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With Laurent's segal and from London and
Gerard read from Berlin, this is redefining

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energy minutes Lauran, where'd you get
that funny music from? Do we not

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have nice bonging bells beforehand? It's
because of my wife Sandra. She's doing

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the text. And then after a
while I had put specially in Pumpkins behind

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and said, Ahna, I don't
like this, so she gave me that

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all songs of the late seventies and
in School Driver's Seat by Sniff and the

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Tears. I think it's much better, and I can't criticize because she is

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doing the text. Not so lam
you turn this week number a week?

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What is it? Twenty eight billion
dollar? That could be the market cap

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of a company that could give me
at least a clue of that is infrastructure.

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Oh, that must be somebody's infrastructure
fond or something like that. Some

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exactly exactly it's from who is it? Brookfield? Yeah, the Kings,

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the Kings of infrastructure, right,
and it's the mammoth fund that they're raised

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into twenty three it's called the Brookfield
number five. And guess what it is?

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Half of all the money raised in
infrastructure into twenty three. Amazing,

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amazing. It's really a paradox that
the year where you have the biggest ever

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fund raised, it's the raised are
at the lowest in seven or eight years.

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If you look at years like twenty
to twenty one, they were above

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one hundred billion raised for infrastructure,
and the peak was one hundred and fifty

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billion into twenty one. And that's
compared to thirty billion into twelve. So

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the industry had incredible drive during the
last decade, but last year was a

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bit of a disaster. Ah.
Now, you just picked that number deliberately

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because you knew we were going to
talk about infrastructure today, right, and

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that's your speciality. I do have
lots of questions for you actually actually start

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with that. Why do you think
that happened? Is just because the interest

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rates have gone up at this point
in time? That is that what's driving

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that? Or is there something?
Is there something I'm missing? Yeah,

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so I think interest rates are a
huge factor. Now, let's face it,

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when we talk about infrastructure investing,
it's not just renewables. We're talking

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about energy in general, oil pipelines, but all supports, airports, motorways.

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I mean, this is everything that's
big, and there's not enough public

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money to finance all the needed infrastructure. So that's why got some funds or

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really big specialized infrastructure investing. And
we're going to talk about the phenomenon which

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is happening right now, which is
a consolidation of the sector. But if

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we put a bit of the number
in perspective, you know, last week

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we talked about clintech and in clin
tech, if you have one billion clint

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tech fund, wow, you're the
biggest in the room. Whereas here the

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tickets are twenty billion, fifty billion, one hundred billions. So it's a

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totally different magnitude compared to the VC
universe. Of course, and liesten,

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let's be really clear, if we
talk about renewables in this area that we're

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in, it's a critical part of
it because at the end of the day,

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all the financing is coming from you
know whatever, ten fifteen percent equity

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and the rest is debt. So
these funds are really really great. And

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can I ask these equity funds or
dead funds are mixes? Yeah, it's

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not very clear because some people report
just equity, but generally those very big

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asset managers. We're going to talk
about. They have a mix, so

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they do both equity and that.
But yeah, of course it's started as

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equity and you have dead funds,
but it's it's mostly in the US.

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In Europe you still have banks doing
the financing, but apparently it's coming to

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Europe as well. Anyway, I'm
going to make it very simple. It's

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probably over simplified, but that's going
to give you an idea. Let's go

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back, say four or five years
ago. You have government bonds would deliver

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you one percent interest rate, and
let's say you have an infrastat project of

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say one hundred million, would delivers
four percent. You would put fifty percent

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of debt at two percent, so
the equity would deliver six percent. Okay,

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you know four percent for the total, two percent for the dead,

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six percent for the equity, which
was five hundred business point above government bond.

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Okay. Now government bonds are at
five percent, yeah, five percent,

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so then what happens The cost of
your debt is probably at six so

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you will ask equity to deliver ten
percent. And by the way, Macquarie

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just closed the funder this week and
they say we'll deliver double digit returns,

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which mean that your project of one
hundred million, who used to be a

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built to deliver four percent, now
needs to deliver eight percent. So basically

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you need to double the economic performance
of the project, which is difficult.

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That it very simplictly explain what's going
on in the infrastructure world. Can I

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take this a little bit back to
renewables, because okay, what you're saying

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is the cost of capital is basically
double. So if we take an offshore

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win project, on shore wind projects
solar, I'm going to add another thing

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to it, which is I would
see this a lot of risk increasing in

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and around those projects, risks of
just you know, deliveries don't happen,

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that you don't get a feed entra
for a government grant more and also capture

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price risk. So you would expect
then that actually the cost the capital for

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rens go even higher, which is
not good for renewable built dot com forward.

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Yeah, it means people have less
money to invest in a moment where

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the price of goods has been eat
by inflation. So there's a bit of

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a squeeze here. There's a bit
of a squeeze here, and at the

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same time we've got stock markets hitting
all time highs. It's listen. Can

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I ask another thing, which is
it is? It's an interesting thing.

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We had a brief conversation about this
recently, and I think it's important to

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dig into it, which is what
you're saying is significant consolidation in and around

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infrastructure films. Right, I think
I seen black Rock going to the market.

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Aquila, whose sponsors our podcast being
Bock on commerce Bank, tell me

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why you think that's happening. As
you know, consididation tends to open at

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the bottom of the cycle, and
you're right. The big news was black

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Rock, as everybody knows, is
the world's biggest asset manager with ten trillion.

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I mean ten trillion. It's like
half of the usg it's mad.

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But their infrastructure bucket is only fifty
billion, which looks enormous, but it's

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like zero point five percent of the
asset they manage. So they bought Global

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Infrastucture Partner, which was an independent
infrastructure investor who was managing one hundred billion.

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So now Combine is one hundred and
fifty. You almost reach Macquarie,

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who is number one. And the
very interesting thing is if the black Rock

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guys gave the key to the Global
infrastructure partner's guy, so they're going to

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run the combined division. And all
of a sudden and Valentine Andrews, who

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was global head of Infrastructure and Allaysted
in black Rock, has resigned because she

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has a new boss and apparently it's
a bit tough for her. Right.

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Do you see this consolidation then continuing, yeah, yeah, we saw General

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Atlantic buying Actists. So Actiss twelve
billion a UM, as you said,

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Aquila seventy five percent is going to
be acquired by Commerce Bank. And if

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you look back the past two years, were the Shroders buying Greencoat green Coat

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at ten billion under management, a
CVC acquiring Deef sixteen billion under management,

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Searchlight Capital buying Gresham House same ten
billion under management, New Veen buying Glenmont

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and Aartmond and so all those mid
size asset manager and those people are very

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successful, their technical, great teams, but the moment they reached this ten

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to twenty billion zone, they become
very interesting targets for much bigger guys and

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much more diversified. It's almost impossible
to create an infrastruture business out of thin

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air, like it was the case
fifteen years ago. The amount of infrastructure

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infrastructure you need in order to run
infrastuctual funds, financial, technical, legal,

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you need to buy those companies.
You just count hire two or three

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guys and you think you got it. It also shows you the power of

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these huge financial institutions, right,
the financial asset manners. At the end

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of the day. The reason they're
buying these businesses because they believe, hey,

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listen, we've got the capabilities to
ramp that business up even quicker and

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more assets under management. So that
which of course is very good for we're

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talking about here, which is the
whole clean energy space which needs increasing amounts

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of capital going forward if we are
to move towards a net zero world.

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Right, it's excellent. And I
can even give you the name of funds

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which are perfect targets. So you
know they've been managed for the past ten

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fifteen years by independent teams and I
guess those guys want to catch out,

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which is fair. So you know
Copenhagun Infrastual Partners twenty five billion dollar management,

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very good team in honorable win Ontime
Partners. Those are very up just

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target and I'm sure there are a
lot of discussion happening already and acquire us

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can be the Blackstone who already manage
forty billion in infrastructure EQT same managing forty

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billion. So yeah, it's pretty
obvious that this movement is going to continue.

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Just my friend, very good.
God for well, I've learned something

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new today from you, Thank you
very much. But we will discuss that

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together in Berlin during the PEI conference
end of March. I think the twenty

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or twenty first of March. Infrastructure
so much, isn't it. Yeah,

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yeah, yeah, yeah yeah.
I will put the link in the show

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notes. That's for those who don't
know. That's where the infrastructure fund managers

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meet their investors. Actually, what
it's about. Lots of very good contact

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content and good people there. Looking
forward to Okay, Joe, I'll talk

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to you next week, look forward. Thank you for listening to Redefining Energy.

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Don't forget to rate the show and
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