Ardian’s Daniel von der Schulenburg and Simo Santavirta talk to Real Deals about current opportunities in the Nordic infrastructure market.

How would you describe the current infrastructure investment market in the Nordics?

Daniel von der Schulenburg: We see an active investment market with many opportunities and strong dealflow. The infrastructure market in the Nordics is different because there is an enormous requirement for primary investment in new infrastructure. Macro trends, like the need to transition to a low-carbon economy and the opportunities presented by new technologies, have helped to create this significant investment need.

There is a huge amount of capital required to fund the energy transition, including new renewable energy assets. Improving critical infrastructure in the region is also a big opportunity.

Simo Santavirta: I would also highlight the strong ESG demands placed on infrastructure investors in the Nordics. As sustainability is integrated into our strategy, this works very well and gives us a competitive advantage.

What effect is high inflation having?

Von der Schulenburg: Infrastructure investments can serve as a so-called inflation ‘hedge’ for investors. The type of investments that we look at are usually protected against inflation. The assets are either regulated, or have long-term service contracts where payments are linked to inflation. Inflation can also benefit essential infrastructure investment rather than have a negative impact, compared to other asset classes.

Where do you see the best opportunities?

Von der Schulenburg: One exciting area is the energy transition. In recent years, we have seen growing political will to decarbonise our economy. The conflict in Europe has also exemplified the need for new and cheaper energy supplies.

Another very active area is the data centre market. The Nordic region is a popular location because of its cooler-than-average temperatures, and there is currently more demand for this type of space than there is supply. We are also interested in transport assets that offer long-term growth opportunities, such as airports and toll roads, the circular economy and the waste-to-energy sector.

Because of the rising cost of debt, we are seeing many industrial companies and investors looking for equity partners to back infrastructure assets alongside them to avoid or minimise debt. These are complex carve-out transactions that require a lot of industrial expertise.

Why do you think is it important to have local investment teams for Nordic infrastructure investments?

Santavirta: Understanding the local culture, economic conditions and way of working is critical for an infrastructure investor because infrastructure assets provide essential services to society and need to be looked after responsibly. Therefore, in all the geographies we invest in, we make sure we have local teams on the ground.

That is why Ardian has set up an operating partner company in the Nordics, which has been key to our success, including bringing us dealflow or helping us to implement value creation strategies.

Can you introduce some of your Nordics infrastructure portfolio companies?

Santavirta: Two years ago we invested in Nevel, a Finnish heating and industrial energy solutions business with significant activity in Finland and Sweden. We identified this company as an interesting opportunity well ahead of any sale process. We saw an unpolished diamond, which was underinvested and not operationally optimised, with scope for accelerated decarbonisation.

Therefore, we developed an industrial plan: investment in plants and networks, acquiring flue gas condensers to improve operational efficiency and sourcing fuel from local biomass providers and others.

Nevel offers energy solutions for industries including reprocessing, mining, manufacturing,  pulp and paper production. It also offers decarbonisation and provides investment for these areas. We saw this as an interesting strategy, especially in an economic climate where many industrial players need to manage their balance sheets while also decarbonising.

We predicted this plan would improve the company's Ebitda by about 35%. Nevel’s growth so far has been much faster than anticipated, and we hope to further develop the business.

Von der Schulenburg: Míla is Iceland's largest telecommunication infrastructure company. We acquired 100% of the infrastructure from a telecoms incumbent – it’s the first time that a European national telecoms company has sold all of its infrastructure, including a copper network, a fibre network, mobile towers and other equipment, to a single party.

We are now working to swiftly accelerate the rollout of telecoms infrastructure in Iceland, including its 5G and fibre network. It means we can provide non-discriminatory open access to all the country’s telecommunication services providers.

How would you sum up the Ardian approach to value creation?

Santavirta: We aim to create real industrial value rather than profiting from financial engineering. Míla uses 100% renewable energy, while Nevel actively assists other companies to decarbonise.

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