Strategy - Key Features
Cube seeks to combine regular yield with capital appreciation through a platform build-up and growth strategy. By targeting regulated, brownfield infrastructure in Europe, focusing on sectors benefiting from a changing regulatory environment, market consolidation opportunities and strong downside protection, this strategy provides investors with predictable, infrastructure-type cash flows and capital appreciation through a well-targeted platform build-up of the Fund’s portfolio companies.
Cube focuses on strategic infrastructure markets offering sustainable growth potential principally driven by deregulation and/or market consolidation needed to improve the efficiency of infrastructure & public services, notably Energy Supply, Communication Infrastructure, Public Transport and Waste Management.
Cube positions its investment strategy in the lower end of the risk spectrum, focusing on brownfield, regulated infrastructure assets operating on availability-based contracts, in growth sectors in Western Europe where the legal, regulatory and political environment is usually seen as more stable than it is in the emerging markets.
Rather than being a pure financial player, Cube positions itself as a strategic partner, bringing both capital and management expertise to its portfolio companies. The assets are managed proactively, with a long-term perspective, based on the team’s expertise and its long-standing ties with infrastructure contractors, operators and public authorities.
Strategic Sectors
The need for investment in infrastructure in the coming years remains considerable and investment is particularly needed in areas such as public transport, district heating & cooling, telecommunication ultra-high broadband networks, waste management, water treatment & distribution and clean power generation. The required levels of infrastructure investment cannot be funded by traditional sources of public finance alone. Institutional investors, such as pension funds, insurance companies and mutual funds, are expected to play a more active role in bridging the infrastructure gap.
Energy Supply
The high cost of fossil fuels and the need to limit carbon emissions, drive local authorities to increase investments in more efficient heat and cooling generators and networks. As local authorities in Western Europe currently lack the financial strength to carry out these investments, the need to rely on private capital has grown. At the same time, the drop of electricity prices in Europe puts highly levered energy utilities under pressure to sell assets such as grids and district heating networks.
Communication Infrastructure
Fiber optic high speed broadband communications networks need to be deployed to cope with the capacity and speed of data transfer now required by 4G and HD technologies which can no longer be handled by traditional copper cable networks. The roll-out requires massive investments which cannot be financed solely by telecom operators (in particular in low density areas). According to the OECD, between €181 billion to €268 billion of capital investments are required by 2020 in order to achieve the broadband targets that have been set by the European Union. (Source: “Pension Funds Investment in Infrastructure Survey”, OECD, 2011)
Public Transport
Most European countries are opening up their public transport markets to break historical mono/duopolies upon request of local communities looking for more autonomy towards central governments. Local communities are also focusing on developing public transport in order to reduce traffic congestion and air pollution attributable to private car traffic which still represents the dominant means of transport.
Waste Management
In Europe, each person currently uses 16 tonnes of material per year, out of which 6 tonnes become waste. Reducing and managing the treatment of waste is one of the key challenges and concerns of local communities today. Private operators and private investments are part of the European waste management landscape historically, and they have an important role to play going forward as well turning waste into a resource.
Asset Management
Rather than being a pure financial player, Cube positions itself as a strategic partner, bringing both capital and management expertise to its portfolio companies. The assets are managed proactively, with a long-term perspective, based on the team’s expertise and its long-standing ties with infrastructure contractors, operators and public authorities. As a consequence, Cube seeks management control, or co-control positions in each of its Fund’s portfolio companies, and requires board seats, in order to actively participate in choosing each of the companies’ executive management teams and in defining their strategic vision, business plans and budgets.