Inspiratia InfraTech Takeouts

InfraTech
Five key takeouts
InfraTech: investing in the future
in partnership with

Contents
InfraTech - video takeouts
4
Data can help shape the future of infrastructure
6
The rush for full fibre
8
InfraTech revolution requires new sources
of capital
14
The era of infraTech is here
18
Digital twin needs private sector backing
Innovations in mobility
20
Fibre is the future
Dealing with data
22
24
Innovation in mobility
26
Panels
28
2 Project name / Section

InfraTech - video takeouts
Watch industry experts discuss how technology is revolutionising the
infrastructure space at inspiratia's InfraTech conference
The conference – held on 5 June in partnership with Pinsent Masons – explored
applications for data, the digital twin, fibre-optic broadband and smart mobility,
among other topics.
inspiratia's video takeouts installment features infrastructure and technology
specialists examining the key themes of the conference and how the
infrastructure space is being changed by radical new approaches.
David Pool
CEO, Mind Foundry
Nick Boyle
Technical Innovation Officer, Balfour Beatty
Interviews
Anne-Marie Friel
Partner, Pinsent Masons
Simon Colvin
Head of TMT & Sourcing, Pinsent Masons
Anne Kemp
Director, Atkins
Dominic Thasarathar
Thought Leadership, Autodesk
Erik Jorgensen
Managing Director, Macquarie Group
James Dean
Co-founder and CEO, SenSat
Mark Enzer
Chief Technical Officer, Mott MacDonald
InfraTech conference
June 2018
4 5

Data can help shape the future
of infrastructure
listen back
Listen here
Sarah Hayes
Senior Economic Adviser and New Technology Lead,
National Infrastructure Commission
The idea of a national digital twin was floated in the National
Infrastructure Commission's Data for the Public Good report last
year 2017.A digital twin is a computer-generated model of physical
infrastructure and data networks in a city, which can be implemented
to map an entire country.
In this audio clip, the NIC's Sarah Hayes explains how the digital
twin will improve the way we plan and use infrastructure, and what
steps the NIC has taken to implement the initiative.
Listen here
Dr Olga Feldman
Directory, Advisory and Strategic Modelling, Data
Analytics, Arcadis
The Internet of Things is a digital network of physical devices and
assets which allows the collection and exchange of data.
Billions of devices around the world are connected to the internet
with the ability to make every aspect of modern life smart.
With this in mind, Dr Olga Feldman ponders how the Internet of
Things should focus more on the application of data and not just its
collection
Mark Enzer
Chair of Digital Framework Task Force and Chief
Technical Officer, Mott MacDonald
David Pool
Founder and Chief Executive, Mind Foundry
Dominic Thasarathar
Thought Leadership, Autodesk
Listen here
Machine learning is the ability for computer systems to learn
independently, through the use of data and algorithms.
For many in the industry, it may seem like a new concept, but it has
been part of the infrastructure space for many years.
David Pool defines the three types of machine learning and explains
how the input of data is key in solving complex challenges.
Dr Angie Ma
Co-founder, ASI Data Science
Artificial intelligence can perform tasks which traditionally only
humans could carry out, such as identifying images and speech
patterns.
Listen here
Raw data is the key resource of the modern age, allowing more
accurate information to be collected which leads to better decision
making.However, the value of data has yet to be quantified,
with new business, procurement and commercial models going
unrealised.
In this extract, Mark Enzer looks at how data can be valued, and
is joined by Dominic Thasarathar for a discussion on who should
benefit from the monetisation of data..
James Dean
Co-founder and CEO, SenSat
A technology which can capture and analyse high quality
information in real time is a valuable asset for any sector.
The technology underpins the ongoing revolution within the
infrastructure space, allowing universal improvements to both
understanding and application.
However, while drones can and have carried out these tasks, the use
of this technology is not universal in the infrastructure space.
Listen here
To that end, Dr Angie Ma outlines some practical examples of
artificial intelligence, which has led to efficiencies and savings
across the board.
Listen here
James Dean and Dominic Thasarathar explore the role of these
flying robots, and say why there needs to be long-term investment in
technology to truly unlock its benefits for the infrastructure sector.
6 7

The alternative network providers (altnets) – a variety of entrepreneurs
competing with incumbents Openreach and Virgin – have received a helping
hand from the UK government by way of competition rules and a funding
environment stimulated by the Digital Infrastructure Investment Fund (DIIF).
But full fibre connectivity is still at around just 3%, meaning that the national
network build-out will require much more capex investment – estimated to be in
the tens of billions of pounds.
The rush for full
fibre
"Given only 2-3% of the country has full fibre, there is a lot of land to go for and
that is why you're seeing increased interest from infra investors in the space. It
is a little bit of a land rush," said Oliver Bradley, corporate finance director with
London-based fibre developer CityFibre.
For the altnets – which also include the likes of Hyperoptic and Gigaclear – the
main challenge is amassing sufficient scale to be taken seriously by internet
service providers (ISPs) and financiers alike.
Already there have been some examples of success, with CityFibre recently
striking a subscriber deal with ISP Vodafone and now receiving equity backing
from major infrastructure fund managers Antin and Goldman Sachs.
"The challenge for altnets has been a chicken and egg problem of unless we are
big we are not relevant to [ISPs], but unless one of you helps make us big we will
always be small. So how do you break that cycle?" asked Bradley.
On the financing side, also, scale is a problem. Debt providers say companies
need to grow and consolidate to be more creditworthy and attract cheaper forms
of financing. Yet the altnets' access to capital has already improved dramatically
since the government began developing its DIIF initiative in 2015.
"You can argue that the government has achieved its policy objectives already
because the amount of focus on the sector, the amount of transactions that have
happened. The capital is there – the DIIF is complementing and doubling the
firepower available," said John Mayhew, head of infrastructure finance at M&G
Investments, which is mandated as one of the fund managers under the DIIF
initiative.
8 Project name / Section
For lenders, Mayhew said, the altnet financing market still has a way to go
before it is more mature and can command higher gearing and better pricing.
In addition to size, the altnet business model is also prone to demand and
technology risk, though these can be mitigated with anchor contracts and the
backing of large corporate ISPs.
9

An open question
Where the altnets lack size, their larger incumbent competitor Openreach
lacks incentive. With the way the market is regulated, it makes little sense for
Openreach to invest in fibre infrastructure upgrades when its legacy copper
network is already bringing in revenue and the opportunity for additional
returns is slim, said Ian Dabson, a commercial specialist with the government's
Infrastructure & Projects Authority.
"So the only business case they can make is opportunity cost if they lose their
market share," said Dabson.
With CityFibre already claiming to offer cheaper and higher-quality connections
than Openreach, there are certainly pressures on the market to evolve. While
Openreach theoretically has the clout to simply outprice its smaller competitors,
new entrants have benefited from a number of regulatory changes in recent
years that level the playing field, including restricting Openreach from
selectively lowering prices only in the areas where competitors are taking
market share.
The UK government is still developing its strategy to attain near universal full
fibre coverage for homes, businesses and future smart cities infrastructure such
as lamp posts and traffic lights. It is currently carrying out the Future Telecoms
Investment Review.
Experts estimate the densely populated parts of the UK – around 40-50% of
the market – will be developed on a fully market-based approach in the next
few years. On the other end of the spectrum, where the country is sparsely
populated and demand is low, it will make little economic sense for fibre
developers to invest without subsidies. But there are also second tier population
centres which could be developed under more innovative schemes such as
regional monopolies or the French and Portuguese models.
"When you get to the very edge of the network it's going to be extremely
challenging to deploy that economically," said Matthew Evans, CEO of
Broadband Stakeholder Group and Executive Director of SmarterUK. "In that
middle third there's some really interesting policy choices facing the government.
That could be something in the way of a regional monopoly. It could be a bit of
a more innovative approach than what we have seen today."
Lessons from France
In a similar vein, the French full fibre market has been developing at a rapid
pace in recent years.
"We started looking at infrastructure in broadband back in 2009," said
Gwenola Chambon, head of infrastructure funds at Mirova. "At the time nobody
was interested in that sector in France. Very limited banks were attracted by the
sector due to technology risk. And then in 2014, we actually went to the capital
markets."
In a few short years, infrastructure investors have come up with ways to compete
with the major telcos, introducing mini-perm structures and creating a new asset
class within rating agencies in order to facilitate aggressively geared project
finance in a space with significant technology and revenue risk. Today, the
market has heated up to the point where some bidders are no longer asking for
subsidies.
"We are in France seeing crazy terms," added Chambon. "We started with an
initial double-digit strategy for new projects and now we are even below double
digits for risky greenfield transactions, because we are facing competition from
incumbents which are just struggling not to lose opportunities."
While the French broadband PPP programme is coming to an end, Chambon
said she sees further opportunities elsewhere in Europe.
"We are in a market that is very hot on infrastructure. There is major potential
for investment. Some of the traditional countries – the UK, Germany, France
and Italy – are lagging behind and we need to catch up and invest massively to
reach the threshold of 80% by 2022."
5G era
Whilst full fibre investment has fallen behind in the UK, authorities are working
to ensure that the nation is at the front of the pack in developing the next major
widely adopted telecom technology – 5G.
The new mobile communications standard is necessary to support many
upcoming innovations – including artificial intelligence, the cloud and driverless
cars – and then connecting these systems to physical infrastructure.
"5G is the bit that sits between the infrastructure and the data and the
10 11

management platforms," said Tony Sceales, sector coordination lead for the 5G
Testbeds & Trials Programme at the Department for Digital, Culture, Media &
Sport. "It's the way that everything starts to get glued together."
The world moves to a new generation of mobile technology roughly every 10
years, said Sceales, and the UK is believed to be a year or two ahead in the
decade-long rollout of 5G.
Communications regulator Ofcom recently auctioned off the 3.4GHz band
to telecoms companies for 5G use, and various government-backed research
initiatives are underway to encourage investment, develop technology and
prepare a regulatory framework.
The £1 billion National Productivity Infrastructure Fund has provided a £700
million pool of funding split between local full fibre and 5G programmes. And
the government is also in the process of appointing a pilot 5G city as part of the
5G Urban Connected Communities project.
All this will support inward investment, exports, productivity and academia, said
Sceales, adding, "Our ambition is to be the number one digital nation."
listen back
Oliver Bradley
CityFibre,
on the altnets
John Mayhew
M&G, on the financing
environment
Ian Dabson,
Infrastructure & Projects
Authority, on regulation
12
Project name / Section
13

For traditional infrastructure investors, InfraTech means the emergence of
technology-led asset classes like broadband, data centres and electric vehicle
charging stations. But the real innovation is happening higher up the risk curve
– with venture-type capital out to support early-stage businesses that offer
higher-tech solutions to the infra sector
The UK's infrastructure sector – once among the most active greenfield markets
in the world – has been characterised in recent times by a lack of dealflow and,
on the few transactions that have emerged, fierce competition.
With investors searching for ways to deploy their capital, new asset classes
have fallen under the banner of infrastructure – among them technology-led
sectors like smart meters and data centres. In addition to expanding the range
of investable asset types, infratech is also about smarter construction and asset
management.
This technological charge is progressing at a rapid pace. Market players are
looking at how advanced tech – including drones, artificial intelligence and
autonomous vehicles – could provide solutions for traditional infrastructure.
But these disruptive businesses – mostly early-stage startups – are more akin
to venture capital or growth capital plays, and such ventures require different
investing skills, according to Erik Jorgensen, managing director at Macquarie
Capital.
"You need to have the right skillset in place to evaluate the person risk, the
technology risk and the market adoption risk that come with early-stage
investing, versus the construction risk and the regulatory risk that comes with
an infrastructure project," Jorgensen said at inspiratia's InfraTech conference in
London on 5 June.
InfraTech
revolution
requires new
sources of capital
Finding the funds
These opportunities – offering equity returns north of 25% – are clearly at the
riskier end of the curve.
They are also, in infrastructure terms at least, small fry in terms of equity tickets.
As one example, Jorgensen said Macquarie was looking at companies with
revenues of between US$10-15 million, in which it would be able to deploy
between US$10-50 million in equity.
Meanwhile, the question traditional investors and financiers have, considering
they are used to long-term stable cashflows, is around how their capital is going
to be repaid.
There are some interesting models coming out around how you capture value,
how you pay back the debt and how the equity goes into it," said Nick Ogden,
partner at Pinsent Masons, which sponsored the InfraTech conference.
14 Project name / Section 15

Luca Gatto, head of infrastructure at Japanese lender SMBC, said banks are
even less keen on the kind of technology risk, volume risk, demand risk and
pricing risk that highly technology-intensive sectors bring with them.
However, he added that for many market players, a starting point in tech has
been to look at existing sectors that might be undergoing digital transformations.
Government backing
The UK government is playing a central role in the development of two
technology-led infrastructure sectors through the creation of two public-private
investment funds.
The first – the Digital Infrastructure Investment Fund (DIIF) to support the
broadband rollout – saw Amber Infrastructure, Infracapital and M&G selected
to manage three separate vehicles last July [2017]. The Infrastructure & Projects
Authority (IPA) is now preparing to launch a follow-up to service the EV
charging market.
Axel Jaegle, commercial specialist at the IPA, said the idea behind both funds
was to catalyse private sector investment and send signals to the market that the
government was supporting the sector.
In the case of broadband, he added, the sector had been less popular as
an investment theme among infrastructure investors when the IPA first started
marketing the DIIF in 2015, but is now seen as an established asset class in its
own right.
Once a manager has been selected for the EV charging fund, Jaegle said the
IPA could turn its focus to a third investment vehicle aimed at another emerging
asset class – cleantech.
Investment demand
The government's involvement in the broadband and EV charging markets will
not please everyone – some will say it is up to investors to price risk and fund a
sector's early growth, without the influence of the state.
And in that respect, infrastructure funds have a critical role, according to Patrick
Bossert, associate partner at EY.
"We need some of the big traditional funds to invest in, for example, digitising
rail – that will drive a massive demand for the right digital technologies for
managing markets, capacity and arbitrage, where the venture funds and more
specialised investors can play," he said.
"But we still need the government to unlock the big prize first to enable this
whole market, and something tells me that we're just on the cusp of that
happening."
16 Project name / Section Project name / Section 17

The infrastructure sector is becoming smarter with the emergence of infratech
– described by Simon Colvin from Pinsent Masons as "the digital disruption
of physical infrastructure". New technologies in transport and energy are
developing; advanced robotics, artificial intelligence and drones are being
deployed to make assets more efficient; and data is revolutionising the way
projects are being built and operated – and many of these innovations are
being driven by the infrastructure users themselves.
The era of
infratech is here
But the rise of smart infrastructure brings about challenges, not least when it
comes to investment horizons. How does a tech company operating, say, on
12-month cycles interface with an infrastructure asset owner that has a 30-year
outlook? And how do they both square with a political environment that rarely
extends past the next general election? What are the business models of the
future?
In this regard, Macquarie's move to buy 50% of environmental monitoring
business EMS – its first investment out of its new infratech business – could
provide some inspiration. Other entry points include the creation of in-house
technology units by infrastructure companies, some of which are also starting to
partner with tech firms on project bidding teams.
But with all these innovations, it's crucial to avoid the divide between having
a technologically advanced asset and employees that are not digitally
empowered, said Macquarie's Erik Jorgensen – a prime example being in the
health sector, which despite developing robotic surgery, processes fewer than
20% of payments digitally.
Fundamentally, for the infrastructure and construction companies that historically
have been reluctant to change – construction in particular is famously one of
the least digitised industries – it is about better communicating the benefits
technology can bring.
19

Last year [2017], the UK's National Infrastructure Commission (NIC) floated
the idea of a pilot digital twin – a computer generated model of physical
infrastructure and data networks. The digital twin would help develop a greater
understanding of how individual infrastructure assets interact and allow more
detailed planning of future physical infrastructure, said the NIC's Sarah Hayes.
A long-term timetable has been tentatively set out for the implementation of
digital twin models, starting with initial versions based on cities and rural areas,
before a gradual combination into a full, national model.
The first panel at inspiratia's conference visualised what infrastructure would
look like in the year 2025 and explored the applications of a digital twin. It was
suggested that by incorporating data on asset usage and service capabilities,
owners could find the most efficient uses for their projects, as well as potentially
avoiding major capital expenditures.
The crucial aspects which would enable a digital twin to be used to its full
potential are artificial intelligence (AI) and machine learning, according to
panellists. These technologies would be able to analyse and make a huge
number of predictions more successfully than human experts.
Digital twin
needs private
sector backing
It was also stated that the key to a successful rollout of a digital twin is to gather
appropriate parties to work together on it. AI companies, entrepreneurs and
academics would need to combine with infrastructure players and authorities to
develop a successful digital twin, as the "government needs a nudge from the
private sector," according to Hayes.
20

Information technology and data provide the backbone for infratech
innovations, as underlying digital assets – broadband, data centres and 5G –
are increasingly embraced as essential infrastructure.
'Fibre is the
future'
The UK broadband market has been particularly active in the past 12 months,
with a wave of infrastructure players – Amber, Aviva and Infracapital – striking
deals. In perhaps the most significant yet, the UK's largest alternative network
provider, CityFibre, is being acquired by Antin and Goldman Sachs funds.
"Over the last few years you've seen more and more acceptance that fibre is
the future and that it can be thought of as infrastructure," said Oliver Bradley,
corporate finance director at CityFibre.
The uptick in investing has coincided with the launch of the government's Digital
Infrastructure Investment Fund (DIIF) last summer. With fibre-to-the-premises
connectivity in the UK falling behind other European countries due to years of
underinvestment, the DIIF has helped attract new capital.
"You can argue that the government has achieved its policy objectives already
because the amount of focus on the sector, the amount of transactions that have
happened. The capital is there – the DIIF is complementing and doubling the
firepower available," said John Mayhew, head of infrastructure finance at M&G
Investments, which is mandated as a fund manager under the DIIF initiative.
The UK competitive landscape is still in flux, and the potential opportunity for
investors is vast – experts estimate capex needs for the nationwide fibre rollout
to be in the tens of billions of pounds.
While funding and regulatory schemes vary in each country, the race is on
to build broadband networks across Europe. The French PPP programme, for
instance, has notably quickly become a highly competitive financing target.
Once broadband is an established infrastructure asset, other digital
technologies such as 5G are poised to follow suit. These technologies will
support everything in the infratech sector – from BIM software and drone
mapping for construction, to the Internet of Things and smart roads that will
boost asset management capabilities.
23

As the production and consumption of data by asset owners and users increases,
this creates issues around how that data can be best put to use. As it stands,
there is no consensus in how to approach this, suggesting work is required
before a best practice emerges. Solutions will naturally differ between sectors
but the issue is taking up increasing amounts of the time of those engaged in
technological applications for infrastructure.
For one, Transport for London (TfL) – the public body in charge of the UK
capital's underground, bus and trunk road networks – sees value in free data
sharing. TfL's Gareth Sumner said that the creation of an API allowing unfettered
access to its data had already saved money. Furthermore, TfL is actively seeking
relationships with companies that could derive value from the free flow of data,
in quid pro quo arrangements.
Dealing with
data
Highway owner Hochtief takes a different approach, in that it does not foresee
free data exchanges on its smart road projects. For instance, the group receives
significant data from car manufacturer VW but does not get this for free, and so
predicts a data marketplace will arise to deal with these transactions.
But what is currently lacking is a well-defined framework within which
information can flow from one party to another. Key to this occurring is ensuring
that data protection requirements are adhered to.
Anne Kemp of Atkins highlighted this as a crucial issue, saying, "The nightmare
of this is when we're talking about individuals and GDPR, when we put no more
than five datasets together we can identify an individual. We all need to be
much more aware of it and learn how to do this."
24

At the same time as new infrastructure sectors emerge and approaches to asset
management evolve, private vehicular transport is also on the cusp of a new era.
Innovations in
mobility '
Electric vehicles (EVs), autonomous vehicles (AVs), vehicle-to-grid (V2G)
charging infrastructure and mobility-as-a-service solutions (MaaS) are all
coming to market almost simultaneously, with potentially radical implications
for emissions, driving habits and even threatening the concept of personal car
ownership.
Perhaps the most immediate innovation to make a significant impact on cities
around the globe will be EVs. TfL's Sumner explained his employer's approach,
saying, "For us what's really important is to make sure EVs aren't just aimed at
private ownership, but also at taxi private hire, freight, and at fleets. We believe
one of the key ways to make that happen is to make sure there are enough rapid
charging points in central London."
But, as is the case with many infratech initiatives, there is still work needed to
fully accommodate these new technologies. Octopus Energy's Tim Heal stressed
that more sophisticated marketplaces are needed to allow V2G deployment
to become widespread, as well as for the experience of customers to be
fundamentally simplified so that they can be encouraged to switch from petrol.
Perhaps further afield, but potentially more seismic, is the nascent AV industry,
which Appyparking's Dan Hubert claimed would lead to a drastic fall in car
ownership among the populace. However, bureaucratic issues in the different
approaches to this taken by councils, at least in London, would need to be
cleared up before car sharing could mature.
On the other side of the coin, according to Hubert, is the notion that institutional
fleets of AVs will increasingly become the norm, particularly in cities where
owning a car is less vital for navigating between neighbourhoods.
26 Project name / Section
27

Panels
Infrastructure 2025
• Dr Angie Ma, Founder – ASI Data Science
• Mark Enzer, Chair of Digital Framework Task Force and Chief Technical Officer –
Mott MacDonald
• Sarah Hayes, Senior Economic Adviser and New Technology Lead –
National Infrastructure Commission
• Dr Olga Feldman, Director Advisory and Strategic Modelling, Data Analytics – Arcadis
• James Dean, Co-Founder and CEO – SenSat
• Dominic Thasarathar, Thought Leadership - Autodesk
Smart Mobility: Economics and Technology
• Gareth Sumner, Foresight Manager – Transport for London
• Anne Kemp, Director – Atkins
• Dr Joachim von Lukowicz, Vice President – Hochtief
• Dan Hubert, CEO and Founder – AppyParking
• Tim Heal, Head of Strategic Finance – Octopus Energy
Smart Infrastructure: Investment Opportunities
• Axel Jaegle, Commercial Director, Financial Advisory – Infrastructure & Projects Authority
• Luca Gatto, Head of Infrastructure – SMBC
• Erik Jorgensen, Managing Director – Macquarie
• Nick Ogden, Partner – Pinsent Masons
• Patrick Bossert, Associate Partner – EY
Broadband and Digital Infrastructure
• John Mayhew, Head of Infrastructure Finance – M&G
• Oliver Bradley, Corporate Finance Director – CityFibre
• Gwenola Chambon, Head of General Infrastructure Funds – Mirova
• Ian Dabson, Commercial Director – Infrastructure & Projects Authority
• Matthew Evans, CEO of Broadband Stakeholder Group and Executive Director of SmarterUK
– TechUK
Presentations
• Simon Colvin, Partner – Pinsent Masons
• Nick Boyle, Technical Innovation Director – Balfour Beatty
• David Pool, Founder and Chief Executive – Mind Foundry
• Tony Sceales, Sector Coordination Lead for the 5G Testbeds & Trials Programme –
Department for Digital, Culture, Media & Sport
28 29

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