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Speaker 1: Kyorder, Welcome to Shared Lunch, brought to you by Chairs's.

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Speaker 1: I'm Brook Roberts, one of the co founders in Cocosa Chass.

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Speaker 1: Today we are joined by Jason Boys, the CEO in

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Speaker 1: rim Fatil. We're going to be talking about data centers

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Speaker 1: with their investment in CDC Renewable Energy, their one billion

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Speaker 1: dollar divestment plan, in Frattil's portfolio, and a whole lot more.

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Speaker 1: But before we get started, here's some important information.

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Speaker 2: Investing involves with risk you might lose the money you

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Speaker 2: start with. We recommend talking to a licensed financial advisor.

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Speaker 2: We also recommend reading product disclosure documents before deciding to invest.

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Speaker 2: Everything you're about to see and here is current at

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Speaker 2: the time of recording, Ook.

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Speaker 1: Cure to welcome, Thanks for coming on Shared Lunch and

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Speaker 1: chatting to us. All things in Fratill. And you know,

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Speaker 1: Infratil has got such a wide ranging portfolio, so we'll

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Speaker 1: dive deeply into them, you know, starting with CDC the

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Speaker 1: data center side of things. But before we do, really

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Speaker 1: intrigued on you know, what Infantel's view in terms of

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Speaker 1: what's happening in the world at the moment, and what

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Speaker 1: do you think INVESA should be really thinking about.

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Speaker 3: From an infantil perspective. We don't really use a lot

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Speaker 3: of liquid fuel in the individual businesses, so we're reasonably

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Speaker 3: insulated there. The airport obviously has an exposure through in

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Speaker 3: New Zealand, which is doing it really tough kind of

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Speaker 3: for us all like critical infrastructure, right, so we will

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Speaker 3: see a bit of an impact there. When you look

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Speaker 3: out at the world though, the thing that's moving a

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Speaker 3: lot that really we think about a lot as long

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Speaker 3: interest rates, so tenure bond rates in Australia, the US

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Speaker 3: and New Zealand have reacted really strongly. You know, you're

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Speaker 3: sort of mid to high fours and a lot of

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Speaker 3: those cases, which is extremely impactful over a six month period.

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Speaker 3: You're talking about fifty basis points, you know, half a

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Speaker 3: percent on a long datded set of cashlows, which is

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Speaker 3: what infrastructure is that can move your evaluation by like

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Speaker 3: a billion dollars. It's just a lot, right, It's a

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Speaker 3: dollar dollar a share, and I feel like if you've

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Speaker 3: been watching our share price over the last three months,

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Speaker 3: the market really anticipated that quite early on. Actually in January,

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Speaker 3: we all came back quite bad. Inflation prints out of

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Speaker 3: Australia and New Zealand. And then obviously the war has

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Speaker 3: kind of compounded it, and in some ways the market

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Speaker 3: was a little bit right, I think in terms of

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Speaker 3: I think it was about a billion that came out

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Speaker 3: as people anticipated those long rates. Have they gone too far?

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Speaker 3: I think there's a strong case that they are anticipating

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Speaker 3: quite a bad outcome to stackflation outcome. You've got no

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Speaker 3: growth to offset higher interest rates and higher inflation. It's

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Speaker 3: not as zero risk though, so you know, they might

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Speaker 3: be right, they might be wrong. But then on the

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Speaker 3: other side, we are seeing and you might see this

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Speaker 3: as well in your flows, as a real interest in

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Speaker 3: defensive stocks places to hide. And I think we've definitely

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Speaker 3: seen that, and our share approach has actually been quite

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Speaker 3: resilient since that kind of interest rate anticipation and good

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Speaker 3: growth over the last week. So you know, places where

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Speaker 3: you've got steady cash flows that aren't super exposed to

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Speaker 3: kind of growth up or down. In the past, those

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Speaker 3: have been a little bit boring for people, right, but

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Speaker 3: definitely seeing a real comeback in the market on those

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Speaker 3: sorts of things. And then I guess lastly, actually when

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Speaker 3: we created this portfolio ten years ago. Now we were

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Speaker 3: anticipating a recentably low growth world and we're really trying

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Speaker 3: to find places to hide which had really resilient growth

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Speaker 3: in strong downside protection. So again with that kind of

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Speaker 3: defensive lens of mind, I feel like digital infrastructure has

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Speaker 3: some really strong tailwinds. Renewable energy is getting a kind

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Speaker 3: of another shot in the arm through this, those elements

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Speaker 3: of the business feel like they will do well in

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Speaker 3: a kind of messy world.

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Speaker 1: Yes, so a lot on your mind. How do you

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Speaker 1: manage it all? You know? And I'm just even thinking

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Speaker 1: about your treasury.

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Speaker 3: Yeah, Yeah, there's a lot of people in Morrison's two

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Speaker 3: hundred people. There's a treasury team that were really busy,

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Speaker 3: and a strategy team, and then there are people who

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Speaker 3: are teams that are across their individual assets and a

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Speaker 3: lot of the job is receiving, coaxing out of them

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Speaker 3: all their kind of current views and then trying to

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Speaker 3: merge it into twists, tilts or total changes in strategy.

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Speaker 1: So if we dive into one part of the strategy,

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Speaker 1: which is data centers, and you know you own to

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Speaker 1: own CDC about eight billion dollars, I believe when you

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Speaker 1: last took to us only around a forty percent state,

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Speaker 1: now around fifty percent state. Why do you have that strategy?

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Speaker 3: So we own just under fifty percent, we have more

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Speaker 3: than that, a bit more than fifty percent, and voting terms,

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Speaker 3: we bought a little bit at the start of last year,

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Speaker 3: as you say. But really kind of more interesting is

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Speaker 3: it is one of our biggest weights in our portfolio.

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Speaker 3: So I think we have forty percent or so off

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Speaker 3: the portfolio invested in CDC data centers, and it's a

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Speaker 3: massive investment theme for us. And it's you know, we

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Speaker 3: didn't do that overnight. This is something that's emerged over

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Speaker 3: the ten years that we've held that business, and you know,

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Speaker 3: our approach really is to stay really close to the es,

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Speaker 3: it's particularly the big one. So we've been sitting on

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Speaker 3: the board, we've been working with the management team. We've

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Speaker 3: seen how they developed over time, as well as reading

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Speaker 3: externally all the stuff everyone reads about the growth in

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Speaker 3: data centers. And we're still incredibly high conviction obviously with

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Speaker 3: its weight in the portfolio. On the business, it's kind

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Speaker 3: of gone through two or three waves in our ownership time.

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Speaker 3: It was actually originally designed to take advantage of outsourcing

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Speaker 3: of data centers from government. That was good, but it

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Speaker 3: got a massive shot on the arm when Cloud came along,

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Speaker 3: and you know that was probably tailing off a little

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Speaker 3: bit two years ago and then AI and AI Cloud

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Speaker 3: is now really driving that whole business on still fundamentally

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Speaker 3: and incredibly attractive terms, and in a business that we

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Speaker 3: believe has some real structural advantages to capture you know,

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Speaker 3: more than its fair share of that growth.

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Speaker 1: And what are some of those structural advantages.

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Speaker 3: Yeah, we talked about a bit of that in Sydney

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Speaker 3: last week. Greg I think outlined really well where he

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Speaker 3: sees the advantage of the business today in a kind

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Speaker 3: of AI focused market for data centers. The two that

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Speaker 3: really stand out to me one, it's capital structure, so

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Speaker 3: because of its mix of business is very high credit

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Speaker 3: quality oriented, long term contracted. He often talks about he's

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Speaker 3: never lost a customer that creates a kind of credit

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Speaker 3: profile that enables them to invest earlier in land and

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Speaker 3: power in the right locations to them win contracts later on.

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Speaker 3: And that is proving to be incredibly important in this

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Speaker 3: phase where the builds have got bigger and bigger and

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Speaker 3: the contracts have got bigger and bigger. So you know,

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Speaker 3: to buy a decent plot of land in and around Sydney,

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Speaker 3: you could be talking four five hundred million dollars Aussie.

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Speaker 3: And then to develop the power infrastructure, that's one hundred

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Speaker 3: two hundred million more dollars as well before you can

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Speaker 3: then go out and really win a contract in the market.

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Speaker 3: And that's capital structure is proving, I think, to be

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Speaker 3: a very strong advantage. And the other one which stands

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Speaker 3: out to me anyway is what he calls this closed

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Speaker 3: loop liquid cooling, and so data centers in general, certainly

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Speaker 3: talking to my teenagers kids, AI and general, I think

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Speaker 3: it's a bad rap, and rightly so in some ways

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Speaker 3: for using water. And that's data centers that evaporate water

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Speaker 3: to more efficiently call the computing infrastructure inside. CDC does

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Speaker 3: not use that technology. It uses a different technology where

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Speaker 3: you fill up the data center once and the same

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Speaker 3: water just gets reticulated around, reticulated around in a loop

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Speaker 3: and it's chilled using chillers on the roof and a

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Speaker 3: whole heap of other smarts before it goes down into

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Speaker 3: the data center, so it's not actually using water. And

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Speaker 3: for a bunch of kind of I think happenstance reasons.

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Speaker 3: That is what CDC's always done. I think that's going

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Speaker 3: to prove to be an incredibly big advantage in terms

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Speaker 3: of getting development approvals, community acceptance and all those things

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Speaker 3: which are really important because these structures are really big.

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Speaker 3: So that's a real advantage for them as well.

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Speaker 1: Yeah, I mean making that bet ten years ago that

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Speaker 1: would have seemed quite futuristic, really and now you know,

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Speaker 1: obviously that's really you can see the trajectory of AI.

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Speaker 1: How do you assess the future demand of you know,

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Speaker 1: AI products.

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Speaker 3: I wake up in the morning thinking about CDC and AI,

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Speaker 3: and I go to sleep and not thinking about it.

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Speaker 3: It's like one of the biggest calls we'll probably make

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Speaker 3: in our collective investment careers. And we listen to what

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Speaker 3: Greek tells us the customers are taking. We have, as

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Speaker 3: I said Morrison, as two hundred people all around the

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Speaker 3: world investing in infrastructure, and a lot of them are

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Speaker 3: spending time thinking about data centers, thinking about fiber, thinking

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Speaker 3: about the implications of AI, and so you've got a

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Speaker 3: lot of I guess inputs coming through on which to

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Speaker 3: form a kind of investment view. I would say it's

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Speaker 3: been a little bit easier actually over this last period

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Speaker 3: when I think the market in general, capital markets in

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Speaker 3: general have been quite skeptical and I think in some

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Speaker 3: ways undervaluing the potential benefits of AI, even when aegentic

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Speaker 3: really came along and we could see the implications of it.

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Speaker 3: For one in Z for example, which is another great

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Speaker 3: way we get on the ground views of exactly what

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Speaker 3: AI can do for existing businesses, we could see how

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Speaker 3: much that changed the whole equation, not just humans calling AI,

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Speaker 3: but agents calling the bapis the amount of extra flow

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Speaker 3: you were going to get through these data centers from that,

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Speaker 3: which is obviously massively more than people were able to

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Speaker 3: kind of actually comprehend. And so through this period, I

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Speaker 3: feel like it's been a little bit easier just to

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Speaker 3: take that call. Maybe it's not been that popular, but

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Speaker 3: then we can monitor through one in Z does it

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Speaker 3: actually turn into money? You know, this whole ROI thing,

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Speaker 3: And they're like, yeah, it really does. We're getting three

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Speaker 3: x return on these agent investments if we do it right.

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Speaker 3: It's hard actually to get that to the bottom line

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Speaker 3: because as you probably know in your business, right, if

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Speaker 3: you get twenty percent more efficient, you can't just change

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Speaker 3: a person or move them on to something else. You

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Speaker 3: kind of got to get to a whole times more

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Speaker 3: efficient to actually say that. But the returns are really there.

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Speaker 3: I think it could get hard again if the market

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Speaker 3: runs again and the way ahead of where we think

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Speaker 3: logically you can get to. Then I think that's almost

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Speaker 3: a harder call to makers actually should we be harvesting

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Speaker 3: some from this? Because actually people have got ahead of themselves.

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Speaker 1: So yeah, a lot of the major providers of AI

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Speaker 1: technology you know, are running at a loss and not

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Speaker 1: really clear signed profitability. How does that plan and how

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Speaker 1: you think about you know, those customers in the demand.

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Speaker 3: Going forward, think about it a lot. So you're talking

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Speaker 3: about the labs right, the anthropics and open aye again

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Speaker 3: when you're seeing what the technology can do, say at

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Speaker 3: one or even talking We were in Asia two weeks

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Speaker 3: ago talking to fund managers up there who are implementing

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Speaker 3: this in their own businesses, astonished by how much value

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Speaker 3: they're getting out of them. I think what people find

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Speaker 3: hard to imagine is, you know, what does a Bloomberg

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Speaker 3: terminal cost like ten thousand dollars a year maybe twenty

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Speaker 3: What if your clawed subscription costs that much because it

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Speaker 3: actually provides the same amount of value. Then you can

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Speaker 3: suddenly see how you know, that's twenty x what you

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Speaker 3: pay for Lord today or opening today, right professional, Then

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Speaker 3: you can see, I think, how the economic could actually

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Speaker 3: work when you're actually getting this massive shift of value

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Speaker 3: to the model providers. And now some of that will

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Speaker 3: need to go to infrastructure, et cetera, et cetera. But

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Speaker 3: when you can see those the potential for those subscription

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Speaker 3: numbers to change wildly, then I think you can understand actually,

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Speaker 3: these these people can make money out of it. Actually

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Speaker 3: quite a lot of money out of it. It comes

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Speaker 3: from other people probably, But I think the more and

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Speaker 3: more we see that, the more and more we get

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Speaker 3: convinced that people will really pay for the value that

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Speaker 3: these models or tokens is the n video guys talk

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Speaker 3: it provide to them. That's where you kind of get confidence.

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Speaker 2: I think.

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Speaker 1: Closer to home, you know, in Australia and New Zealand,

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Speaker 1: we're seeing rising fuel prices, hearing a lot more rhetoric

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Speaker 1: about moving to electronic vehicles. You know, you've obviously got

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Speaker 1: big exposure to renewables. Time we talked, you spoke a

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Speaker 1: lot about renewables and demand for soul in particular in

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Speaker 1: the US too, I believe. How do you see the

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Speaker 1: conflict in the Middle East, How are you thinking about

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Speaker 1: that when it comes to your renewable exposure.

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Speaker 3: Yeah, it's hard. These things are quite complex. It's really

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Speaker 3: hard to predict. So maybe, and I think it's different

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Speaker 3: in different regions. So in the US it's fundamentally very strong,

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Speaker 3: even though the rhetoric from some in central government is

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Speaker 3: quite anti renewables in some ways. Actually, in fact, they

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Speaker 3: preserve the tax credits, the subsidies that they have there

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Speaker 3: until twenty thirty, so and now are the most subsidies

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Speaker 3: anywhere that anyone offers anywhere in the world for renewable

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Speaker 3: energy development. So there's this real period now the industry

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Speaker 3: just talks about filling the box, building as much as

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Speaker 3: you can in this period. While the power has never

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Speaker 3: been cheaper, it's come at a great time because at

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Speaker 3: the same time demand for new energy in the US

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Speaker 3: is really strong. We see that playing up pretty much

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Speaker 3: as we would have talked about last time, in quite

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Speaker 3: quite a strong way, which is good. But then elsewhere

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Speaker 3: in the world we're seeing, you know, returns from kind

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Speaker 3: of middle of the road or was kind of standard

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Speaker 3: renewable energy projects is actually getting quite compressed. So to

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Speaker 3: give you an example, in Europe, you would have thought,

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Speaker 3: sort of out of the Ukraine watch is obviously still

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Speaker 3: ongoing and the energy security issues that created for Europe,

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Speaker 3: that there would be more stimulus there for renewable energy.

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Speaker 3: In fact, you know, the same public dollar can only

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Speaker 3: go so far, and it's being stretched to building gas

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Speaker 3: infrastructure of a backup, and it's being spent on defense,

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Speaker 3: which is usually strategic as well, and so renewables, while

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Speaker 3: it is still a priority in Europe, you don't get

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Speaker 3: the same rhetoric at all. The amount of public money

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Speaker 3: that's available to go to that is less effectively because

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Speaker 3: you've got these other things that are really important as well,

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Speaker 3: and it's hard to know when that will change. And

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Speaker 3: then in Asia, where we have a small business, they're

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Speaker 3: definitely feeling the impacts more directly and just about anywhere

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Speaker 3: in the world of this current and this current war.

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Speaker 3: So I feel like it will get a good stimulus there,

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Speaker 3: but I think given what we've seen in Europe, we're

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Speaker 3: probably going to take a bit more of a weight

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Speaker 3: and semb very selective. I think on what we expect

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Speaker 3: to get underway. There was a Regional Energy Security forum

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Speaker 3: I think two weeks ago between southeas Asian countries and

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Speaker 3: New Zealand was part of that, where there was a

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Speaker 3: lot of talk about, for example, Indonesia being out of

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Speaker 3: expert solar power into Singapore, which is a project we

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Speaker 3: have on the go there, which is good to see

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Speaker 3: that starting to move again, but also Indonesia itself saying well, actually,

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Speaker 3: maybe we should have some of this power for ourselves,

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Speaker 3: right because we're as exposed as anyone on this. So

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Speaker 3: I think it's very complex to figure out exactly where

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Speaker 3: the ball lands on any given year on these things.

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Speaker 3: I guess the general trend is fine, but the short

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Speaker 3: term effects can be real, whereas at the moment it's

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Speaker 3: just a green light on I think, you know the

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Speaker 3: US for these sorts of investments.

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Speaker 1: Talking about the US center exposure to long Roads they

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Speaker 1: are in the data center gold Rush. Can you tell

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Speaker 1: us about the one thousand mile solar project and the

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Speaker 1: relationship a long Roads with Meta, Yeah, so.

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Speaker 3: That's reas me big. I think so about four hundred

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Speaker 3: MiG what solar project and the kind of capital cost

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Speaker 3: to get these things into construction has reasonably significant So

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Speaker 3: we bought it with a PPA, so a power purchase

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Speaker 3: agreement with Meta, who is buying basically all the power

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Speaker 3: out of that business for a very long period of time,

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Speaker 3: well over twenty years, and a market that they're using

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Speaker 3: to either power or offset the power they're taking from

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Speaker 3: the grid for data centers. And we would have multiple

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Speaker 3: examples of that across the portfolio, whether or it's either

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Speaker 3: Meta or Microsoft or one of these people taking it

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Speaker 3: for their own needs or the utility in that region

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Speaker 3: who's buying it and then basically on selling it, And

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Speaker 3: so that's a driver of demand in the market, but

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Speaker 3: it's not the only driver of demand in the US

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Speaker 3: through all this. And if you're you know Nvidia's presentations

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Speaker 3: a couple of weeks ago, they're all talking about national

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Speaker 3: security needing to re sure these kind of critical industries

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Speaker 3: and not be as exposed as they have been in

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Speaker 3: the past, and that is definitely driving power demand as well.

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Speaker 3: Like a robotic factory, I saw some statistics were up

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Speaker 3: in the US last week. A robotic factory can use

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Speaker 3: thirty to forty megawats of power. That's what a big

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Speaker 3: data center used to be right, and that's just one

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Speaker 3: of these automated battery assembly lines, I think was the

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Speaker 3: example there the massive amount of power we.

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Speaker 1: Had the big beautiful bill which was looking actually kind

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Speaker 1: of bad news for Long Road. It seems to be

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Speaker 1: a bit more optimistic. Now, what is your latest outlook

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Speaker 1: on the US policy in its impact?

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Speaker 3: These were the reforms that were brought through middle of

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Speaker 3: last year, I think middle to late last year that

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Speaker 3: were affecting those tax subsidies they talked about for US

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Speaker 3: renewal development. In the end, kind of nobody really lost

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Speaker 3: an eye because, as I said that, the subsidy has

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Speaker 3: got extended to twenty thirty for solar, actually out to

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Speaker 3: twenty thirty seven, I think is the date for battery,

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Speaker 3: which is half your capix cost now. So it's created

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Speaker 3: an environment where everybody kind of needs to rush to

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Speaker 3: build by twenty thirty. But it's not actually necessarily a

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Speaker 3: bad thing. And we're already seeing actually signs with customers

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Speaker 3: of the price they'll be willing to pay when the

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Speaker 3: tax credits are gone through Long Roads. So essentially the

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Speaker 3: power price has to go up to keep returns as

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Speaker 3: they were, and we're seeing signs that customers will do

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Speaker 3: that through the negotiations we're having with them already. You know,

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Speaker 3: it sort of goes if we can't make twenty thirty,

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Speaker 3: then we're going to need a different power price and

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Speaker 3: people agreeing to that. So we're good to twenty thirty

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Speaker 3: and we're starting to see that the market post twenty

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Speaker 3: thirty is becoming a bit clearer as well.

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Speaker 1: Last time we talked about Wellington Airport where there's major

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Speaker 1: upgrades underway. Obviously there's more to come there. How has

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Speaker 1: the revamped termin all been received?

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Speaker 3: I think really well. I just went through it for

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Speaker 3: the first time with the new relay open the other day.

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Speaker 3: It looks amazing. It'll be nice when that kind of

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Speaker 3: jet star end, I think is the next part that

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Speaker 3: is going to get a revamp, because that's pretty tight

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Speaker 3: in there. It's actually a mixture of like fall buildings,

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Speaker 3: so it hasn't been that easy. But they've got a

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Speaker 3: really great plan there as well. The tricky thing for airports,

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Speaker 3: all these infrastructure things is how can you time your

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Speaker 3: capex to when it's going to be needed? And so

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Speaker 3: through this period I think we'll get some good signals

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Speaker 3: from our airline partners about exactly what they need when

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Speaker 3: if we can shift around CAPEX to help them. The

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Speaker 3: other thing we've finished is, I don't know if people

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Speaker 3: have seen at the end of the runways, there's kind

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Speaker 3: of different colored parts of the runways at the end,

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Speaker 3: and that's called EMASS. It's a different type of concrete

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Speaker 3: that is designed to help decelerate planes if they're by accident,

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Speaker 3: they shouldn't are going to overshoot the wrong way, which

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Speaker 3: I think is great to know as a consistent user

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Speaker 3: of that airport. So that's just been deleted and that creates,

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Speaker 3: along with some airplane improvements, almost the same runway extension,

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Speaker 3: you know, a usable runway that the full runway extension

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Speaker 3: we're talking about two or three years ago would have

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Speaker 3: created a real fraction of the cost just through using

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Speaker 3: this new technology. So that's being completed and we hope

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Speaker 3: to be the beneficiary of that in Wellington at some time,

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Speaker 3: right with some longer haul aircraft hopefully being able to

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Speaker 3: come in and out of here again.

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Speaker 1: Yeah, that's a fantastic innovation and not having to do

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Speaker 1: all of that build and you know, the surfers we're

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Speaker 1: getting a bit up.

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Speaker 3: Well, yeah, it's totally right.

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Speaker 1: I think the brakes I don't have to do that anymore.

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Speaker 1: And you mentioned, you know, might be able to do

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Speaker 1: more international routes. Is there any discussions about you know,

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Speaker 1: different routes coming constantly?

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Speaker 3: I mean always the objective has been can we get

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Speaker 3: to Singapore, caming get to North America? And certainly through

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Speaker 3: this crisis, I guess it is Singapore is getting a

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Speaker 3: massive up to traffic as the way to get north

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Speaker 3: if you don't want to go through North America. So yeah,

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Speaker 3: if we could land that anyone out there listening a plane,

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Speaker 3: that would be amazing.

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Speaker 1: Yeah, I think for the airport, So onto infrastructure and

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Speaker 1: you know a bit more about New Zealand politics. The

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Speaker 1: Instructure Commission released New Zealand's first ever national instructive Plan,

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Speaker 1: calling for decisive action including accelerated electricity investment and asset recycling.

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Speaker 1: Does this plan actually change anything in terms of your

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Speaker 1: pipeline and investable opportunities and do you expect it to

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Speaker 1: result in real change?

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Speaker 3: So good question. I think those elements of the plan

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Speaker 3: made a lot of sense and things we would have

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Speaker 3: been advocating for in a long period of time. People

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Speaker 3: often ask, so if you had to choose, what would

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Speaker 3: you invest in New Zealand. I think energy is definitely

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Speaker 3: one where any country that has long energy says more

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Speaker 3: than enough of particularly renewable zero marginal cost energy is

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Speaker 3: going to do really well in the future, whether it's

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Speaker 3: his factories exporting tokens or your own digital infrastructure for

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Speaker 3: education and healthcare is going to be amazing. So I

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Speaker 3: would one hundred percent support that. I don't think. I

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Speaker 3: actually think a lot of the ingredients for that investment

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Speaker 3: already exists amongst the existing nual energy companies with Transpower

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Speaker 3: Z owned plans and funding plans. There's a few tweaks

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Speaker 3: you could make, but I think the future looks bright

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Speaker 3: if we can just get on with some of that stuff,

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Speaker 3: So that's good. I think, you know, recycling of capital

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Speaker 3: probably does make sense. We can't afford everything we want,

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Speaker 3: and particularly if you can, I don't know if it's

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Speaker 3: ring fence or whatever, that capital for reinvestment and new

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Speaker 3: stuff we need. I think then you're taking the country forward.

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Speaker 3: That would be pretty important requirement for it. But I

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Speaker 3: wouldn't advocate doing it because you know, we've got a

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Speaker 3: limited window to do it, so we should do it.

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Speaker 3: Because if you look back at the history of privatizations,

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Speaker 3: once they get ahead of steam, people just go ahead

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Speaker 3: with them and you don't necessarily get the best number.

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Speaker 3: And if you look at the way we think about it,

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Speaker 3: we're always thinking about where to shift the portfolio. But

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Speaker 3: it's a pretty high bar to just sell something just

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Speaker 3: because we have to, because we've got a limited window

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Speaker 3: to do it. So if you can, through this infrastructure plan,

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Speaker 3: create alignment around you know, over the next thirty years,

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Speaker 3: we're going to do this rather than we're going to

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Speaker 3: do it next year. Late next year could be an

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Speaker 3: absolutely horrific market to sell stuff into. And I just

436
00:22:25,720 --> 00:22:29,000
Speaker 3: wouldn't do it just to try and take a political

437
00:22:29,000 --> 00:22:30,840
Speaker 3: window to do it. That would be my kind of

438
00:22:30,880 --> 00:22:32,480
Speaker 3: little worry to watch out for. But I think in

439
00:22:32,520 --> 00:22:33,680
Speaker 3: general it's a sensible idea.

440
00:22:33,960 --> 00:22:37,840
Speaker 1: Yeah, that long term. Yeah, your credit rating has recently

441
00:22:37,920 --> 00:22:39,840
Speaker 1: changed to triple B plus. Can you tell us what

442
00:22:39,880 --> 00:22:42,560
Speaker 1: that means to infantool investors?

443
00:22:42,640 --> 00:22:45,200
Speaker 3: Yeah, I'm glad you asked the So in December last year,

444
00:22:45,280 --> 00:22:47,600
Speaker 3: we announced we've got a credit rating from Standard and

445
00:22:47,640 --> 00:22:50,040
Speaker 3: pause just triple B plus. As you say, we've never

446
00:22:50,080 --> 00:22:53,040
Speaker 3: had a credit rating before. In fact, Lloyd Mike turn

447
00:22:53,119 --> 00:22:55,920
Speaker 3: in his grave. The really hated rating agencies. You thought

448
00:22:55,920 --> 00:22:59,159
Speaker 3: they were the cause of the global financial crisis. You,

449
00:22:59,160 --> 00:23:02,840
Speaker 3: I think you could make a case for. But for us,

450
00:23:02,960 --> 00:23:07,000
Speaker 3: really it is about becoming more clearly an institution, you know,

451
00:23:07,000 --> 00:23:11,480
Speaker 3: an institutional grade stock, which goes with our size. What

452
00:23:11,520 --> 00:23:14,760
Speaker 3: it means really is we can access many more capital

453
00:23:14,800 --> 00:23:17,720
Speaker 3: markets now at materially cheaper costs than we used to

454
00:23:17,720 --> 00:23:21,240
Speaker 3: be able to. And actually why we never had one

455
00:23:21,240 --> 00:23:23,840
Speaker 3: before really was standard and pause didn't have a way

456
00:23:23,840 --> 00:23:27,879
Speaker 3: of rating investment hoarding companies like us. But they have

457
00:23:28,040 --> 00:23:30,560
Speaker 3: had one and developed one over the last number of

458
00:23:30,640 --> 00:23:33,480
Speaker 3: years and more and more investment enteres using it, and

459
00:23:33,520 --> 00:23:36,800
Speaker 3: so it was a great opportunity I think to kind

460
00:23:36,800 --> 00:23:39,160
Speaker 3: of respond to people's questions of you know, you guys

461
00:23:39,320 --> 00:23:41,199
Speaker 3: use a lot of debt, How should I think about that?

462
00:23:42,560 --> 00:23:45,520
Speaker 3: We use reasonable amount of debt. That's how we get

463
00:23:45,560 --> 00:23:47,879
Speaker 3: the equity returns. A lot of that sits in the

464
00:23:47,920 --> 00:23:52,000
Speaker 3: portfolio companies. So for example, Long Road they would fund

465
00:23:52,240 --> 00:23:55,080
Speaker 3: ninety percent more of their cap X to build a

466
00:23:55,119 --> 00:23:58,959
Speaker 3: solar farm using other people's money, mainly debt. And CDC's

467
00:23:59,080 --> 00:24:03,399
Speaker 3: no different but that they all have their own credit ratings.

468
00:24:03,440 --> 00:24:06,320
Speaker 3: And then at our level, we've always carried additional debt

469
00:24:06,800 --> 00:24:11,040
Speaker 3: at the holding company level, which creates a number of benefits.

470
00:24:11,080 --> 00:24:12,720
Speaker 3: I think for Shielders that then people worry you've got

471
00:24:12,760 --> 00:24:14,679
Speaker 3: debt on debt, how do I think about that? And

472
00:24:14,760 --> 00:24:18,520
Speaker 3: so trying to make it super simple for people to

473
00:24:18,680 --> 00:24:21,920
Speaker 3: think about that through the credit rating, and then you

474
00:24:21,920 --> 00:24:25,040
Speaker 3: should see tangible benefits in terms of the cost of

475
00:24:25,040 --> 00:24:28,399
Speaker 3: our funding. But also I think resilience of funding sources

476
00:24:28,440 --> 00:24:31,520
Speaker 3: because we'll better go to so many more markets to

477
00:24:32,040 --> 00:24:34,440
Speaker 3: refinance dead or extend it if we need to overtime.

478
00:24:34,520 --> 00:24:36,240
Speaker 1: And so lastly I thought we could talk about the

479
00:24:36,280 --> 00:24:40,040
Speaker 1: one billion dollar divestment plan. You're halfway to the target

480
00:24:40,040 --> 00:24:45,080
Speaker 1: of the billion dollar asset sales. Retire Australia was held

481
00:24:45,119 --> 00:24:47,720
Speaker 1: for eleven years and Infratil took an accounting loss of

482
00:24:47,800 --> 00:24:50,359
Speaker 1: around eighty million on the sale, with a lot of

483
00:24:50,400 --> 00:24:53,080
Speaker 1: management time and capital tied up over those eleven years.

484
00:24:53,560 --> 00:24:56,240
Speaker 1: What does that experience tell you about what Infratil should

485
00:24:56,240 --> 00:24:58,560
Speaker 1: and shouldn't own And were their warning signs early in

486
00:24:58,560 --> 00:25:01,560
Speaker 1: the holding period This wasn't going to scale the way

487
00:25:01,560 --> 00:25:02,840
Speaker 1: that you might have hoped you.

488
00:25:02,760 --> 00:25:04,760
Speaker 3: Started at that when we're talking about data centers about you,

489
00:25:04,880 --> 00:25:07,439
Speaker 3: that was a big bit ten or eleven years ago. Well,

490
00:25:07,440 --> 00:25:10,240
Speaker 3: actually Retire Australia has made exactly the same year and

491
00:25:10,280 --> 00:25:12,639
Speaker 3: so it was Long Road exactly the same year anyway,

492
00:25:12,640 --> 00:25:16,399
Speaker 3: and they were all about two to four hundred million dollars.

493
00:25:16,400 --> 00:25:18,720
Speaker 3: I think so though that class of twenty sixteen we

494
00:25:18,880 --> 00:25:22,280
Speaker 3: call it. And so you never know how these things

495
00:25:22,280 --> 00:25:24,239
Speaker 3: are going to go right. One goes crazy, another one

496
00:25:24,240 --> 00:25:27,040
Speaker 3: goes crazy. Another one didn't work as well as we

497
00:25:27,680 --> 00:25:31,400
Speaker 3: as well as we hoped. I think you can't. You know,

498
00:25:31,520 --> 00:25:34,119
Speaker 3: if we could all get two out of three in

499
00:25:34,119 --> 00:25:37,080
Speaker 3: that way, we'd probably be happy. But I think it's

500
00:25:37,160 --> 00:25:39,320
Speaker 3: right to try and learn from what worked well what

501
00:25:40,320 --> 00:25:44,159
Speaker 3: did end I think for Retire Australia. I might have

502
00:25:44,200 --> 00:25:46,240
Speaker 3: talked about this in the past. I think we underestimated

503
00:25:46,280 --> 00:25:49,560
Speaker 3: how hard it would be to convert existing retirement villagers

504
00:25:49,640 --> 00:25:52,720
Speaker 3: to the more New Zealand model, which they called a

505
00:25:52,720 --> 00:25:55,800
Speaker 3: continuity of care model where you have hospital grade care

506
00:25:55,920 --> 00:25:58,240
Speaker 3: on site. It actually took us quite a while. I

507
00:25:58,240 --> 00:26:02,159
Speaker 3: think they have actually got a really quid product to

508
00:26:02,280 --> 00:26:06,200
Speaker 3: do that now, which is great and part of this

509
00:26:07,119 --> 00:26:12,040
Speaker 3: story that was marketed when we sold the business last year.

510
00:26:13,240 --> 00:26:17,480
Speaker 3: But probably the other learning would be a living It's

511
00:26:17,480 --> 00:26:20,040
Speaker 3: impossible to catch up when you're behind a case after

512
00:26:20,080 --> 00:26:23,840
Speaker 3: eleven years, so there is a real cut your losses.

513
00:26:23,880 --> 00:26:27,320
Speaker 3: I guess mentality. I think if you get behind, you're

514
00:26:27,400 --> 00:26:32,200
Speaker 3: way better off to exit, give somebody else the opportunity

515
00:26:32,200 --> 00:26:36,200
Speaker 3: to buy and actually do that gross story, but rather

516
00:26:36,240 --> 00:26:38,200
Speaker 3: than try and keep pushing on and try and make

517
00:26:38,240 --> 00:26:42,439
Speaker 3: it work. So for us, we'll probably just like everybody else. Right,

518
00:26:42,480 --> 00:26:43,840
Speaker 3: So I can fix this, I can fix this, I

519
00:26:43,880 --> 00:26:46,200
Speaker 3: can do this, I can do that. But actually the

520
00:26:46,760 --> 00:26:51,719
Speaker 3: weight of time on your return is absolutely savage, and

521
00:26:51,760 --> 00:26:55,880
Speaker 3: you are almost always better to leave earlier, leave that

522
00:26:56,000 --> 00:26:57,679
Speaker 3: you know the management team stays in place, and then

523
00:26:57,760 --> 00:26:59,959
Speaker 3: keep with a wig on, give them a good yearholder

524
00:27:00,280 --> 00:27:02,600
Speaker 3: who can really fund that gross story, and then just

525
00:27:02,640 --> 00:27:04,679
Speaker 3: move on to something else with probably the other big lessons.

526
00:27:04,800 --> 00:27:07,560
Speaker 1: Yeah, nice and in q scan has been put under

527
00:27:07,560 --> 00:27:10,800
Speaker 1: a strategic review, and there's more to be cut to

528
00:27:10,840 --> 00:27:15,240
Speaker 1: achieve that billion dollar in divestments infratal exiting healthcare together

529
00:27:15,520 --> 00:27:17,640
Speaker 1: or is it purely a matter of kind of scalability

530
00:27:18,400 --> 00:27:21,200
Speaker 1: relating to the specific businesses are currently in your portfolio.

531
00:27:21,280 --> 00:27:24,680
Speaker 3: Yeah, like healthcare is the theme. I think there's definitely

532
00:27:24,680 --> 00:27:27,160
Speaker 3: a scalability element here, which you talk about last time.

533
00:27:27,200 --> 00:27:30,080
Speaker 3: So meanwhile, if you know, for Tire Australia, I think

534
00:27:30,160 --> 00:27:32,320
Speaker 3: kind of went sideways, maybe slightly down, as you said,

535
00:27:32,320 --> 00:27:34,959
Speaker 3: that was an accounting loss in the end. In the meantime,

536
00:27:35,000 --> 00:27:38,280
Speaker 3: these other businesses sort of did ten eggs and so

537
00:27:39,160 --> 00:27:41,639
Speaker 3: for them to then do ten x from there as impossible, right,

538
00:27:41,680 --> 00:27:43,440
Speaker 3: And it's almost the same for q Scan. I think

539
00:27:43,440 --> 00:27:45,440
Speaker 3: when we made that investment it was about ten percent

540
00:27:45,480 --> 00:27:47,960
Speaker 3: of our market cap. We're about three billion den yeah,

541
00:27:48,040 --> 00:27:51,359
Speaker 3: now are eleven or whatever, and they are still about

542
00:27:51,359 --> 00:27:53,800
Speaker 3: the same size, right, So they haven't been anted to

543
00:27:53,840 --> 00:27:58,200
Speaker 3: keep up for all good reasons to do with both

544
00:27:58,280 --> 00:28:03,080
Speaker 3: their physical capacities and also just the market and general

545
00:28:03,119 --> 00:28:06,440
Speaker 3: over there. So I think it makes sense to recycle

546
00:28:06,480 --> 00:28:10,800
Speaker 3: that capital and have it available. They are a great business,

547
00:28:10,960 --> 00:28:13,520
Speaker 3: just maybe it doesn't fit in our portfolio, and a

548
00:28:13,560 --> 00:28:15,480
Speaker 3: little bit learning the lesson from Ora, right, it's like

549
00:28:15,600 --> 00:28:18,320
Speaker 3: you can overse, you welcome in some ways and it's like, well,

550
00:28:19,400 --> 00:28:23,480
Speaker 3: let's move on, give them a good home and use

551
00:28:23,480 --> 00:28:25,600
Speaker 3: that capital ourselves. The other kind of thing that was

552
00:28:25,640 --> 00:28:27,560
Speaker 3: going on in the background when we set that target,

553
00:28:27,800 --> 00:28:30,639
Speaker 3: was a lot of questions about how we fund CDC's

554
00:28:30,640 --> 00:28:34,280
Speaker 3: growth in particular and long road a little bit as well,

555
00:28:34,760 --> 00:28:37,240
Speaker 3: without having to come back to market to raise equity,

556
00:28:37,240 --> 00:28:39,000
Speaker 3: which we have had to do in the past as well.

557
00:28:39,480 --> 00:28:42,480
Speaker 3: And the market is very intolerant. I think of stories

558
00:28:42,880 --> 00:28:44,800
Speaker 3: where you are constantly having to come back to the

559
00:28:44,800 --> 00:28:47,160
Speaker 3: market to raise capital and you can see a few

560
00:28:47,160 --> 00:28:50,080
Speaker 3: examples of that Australia and New Zealand at the moment.

561
00:28:50,200 --> 00:28:55,520
Speaker 3: So again, in terms of bang for the buck for shareholder,

562
00:28:55,560 --> 00:28:57,440
Speaker 3: getting that money back and even just holding it to

563
00:28:57,440 --> 00:28:59,280
Speaker 3: show you can fund those things is probably going to

564
00:28:59,320 --> 00:29:02,800
Speaker 3: make shareholders more money than us just hanging around in

565
00:29:02,840 --> 00:29:05,200
Speaker 3: there and you know, hoping it grows.

566
00:29:05,400 --> 00:29:07,440
Speaker 1: So when you look to the year ahead, you know

567
00:29:07,480 --> 00:29:08,280
Speaker 1: what excites you.

568
00:29:09,000 --> 00:29:11,720
Speaker 3: Pretty excited about the AI side, as you can probably tell,

569
00:29:11,840 --> 00:29:15,520
Speaker 3: I think the question mark a little bit out there,

570
00:29:16,040 --> 00:29:18,440
Speaker 3: although I think the industry addressed a bit last year.

571
00:29:18,480 --> 00:29:23,720
Speaker 3: As can Australia grow as fast as Asia? Is it

572
00:29:23,800 --> 00:29:27,840
Speaker 3: going to get serious interest from US for kind of

573
00:29:27,920 --> 00:29:32,880
Speaker 3: overflow of their AI needs, which would see the industry

574
00:29:32,880 --> 00:29:34,920
Speaker 3: in Australia and New Zealand growing much faster than our

575
00:29:35,000 --> 00:29:39,080
Speaker 3: natural growth rates. So we think there's a really great

576
00:29:39,120 --> 00:29:41,400
Speaker 3: case for that, certainly from the conversations we're having with

577
00:29:41,440 --> 00:29:44,720
Speaker 3: customers and being able to reveal that this year would

578
00:29:44,760 --> 00:29:47,760
Speaker 3: be amazing. I think everything else around AI is super

579
00:29:47,760 --> 00:29:52,120
Speaker 3: interesting from an investment perspective as well, And that's what

580
00:29:52,160 --> 00:29:57,560
Speaker 3: one en z to doing in terms of changing culture

581
00:29:57,600 --> 00:30:00,320
Speaker 3: and mindset and training their staff to use this and

582
00:30:00,320 --> 00:30:04,280
Speaker 3: then seeing the outputs that is going to be super exciting,

583
00:30:04,320 --> 00:30:07,600
Speaker 3: and then finding other ways to invest in and around

584
00:30:07,640 --> 00:30:10,680
Speaker 3: the theme. I think are a sensible thing to think about, Kevin.

585
00:30:10,760 --> 00:30:14,400
Speaker 3: Our good position and data centers in a great position

586
00:30:14,520 --> 00:30:17,240
Speaker 3: in a business that's transforming itself using this technology is

587
00:30:18,200 --> 00:30:20,920
Speaker 3: really super exciting. So yeah, I couldn't say enough about that.

588
00:30:21,400 --> 00:30:23,800
Speaker 1: So I've got quick five questions for you. All right,

589
00:30:24,040 --> 00:30:27,000
Speaker 1: if you had to sell every asset tomorrow except one?

590
00:30:27,120 --> 00:30:28,000
Speaker 1: What are your keep things?

591
00:30:28,200 --> 00:30:28,960
Speaker 3: You see?

592
00:30:29,560 --> 00:30:32,360
Speaker 1: Does conflict in the Middle East change a renewable equation

593
00:30:32,440 --> 00:30:35,840
Speaker 1: for you?

594
00:30:35,880 --> 00:30:36,880
Speaker 3: No? Slight upweight?

595
00:30:37,640 --> 00:30:39,880
Speaker 1: What's the one in petal asset you think people are

596
00:30:39,880 --> 00:30:40,400
Speaker 1: sleeping on?

597
00:30:41,480 --> 00:30:44,360
Speaker 3: I think still I think long road. To be honest,

598
00:30:44,640 --> 00:30:48,960
Speaker 3: people don't understand that business is very misunderstood especially amongst

599
00:30:49,120 --> 00:30:52,120
Speaker 3: institutions outside New Zealand that don't really get it. So

600
00:30:52,120 --> 00:30:53,920
Speaker 3: it's a big focus for us to explain.

601
00:30:53,560 --> 00:30:57,120
Speaker 1: That, Hey, thank you so much, great you, thanks for

602
00:30:57,120 --> 00:31:00,120
Speaker 1: having us, and thank you so much for joining us today.

603
00:31:00,360 --> 00:31:03,240
Speaker 1: Thanks heaps for listening. You again. Can listen to Sheard

604
00:31:03,320 --> 00:31:06,200
Speaker 1: Lunch on YouTube or wherever you get your favorite podcasts,

605
00:31:07,000 --> 00:31:09,120
Speaker 1: Leave us a rating and tell us what you'd like

606
00:31:09,160 --> 00:31:17,600
Speaker 1: to hear about next. Until then, Marty wa