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The Nordics are well known for their stable macro environment, reliable legal framework, and dynamic economies. But they have also designed sound policies in the field of infrastructure management, and they are at the forefront of innovation, especially with regards to energy transition.

Governments have fixed deadlines for their countries to become carbon neutral as early as by 2035 for Finland to 2050 for Norway, which are now binding by law, and they have heavily subsidised large infrastructure projects especially in the fields of renewable energy. This created an environment where both public and private actors work together to achieve these goals while creating value for their local communities.

The Nordic infrastructure market is very fragmented and diverse. For example one can find over 150 Distribution system operators (DSOs) across Sweden and almost the same number in Norway vs less than 10 in the UK. This leaves a lot of potential for consolidation of these markets to asset managers such as CapMan specialized in managing private infrastructure assets in the Nordic region. Some companies have been owned and managed by families or municipal entities since the beginning of their operation and are now under pressure to implement the energy transition critical to make them competitive and carbon-neutral.

Capex requirements can be massive and that is when private capital is needed. For example CapMan has accompanied transport operators to accelerate their switch to green energy. We have invested in a ferry business in Norway where the electrification of part of the fleet reduced the carbon footprint by 30% in three years. We are doing the same with one of the largest bus operators in Finland, previously family-owned, where we are targeting an objective of a third of the fleet running on electric in the next five years. This is also true in fields such as district heating where we try to push geothermal energy solutions which are clean and reliable, and in digital infrastructure as well, where the cold climate creates ideal conditions for cooling IT infrastructures while offering high connectivity within the region.

The other favourable factor supporting these trends is the fact that the Nordic region has among the cheapest energy prices in Europe. This is due to a large share of renewables and a relatively small share of gas in the energy mix, coupled with a relatively weak demand compared to supply. Norway and Sweden use geothermal energy extensively, while Denmark is a champion of windfarms, and Finland is one of the few European countries actively growing its share of nuclear energy as it is putting into service its new large scale EPR reactor Olkiluoto-3. This atypical profile of energy independence makes the region very attractive for investors, which is why the number of transactions and the volume of investment by foreign investors are both at historical record highs.

The Nordic region will continue to be driving innovation and investment in the infrastructure space over the years to come; some large scale infrastructure projects will be completed in the coming years, such as the Viking link between the UK and Denmark improving the inter-connectivity within Europe and securing the resilience of its energy market.

M. Jonathan AIACH
Fund Investor Relations