Infrastructure + Case Study: Power Transmission Platform
July 2022
AC Capitales – Legal Disclaimer
This presentation is strictly confidential and is being furnished to you solely for your information. It may not be reproduced or redistributed to any other person, and it may not be published, in whole or in
part, for any purpose. By receiving this presentation, you become bound by the above referred confidentiality obligation. Failure to comply with such confidentiality obligation may result in civil,
administrative or criminal liabilities. The distribution of this presentation in other jurisdictions may also be restricted by law and persons into whose possession this presentation comes should inform
themselves about and observe any such restrictions.
The sole and exclusive purpose of the document is to inform the investors and members of the committees of AC Capitales Infrastructure II, L.P, AC Capitales Fondo Infraestructura II, AC Capitales Fondo
Infraestructura II GP and any other parallel funds (together the “Fund”), about the status, performance and forecast of the Fund and its investments, and can not be used for any other purpose. This report
does not constitute an express or implied offer, recommendation or suggestion of investment.This presentation does not constitute or form part of any offer for sale or solicitation of any offer to buy any
securities in the United States or elsewhere nor shall it or any part of it form the basis of or be relied on in connection with any contract or commitment to purchase shares. Securities may not be offered or
sold in the United States absent registration or an exemption from registration under the US Securities Act of 1933, as amended (the “Act”). This presentation is being made only to investors that, by means
of their attendance at this presentation or their request to review this presentation, represent that they are “Accredited Investors” as that term is defined in the Act and “Qualified Purchasers” as defined in
the Investment Company Act of 1940, as amended. AC Capitales SAFI S.A. or any of its affiliates or subsidiaries (the “AC Capitales” or the “Company”) has not and does not intend to register any
securities of the Fund under the Act or offer any securities of the Fund to the public in the United States. Any decision to purchase shares in any offering should be made solely on the basis of the
information to be contained in the confidential offering memorandum of the Fund. This presentation has not been reviewed or authorized by Peru’s Superintendencia del Mercado de Valores (SMV), the
U.S. Securities and Exchange Commission or any other securities regulatory authority of any jurisdiction. No reliance may be placed for any purposes whatsoever on the information contained in this
document or on its completeness. All information in this presentation is subject to verification, correction, completion and change without notice. No representation or warranty, express or implied, is given
or will be given by or on behalf of the Company, any other manager or any of their respective affiliates, or agents, or representatives, or any of such persons’ directors, officers, employees or advisors or
any other person as to the accuracy, completeness or fairness of the information or opinions contained in this document and any reliance you place on them will be at your sole risk. In addition, no
responsibility, obligation or liability (whether direct or indirect, in contract, tort or otherwise) is or will be accepted by the Company, or any other person in relation to such information or opinions or any other
matter in connection with this document or its contents or otherwise arising in connection therewith.
The document may contain information that is not publicly available, and that AC Capitales had received as administrator of the Fund. This presentation includes forward-looking statements. All statements
other than statements of historical fact included in this presentation, including, without limitation, those regarding the Fund’s prospective resources, contingent resources, financial position, business
strategy, management plans and objectives or future operations are forward-looking statements. These forward-looking statements involve known and unknown risks, uncertainties and other factors, which
may cause the Fund’s actual resources, reserves, results, performance or achievements to be materially different from those expressed or implied by these forward-looking statements. These forwardlooking statements are based on numerous assumptions regarding the Fund’s present and future business operations and strategies and the environment in which the Fund expect to operate in the future.
Forward looking statements speak only as of the date of this presentation and the Fund expressly disclaims any obligation or undertaking to release any update of or revisions to any forward looking
statements in this presentation, any change in the Fund’s expectations or any change in events, conditions or circumstances on which these forward-looking statements are based. Information in this
presentation is as of December 2019, unless otherwise indicated.
Certain information contained in this presentation is based on, or derived from, information provided by third-parties. The Company believes that such information is accurate and that the sources from
which it has been obtained are reliable. The Company cannot guarantee the accuracy of such information, however, and has not independently verified the assumptions on which such information is
based. None of the Fund, the Company or any of their respective affiliates or subsidiaries assume any responsibility for the accuracy or completeness of such information.
2
A
Infrastructure: Defining Core, Core Plus and Value Add
4
B
Executive Summary
6
C
Origination
9
D
Operational Enhancement
11
E
Harvest & Exit
13
A. Infrastructure: Defining
Core, Core Plus and
Value Add
4
Infrastructure: Defining Core, Core Plus and Value Add
The Roots of the Infrastructure Asset Class and its Stand-Alone Categorization …
Infrastructure Investment History(1)
Infrastructure Classic (Old) Benefits
▪ For decades, Govts. have been eager to attract private capital and pension capital to help fund the infrastructure
▪ Long-term contracts with inflationary protection built into their pricing structures
needed
• Consistent cash flow
▪ In Australia and Canada, Infrastructure has become a mainstay of pension portfolios
Inflation hedge and
income
o Australia pioneered investing in infrastructure by creating a domestic market (90s)
▪ Provide critical solutions to society, providing a level of demand inelasticity and
ability to keep up with inflation (due to price escalators)
▪ Infrastructure is being considered equally vital to the performance of institutional investors’ portfolios as more
traditional and standalone asset classes
o After +2 decades of sector growth, risks were taken, and returns were enjoyed
o Europe, Asia and the US are still, overall, placing infrastructure within “alternatives allocation”
▪ Long-term contracted cash-flows offers insulation from economic cycles and factors
Infrastructure Categorization Evolution(2)
Low correlation to
broader markets
• Ties to essential services
▪ This has been exhibited via less correlation to the broader market than
traditional asset classes, such as public equities and fixed income
▪ This asset class is typically supported by regulation and often monopolistic
Private
Equity
Separate
Infra.
Allocation
2007
1)
2)
Alternatives
2019
Real
Estate
Real
Assets
2022
Source: IFM (´24)
Probitas Partners Infrastructure Institutional Investor Trends: ’07, ’19 and ‘22 Survey Results
Stable, risk-adjusted
returns
positions in existing markets that support consistent yield
▪ Stable cash flows provides upside potential for investors, with scale to build
platforms and drive operational initiatives
5
Infrastructure: Defining Core, Core Plus and Value Add
…And its Increased Allocation in the Biggest Asset Managers…
Biggest Global LPs
310bn
434bn
140bn
315bn
828bn
AustralianSuper
CDPQ
Infrastructure
Public Equities
1500bn
356bn
ADIA
Private Equities
Real Estate
Credit
570bn
CPPIB
Bonds
Others
6
Infrastructure: Defining Core, Core Plus and Value Add
Infrastructure Market Definition and AC Capitales PoV
Infrastructure Strategies(1) and AC Capitales Checklist (2)
Biggest Investors / AC Capitales definition
“
More Stable
Canada Pension Plan Investment Board
“
”
Investments with a combination of stable and predictable cash flows,
ability to pass through inflation and low risk of obsolescence. Their
returns tend to be resilient across macroeconomic cycles due to the
defensive nature of the underlying assets
“
Government of Singapore Investment Corporation
”
Fixed-assets that provide essential services with a combination of
stable, predictable and inflation adjusted incomes. Highly regulated,
high barriers to entry and generates high operating margins
AC Capitales General Partner
1)
2)
Source: Brookfield Annual Report . Oaktree (’24)
AC Capitales internal checklist
”
Less Stable
Value Add
Return
Long-term tangible assets with stable long-term cashflows and less
vulnerability to economic downturns. Such as regulated networks,
transportation and energy sectors
Cash Flow Stability
Core - Plus
Core
Risk
Fixed-asset intensive
Energy Generation
Telecomm.
Stable cash flow
Roads
Education
Health
Renewables
Airports
Energy Distrib.
Highly regulated
High barriers to entry
Essential services
Energy Transm. Water
High operating margins
Parking
7
Infrastructure: Defining Core, Core Plus and Value Add
The Infrastructure Universe
Infrastructure Assets
Income Driven
Growth Driven
Despite on the surface looking similar, no 2 infrastructure
assets are alike. They cover many different sectors, are at
different stages of lifecycle and vary widely regarding revenue
frameworks, cash flow/risk profile
+
Private Equity Style
▪ Utilities
▪ Electric, gas and water networks
▪ Renewable power assets
▪ Hydro, wind and solar generation
▪ Transport assets
▪ Seaports, airports, toll roads and rail
▪ Midstream networks
▪ Pipelines, processing and storage
▪ Data infrastructure
▪ Telecom towers, data centers and fiber
▪ Social infrastructure
▪ Hospitals, schools and public facilities
Value Add
Return
Core Plus
Core
Risk
+
▪ These assets exhibits similar key characteristics
▪ Capital Intensive
▪ High barriers to entry
▪ Low demand elasticity
▪ Long operational and useful life
▪ Relatively stable long-term cash flows (inflation
adjusted)
▪ Provide essential services
8
Infrastructure: Defining Core, Core Plus and Value Add
Infrastructure’s Secular Trends
The Biggest one is Energy Transition
Infrastructure Supported by Secular Growth Drivers
▪ Global energy transition will arguably be the most significant structural change undertaken since the early
industrial revolution
Energy & Environmental
Infrastructure
• Renewable energy and climate change adaptation methods
▪ The transition was triggered by a massive cost reduction of electricity generation in renewable energy and
strong fundamentals suggest a continued trajectory of lower electricity generation cost
Resource Efficiency
Decarbonization
Circular Economy
Decentralization
• Energy transition investments increased 734% since ‘13(1)
Electrification
• Strong declines in cost of “green” power(2):
Solar
US$/MWh
Wind
US$/MWh
Internet of Things
Network Sharing
Fast & Reliable
Edge & Latency-
Connectivity
Limitations
Cloud Adoption
EV Batteries
US$/MWh
Green Hydrogen
$/kg
Transport & Logistics
Infrastructure
3
120
Digital Infrastructure
Social Infrastructure
3
100
E-Commerce
2
0
2
0
1
40
1
20
Connectivity
Sustainable Supply
Accessible
Chains
Mobility
Automation
Healthcare
Global Population
Consumerization
Growth
Changing
Health &
Demographics
Wellbeing
0
0
0
1)
2)
Source: BloombergNEF, Energy Transition Ivestment trends (’24)
Source: Rocky Mountain institute The Energy Transition (’22)
9
B. Executive
Summary
10
Executive Summary
Growth/Add-On Case Study – Red Eléctrica del Sur S.A
The Asset
Company with various concession agreements to own and operate a network of approximately 800 kms of
power transmission lines and sub-stations in the Southern Andean regions of Peru
55.0%
45.0%
Platform
Sector(1)
100%
IC8020: Electricity
transmission
companies
BR10: Fully
contracted income
75.0%
II
Contracts
Grantor
Shareholders
Type: BOOT
MINEM
Red Elec. Int. (55.0%)
AC Capitales (45.0%)
Term: 30-yr
Expiration(2):
’31, ’44 and ‘4
Redesur
Tesur I, II, (III and IV)(3)
Key Investment Highlights
1
2
3
4
5
6
Industry
Expertise
Strategic Asset
Relevant Size
Stable and Predictable
Cashflows
Stable
Regulatory
Framework
Reputable Management
Highly experienced
operating partner
Transmission network that
serves 5 different regions of
Peru
Represented 44.8% of total
infrastructure investments of
the Fund
Fixed income related to
investment repayment, in
US$ and inflation adjusted
Regulations stablished in
’91, driven by technical
fundamentals
Experienced management
team and strong corporate
governance
All data presented as of January 2017, time of exit of AC Capitales’ Infrastructure Fund I
1) According to TICCS: The Infrastructure Company Classification Standard, EDHECInfra.
2) Redesur, Tesur I and Tesur II respectively
3) Developed/Acquired after AC Capitales’ exit
11
Executive Summary
Value Creation Levers Through the Investment Cycle
Origination/Sourcing
Operational Enhancement
Harvest Mode / Exit
Active searching
Ownership consolidation
Diligent negotiations
Internal discipline
Operational efficiency
Exploit network relationships
Strong fundamentals
Platform development
Reap target returns
Financial engineering
IRR
+
1
2
3
4
5
6
7
8
9
10
11
12
YEAR
12
C. Origination
13
Origination
A Team Active Searching for Opportunities with Strong Fundamentals and High Expected Returns
Active Searching
Internal Discipline
1
Investment Origination
2
Opportunity Assessment
Redesur won the
▪
▪
▪
Experienced asset manager
Specialized team members
Established proprietary network through access
to APOYO Consultoria’s network and
experience in public and private infrastructure
▪
Filters to determine if a given opportunity
qualifies (3 phases):
I) Initial assessment of the investment “go – no
go”
II) Review more detailed information to prepare
an NBO
concession in 9 ’
Idea
originated by
▪
AC Capitales
Proinversion
▪
tender to sell
State’s interest
Sole bidder.
3
Made the
Due Diligence & Execution
investment
Strong Fundamentals
High Barriers To Entry
Provide Essential Services
▪
▪
III) DD before presenting a binding offer
Scope of the DD considering specific
characteristics, situation and objectives of the
potential investment
Stable, Predictable And Inflationadj Income Through Long-term
Concesión Agreements
Highly Regulated
High Operating Margins
Relevant Minority With
Significant Influence Over The
Management And Rights
14
D. Operational
Enhancement
15
Operational Enhancement
A Local Partner Enhancing Value Through an Operations-Oriented Approach
Timeline
Consolidation of Ownership
US$ 4.4 mm to
acquire the 15%
owned by the State
3.75% owned by
Santander for US$ 1.1
million
US$ 8.5 mm to acquire 26.25% of
the stake and reach 45% of the
Company
Sold shares to
REI
05’
07’
3’
7’
Operational Relevance
Permission to qualify (by MINEM) as a strategic partner (as Red
Electrica del Sur - Peru) for future concession tenders
5’
Platform Development
Financial Engineering
Tesur won the
concession for
210km, in Arequipa
and Cuzco
Equity
contribution of
US$ 11.6 million
to develop
T2 won the
concession for
100km, in Puno
0’
’-
5’
’
1st securitization in Peru
to include 2 concessions
in a trust asset
At the time, the longestterm issue bond in the
local mkt (28 yr.)
5’
Securitization’s Use of Funds
Value Creation Activities
▪ Prepayment of debt at Redesur and project finance debt at Tesur
Consolidation of
Ownership
▪ Equity contribution for Tesur II
Promoted and actively
participated in the buy- out
of 2 initial shareholders
▪ Dividend recapitalization to shareholders
Tesur I
Tesur II
Financial Engineering
Promoted and co-led local
bond, consolidation of
operations, growth prospects
and distribution to shareholders
Platform Development
Promoted and actively
participated in origination,
screening and execution of
three greenfield tenders and two
brownfield acquisitions
Assisted in obtaining
permission to qualify as
strategic partner for
future concession
tenders
Company multiplied
by 2.5x – 3x in
terms of EBITDA
Dividends of US$
6.1 million
16
E. Harvest & Exit
17
Harvest & Exit
Diligent Negotiation with the Controlling Shareholder, Leveraging their Deep Knowledge of the Asset and Synergies
Cash Yield (%)
▪ Due to the good relationship built through the
Investment Period…
▪ …Ownership
sold
through
negotiated
sale
to
Red
a
privately
Eléctrica
Dividend Recapitalization
Dividends + Capital Reduction
Internacional, the controlling shareholder
44.4%
43.2%
▪ Entry Value: $25.5mm
▪ Exit Value: $29.0mm
22.1%
▪ IRR: 15.4%
9.2%
▪ MOIC: 1.9x
8.2%
7.4%
7.6%
6.8%
2.4%
–
2005
2006
2007
2008
2009
2010
2011
2012
2013
–
2014
–
2015
2016
18
Harvest & Exit
Diligent Negotiation with the Controlling Shareholder, Leveraging their Deep Knowledge of the Asset and Synergies
▪ Xx.
▪ X
▪ X
▪ X
▪ X
▪ X
▪ x
19
Harvest & Exit
Diligent Negotiation with the Controlling Shareholder, Leveraging their Deep Knowledge of the Asset and Synergies
20