Q1 2023 quarterly valuation update for the energy and infrastructure sector

Fri 02 Jun 2023

Welcome to the Q1 2023 edition of our quarterly valuation update, which provides a snapshot of some of the main publicly available valuation trends across the energy and infrastructure sector, covering both debt and equity metrics.

This quarter we continue to look at trends in debt and equity metrics relying primarily on publicly available information. In relation to the equity trends, we use the Mazars indices of listed infrastructure funds and listed renewable energy funds, compiled on the basis set out in Appendix 1 to this update.

In addition, this quarter we have included a spotlight on ESG and how far ESG considerations should influence the approach to infra and energy valuations.

Three key themes from Q1 2023

Cost of debt has settled in a new range, and asset owners are having to adapt to this. Long-dated gilt yields indicated a relatively stable trend over the past quarter, which therefore crystallises the rising yields experienced in H2 2022. Private debt transactions are still taking place, but asset owners are having to accept the higher cost.

High levels of competition for energy and infrastructure assets; transactional discount rates have remained high. Strong competition for energy and infrastructure assets has limited the extent of increases on asset discount rates to date. But the capital markets are expecting more to come.

ESG considerations are increasingly impacting on asset valuations, although the reasons for this are complex. ESG impacts on investment appetite, and therefore liquidity and pricing. It also impacts on specific risks that would in any case need to be considered in a valuation exercise. It may not need to be separated out explicitly, but ESG can’t be ignored by a valuer.

Download our quarterly valuation update for Q1 2023