Jason Downie, co-founder and managing partner at Tailwater Capital, shares his thoughts on what lies ahead for the energy-infrastructure sector
Real-assets investments have attracted growing interest among institutional investors in recent years, thanks partly to concerns over inflation risk, low yields in traditional bond markets and a mounting inventory of deteriorating infrastructure in need of repair and renewal. Investors have poured capital into funds focused on different subsectors of real assets, most notably infrastructure. We caught up with investors who touch the different corners of the real-assets world to get their perspectives on what lies ahead for their respective subsectors. Responses have been edited for clarity and style.
Jason Downie, co-founder and managing partner, Tailwater Capital
What do you see as the biggest hurdles facing investors in North American energy-infrastructure deals?
We are seeing a growing global population demanding a more energy-intensive lifestyle, and as an industry, we need to keep up. One major hurdle is the lack of appreciation for the inputs required to deliver safe, reliable and clean energy. As stewards of capital, we continue to believe that an ‘all of the above’ approach and a lower-carbon impact [are] required to pursue opportunities, build strong businesses and generate attractive returns.
What subsectors or themes in the energy-infrastructure investment world excite you the most these days?
I find carbon capture and sequestration to be one of the more exciting and compelling opportunities right now. It solves two key challenges—meeting the need and the demand for energy, while also embracing the broader desire to reduce overall carbon emissions. I think the potential for significant innovation and progress in the next five to 10 years is really unique across the broader energy space.
What do you see as the one or two biggest forces driving returns in the energy-infrastructure investment landscape today?
I believe access to capital will be critical in driving returns. Limited access to capital in an industry with a naturally depleting, core asset base creates an interesting paradigm. We have already seen how the lack of investment impacts supply, and that has led to an uptick in commodity prices. In the long run, those that have capital to invest will benefit.
What role, if any, do you see public-private partnerships potentially playing in the world of renewable-energy investing?
Public-private partnerships should play a meaningful role, particularly in the power generation segment given the recent issues in both California and Texas with renewable energy and the associated intermittency challenges. These situations have made it clearer than ever that we need a clean base capacity of natural gas, and these types of partnerships are likely going to be the best avenue of support to get us there as an industry.