[SINGAPORE] The infrastructure sector is piquing investor interest, given that data centres and the growing number of electric vehicles are consumers of energy, and will drive the demand for power-generation facilities.
Based on a global investor sentiment survey by data platform Preqin, the share of investors planning to commit more capital to the asset class in the next 12 months rose five percentage points to 37 per cent – the fastest growth since 2020.
Institutional investors in Asia are now also nursing a bigger appetite for infrastructure investment, said Sadek Wahba, founder, chairman and managing partner at infrastructure-focused private equity (PE) firm I Squared Capital.
Within Asia, Japan is spearheading the interest in alternative investments and infrastructure.
“The rest of the region – whether it’s Korea, Singapore, Malaysia – all continue to look to invest in infrastructure as an asset class,” Sadek told The Business Times.
He noted that investors in Singapore, for example, are investing domestically and regionally, mainly for energy security.
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But investors from Japan, Singapore and Malaysia can offer more than just capital.
Sadek said: “(Infrastructure projects) are looking for technology expertise, manufacturing expertise, and in a way, this is where I think economies like Japan, Singapore, Malaysia, who have not just capital to offer through excess savings, but also a technology and manufacturing base.”
Juri Jenkner, president and co-head of investments at private equity firm Partners Group, noted a significant structural demand for infrastructure investing. He said that, despite the dry powder for infrastructure investment being low and investment multiples not being as high as before, it is not a bad time for infrastructure investing.
“(With) the structural growth and tailwind that infrastructure has… you don’t just have the existing number of assets on the book. You have additional multi-trillion-dollar demand for data centres, and you have double-digit data volume growth,” he said.
This means more infrastructure needs to built, and more investments need to be made to facilitate growth. Partners Group, for example, has capitalised on the demand for private capital, from acquiring data centre operator Digital Halo to building cell towers in the Philippines.
“There is significant data demand and also a bit of network needed,” said Jenkner.
This extends to power as well. Green energy is now important as the world phases out coal-fired power plants. From renewable energy to battery storage, governments are looking for such energy sources in this energy transition – a wave that infrastructure investors can ride on.
“So again, there’s a structural need across energy, across data centres in the US, in Europe, in Asia,” said Jenkner.
A report by Aberdeen Investments showed that the world’s largest economies will need to spend about US$64 trillion on physical infrastructure just to keep the lights on. Power will need one of the biggest new investment injections, with costs of up to US$27 trillion required to pivot to renewable energy.
This is an increase of about US$20 trillion more than in the last 25 years, with the growth driven by power-hungry new technologies such as artificial intelligence data centres.
Robert Gilhooly, senior emerging markets economist at Aberdeen, said: “Our latest modelling shows that the pivot to renewables almost doubles the amount of capacity that needs to be installed to meet the demand for many major economies.”
