Cool Vector Video-Podcast TRANSCRIPT: "Infranity, Sustainable Infrastructure Lender, Enters the North American Market"
Cool Vector Video-Podcast: Charting the rise of data centers and the digital infrastructure asset class.
Episode Title: Infranity, Sustainable Infrastructure Lender, Enters the North American Market
Episode Duration: 15:45
Originally Posted: February 17, 2025
Listen to the Full Episode here.
Speakers: Sacha Kamp, Investment Managing Director & Head of Investment Debt, Infranity; Paul Colatrella, Managing Director & Head of North American Debt, Infranity; MODERATOR: David Snow, Cool Vector
Episode Overview: Infranity's ambitions to become a global player in the infrastructure debt market have advanced with the establishment of a US office. Cool Vector caught up with two Infranity partners to learn about the sustainable lending opportunity in North America, the risk-reward profile of co-location data centers and the limits of the energy transition.
Infranity, based in Paris, launched seven years ago in partnership with Italian insurer and asset manager Generali. The firm has a mandate to lend to the expanding infrastructure market in a way that supports sutainability goals, says Sacha Kamp, Investment Managing Director and Head of Investment Debt. Infranity's backers want to see their capital "creating positive change."
Paul Colatrella, Managing Director and Head of North American Debt, explains that while the focus on sustainability is more pronounced among European investors, his recent meetings with North American investors reveal a "material segment in the US and Canada" that integrate sustainability goals into overall investment objectives.
In the interview, Colatrella and Kamp also discuss the firm's digital infrastructure deal flow, led by co-location data center opportunities, fiber, and small-cell investments. The firm is seeing good opportunities in tier two and tier three markets in North America. Infranity is focused on co-location opportunities in part because these assets have more diversified customer bases, and their more complex business models require more careful due diligence. Infranity looks to invest between $100 million and $200 million per transaction.
While not every emerging low-carbon power technology has led to a viable business model, Colatrella and Kamp say the rising demand for power is producing lending opportunities across the energy transition landscape. "The massive scale of not just building the data centers but the energy need behind them is I think something that might shock really shock a lot of Americans," notes Colatrella. "We're talking about replacing and expanding a very large percentage of our electrical grid if we're going to achieve the AI targets and the quantum computing targets."
TRANSCRIPT
David Snow: Hello and welcome to Cool Vector. I'm David Snow, your host, and today we're joined by Sasha Kamp and Paul Colatrella, both of Infranity. Sasha and Paul, welcome to Cool Vector today. Thanks for being here. Great to be talking to both of you.
Sasha, where are you sitting right now?
Sasha Kamp: I am in our offices, our headquarters in Paris.
David Snow: Excellent. So you're in Paris. And Paul, the reason you're in New York is because Infranity has expanded its lending-to-infrastructure business to the U.S., to North America, and you are in charge of that business. So we're going to learn about that.
But first of all, why don't we learn about Infranity in general? It's headquartered in Paris. Your firm has nine billion euros in assets under management. What led the leadership of Infranity to decide that its style of sustainable lending to infrastructure was a good fit for the U.S. market? Maybe we could start with Sasha.
Sasha Kamp: Yeah, I’m happy to. And obviously, Paul’s the expert here on the U.S. markets, but I think it's very clear that the U.S. is probably the most dynamic market in the world. From a diversification perspective, it's sensible — you need to be in that market.
From a broader Infranity perspective, we have ambitions to be more present and investing consistently in that market.
Paul Colatrella: The managers have done a great job in building out the brand and footprint in Europe. So I think in terms of money lent in the sector, depending on how you measure it, we're kind of number two in recent activity and number five overall in Europe.
The firm certainly has ambitions to be a global player in the infra debt market overall. Obviously, Infranity’s roots come from Europe, but the United States market is slightly bigger than the European market. So it's really just a place you need to be.
David Snow: I’d love to dig a little bit deeper into the history of Infranity and its commitment to ESG, to sustainability. Infranity is a joint venture partner with Generali from Italy. Maybe Sasha, can you talk about the origins of Infranity and how it is that sustainable investing — sustainable lending — became a core principle of the business?
Sasha Kamp: It's something that we've been integrating into the business since day one, really. The platform started almost seven years ago now, and it's really been part of the strategy to integrate sustainable investing into what we do and to recognize the tremendous potential that the infrastructure asset class has to contribute to sustainability — to delivering essential services of benefit to the economy, to society, and also potentially to the environment.
Generali, and indeed other LPs — particularly in Europe, but increasingly in Asia and also in North America — are focused on how their capital is being invested, what sort of repercussions that’s having, what benefits that’s having, how it’s creating positive change.
It’s been a good confluence of both our own convictions as a firm and the demand that we’re seeing within the LP market.
David Snow: Yeah. Let’s pause briefly on the LP market. Would you say that your orientation toward sustainable investing is a competitive advantage with institutional investors, particularly in Europe, given that they now have much more of an orientation toward all things sustainable?
Sasha Kamp: They’re also under a lot of pressure from a regulatory perspective and from their own investor base to be delivering results from a sustainability perspective. And so we like to be able to offer them a solution whereby they can deploy their capital in a manner that optimizes their own risk-return within this asset class — which is a very good, uncorrelated, diversifying asset class — while at the same time meeting the demands that are being put on them increasingly from a sustainability perspective. So, yeah.
David Snow: Have you had many conversations with U.S.-based institutions about the Infranity strategy? And are you finding enthusiasm for the fact that, obviously, you need to be good at lending, but also that you have this sustainable orientation?
Paul Colatrella: I've had meetings with scores of U.S. and Canadian investors over the past several years. I think there's definitely a large segment of the LP market for whom sustainability and environmental concerns specifically totally resonate and are either a priority or certainly a welcome addition to the overall investing strategy.
As we all know from some things in the news, there are smaller segments of the LP market — specifically in the United States — that are either neutral to sustainability or they don't want sustainability at the forefront. They want risk and return at the forefront, and sustainability less focused.
But absolutely, I think maybe Europe is ahead and more concentrated in terms of how LPs think about sustainability, but there's a material segment in the U.S. and also in Canada who understand those issues and for whom that is a priority in their choosing managers.
Sasha Kamp: Sustainability is also very much about risk — the regulatory risk, the market risk that a business might be exposed to. In infrastructure investing, we’re long-term investors. Transactions can range anywhere from five to twenty-five years. We think there’s significant risk to players that are not paying due attention to sustainability topics.
David Snow: Paul, so Infranity is now open for business in North America. If you could summarize, what is your opportunity flow looking like, particularly within digital infrastructure?
Paul Colatrella: We've already had over 40 potential screenings of deal opportunities. A lot, as you would expect, are in energy transition and a lot in digitalization, which are kind of the two core pillars for Infranity. Most of those opportunities fit into one or the other of those segments.
Specifically in the digital space, the deal count we've seen is in data centers. For us, co-location data. There seems to be a sweet spot in the U.S. right now, so we’re working on some of those opportunities.
We do see fiber — both fiber to premises, fiber to home, fiber to business — which could be interesting as well. And then we see some small cell opportunities, things where 5G doesn't penetrate well and where you want to have a different technology inside, say, a stadium, an airport, or a series of buildings.
Then, general energy transition — renewable energy is probably the second biggest tier of opportunities we’re seeing. Other things around circular economy, waste-to-value, water, and infrastructure around water and transportation could also be something that we’ll visit.
David Snow: What size are we talking about as far as data center opportunities that are within Infranity’s sweet spot?
Paul Colatrella: We typically look to invest approximately $100 million to $200 million, or slightly more, in each investment. So what that means for us is either being the sole lender on something that falls within that size or being a leader in a small club of lenders where the opportunity set would go up to, say, $500 million.
A lot of those data centers — all but the very, very largest hyperscale — fall well within that bandwidth.
David Snow: Can you characterize where you see private debt in particular playing a role versus perhaps much larger lenders for larger, I guess, hyperscaler-type deals?
Paul Colatrella: The hyperscalers are accessing either a combination of bank or ABS financing, which is definitely lower cost and might serve their needs. It has a larger market that serves their needs a little bit better.
But I see us playing as well in tier two and maybe tier three markets — with tenants that are still household names. On co-location data centers, these are companies whose main business is not technology-related. They’re in retail, food distribution, manufacturing — things where the IT component is not core to the business and where they want to outsource that.
The tenants themselves tend to have very good credit ratings. The leases may not be quite as long, but there's very low limits to the churn, and you have a really diverse pool of potential tenants to the data center where you can get comfortable and have a really strong credit.
That’s a lot of what we’re seeing. I think that’s where private debt — whether it’s funds or finance companies — will have a role.
David Snow: How would you characterize the risk and the size of a co-location type of business versus some of these hyperscaler mega campuses that are being built?
Paul Colatrella: The hyperscaler is basically a dedicated data center where you have a permanent tenant — these names we’ve thrown around like Microsoft and Google, all of which right now are very strong investment-grade credits.
There’s a kind of very traditional project finance look to that. Like when you used to build a power plant and it would sell all the energy to the local utility, which was investment grade. It kind of feels like that, and I think that gives lenders a lot of comfort.
The co-location is more the wholesale or retail end of that market. If it’s a portfolio, it could be hundreds of customers that are smaller scale in general, but generally blue-chip names — Fortune 500 types of names. Those contracts tend to be a little bit shorter.
Paul Colatrella: They can be anywhere from a couple of years to maybe five years or so, and you will see some churn, but there's enough demand and enough diversity in the portfolio that you can get comfort there. That credit analysis lends itself a little bit more to funds looking for an enhanced return.
We're just getting more and more comfortable with the co-location model, choosing what we think are the good players. Geography is a big focus as well. And then also the model they use — if they have some advantages with cost of power or, again, location. You want to be close to those customers. They still like that — not for latency, but for that physical connectedness to where their data is sitting. So if you're within an hour’s drive of a tier-two market, a mid-sized city in the U.S., that can be very valuable and can give you comfort that there's going to be a core market to sell that data product.
Sasha Kamp: What we're seeing on co-location, on HPC, on edge data centers — there's a little more complexity in the business models. But that lends itself to what we like to do, which is take the time to really understand them. It's a more involved due diligence exercise, but ultimately, that’s why the returns are there as well.
David Snow: How would you characterize the percentage of the deal flow between the three main pillars of digital infrastructure — data centers, towers, and fiber? What's in your deal flow and how does it all break down?
Paul Colatrella: It may be different in Europe, but I would say something probably close to half in data centers, and probably a slightly smaller percentage in fiber, maybe 35%.
Sasha Kamp: I think if you look back over the last three or four years in Europe, there’s been a lot of investment in fiber, and that's been driven by European-wide targets for fiber coverage that have been implemented on the country level. But there's also been a bit of a retrenchment, as some of the fiber businesses have underperformed. We've seen a couple of insolvencies in Germany and in the UK.
You see the occasional towers deal. These are nice, stabilized assets — this sort of super-core type infrastructure asset. So it's great when they come around.
David Snow: Paul and Sasha, what kinds of opportunities are you seeing in the energy transition space?
Sasha Kamp: In Europe and in the U.S., there's a lot of platform financings we've been doing for renewables companies. So that’s kept us quite busy. I think this is probably more relevant for the European market, but on the district heating and green heat side, there’s been a lot of investment — particularly in the Nordics, but also in Germany — in industrial heating, moving away from, for example, coal and toward biomass.
We're looking at decarbonization of industry, we're looking at EV charging, we're looking at green mobility. We haven't yet been convinced that the business models are sufficiently robust, sufficiently evolved to be investing in that new frontier of energy transition, but we’re definitely following it closely.
Paul Colatrella: The majority of dollars and deals is in the solar space — or solar and storage. That’s across utility-scale, commercial and industrial, and even residential solar. We're seeing a lot of DevCo loans — development company loans — developers looking for capital to secure sites, get interconnection studies done, secure equipment, and negotiate and market PPAs.
Those can be tougher for funds because of the revolving nature of that capital — the velocity of it. The challenge also is that a lot of those developers have a develop-and-flip model where they’re selling the assets, whereas our preference is more the IPP model — where the borrower would ultimately own the operating assets, which works a little bit better for us.
There's still the one-off deals, whether in hydro or biomass — things like that can still be very interesting. Onshore wind is certainly in scope for us. And the other big segment we see is renewable fuels in all of their various forms.
So, RNG — renewable natural gas — that generally can come from either landfill waste or more of an anaerobic digester model, which tends to be agricultural-related. Those can be very interesting transactions for us as well.
David Snow: What are you seeing in the overlap between energy transition and digital infrastructure? Obviously, many of these digital infrastructure projects — data centers — want as much renewable energy as possible. Are you seeing opportunities yet around that demand for renewable energy to be supplied to data centers?
Sasha Kamp: It's probably not gotten to a point where it’s really concentrated. We’ve been investing in platform financing and renewables businesses that are expanding. We're financing them at a point where they’re ready to construct and are entering into PPAs. Increasingly, we see those PPAs being struck with the likes of Microsoft, AWS — the hyperscalers.
Paul Colatrella: For data centers, probably the most important thing is reliability of the energy supply. And on the renewable energy side, the biggest challenge is the fact that most renewable energy is intermittent. It produces when the wind blows or when the sun is shining.
The good news is the projected demand for data center power generation is so high that every megawatt hour counts. So whatever you can put onto the grid — whether solar or not — is going to be useful to them.
However, you still need to back up that reliability. What’s most interesting is we’re starting to see some microgrids. These are small, self-contained, almost utility-like businesses that are either connected to the grid or truly an island from the grid. You could have renewable power — a solar park — supplying a lot of the energy during peak hours, then battery energy storage as backup. But because of the technological limits still with battery power, you still need a fossil fuel backup system at some point.
The challenge is to marry the generation profile of renewable energy assets with the demand need for data centers, which is not a perfect fit.
Paul Colatrella: The massive scale of not just building the data centers, but the energy need behind them is, I think, something that might really shock a lot of Americans. We’re talking about replacing or expanding a very large percentage of our electrical grid if we're going to achieve the targets — and the quantum computing targets, potentially.
Basically, right now, the interconnection model — where it can take three to five years just to get in the queue — is not going to work. We need to figure that out.
At the same time, we’re still replacing coal plants, so that’s cannibalizing some of this load growth. Our nuclear plants — if you look at the fleet — the average age is right about 50 years. Their licenses are running out. Most of those will be renewed, but that’s thousands of megawatts of power that are getting close to the end of their useful life, which will need to be replaced, repowered, or what have you.
It’s a truly daunting amount of power that we’re going to need if we’re going to really achieve these targets.
David Snow: Excellent. Paul Colatrella and Sasha Kamp from Infranity, thank you so much for sharing your expertise with us.
Paul Colatrella: Thanks, David.
Sasha Kamp: Thanks very much.
TRANSCRIPT END