NOVA’s Chris Beall Shares Critical Insights on the Future of North American Infrastructure at High Profile Roundtable
Published by Infrastructure Investor
December 1st, 2019
NOVA Infrastructure Managing Partner and Founder Chris Beall was among six investment industry thought leaders discussing “North American Infrastructure: 2020 and Beyond” at an invitation-only roundtable recently hosted by Infrastructure Investor magazine.
Highly regarded for his more than 20 years’ experience in infrastructure operations and investing, Mr. Beall was previously a managing director and co-portfolio manager for Oaktree Capital’s infrastructure strategy and one of four owners and a partner at Highstar Capital. Currently, Mr. Beall chairs NOVA’s Investment Committee and is a member of the Board of Directors of Amtrak and Jaguar Transport.
Mr. Beall shared critical insight on investment opportunities and challenges that lie ahead in infrastructure markets in the US, Canada and Mexico.
While significant capital flowed into US energy industry between 2010 and 2013, have midstream investments lost their shine?
“That capital was supported by high volume growth rate, as domestic production supplanted imports. Those imports have largely been displaced, so growth rates have moderated. Today, the US is trying to take a global share from sovereigns that have non-economic reasons to maintain production, and that is a much harder game to play.”
Does growth in infrastructure capital under management create opportunities at the smaller end of the market?
“The key to capitalizing on that is relationships. If you are only looking at banked transactions or are focused on PPPs, I think dealflow will be a concern. But the US economy is massive and there are lots of smaller projects looking for capital, for those prepared to put in the elbow grease.”
Can larger funds or direct investors come down into the mid-market?
“…Entrepreneurial businesses are not indifferent to whether you are a financial or strategic investor. A strategic investor looking to synergize a management team is much less attractive than a financial partner which can provide capital and support to help them grow.”
Is rate-based risk a significant danger in investment in utilities?
“We are seeing that play out on a massive scale in California. People are talking about the political repercussions, but at the end of the day, it was at least partially caused by underinvested infrastructure.”
Will digital infrastructure ever be considered core?
“I don’t think it is possible to generalize. Is a road core? What if you leverage it 25 times and put an accreting swap on it? You have to analyze downside protection asset by asset and contract by contract.”
Compare long-term investment in assets as bond substitutes with a growth strategy in a closed-end market.
“In a downturn, I think you are much better off with a more lightly levered business with operating leverage, rather than a long-dated bond approach. I am of the view it is only possible to look about five years into the future easily; 10 years feels almost impossible – 30 years, no way.
“If you are buying assets you intend to hold for 30 years, you had better have a very robust internal policy around aggressively re-evaluating market conditions every four to five years. Whereas, if before exiting you have a strong management team and a very good five-year plan, you reduce the exposure to something unexpected that may happen 30 years down the line.
“For me, the discipline provided by a defined exit horizon is a compelling reason to stay in the closed-end market.”
Mr. Beall represented NOVA Infrastructure excellently among other leaders in infrastructure investment and demonstrated his deep knowledge of the industry. You can access the entire article from Infrastructure Investor here: