Maple-Brown Abbott (MBA) is turning off gas and switching more to electric in its global listed infrastructure strategy as the world adjusts to a low-carbon energy future.
In a new paper published last week, the Australia-headquartered MBA says its analysis suggests electric utilities will be the major beneficiaries of global climate change energy policies while gas faces several challenges.
“We have put our research into practice with respect to the investment opportunities we currently see globally – as of 31st December 2020, approximately 29% of our portfolio is exposed to electric utilities, versus approximately 1% in gas utilities,” the report says. “This compares to 22% and 4% exposure to electric and gas utilities in the same period two years ago (31st December 2018).”
Titled ‘The impacts of the energy transition on infrastructure needs in the US’, the MBA study says while the electrification trend appears entrenched across many countries and sectors, the “outlook for gas utilities remains a lot less certain, and much more dependent on unique factors and/or unproven technologies”.
But according to the report, regulated electric utilities – including generation and distribution networks – offer a more attractive way to access growth in low-carbon energy compared to commercial renewable operators.
The paper says commercial renewable companies are currently over-valued compared to regulated utilities with a “stark divergence between the stock performance” of the two energy sub-sectors.
Furthermore, the MBA report says the commercial renewable sector presents some risks for investors such as opaque ownership structures, the relatively small size of companies and the dominance of developers (rather than long-term owners) in the solar market.
“For all these reasons, at this point in time, we see more compelling opportunities to participate in the renewable investment opportunity through regulated electric utilities, and not through commercial renewable companies,” the paper says.
“… In our opinion, electricity transmission and distribution network owners are favourably positioned to benefit from the transition to a low carbon economy. We find the regulated returns that they receive on these investments to be stable and predictable and provide an attractive risk-adjusted return.”
The study – authored by a group including MBA global listed infrastructure managing director, Andrew Maple-Brown – covers a number of trends and technical developments in the energy industry including hydrogen, battery technology and storage innovations.
“As global energy needs continue to evolve, we believe it is critical for infrastructure investors to continue monitoring these trends, as they will have a significant impact on the growth outlook for these businesses,” the report says.
MBA manages over A$1 billion in its global listed infrastructure fund, which is represented in NZ by third-party marketing firm, Heathcote Investment Partners. In 2019, MBA secured its first major institutional mandate in NZ after winning a $250 million allocation (now likely more than doubled) from ANZ Investments.