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The ongoing industrial transformation

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Traditional European infrastructure is going through a period of transition. Digital communication technology and a push towards sustainable energy production is leading to a move away from a centralised, regulated and vertical model to more of a distributed, connected model that scales laterally.

This is giving rise to a slew of new investment opportunities in key areas such as transport and e-mobility, sustainable energy and digital communication as EU countries seek out ways to upgrade ageing infrastructure to respond to 21st century living.

One of the key components to making this happen is having the right investment partners to bridge the gap between corporates requiring fresh injections of private capital and institutional investors, keen to invest in long-term, yielding real assets.

Conquest Asset Management is one such partner. It was established in 2010 to offer strategic and financial advisory services to corporates. Then, in 2016 it added an asset management arm, independent from the advisory business line, to benefit from the on-going industrial transformation driven by corporates by establishing a dedicated investment fund vehicle; in so doing, introducing investors to some of the most innovative investment opportunities currently emerging.

Today Conquest is pursuing a strategy which echoes some of today’s economic mega trends to create a more sustainable infrastructure market. Key sectors targeted by Conquest include Energy & Utilities, Renewables, Transport & Mobility and Digital Infrastructure and Data Management.

“We are the new smart kid on the block as asset managers but not in terms of the team’s experience, which cumulates decades of members having worked together and even more regarding the team’s global infrastructure exposure,” explains Frederic Palanque (pictured), Director at Conquest.

“We bring a strong, in-depth industrial view to an infrastructure sector that is going through transformation. Our team started in 2010 working as financial advisors to the infrastructure sector. Some of our clients are tier one institutional investors including pension funds who started asking us not only to advise but to manage on their behalf, investments in sustainable real assets.

“This crystallised in 2016 with the formation of Conquest Asset Management.”

Philippe Taillardat is Director at Conquest and brings 25 years’ experience to the table, his most recent position being Co-Head of Infrastructure Investments Europe at First State Investments. He explains that with its close links to the industrial sector, Conquest is uniquely positioned to advise institutional investors on new investment opportunities.

“We harvest the unique relationship we have with industrial players to source proprietary deals. Instead of looking at just plain vanilla infrastructure e.g. roads, ports, highways, we go deeper into sub-sectors. This is because our team is able to sit with corporates to help them restructure their balance sheet and they trust us because we’ve done this with them for years.

“We ring fence the right investment opportunity, which mirrors our investment strategy and bring it to our institutional clients,” explains Taillardat.

Conquest’s experience allows it to develop insights and views on next generation developments within different sub-sectors which could become interesting investment sectors. Palanque was formerly the group head of M&A at Schneider Electric, managing all its investments in sustainable energy and overseeing the transformation of the medium voltage grid across the globe.

“On a day-to-day basis we speak with global CEOs of infrastructure groups to see how we can help to finance and support the transition of the infrastructure sector. We see a significant shift towards more digital, more connected infrastructure; in the energy space, in transportation (electric cars and smart mobility), and certainly within digital infrastructure. In one of my earlier roles at Areva T&D, we invested in energy transition from the formal energy grid to the digital grid we are witnessing today,” says Palanque.

Conquest views the political decision by Europe to change its power generation mix by increasing the proportion of renewables as one of the triggers for the digital transformation. However, it is incumbent upon the corporates to play their role. Naturally, local regulators and governments need to be on board but as Taillardat stresses, “the corporates are key to making this transformation happen”. “Initially it was a political decision and what people didn’t anticipate was the consequences this would have on Europe’s electricity markets and the need to change a vertically organised network into a more lateral distributed network,” says Taillardat.

Take electric cars as an example. This requires charging points in the cities. The issue today, however, is countries lack the right distribution electrical network to support these charging points.

“It’s a good decision to move to renewables and electric cars but to get there you need to make a lot of changes to the existing medium voltage networks, which requires a lot of capital,” says Palanque.

“The starting point was changing the generation mix. Before you used to have a limited and centralised generation plants to produce electricity. Now you’ve got disperse and multiple small generation plants, in particular for renewables. But there are reliability issues – when there’s no sun or wind you’ve got no electricity and you find yourself missing X per cent capacity. This intermittency issue requires new solutions, such as battery storage, and increased load management.”

How to use digital to make energy markets more efficient is also becoming an important trend that Conquest are playing close attention to.

Palanque explains that in addition to the digital transformation, the underlying enabling infrastructure needs to be upgraded as well. It needs, he says, to be “upscaled and upgraded” to cope with the digital revolution unfolding.

“It will require a number of solutions, which, when combined will provide the necessary agility.

“First you have the electrical network. To make it cleaner, people have heavily invested in renewables. But the more you invest into it, the more you disrupt the network. In addition to this investment, you need to start working with the networks to invest elsewhere to maintain stability. This includes areas such as storage but it could also include upscaling grid substations.

“In parallel, electrical cars are going to become more broadly used, which will require a more decentralised energy network and this again, will require additional investment. Powering electric cars was not a consideration in medium voltage networks in cities. They were built to allow you to put the lights on at home and switch on your TV.

“Charging electric cars will require using a primary network, which is more of an industrial scale network. This intermediary network will need to be the one available in the cities and suburbs to enable people to charge and operate their electric cars,” outlines Palanque.

Palanque’s argument is that on the one hand, switching to cleaner energy supplies will admittedly lead to increased investment in renewables but that’s only half the story. On the other hand, if European governments want cleaner cities and transport, it will have a huge impact on the existing electrical network; one that will require huge investment that the state alone cannot cope with. It will need private capital working with industrial capital.

“This is the proposition we bring to investors: spotting investment opportunities for our standalone vehicle and co-investment vehicle, depending on the project and the country, ahead of other asset managers. We want to make sure the projects we select are in the best interests of our investors,” concludes Taillardat. 

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