through multiple cycles, and she says it remains an attractive proposition.
Speaker 2Transport is an amazing space because you have everything you'd be looking for in infrastructure, and in particular, also a constantly evolving market. We believe that through an in-depth understanding of what's going on in the environment, we can make a difference. And we believe that we can forces that drive change is the only way really to acquire assets that benefit from positive tailwinds and avoid assets where external factors are influencing structural decline.
Speaker 1Shoshlin says there are six specific areas in which these megatrends are affecting transport infrastructure. The first two, which we'll go into in a moment, are digitalization and decarbonization. But there are other aspects to this too.
Speaker 2The third aspect we see really is around autonomous and connected mobility. So the growing adoption of self-driving vehicles, including freight and public transport, vehicle-to-infrastructure communication, which improves safety and efficiency. Or think about drones and drone-based solutions for urban logistics. The fourth aspect we see is urban mobility and multimodal integration. Think about expansion of mobility as a service platforms. Infrastructure for micromobility. Or think about 15-minute cities with localized transport hubs. The fifth aspect, and that's very important, are resilient and climate-adaptive infrastructures. So, you know, we've seen a lot of floodings in the last sort of two, three decades. So investment into flood-resistant roads, bridges, and tunnels are increasingly important. Our final point that I'd like to make is the logistics and freight innovation. So here we are thinking about a shift to autonomous and electrified freight, the growth of urban infrastructure centers for faster e-commerce deliveries, and finally, the expansion of maritime decarbonization initiatives, such as green shipping corridors.
Speaker 1The key to picking winning assets, therefore, is understanding the long-term megatrends and how they interact and overlap. The first major one we mentioned was digitalization, which in the context of transport can come in a few different guises.
Speaker 2So here we're getting very close to digital infrastructure, integration of AI, IoT, and big data for predictive maintenance and traffic management. Think about smart roads and how connected infrastructure will allow for autonomous and electric vehicle. Or think about digital twins for planning and real-time monitoring.
Speaker 1Digital twins and real-time monitoring often get mentioned in the context of so-called smart infrastructure. But what do we mean by that? What's its role within digitalization? And to what extent is it just another way of talking about integrating AI? Here's Simon Soda.
Speaker 3So the concept of smart infrastructure incorporates a number of things. I think a common theme is that it typically means involving more data in managing those assets, which can incorporate AI, and more and more will do so. It doesn't have to incorporate AI. I think it starts with the data better manage those assets to increase utilization, to have a better preventative approach to maintenance, and also sometimes automating the use of those assets. So it typically means better management of an asset, often a safer management of those assets. And more and more, you can also then include AI in optimizing the decision-making around that based on an increasing use of the data.
Speaker 1Investors in digital infrastructure will be familiar with trends such as these. Collecting data means having better connected assets, which often includes fiber, but also sensors deployed across assets to collect that data and feed it back, often in real-time, to facilitate better management and decision-making. This is often known as the Internet of Things.
Speaker 3Yes, Internet of Things is one term often used to describe that, which typically means having thousands or, in some cases, millions of assets. And it's important to have a sense of sensors to actually feedback data real-time, to monitor the performance of your assets, and also to make sure that you manage those assets in a safe way for the
Speaker 1users. Antin has experience with this, not least through its portfolio company Consilium Safety, which provides safety management infrastructure focused on marine, rail, complex buildings, and energy
Speaker 3sectors. What is very relevant for this business is that it operates across four verticals, so it's customers are in four verticals that we have invested in before, the main one being maritime. So most of Consilium's business consists in providing fire and gas detection and the associated infrastructure on large, high-value vessels. One of the other verticals where Consilium is active is in rail infrastructure, and we've also owned a business in our first fund that was a business, a customer of Consilium. So we've. Very well understood the importance of the infrastructure that Consilium provides, which is used to make sure that those transport infrastructure assets are protected for the end users, both the actual assets themselves, but of course, very importantly, also the user of those assets. So Consilium is an example of a business which is collecting data across the assets where it has to deploy its system, and it's really integral to the whole asset itself. So using this approach, you can then harness the infrastructure to collect a lot of signals across the vessel. And if you would have, for example, a large cruise ship, you would typically see more than 10,000 detectors on such a ship.
Speaker 1As you would imagine, 10,000 sensors can between them collect an awful lot of data. By digitizing that data and applying AI to the analysis of it, the idea is to anticipate problems and prevent them, rather than being forced to react after the fact.
Speaker 3So this business is benefiting from the trend of people wanting safer infrastructure, certainly smarter infrastructure in how it's managed. And there is also an ongoing trend where, as you decarbonize the shipping industry, you will have different fuel sources. And those fuel sources are going to be different than they used to be. So this means you need even more detectors and different type of detectors. Because whether you are using batteries, hydrogen, ammonia, dual fuel LNG, all different fuel technologies that are increasingly used in the shipping industry to help decarbonize, that's driving a further need for additional detectors.
Speaker 1That brings us to a second major megatrend that overlaps here: decarbonization. For a sector such as transport, this clearly takes on added significance. And it affects transport on the ground and in the air every bit as much as it does sensor-heavy ships on the waves. The way transportation is powered on land, and indeed the forms of transport people choose, is changing.
Speaker 2The expansion of electric vehicles is obviously driving the deployment of charging networks in various sort of forms. We see a lot of investment in green public transport. Just think about hydrogen buses or electric rail. And we also see a lot in the development of low-emission zones and urban congestion pricing. Think about cities like London or Paris, and how really the traffic there has changed in the last decade or two. I mean, look, transport accounts for about 25% of the world's CO2 emissions. So it's really at the center of the energy transition dynamic. And that brings us very quickly to rail. We love rail. And rail is really in the center of what I would call limited CO2 emissions, sustainable transport. It's a sector where you will find people who are real enthusiasts. Most people I've met who've been in rail for, you know, for a long time, it's, you know, they start off playing with little trains when they're children. It is a sector that exhibits a very sort of amazing attraction to those that are in it. And once you're in it, you never and you never want to get out of it anymore. news really is it is fully on what we should be doing i.e. in terms of investing into sustainable infrastructure for the future.
Speaker 1Rail is having something of a renaissance and its green credentials make it easy to understand why. It is in that context that Antin came to back a management team in France to start what it hopes will be the first independent high-speed rail operator in the country. Antin launched Proxima in 2024 with the intention of running rail services from the French capital, Paris, to destinations in the west of the country.
Speaker 2France accounts for almost half of Europe's high-speed rail passenger kilometres. It has an amazing network, very high usage, but we are also facing an undersupply.
Speaker 1Unlike other major European markets, France is still dominated by a single player, the incumbent SNCF. There could well be an opportunity to change
Speaker 2that. This is really around the policy initiatives introduced in the EU. It's around supporting new competition and it's really about offering additional volume and services to the customer.
Speaker 1With rail and EV chargers getting plenty of attention, sustainable aviation can sometimes fly under the radar. So, are alternative fuels ready to take off?
Speaker 2That's an interesting one. From our perspective, it's unfortunately still a bit early stage and the jury is still open what the sort of winning solution is going to be. But there's a lot going on and I think I'm very hopeful that 10 years from now, it will be an area where we as an infrastructure investor will be able to invest in.
Speaker 1Digitalisation and decarbonisation may well be the most prominent megatrends, but there are a number of others driving innovation. Whether around autonomous and connected mobility, climate adaptive infrastructure or changes in logistics and freight. And it's by focusing on these long-term megatrends, that the most attractive opportunities can be found. This may take investors into otherwise overlooked or less crowded markets. Take salmon farming as an example. It may not be thought of as prominently within transport infrastructure as EV chargers or rail, but it has those classic infrastructure characteristics that investors look for. Such as high barriers to entry and long-term contracted cash flows. It's also a prime example of how following these megatrends can pay dividends.
Speaker 3So we spend a lot of time doing our own proprietary research, mapping out long-term trends and then in a very meticulous way, going through the sub-sectors and the different businesses that we think will be impacted by that and that will likely need further investment and growth to support those trends. And we have for example identified that some of the demographic trends means that with a growing population and also an expanding middle class with higher disposable income, means an increasing consumption of protein. This has been going on for many years and it's expected to continue for decades. Having started with that macro theme, one of the follow-up questions is then, well, how is the world going to produce this increased amount of protein in a sustainable way? And if you look at the different ways proteins is produced, one of the most sustainable ways is the farming of fish and seafood. If you compare, for example, with beef, if you feed a cow a hundred kilos of food, only about five to ten percent of that turns into edible meat. So it's relatively inefficient, you might say. Whilst if you feed a fish and specifically a salmon a hundred kilo of meat, a majority of that turns into edible meat. So in terms of using the Earth's resources in a sustainable way, fish farming and production of seafood is a very resource-efficient way of doing it. And you can look at a number of other metrics like the carbon footprint and you'll find similar favorable comparisons where the carbon emission to produce beef is about eight times higher than compared to salmon. So having looked at that, we also then saw that this sector, being salmon farming, that I'm now zooming in on, has been actually growing for decades. It's been increasingly professionalized and also the volumes are growing because there's an increased demand for the meat. We then mapped out, okay, what is the infrastructure used when farming fish? Because in the end, we are an infrastructure investor, of course.
Speaker 1The infrastructure element of salmon farming comes from the transportation of the fish. Young salmon are transported from freshwater farms out to the sea, maybe a Norwegian fjord or Scottish lock, when they are around a year old.
Speaker 3You do that using a purpose-built vessel, which has, simply speaking, a large aquarium on the inside. And you then transport the fish, drop it off in the cage. You leave it there for the farmer, which is today quite large professional companies, which is the fish farming companies. They look after the fish and then they feed it, keep it happy, let it grow for normally 18 to 24 months, at which point it needs to be collected again, using then the same purpose-built vessel, which picks up the fish. Transports it to land where then the processor takes the fish and turns it into the products that we can buy in the shop. So you have, at least twice in the life cycle of a salmon, the need of these purpose-built large vessels. Now, because they're such an essential part of the value chain, the companies that does the farming tends to sign long-term contracts called time charters, which are effectively take or pay in nature.
Speaker 1That means that, irrespective of volumes, you get paid. When you add inflation indexation built into the contract and asset backing in the form of the vessels, which can cost 50 to 100 million euros, it begins to really look like an infrastructure business. The fact that these boat crews need to be particularly skilled adds a further barrier to entry. So there simply aren't many companies doing this work. One that is, is Antin's portfolio company, Solvetrans.
Speaker 3Solvetrans is the global market leader in this. They were the one that, with the founder, invented this type of vessel over 35 years ago. They are still today twice the size as the number two operator, and today have a fleet of about 45 of these vessels. So even though it's a business that few people would have heard of, as it happens, if you eat salmon here in the UK, it's about 50% chance that it's been in one of those vessels. So it's been a fantastic journey. It is an amazing business. All those long-term trends that we had identified has been supporting the growth of the business, in addition to what I mentioned, which is the increase in consumption of protein. It's also a sector where there's higher and higher demands put on the fish farmer in terms of how they manage the fish, which is a good thing for Solvetrans, because they've always been the pioneer and market leader in building and owning vessels that has the cutting edge technology when it comes to animal welfare, managing any other sort of health issues with the fish. And that's really been, in addition to the volume growth, a driver of why you need more vessels. Basically, as the regulation in each of the countries that farms fish, which in Europe is mainly Norway and Scotland, but more globally, you also have it in Australia, Canada, and Chile, all those markets are seeing stricter and stricter regulation. And for Solvetrans, that's really a good thing. Because the stricter regulation means you need higher quality modern vessels to do the transportation like. So that's been another sort of key driver behind it. And it's a business where we've been involved in supporting the growth, helping to fund this expansion, if you more than double the fleet, which is what we've done during our involvement, you also need to provide a lot of funding and financing. And one of the things that we've been able to support with is to educate the wider lender universe as to why this is infrastructure. And today, it's a business which is very much financed by infrastructure lenders using an infrastructure financing structure, which is good for the business because it provides cost efficient financing. But it also is a stamp of approval from the debt markets and the lender community that they could see the same infrastructure characteristics and defensive qualities that very much attracted us to the business in the first place.
Speaker 1And there you have it. By digging into these long-term trends and seeking to understand them deeply, it is possible to find opportunities where others don't. But it's also important to keep in mind that these megatrends are rarely discrete and they frequently overlap. So where do these converging trends point to new opportunities opening up?
Speaker 2I think it's really investing across the big trends that we've been outlining. I think the world we're in is increasingly, and Simon has, I think, explained very well, increasingly converging between transport, energy and digital infrastructure. So today, it's not enough just to look into some transport asset and think about, you know, volume risk, but you really need to understand a whole wealth of topics when it comes to, you know, making these assets more sustainable, you know, moving this into a market in which you can anticipate maintenance, you use data, and you move into alternative fuel sources. And I think that's what makes us really excited about it. It's never stops and it continuously develops and we can use our knowledge from all our infrastructure verticals to really assess transport opportunities.
Speaker 3So I guess all the trends, we've touched on, I think are increasingly relevant across a set of assets and often intersect with each other, as we talked about. I think what we tend to do is then dig one level deeper in terms of what happens in each of the subsectors. And also, because we invest a lot across different geographies, and a lot of it in Europe, it's very much a market by market analysis to see how is this impacting the infrastructure within this specific market? context, because a lot of infrastructure is is really local in nature. So the macro trends is definitely key for us. But the other angle that we always take is to do a very local analysis to see what does this actually mean for the users of this infrastructure? And how will this materialise in this specific market and regulatory context? Now, we do have a track record across all our funds of always identifying one or two things which may or may not be what we're looking for. So we do have a track record across all our funds of always identifying one or two things which may or may not be what we're looking for. So we do have a track record across all our funds of always identifying at the time is pioneering, which we then have a very good track record of explaining to the market why this is infrastructure and I'm confident that in this fast evolving market, there will be additional opportunities for us to be a pioneer and unearth sub sectors or specific businesses, like a Concilium or like a SolvTrans, which maybe hasn't yet been recognised as infrastructure, but given where it sits in the value chain, and with the support of these macro trends might be new sub sectors for the infrastructure market going forward.
Speaker 1As we've seen, those sub sectors can include assets that other investors overlook. That's all we have time for in this episode. But to keep abreast of all the latest news and trends in transport infrastructure, or for that matter, the wider infrastructure investing universe, go to www.infrastructureinvestor.com. You might also want to listen to more of our podcasts, and those are available in all the usual places or on PEI Group's various titles online. Thank you again to our guests, Angelica Sjösslin and Simon Söder. I'm James Lineker. Thanks for listening.
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