An interview with First State Investments

Established in 1988 in Australia, First State Investments is a global asset manager with approximately AUD 223bn of assets under management.

Established in 1988 in Australia, First State Investments is a global asset manager with approximately AUD 223bn of assets under management.

First State launched its third European infrastructure fund in September 2019, with a EUR 3.5bn target and a focus on mature assets in the energy, transportation and utility sectors.
Despite a period of change, caused by Brexit and other political changes across Europe, there remains an attractive pipeline of opportunities in European infrastructure, according to Mills.
First State recently closed the OU Utilitas transaction in Estonia on a bilateral basis, signed a deal to acquire the Vopak storage terminals, and purchased a substantial stake in OLT’s Italian offshore LNG terminal.

Reflecting on these deals, Mills says, “We are looking for well-managed businesses with high quality management teams, and assets with a long-term horizon, good environmental track-record and excellent customer engagement.

“Good relationships with the local community are another decisive factor when assessing opportunities in the infrastructure sector.”

Several infrastructure sectors offer outstanding potential, according to Mills, with European countries having distinct, individual infrastructure development agendas.

“Transformation and innovation in technology are really impacting the electricity sector, which not only offers distribution companies the ability to control power demand more dynamically than even five years ago but is also preparing the network for electric vehicle roll-out, self-charging points, as well as other emerging demand-profiles,” says Mills.

A number of airport concessions as well as pure M&A opportunities have already come to market in 2019, with most transactions attracting multiple experienced bidders, including the likes of Vinci, Meridiam and ADP.

“Airport passenger numbers have grown a lot in the past 10-20 years and many major hub airports are near capacity. We have witnessed this with the ongoing UK debate around building more runways and terminals. We need infrastructure solutions, or we will encounter a capacity problem soon.” 

An ESG era 

ESG leadership is increasingly perceived as an intrinsic part of infrastructure businesses, and an area Mills identifies as assuming the highest importance. He says, “ESG has become a top priority for infrastructure investors. All of our investors and sector peers are trying to introduce strong ESG strategies and policies. This is because the sector is becoming increasingly aware of its social obligations and wants to do the right thing for the environment.”
According to him, businesses must display genuine commitment by implementing ESG standards from bottom-up.

“ESG is very much part of our business, it is not a built-on, it is not an extra, it is business as usual,” concludes Mills.