What does Infratil do?
Infratil is an infrastructure investor with a significant portfolio of investments in digital infrastructure, renewables, healthcare, and transport. These are defensive sectors supported by long term growth trends such as growing data usage, global decarbonisation and an increase in the ageing population. Current investments include renewable developments, data centres, diagnostic imaging, and more locally Vodafone, Wellington Airport and Manawa Energy (formerly Trustpower).
Infratil and their manager Morrison & Co have a strong track record of identifying these trends early and creating value through active management. This is evident with Infratil delivering an impressive shareholder return of over 18% per year since listing on the NZX in 1994.
Infratil has been a core holding across our NZ equity funds since 2019 where we participated in a capital raise by Infratil to fund the acquisition of Vodafone and we have subsequently increased our holdings. Infratil has been a strong performer since then with their share price increasing from $4.35 to above $9.00 today. This has been driven by their investments in renewable energy and Canberra Data Centres in particular.
Renewable Energy
Infratil was an early investor in renewables with their first investment being a minority stake in Trustpower back in 1994. Infratil went on to acquire control of Trustpower which continued to develop renewable energy in New Zealand and then in Australia.
In 2016 Trustpower spun out their wind generation and development projects into a new listed company called Tilt Renewables. Tilt was valued at about$600 million after being demerged and it has continued to develop renewables in both New Zealand and Australia. Growing demand for renewables and the quality of Tilt’s development pipeline saw the company acquired in 2021 for $3.1bn resulting in significant gains for Tilt shareholders including Infratil with a 65.5% stake.
Infratil went on to build renewable development platforms in North America in 2016 (Longroad) and more recently in Europe and Asia. Infratil has invested a net US$112m in Longroad since 2016 which recently sold a minority stake valuing Infratil’s investment at US$800m.
Both Tilt & Longroad are illustrative of Infratil’s expertise in renewables. Today Infratil has become a global leader in renewables with a 20GW development pipeline across 4 continents and 26 countries. To put that in context, New Zealand has c.10GW of installed generation capacity.
Canberra Data Centres
In 2016 Infratil acquired a 48% shareholding in Canberra Data Centres for A$392m which builds highly secure datacentres for customers including the Australian government. At the time the business had ~30MW of data centre capacity which is expected to grow to 268MW in 2023 with Infratil’s shareholding now valued at A$2.9bn. This has been driven by global themes of growing cloud adoption and data sovereignty, where countries including Australia and New Zealand have elected to keep important data onshore.
Vodafone has also been a successful investment for Infratil to date with Vodafone recently announcing the sale of their mobile towers for $1.7 billion. The transaction returns 80% of Infratil’s initial investment in Vodafone, while the mobile towers only contributed 10% of Vodafone’s earnings.
Outlook from here
In our view Infratil has an attractive portfolio of investments that had been underappreciated by the market prior to recent transactions. Long term success will be dependent on Infratil’s managers ability to continue to identify emerging trends for new investments and actively manage their portfolio including divesting assets where the outlook changes.