Infra Dig – APAC infra with Actis

Hello and welcome back to Infradig, the podcast service brought to you by IJ Global, a green street company. My name is Angus Lazy-Mobile and I'm Editorial Director of IJ Global. Having recently hosted our Asia Pacific Conference in Singapore, that is the IJ Global Infrastructure Finance Forum Asia 2025. Today I'm talking to one of our speakers from the event for a regional focus. To that end, I have with me today Rahul Agrawal, Managing Director and Head of Southeast Asia for the Fund Manager Actus. Rahul, welcome to Infradig. Thank you Angus, it's a pleasure to be here. Thank you for having me. And it's lovely to have you here. Now let's start off in the usual manner. Rahul, can you please introduce yourself briefly and tell us a little bit more about the role you play at Actus? Sure Angus. I'm a Managing Director in the Energy Infrastructure Team at Actus and I'm head up the Southeast Asia Energy Investments. The Actus is a leading growth market, sustainable infrastructure investor. We invest in critical infrastructure across the Global South Asia, Latin America, Middle East, Africa, Central East Europe. My role involves investing in energy sector within the ASEAN economies or Southeast Asia as we call it. And we have a pretty strong investment program already in Southeast Asia and to be talking more about the opportunities that we provide. This region provides for us and also the investments that we are looking forward to here. So happy to talk further on that. Thank you. Excellent. Looking forward to it. Right then, I reckon we're up to speed and it's now time to get down to business. Rahul, you were at our conference in Singapore last month. By the way, we're going to be doing it again next year. It was a rolling success and we're really looking forward to really pumped up for next year's event. So, but over the course of those two days, great deal of the focus was on opportunity across the region. So let's follow that line. Can you please share your perspective on infrastructure opportunities across Southeast Asia, which markets and sectors are really catching your attention? Sure, sure, I guess. So let's look at the Southeast Asia market as a whole. I mean, these are 10 large, 10 economies, but if you look at the five top Southeast Asian economies, which is very focused, which is Philippines, Thailand, Vietnam, Malaysia and Indonesia, and if we put them all together, it's 700 million population, three and a half trillion dollar GDP. It's a pretty sizable market. That is what I'm going to say. Second, this market has been having pretty strong GDP growth between four and six percent per annum except probably one or two countries and generally stable macro. An infrastructure is a sector which has been under invested in across many of the subsectors. So given the strong macro and the underinvestment and the growth opportunities, various infrastructure sectors are providing lots of avenues for investment. In particular, what we are seeing is energy, general infrastructure and digital are the kind of the themes that we are seeing more and more investible in this region. Energy is probably one of the largest. So within energy, what we are seeing is that the strong energy transition opportunity, but I think what we also need to recognize is that these economies are growing at five to six percent per annum, power to GDP, demand elasticity is one or slightly higher, which means every year our demand is growing by six, seven percent per annum. And most of these economies have been dependent on imported fuels, which means these economies are also looking at energy security. So what I'm going to say is that energy transition, energy addition and energy security are all coming into play at the same time, creating a pretty sizeable investment opportunity, particularly in renewables in this region. And given where renewables is today, it's about three to four percent of the energy is generated from renewables. It's an underinvested sector, so which provides this very strong room for growth in this region. And that is where we are looking at a lot of opportunities and especially in countries such as Philippines, Vietnam, Thailand, Malaysia and more to come in Indonesia and even in Singapore. And we have played this investment opportunity through a couple of investments, M10 or solar, which is a big Philippine solar plus battery project that we have invested in. And the second one is Levanta Renewals, which is a pan-South East Asia Renewal platform 100% owned by actors, which is again developing these projects across these markets, benefiting from the opportunities in the energy sector. The second opportunity as the sub sectorized book was the general infrastructure, which is energy efficiency or waste management or other kinds of info, which is transportation. We have already invested very recently in BPP, which is an energy efficiency operator in nine Southeast Asian markets. We recently announced the deal to acquire 800 super Singaporean environmental management company through our long-life infrastructure fund. So there are these other infrastructure opportunities, which are also upcoming. And then finally, we cannot have any call these days without talking about data centers, right? So that happens at these digital and data centers. And again, that is that's a very prominent theme in Southeast Asia in particular. So we are already developing a 120 megawatt data center in Johor in Malaysia, through our pan ACA and the data center platform for e-pop digital. Malaysia is clearly providing a lot of opportunities as we believe. And so as we believe as Thailand, we're going to provide in the future. So overall energy, general infrastructure, digital, all of these are providing strong opportunities in our view. And I think investors who can also operate at the intersection of data centers, energy are able to make better use of the synergies that come along. And which kind of opens up newer forms of opportunities that one can invest in. So I would say Southeast Asia, the macro is stable under penetration of various infrastructure subsectors, providing a lot of investable avenues for investors in the region. Yeah, this is very much tracks with our research and our tracking of the market, where the transactions are, who's doing what. And it just seems like the need for energy generation is on a continuous spiral and the likes of power hungry assets like data centers, there's just no end in sight for the requirement to build out greenfield power generating assets. It's going to keep you busy that. Okay, now we've at IJ Global, we've been tracking infrastructure and energy activity since before the start of the century, a couple of sounds longer than, you know, 30 plus years. And we've also got databases to match. But over the course of that time, we see massive shifts and focus on a market by market region by region basis. Can you please run us through how you've seen the Southeast Asian energy landscape evolve over the last, just the last decade. And when I ask that question, I'm particularly keen to hear your thoughts on key developments and regulatory shifts across countries. Yeah, sure. So very, very good question. And I think the Southeast Asia, you know, we believe was quite dominant with fossil fuel generation in between like 2015 to 2020. And why not? Because it was re-endowed with cheap domestic coal. And a few things happened around 2021, which is a, the renewable energy became cheaper with technology improving. B, coal financing became difficult. Local provinces became quite adversarial to any sort of new coal projects coming up. And the governments started also pushing through with the net zero targets. And a confluence of these factors have come together to lead this explosion in renewable energy within the region. So in the last five years, what, you know, we think we have seen as a complete transformation on the renewable energy landscape in Southeast Asia. That being said, it is still we believe under penetrated, right? With the whole, you know, the installed capacity and then the composition of generation from renewable is still pretty low in our view. What we are seeing in future is that, and this is from some of the research reports from, for example, IA that 25% of the global energy demand growth for the next decade is going to come from Southeast Asia. If I take it one step down to renewable energy, we are, we believe that at least there will be a growth of at least two to two and a half times in terms of renewable energy installations within Southeast Asia. And you know, what I told earlier, which was the energy, security, energy addition, energy transition are all at play, which is kind of creating this opportunity, right? So those, some of these fundamental factors have changed. And how has, how have these countries, you know, are changing the regulatory landscape, which was your question, right? In terms of getting more people to invest. And I think there we have seen positive developments. So starting with sector liberalization in Philippines, where foreigners can now own majority in renewable energy projects, starting with government-backed auction programs or procurement programs for power purchase agreements, which is the bedrock of these projects, as we all know, in Philippines or in Malaysia or in Thailand, new direct power purchase agreements or CNI off-take agreement mechanisms coming up in these countries has definitely helped on the regulatory side for investors to become more confident about coming in and leading to, you know, large-scale installations in the last two or three years. In particular, we believe Philippines, Malaysia, Vietnam are providing more large-scale opportunities right now, but I think given the nature of all five six markets that we operate in, I think they are all will be providing these avenues in one way or the other in future. Yeah. Well, busy time ahead. Okay, thank you for that. And much like all other regional markets, there has been a significant evolution over the last decade. Let's follow that theme, but this time costs an eye to the future. In your view, what more could be done to strengthen the energy and power sector across Southeast Asia? Yeah, thanks. So I think I would say two important you know, things which if that can be done in the first is a program-based approach of how you do this renewable energy development and the second is on the third party open access. So let's let's stick with the first point first, which is what I mean by a program-based approach is right now, what happens is that there is this big auction or a big feed-in tariff regime and it is there for one or two years and then everybody is running and trying to get those projects in and then suddenly there is a lull for next two, three years. So it kind of becomes a gain for speculators who have land or grid options and they can go and you know make that and then suddenly there's nothing for a few years. What that leads to is not the best use of the resources at hand. And what I mean by that is I mean you don't get the best LCOE as consumers, right? You don't get a program-based predictable form of growth, right? So for example, as investors you know what we would like to see and we have seen it in other markets like India where this has been done you know over the last decade is like okay if you come up with a plan and say okay we're going to 10 gigawatt of new capacity in the next five, six years. We're going to auction every year to what a harm gigawatt and these are the roles of the game and this is the trough power purchase agreement. This is what you need to have on your technical qualification and financial qualification and these are the role in which you bid and bid. Then as long term investors what you can do is you can hire teams, you can go after land options, grid options, develop projects properly for two, three years which then have higher chances of success and then you can actually participate in those bids with a proper disciplined approach and if you lose which can happen because of competition which is good. Then you can say hey I find that's okay I can invest in another option and I can shop at my pencil and do something better and do that which what that means is that it leads to patient, long term investors coming into the market and actually delivering those projects. What we see right now is that there is a lot of projects being awarded but there is a worry that we think that how many of them will really happen because many of them have been done in not proper full-scale development cycles having been gone through or being done by you know investors who for whom renewable energy or the technical skills gets not core to them. So that's that's the first part which is if you have a program based approach I think it can lead to better results and we have seen that in other geographies too. The second is this third-party open access which I actually quite strongly believe in this concept. I mean as we know on the demand side there's a lot of demand for green power data centers, R100 companies, all of them want green power A because it is cheaper, B because it is sustainable and they all have goals. As renewable power producers they want to sell to these blue chip off-takers bilateral negotiations and provide power. What is missing is this feeling regulation in between which we call it third-party access or open access various names right. Ultimately what I'm trying to say that there's a willing buyer, willing seller. If the willing agreements and all of that can be done and that regulations can come in that market can open up completely without any intervention from the government or the government on entities. Of course they need to be compensated for use of the transmission lines and any of those charges and we have seen what that can lead to in terms of both spurring the economy on the one side by having more manufacturing and more data center investments who want power, reliable power and green power and also for renewable energy investors who can come in and know that they have this avenue to supply. And I think that is where enabling regulations have come in which is very encouraging in Malaysia in Thailand it has just come in in in small part in Vietnam it has been talked about but I think that regulation to come in with full set of rules and implementable I think can just unlock this sector and this energy between data centers and renewable in a big manner. I think these two would be the key the third I mean which I think will be more dependent on the government given the nature of the market which is transmission. I mean we know this is a much cliched saying no transition without transmission but it's actually true. That transmission infrastructure is owned by the government or the government on entities and I think privatizing that could be a long process but having more investment and transmission can really again will be required for the renewable penetration to happen in these markets. Okay thank you for that. Now we're going to switch tack ever so slightly. Could you talk us through some of the active investments across the region you did mention some of them earlier on and to be honest I'm particularly keen to hear about Emterra Solar and Levanta renewables you did mention them right at the beginning and if you have any other projects you think are worth highlighting please you you have the floor. I want to hear about these. Thank you Angus. Very happy to talk about them. So first talk about Emterra Solar. I mean this is a super exciting project it is an integrated renewable energy project solar plus battery to be precise in the Philippines set to be one of the world's largest integrated renewables in battery project when fully commissioned. We completed this transaction for a $600 million investment from actors energy funds in March 2025 in this project which also happens to be the largest FDI in a single project in Greenfield infrastructure in the Philippines. This project is located about 100 kilometers from Manila 3500 megawatt solar PV capacity 4 and a half gigawatt are of storage to provide 850 megawatt of firm power for 12 hours to Maralco under a 20 year power purchase agreement and I think that's that's where the key attraction of this is like we all know the holy grail of renewables is firm power right I mean intermittency is all you know everybody gets you know very excited about it okay right but if you can pair solar plus battery or solar wind plus battery and get to a firm profile that really completely addresses that in this project provides firm power which is 100% PLF during the 12 hours in a day right by pairing solar and battery and so effectively this what is this is a oversized solar project paired with battery so that when the excess generation kicks it during the day that is used to charge the battery and when the solar tapers off between 5 PM and 9 PM the battery kicks in and provides a same power right and this is I mean a truly a remarkable project in that sense and also I would say establishes an example for many other economies to replicate in we have already I'm now glad to report that we already installed about 1000 megawatt already on this site having achieved financial close only in March this year first phase of this project is expected to commission in 2026 and the second phase in 2027 when it will be fully operational I mean this is a project on acute scale and we're quite excited about the partnership that we have with Maralco on this and in the progress that we have made in building this project. The second investment that we have is Levanta Renewals this is a typical actis investment 100% buy and build platform owned by actis we started this platform in late 2022 it is spread across South East Asia this platform today has 720 megawatt of operating construction and contracted capacity across three countries Philippines Thailand and Vietnam and it is doing both solar and wind projects it has a very strong professional management team with decades of combined experience or delivery projects in these economies and creating Levanta value and we are quite excited about the growth that this platform has achieved in a short time frame and we are looking to take this platform to gigawatt plus in the next year or so and it is playing a pretty important role in the Southeast Asian economies energy transition as we spoke about earlier. I would say it is worth noting that while Emter and Levanta are the investments that we are doing from the current fund flagship fund that we have but in general in Asia we have invested about eight billion dollars across 100 plus investments and built and owned more than 10 gigawatt of capacity across Asia through these renewable power projects that we have built across over the last I would say 15 audios. There is a time okay this next question feeds into something I particularly notice in our Q3 reports that IJ Global published in October. For those of you not so well acquainted with IJ Global we track everything from project finance of infrastructure and energy through to fundraising by infrastructure funds and emany activity across asset classes that is on a global basis. Now we have been tracking a continued uptick in renewable energy activity across the globe and there has been a particularly impressive uptick in battery energy storage S projects. What stands true for the world stands true for Asia Pacific. This is a rather fortunate as actor seems to favor projects of this nature. What is it about renewables and battery projects that makes them especially appealing to you? Speaking kindly we think they just make great sense. The levelized cost of energy for solar, wind and batteries has fallen steeply over the last 10-15 years. We all know that. The drop in the cost of utility scale batteries in particular has been remarkably quick. So how many 5 renewables which is wind and solar and battery combined are super cost competitive and especially in the growth markets that we invested which generally tend to have stronger solar irradiance and winder sources making them ideal for you know renewable plus battery in our view. I think as renewable penetration accelerates globally we increasingly believe that storage is no longer optional. It is one of become critical infrastructure. And as I mentioned earlier right I mean you know the whole degree of renewables is to be able to provide firm power of base load power and we are not in there yet but we are getting there with batteries becoming cheaper because then it reduces the cost of intermittent sea grid management makes it less of a headache for transmission operators and then we can have more and more renewables happening. So if the levelized cost of energy is lower if there is less intermittency or no intermittency and third from a country's perspective there is no dependency on imported fuels because wind and solar is of course home grown resource. Batteries is a technology that can import and you know install. There is no fuel cost when you're producing this. It just makes economical sense in long-term commercial sense for the off-takers to off-take this power because there is no price variation or inflation linked to any of this. You are fixing your cost of power through these projects for 20-25 years right and from an investor perspective that makes a lot of sense because then you are not taking any risk of global commodity prices or the governments honoring those or any currency fluctuations which may happen in terms of imported fuels versus domestic economies, FX reserves and all of those. So just in terms of commercial sense sustainability of the economics from macro perspective I think all of those I think it just makes a lot of sense and both for setting up this project and also when we look to sell these projects again those risks are massively reduced and it is good for the country it is good for the consumers it's generally good for the investors because then you are selling less risky cash flows to the incoming investor. And I would say Emptenah Solar is a great example of this and there are other South East Asian economies which are looking to do similar such large-sized projects to provide this base load power using renewable plus battery. Yes Emptenah was a particularly good one which is why one on a board of IJ Global Awards and Singapore just the other day. A little bit of self-promotion there, never miss a trick. Okay let's take a look at working at an infrastructure fund that takes a genuine long-term approach to the assets that acquires or develops. How does actors approach its role as a builder operator and what does that mean in practice for the projects you take on? Yeah. So I would say at this you know you're absolutely correct we take a way focus builder operator approach to investing it's a fundamental part of how we invest. I mean it's basically focusing on operational excellence and which can come in many forms right but ultimately it comes down to achieving better outcomes through improved revenues and reducing cost and risk, right. And I would say there are three aspects where this starts first with the local knowledge and local networks. So I mean as investors we are not tourists, we are in in these growth markets with our teams here. We have 17 offices having been in these markets for 20 years with genuine local and sector expertise with strong local networks and relationships. And then on top of this comes the builders and operators mindset which we think brings you know operational expertise to everything that we invest in working alongside management teams to drive tangible value creation or value preservation techniques. And how are we able to do this basically because our teams are made up of industrial engineers with hands-on industrial experience. So there are people in the team who have built power projects who have been CEOs of power companies. We have been project financiers or investing in this sector for a very long time specializing in these sectors and also we have not only just financial engineers which as investors we all are but also industrial engineers with the role of the sleeves approach and which is I think key right given the real assets or the hard assets we invest in. And I think the other part is also this mindset what it allows us is to also know our limitations and hence always be on the outlook for the constant learning and innovation which is adoption of new technologies such as AI drones smart meters internet of things. So I think this focus on innovation also becomes a key part of this builder and operator approach. And I think the third leg to this operation excellence is sustainability and we just take a lot of pride in that. I mean the sustainability adactes goes hand in hand with operational accidents. We think sustainability is our competitive edge helping to build resilient businesses securing the license to operate in the economies and the localities that we work in. I would say sustainability is key how we mitigate risk create value and be exit ready when the moment comes. So we just think it makes hard-headed business sense. I mean we often call it act is values drive value and it kind of means every word of that. So in short being builders and operators is having the local expertise having that builder operator and the industrial engineering mindset and having that sustainability at the heart of everything we do. And it is a key part of the act is identity. A powerful message. Well then that about brings us to an end for this latest and for a dig podcast. All that is left for me to do is thank you Raul for taking time to join us. It's been really interesting. Thank you so much. The place is all mine. Thank you for having me. Lovely. Lovely to be in Singapore another day and lovely to have you on here today. And for the listener as always I hope that you found this latest episode to be an anything but in for a dig.