Utilities and infrastructure used to be a sector typically associated with producing steady inflation-linked income, but not now.
That’s according to Jean-Hugues de Lamaze, manager of the Ecofin Global Utilities and Infrastructure Trust, who said there are strong growth prospects and a high demand for capital expenditure (Capex) in listed infrastructure.
Speaking to Cris Sholton Heaton on the MoneyWeek Talks podcast, which is now available on all podcast platforms including YouTube, de Lamaze said ageing infrastructure put in place post-World War Two was offering investors plenty of opportunities.
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“Infrastructure…energy networks, pipelines, but I also mean our bridges, roads, airports, which to a large extent were built in the 1950s, ‘60s, ‘70s,” he said.
“Since then, the percentage of capital expenditure…has been declining to a level of say 2.5%, 3% today. It used to be twice that a few decades ago.
“So we end up in a situation where we have a lot of infrastructure which is getting [sic] obsolete and the…opportunity to replace ageing infrastructure is…a big driving theme.”
De Lamaze said a fresh need to power artificial intelligence (AI) datacentres, electric vehicles (EVs), but also a wider electrification of the energy industry, at a time when major countries are struggling to produce power, was another reason why there are growth prospects in the sector.
“We’re lacking power generation resources…OECD economies, [including] the UK, have phased out coal to a large extent.
“In the UK, it’s been astonishing. Coal used to account for 50% of electricity consumed up until 15 years ago. Now, it’s zero.
“We haven’t invested in nuclear [power]. So we are in a situation where we are relying increasingly on intermittent power generation resources, [such as] wind and solar.”
He added: “This is an opportunity…where you have scarcity of power generation resources and demand for electricity, which is starting to increase and that’s, we believe, a long-term trend, at least for the next decade or two decades.”
Should you invest in water and waste management firms?
De Lamaze also put forward the case for investing in firms offering water and waste management services.
“Water faces a major scarcity phenomenon in urban areas worldwide,” he said. “For companies like Veolia…the French non-regulated water operator, it represents a major global market opportunity.”
Even toll roads can provide investors with opportunities.
“I don’t know whether you’ve travelled through France over the summer. You may have noticed that [if] you take a motorway, last year, you were paying €5, and this year you’re paying €5.30,” de Lamaze said.
“It’s a nice inflation pass-through revenue.”
For more, watch the full episode of MoneyWeek Talks with Jean-Hughes de Lamaze in conversation with MoneyWeek’s Cris Sholto Heaton on YouTube or listen on any podcast platform.
About the podcast
MoneyWeek Talks is a podcast that helps you unlock the secrets to financial success.
Editors Kalpana Fitzpatrick, Andrew Van Sickle and Cris Sholto Heaton are joined by influential guests – from CEOs and entrepreneurs to economists and fund managers – to share their top tips on managing money, investing wisely and building wealth.
Subscribe to the MoneyWeek Talks podcast and get ready to make it, keep it and spend it with confidence. You can also watch the episodes on our YouTube channel.
