The key to successful infrastructure investing lies in bringing “industrial best practices” to infrastructure assets, according to Adebayo Ogunlesi, chairman and managing partner of Global Infrastructure Partners.
Ogunlesi made the remark in the context of GIP's ownership and ongoing management of the London City Airport, while speaking yesterday at Private Equity International’s Infrastructure Investor Forum in New York.
“When you're managing an asset like this, you are in the customer management business,” Ogunlesi said, noting that London City Airport last year served 2.9 million passengers.
You need to be conservative in financing these assets.
Customers, he said, have a choice of airports and can go elsewhere. As a result, GIP places a high priority on managing and improving the logistical operations of the airport, having hired a logistical expert to help it in initiatives, like minimising turnaround time for airplanes at the gates.
These and similar operational best practices in the areas of volume growth, pricing and efficiency can help infrastructure investors derive greater value from their investments, he said.
Ogunlesi also cautioned that airports and similar infrastructure assets like port terminals, whose throughput is highly correlated to GDP growth, are not immune to downturns in the economy. He believes that investors should take this into consideration when leveraging such assets.
“The reason we think you need to be conservative in financing these assets is that you have to be able to manage through the cycle,” Ogunlesi said.
Of six such deals GIP has done, two have been all equity, he said.
GIP and AIG bought London City Airport in December 2006 for a reported value of £750 million. Last month, GIP bought AIG's stake in a transaction reportedly valued at about £250 million.
GIP, a joint venture between Credit Suisse and General Electric, closed its debut global infrastructure fund of $5.64 billion in May.