IFT - Infratil

[kiora]

Wonder if this will impact long road at all

https://acore.org/resources/the-risk...y-investments/

Unlikely?

https://acore.org/resources/the-risk...y-investments/

"The Risk Profile of Renewable Energy Tax Equity Investments"
"Conclusion

The federal renewable energy tax credit program, with its proven track record, continues to be a driving force behind the ongoing energy transition. Through tax equity investments, banks will continue to play a pivotal role in monetizing these tax credits and creating significant liquidity in the market.

Renewable energy tax equity structures have protective features that shield investors from project risks and protect their returns even in downside cases. Tax equity investments are not speculative in nature and have a different risk profile than traditional equity investments, with their value driven primarily by tax benefits. The tax equity investor’s position is senior to the project sponsor’s junior equity, providing a priority in earning returns and avoiding structural subordination to long-term debt. These investments are underwritten to be robust and are structured to perform well under various stress scenarios. As recognized by the OCC, tax equity has more loan-like characteristics than true equity investments.

Moreover, the historical performance of exited renewable tax equity investments, as well as projections for current investments, demonstrate overwhelmingly positive yields. The risks from recapture, foreclosure, and bankruptcy have had no or significantly limited impacts on investors’ overall portfolios. Absent new policy impediments, the low-risk profile of renewable tax equity will continue to attract considerable capital from banking investors seeking stable returns."

[huxley]

“Senior Wall Street bankers are warning that a plan by US regulators to rewrite the rules of tax-equity investing will deliver a major blow to a market dominated by JPMorgan Chase & Co. and Bank of America Corp.At issue is the perceived risk of tax-equity investments, which are a form of financing in which banks provide capital to green projects in exchange for tax credits. It’s a market in which JPMorgan and BofA have been estimated to do more than 50% of the roughly $20 billion worth of annual transactions. ”

https://www.bloomberg.com/news/artic...ign=moneystuff

[huxley]

If the risk weighting were to change for the banks who fund these projects then it may make it more difficult to finance Longroads projects?

[mike2020]

Back to boring and $10?

[Swala]

I think it's just a reflection of the general market malaise at present.

Back to boring and $10?

[3141592]

Been a while since i've posted on this thread. Had some time to digest the investor day packs and watch the presentation. So a few random thoughts.
IMHO IFT remains the best placed risk adjusted public investment on NZX by a long shot. So many tail winds are in evidence, but particularly the AI growth into datacentre deployment, into data infrastructure growth and finally into green renewable energy demand. IFT sits across so many strong thematics / tail winds / growth areas. Beautifully positioned / poised!

Rate of increase in datacentre deployment in both CDC and KAO (not material in KAO but maturing nicely and is only a couple of years off of being very meaningful) is astonishing.
In active construction they appear to have more than 140% of existing capacity - that's not a pipeline, that's in active construction. The pipeline of owned sites plus the active construction is 350% increase against the existing deployed operational asset.

At the very end of the presentation, to help finance this the CEO of CDC noted that specialist banks in the US that support datacentres have never analysed a higher average credit rating across their client base and seen a longer forward sales contract profile than CDC and from a banking perspective it put them in the lowest risk data centre globally (not the lowest risk category, but the lowest risk of any data centre. So that's a pretty strong sound bite particularly when taken with their impressive growth - low risk high growth - hmmm - how many businesses have that?... That’s why IFT have noted that CDC is a core and growth asset simultaneously - it’s just incredibly capitally intense as it ramps to a gwh.

The renewables highlights for me - the development cover that Long road released for their 1.5gwh per annum target, they appear to be very confident that they had the depth of pipeline to ensure they would BOTH hit the rate of increase and also ensure that the final projects chosen would meet or exceed their target return profile. The depth of pipeline had grown so much the execution risk looks to be a lot lower than it appeared say as a BHAG style target two years ago… now they horizon for $600m EBITDA doesn’t look that far off and one can easily see it go to $1bn EBITDA within this decade… Gurin the Asian renewable business also looked like it's on a roll largely driven by the Singaporean opportunities that have ramped up it's near term pipeline to be 5 times higher than expected at this stage of its maturity. IFT mentioned its progress with some pride - so we should see that business blossom within the next 3 years.

The delta between their internal valuations, the independent valuation and the further negative delta to market cap appears wider than ever - and the new CFO is working with analysts to increase disclosures to help analysts improve their valuation capability and ergo close the gap to a perceived higher intrinsic value. This is always inherent within the long term manager controlled infrastructure fund but the discount should remain consistent and the growth of asset value remain discounted but inline with real commercial evaluations. I think that the core market cap has not risen as quickly as their internal assessments, so there’s a greater buy case now than ever…

They noted that organic opportunities appeared to be significant, easy to originate, in known fields and have higher returns in general than / vs inorganic and so we'll wait to see how IFT structures the financing of those growth plans - as their growth assets have huge potential and their core assets can’t grow sufficiently to fund all growth optionality. So we'll see how that plays out. Will they raise and rip into the opportunities or manage to milk the gearing levels given the quality of underlying earnings. One things for sure there could not be a better manager to support them through their capital allocation and capital structure programmes than MCO.

MCO discussed their strongly aligned position with IFT given level of equity ownership beyond their fee structure. They were intent on providing higher returns than their impressive track record as a badge of pride. Reiterated that their 10 and 30 year return profiles were basically in the top 10% of any fund in this space and only beaten by closed end time frame funds who presumably had one or two lottery outcomes - not quite the same as their record given the length of tenure...

Other items of note in no particualar order
The airport would be back to pre covid cash generating levels in 2024
One NZ delivered or exceeded IFT base case in recent buy out and was tracking positively, I still don't see the fit of holding a mature domestic telco - but they've made an astonishing return by buying an underperforming asset and releasing the business potential through divestment of towers, simplification and improved management in the core business. I'd prefer to see it rolled off - but if can be a massive cash cow both retained or sold down - and Jason Paris is such a strong leader hard not to enjoy seeing it steadily mature. I always enjoy the interplay across JP and GB the respective CEOs of One NZ and CDC and One tries to keep up with that datacentre business growth and shine bright in a galaxy of dazzling stars..

Concerns. Not many...
Growth pains, how to finance the optionality!
Eternally waiting for Galileo to make some real traction
Holding too much value in a large domestic telco - with substantial gearing - could some black swan event upset that apple cart and dent the trajectory...
Not much else.
Still believe if the NZ analysts community were asked their 5 year share price targets rather than their dumb broker fuelled 1 year spot price targets they'd universally say IFT and we'd see so much greater recognition.... hey ho, let's hope the new CFO can speed up the depth of disclosure and the NZ analysts can ask their clients to tuck away their portoflio's for a decade in this asset (yea right! goodbye broker fees).

[Swala]

Excellent post, thank you.

[Ggcc]

Been a while since i've posted on this thread. Had some time to digest the investor day packs and watch the presentation. So a few random thoughts.
IMHO IFT remains the best placed risk adjusted public investment on NZX by a long shot. So many tail winds are in evidence, but particularly the AI growth into datacentre deployment, into data infrastructure growth and finally into green renewable energy demand. IFT sits across so many strong thematics / tail winds / growth areas. Beautifully positioned / poised!

Rate of increase in datacentre deployment in both CDC and KAO (not material in KAO but maturing nicely and is only a couple of years off of being very meaningful) is astonishing.
In active construction they appear to have more than 140% of existing capacity - that's not a pipeline, that's in active construction. The pipeline of owned sites plus the active construction is 350% increase against the existing deployed operational asset.

At the very end of the presentation, to help finance this the CEO of CDC noted that specialist banks in the US that support datacentres have never analysed a higher average credit rating across their client base and seen a longer forward sales contract profile than CDC and from a banking perspective it put them in the lowest risk data centre globally (not the lowest risk category, but the lowest risk of any data centre. So that's a pretty strong sound bite particularly when taken with their impressive growth - low risk high growth - hmmm - how many businesses have that?... That’s why IFT have noted that CDC is a core and growth asset simultaneously - it’s just incredibly capitally intense as it ramps to a gwh.

The renewables highlights for me - the development cover that Long road released for their 1.5gwh per annum target, they appear to be very confident that they had the depth of pipeline to ensure they would BOTH hit the rate of increase and also ensure that the final projects chosen would meet or exceed their target return profile. The depth of pipeline had grown so much the execution risk looks to be a lot lower than it appeared say as a BHAG style target two years ago… now they horizon for $600m EBITDA doesn’t look that far off and one can easily see it go to $1bn EBITDA within this decade… Gurin the Asian renewable business also looked like it's on a roll largely driven by the Singaporean opportunities that have ramped up it's near term pipeline to be 5 times higher than expected at this stage of its maturity. IFT mentioned its progress with some pride - so we should see that business blossom within the next 3 years.

The delta between their internal valuations, the independent valuation and the further negative delta to market cap appears wider than ever - and the new CFO is working with analysts to increase disclosures to help analysts improve their valuation capability and ergo close the gap to a perceived higher intrinsic value. This is always inherent within the long term manager controlled infrastructure fund but the discount should remain consistent and the growth of asset value remain discounted but inline with real commercial evaluations. I think that the core market cap has not risen as quickly as their internal assessments, so there’s a greater buy case now than ever…

They noted that organic opportunities appeared to be significant, easy to originate, in known fields and have higher returns in general than / vs inorganic and so we'll wait to see how IFT structures the financing of those growth plans - as their growth assets have huge potential and their core assets can’t grow sufficiently to fund all growth optionality. So we'll see how that plays out. Will they raise and rip into the opportunities or manage to milk the gearing levels given the quality of underlying earnings. One things for sure there could not be a better manager to support them through their capital allocation and capital structure programmes than MCO.

MCO discussed their strongly aligned position with IFT given level of equity ownership beyond their fee structure. They were intent on providing higher returns than their impressive track record as a badge of pride. Reiterated that their 10 and 30 year return profiles were basically in the top 10% of any fund in this space and only beaten by closed end time frame funds who presumably had one or two lottery outcomes - not quite the same as their record given the length of tenure...

Other items of note in no particualar order
The airport would be back to pre covid cash generating levels in 2024
One NZ delivered or exceeded IFT base case in recent buy out and was tracking positively, I still don't see the fit of holding a mature domestic telco - but they've made an astonishing return by buying an underperforming asset and releasing the business potential through divestment of towers, simplification and improved management in the core business. I'd prefer to see it rolled off - but if can be a massive cash cow both retained or sold down - and Jason Paris is such a strong leader hard not to enjoy seeing it steadily mature. I always enjoy the interplay across JP and GB the respective CEOs of One NZ and CDC and One tries to keep up with that datacentre business growth and shine bright in a galaxy of dazzling stars..

Concerns. Not many...
Growth pains, how to finance the optionality!
Eternally waiting for Galileo to make some real traction
Holding too much value in a large domestic telco - with substantial gearing - could some black swan event upset that apple cart and dent the trajectory...
Not much else.
Still believe if the NZ analysts community were asked their 5 year share price targets rather than their dumb broker fuelled 1 year spot price targets they'd universally say IFT and we'd see so much greater recognition.... hey ho, let's hope the new CFO can speed up the depth of disclosure and the NZ analysts can ask their clients to tuck away their portoflio's for a decade in this asset (yea right! goodbye broker fees).

Great post and most of my Task cash will go into this share at some point. I have added a small parcel for now, but honestly we need Blackpeter to give the negative side of investing with IFT, I just don’t see them!!!

[Leemsip]

Thanks Pie. Good post

[mike2020]

Thanks. I enjoyed the read. I have been building a small holding. Its one of the few nzx assets I have real long term confidence in lately.