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GAIA: Bringing infrastructure to retail investors

As an asset, infrastructure has the potential to follow the route of the property sector – John Oliphant.
John Oliphant, CEO of GAIA Infrastructure Capital

It goes without saying that the strength of the management team is key to the successful listing of a special purpose acquisition company (SPAC). After all there is nothing to these entities when they come to market but cash and good ideas. It is up to the management team to convert this into tangible assets that deliver a meaningful return.

With this in mind, the prospective listing of infrastructure and renewable energy play GAIA Infrastructure Capital on the main board of the JSE in November looks good on paper.

The CEO of the company is John Oliphant, the highly effective, former principal officer of the Government Employees Pension Fund.

He is backed by a formidable team that includes Mich Nieuwoudt, an engineer with experience in the petrochemical and mining industries; Leon de Wit and Botha Schabort, an actuary and engineer who were involved in PSG in its early days; and Andrew Smith-Maxwell and Clive Ferreira, both engineers and directors of Fieldstone, a global financial advisory firm focused on the energy and infrastructure industries.

GAIA invests in chunky infrastructure development projects such as those prioritised by the State in the energy, transport (roads, railways and port infrastructure) and water (piped water networks and water utility infrastructure) sectors. It has already concluded transactions to the value of R1.35 billion, including one wind farm and three solar farms.

The aim of the listing, says Oliphant, is to enhance the profile of the company as well as of infrastructure as an asset class. “My view is that its time has come. As an asset, infrastructure has the potential to follow the route of the property sector.

“The infrastructure need in this country runs into the trillions. The State cannot fund all this required investment. Finance Minister Nene is battling to allocate resources efficiently as it is. Using the private sector effectively can alleviate that constraint on the budget.”

At present there is little participation by institutional investors in infrastructure, as banks cannot be long-term holders of assets. Institutions also only have sell-side expertise in infrastructure.

Thus, if you wanted exposure to large scale energy, transport and water-related infrastructure investments, you have to do it through a private equity structure, which is a vehicle that is not necessarily accessible to retail investors. This option (GAIA) presents investors with an opportunity to access stable and predictable inflation linked long-term returns in the listed environment.

The target is to raise a minimum of R500 million in capital (which is necessary to secure a main board listing), with potential anchor investors contributing up to 75% of this amount and management 5% of all capital being raised. That management has skin in the game is a necessary precondition of a SPAC listing.

The listing price is expected to be R10 per share with a target dividend yield of inflation plus 2.5% on NAV.

GAIA has several investment opportunities under investigation that would be presented to the listed entity ranging from R120 million to R800 million in size.

Oliphant said that a number of these opportunities could be concluded over the next 12 months.

“The regulatory outlook for renewable energy remains stable and bodes well for other infrastructure sectors. We will remain active in the secondary renewable energy investment market, which currently has a potential secondary equity market worth of R40 billion,” he says.

A pre-listing statement will be issued shortly. Assuming the listing goes ahead, GAIA will be the fourth SPAC listed on the JSE after Sacoven, Renergen and last week’s Capital Appreciation which raised R1 billion from the listing.



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