Infrastructure
The global infrastructure sector was heavily influenced once again in 2021 by pandemic-related factors and other secular themes, such as a continued shift toward greener and ESG focused assets.
With its diversified and flexible approach, ADIA's Infrastructure Division was able to navigate these conditions and deploy capital across a range of attractive opportunities in both private and public markets.
For infrastructure investors, the year began with a global economic recovery that helped core assets in sectors such as transportation and energy to rebound strongly from the volatility witnessed in 2020. However, outbreaks of new COVID-19 variants dented the performance of assets exposed to passenger movements, such as airports and commuter toll roads.
In the energy sector, the pandemic largely took a back seat to the ongoing transition away from hydrocarbon-based assets. While this negatively impacted performance in some areas, it prompted a material spike in the share prices of green energy and related companies early in 2021. This strength, most likely exacerbated by a rush of interest from special purpose acquisitions companies (SPACs), turned out to be short-lived as prices corrected later in the year.
Meanwhile utilities remained resilient throughout 2021, with considerable investment activity in the gas and electricity transmission and distribution sectors globally. This is likely to continue in 2022 and beyond, given the key role that utilities will need to play in facilitating a shift to a lower-carbon world.
Digital infrastructure also remained in the spotlight, having demonstrated its critical role and resilience in responding to pandemic-related disruptions. Investors remained particularly focused on data centre, fibre and telecom tower platforms, due to structural tailwinds and their lower correlation with other infrastructure sectors.
Against this backdrop, the Infrastructure Division deployed more capital in 2021 than in any previous year, across a wide range of both private and listed assets. Its inbuilt resilience enabled it to seek out the most compelling entry points for comparable assets, with listed assets frequently coming out ahead after being oversold in market corrections.
The Division’s portfolio, comprising investments across its four core sub-sectors of transport, energy, utilities and digital infrastructure, delivered a strong performance in 2021. The team also continued to recycle capital out of smaller non-core positions into fewer but larger positions.
Among key investments, the Division increased its stake in Australia’s WestConnex, closed its investment in FiberCop (a JV offering fibre optic connectivity throughout Italy), increased its exposure to India’s Jio Digital Fiber and announced an investment into U.S.-based Sempra Infrastructure Partners (SIP), which aims to facilitate the energy transition by building and operating new energy infrastructure for the 21st century. The acquisition fits well with the Division’s strategy of investing in growth platforms.
On the listed side, meanwhile, the team increased exposure to a number of existing listed positions and also added a new exposure to the portfolio.
In the year ahead, ADIA’s Infrastructure Division will continue to support the growth of existing assets in its portfolio and selectively pursue listed and unlisted investments with attractive risk reward profiles. It will focus on a number of key themes, including the post pandemic economic recovery, the growth in digitisation, and the electrification and decarbonisation of the energy chain.
The Division continues to see opportunities to expand its renewable energy portfolio, which now provides access to assets with a renewable energy capacity of more than 35 gigawatts including projects under construction. Its exposure to renewables is evenly split across developed and emerging economies, with a particular focus on established technologies such as wind, solar, hydro, biomass, energy from waste and battery storage. The team is also collaborating with knowledge partners to explore energy transition opportunities that are much earlier in their evolution, often employing innovative and new technologies, as the decarbonisation process deepens.
Given the existing size and maturity of its portfolio, the Division’s emphasis in 2022 and beyond will be on selective, larger-scale acquisitions, as well as platforms that enable consistent deployment of capital alongside partners.
