PSP, CPPIB, CDPQ plan major Asia infra push

18 July 2017 - 12:00 am UTC

PSP Investments will invest up to USD 3bn in Asian infrastructure over the next five years, director Sandiren Curthan said on Tuesday (18 July).  Speaking at the inaugural Asia Infrastructure Investors Forum in Singapore, he said it would target India, Japan, and the Philippines. Among its plans are participating in a consortium bidding for the Fukuoka airport concession in Japan, as an operator.

Speaking at the inaugural Asia Infrastructure Investors Forum in Singapore, he said it would target India, Japan, and the Philippines. Among its plans are participating in a consortium bidding for the Fukuoka airport concession in Japan, as an operator.

Executives at Canada Pension Plan Investment Board (CPPIB) and Caisse de dépôt et placement du Québec (CDPQ) said they too had spotted an opportunity in Asia’s rapidly maturing infrastructure markets.

Cressida Hogg (pictured), infrastructure head at Canada’s largest pension fund, said CPPIB was looking to increase its exposure to the region.

CDPQ’s Asia-Pacific head of infrastructure transactions Cyril Cabanes said his firm aimed to increase the size of its Asia team from eight to at least 20 people by the end of next year.

Currently just 2% of CPPIB’s CAD 24.3bn (GBP 14.8bn) infrastructure investment portfolio is invested in India. It has not yet ventured into China, Japan, or Southeast Asia.

Hogg said CPPIB would look to mimic the strategy it has used to scale up in Latin America, where it has invested 24% of its portfolio into businesses such the Arco Norte toll road in Mexico and Chile’s Transelec electricity transmission operator.

Elsewhere in Asia-Pacific, CPPIB has invested 16% of its portfolio in Australia. 

CPPIB has until now been wary of Asian companies’ lack of compliance on economic, social and governance issues, Hogg revealed. But she noted that the business environment is “changing pretty rapidly,” for the better – with improvements in terms of ease of doing business and countries climbing up corruption rankings.

Another barrier for large funds like CPPIB is the tendency of infrastructure investments to be smaller scale in Asia compared to other regions. The firm is however considering lowering its CAD 300-500m per deal threshold.

It will adopt a flexible investment strategy and assess co-investments, managed accounts, and “perhaps even funds”, if it does not lower the deal threshold, Hogg added.

Still, she observed that there is an “interesting trickle of deals at that size,” with more opportunities with investors that had been first-time owners of assets now looking to exit. 

Other delegates echoed smaller deal size as a barrier. 

PSP’s Curthan described Asia as a “nascent infrastructure market”.

Macquarie Capital’s Asia vice chairman John Walker said that it had a regional pipeline of just under 5GW renewable energy investments – with less than 1.2GW of this coming from southeast Asia. Northeast Asia presented more opportunities to deploy larger amounts of capital, he said.

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