ESG Focus: Infragreen & The Era of Opportunity

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Infragreen’s IPO on the ASX in June symbolises Australia’s Grand Opportunity in becoming a trusted supplier of green energy to fast-developing Asian countries.

Infragreen’s IPO in an Australian Era of Opportunity

-Infragreen completed an IPO in June raising $40m at an offer of $1 per share
-The IPO happened in an era when local and global trends offer great potential for green endeavours in Australia
-Business that seeks to “Build Big. Do Good. Have Fun” cites a record of 20% annual organic EBITDA

By Ed Kennedy

Infragreen Group’s ((IFN)) recent IPO brings a business with a compelling mission and fascinating construction to the ASX. Infragreen’s fundamental thesis is that “infrastructure can deliver strong financial returns, while building a better, more sustainable future”. 

The business, with this eco-friendly ethos, is led by founder Declan Sherman, and has been launched with the aspiration to have real staying power and contribute to the social good. 

Australia’s Green Surge Amidst Global Instability?

Even the greatest supporters of Donald Trump’s sequel act in the US presidency would acknowledge his first-term unpredictability is repeating. 

In reflecting on recent events involving Iran, Trump himself said, “I like to make the final decision one second before it’s due, because things change”.

Such an ethos means surprises can always arise from the current Oval Office occupant’s approach to the US presidency. 

Yet, his track record suggests a longstanding lack of enthusiasm and interest in seeing the world’s largest economy lead the world in going green. 

Thus, while many Americans and those around the world lament Republican efforts to roll back President Joe Biden’s Inflation Reduction Act –which included billions of funding to encourage renewable energy’s growth– it’s a reality that where America steps back, Australia (among other nations) could look to step up.

As noted by Christian Downie, ANU professor, writing in The Conversation in June regarding the aspirations of the Republican Party to do a 180 on President Biden’s efforts, “Some studies suggest the US could cede A$123 billion in investment to other countries”.

There is context around that ‘could’. As Professor Downie also notes, “Australia should be doing its utmost to attract investors that no longer see the US as an option. Our existing policies are a start, but they are not sufficient”. 

This said, the Albanese government’s decisive re-election in May has been seen as a substantial victory for renewables growth in Australia. 

Other voices alongside Professor Downie’s will advance their contention the federal government’s policies aren’t sufficient in this arena. 

But, ultimately, there’s the prospect of $123bn being ceded by the US, at a time where a re-invigorated Australian government seeks to build upon the renewables uptake seen in its first term.

Accordingly, even if the renewables sector elsewhere is suffering massive setbacks, there are certainly many green shoots visible in the Australian economy. 

Australia’s Path to Being an Energy Superpower 

Just as Infragreen has a long-term aspiration to help build Australia’s clean and green businesses, the country is living through a time when there are immense opportunities for businesses of its kind. 

Especially in a world where nations long relied on for energy, resources present growing risks.

The outbreak of hostilities in Ukraine in 2022 powerfully illustrated the challenge for European powers in pushing back on a Russian government they look to for so much of their energy needs.

Similarly, the most recent chapter of the Israel-Iran conflict showed the ongoing vulnerability of Asia to flare ups of tension in the Middle East. 

Like the reliance European nations have on Russia for energy, any decoupling’ of Asian nations from Middle East nations they rely on won’t be fast.

There’s the scope for Australia to offer an alternative as an exporter of clean and green power.

SunCable’s Australia-Asia PowerLink (AAPowerLink), which is working to build a 4,300km undersea line to transmit solar power generated in Australia to Singapore from the early 2030s, is a powerful illustration of this possibility. 

25% of global energy demand is expected to come from Southeast Asia by the end of 2035.

This fact illustrates the economic possibilities for Australia in providing the region more power, with Indonesia, Malaysia, the Philippines and Thailand all having been cited as candidates for future markets for Australian renewable energy export projects. 

Thus, alongside the domestic benefits Australia’s emergence as a leading renewable energy exporter could provide, the potential to make renewables uptake a great success story of this century for the nation and the wider Asian region is significant.

Getting to the Grassroots

Infragreen’s website proclaims “Build Big. Do Good. Have Fun”.

This is a good encapsulation of the ethos Infragreen seeks to convey, and a worthwhile way to detail the essential features of the Infragreen agenda.

Build Big

The infrastructure businesses that Infragreen targets are in the recycling, renewable energy, and waste recovery sectors. 

A paraphrase of the saying ‘put your money where your mouth is’ helps encapsulate how Infragreen seeks to grow these businesses in tandem to the injection of capital: they ‘put their muscle where their money is’. 

As the company’s site says, “We’re active partners who roll up our sleeves” and “we bring operational expertise, sector knowledge, and patient capital to every partnership”. 

The “Sustainability Highlights” Infragreen lists on its site include 3283 solar systems and over 1150 EV chargers installed, plus more than 48,000 tons of organic waste diverted from landfill, in addition to 512,548 kilolitres of water saved. 

Do Good

Just as the business holds, “Our track record of delivering over 20% annual organic EBITDA growth since inception”, so too does Infragreen contend, “the right mix of institutional and retail investors committed to supporting the growing addressable market of sustainable infrastructure solutions in Australia and New Zealand” will enhance that record further.

The four businesses Infragreen’s website presently advertises illustrate the aspirations of partnerships to build profitable businesses with a green identity: EnergyBuild (renewable energy), Minemet (recycling), Merredin Energy (energy transition), and Pure Environmental (sustainable waste).

In terms of next steps following the IPO specifically, Sherman has said in a video interview conducted with Listcorp published on 1 July, the $40m raised from the IPO allows Infragreen to completely clear its debt. 

In turn, Sherman said Infragreen may “…go back and draw down on those facilities to the extent that we want to fund growth as well as use the cash that’s on our balance sheet…”.

Have Fun

There is a clear audacity in what Infragreen is seeking to do. To some, taking on such a mission may seem like a fast route to soaring blood pressure. 

But, equally, to Sherman, and the like-minded souls who make up the Infragreen team, there’s indeed surely a whole ton of fun on offer in pursuing management’s bold vision.

And Sherman’s history indicates he’s indeed a CEO who understands how to tie a sense of energy and dynamism into a venture.

Prior to his establishment of Infragreen, Sherman –among other roles– was the founder of the Brazil Fitness Corporation (trading as Velocity), which helped popularise gym group cycling classes in the Latin American nation. 

A Green Light for Eco-Friendly Endeavours

Notwithstanding the promising possibilities in the green sector –especially for an Australian operation in this era– the road to going green certainly holds many immense challenges. 

For instance, as Dr Deborah Lau, who leads the CSIRO’s Ending Plastic Waste research efforts, noted in January, “Over 9.5 billion tonnes of plastic waste have been produced globally since 1950, with only 9% recycled each year”. 

In turn, many Australians across New South Wales, Queensland, and Victoria will still have fresh in mind the challenges around such a statistic at a local level.

The past decade has seen numerous high profile stories emerge that 700 recycling bins were routinely dumped into garbage bins in NSW, multiple Victorian councils regularly dispatched recyclables to landfill, and Queensland’s Ipswich council announcing in April 2018 it would send all recyclables to landfill.

Though this announcement by Ipswich was soon followed by a subsequent notification it intended to reverse its decision, these episodes across the Eastern states demonstrate the stumbling blocks and setbacks that have arisen on the path to progressing recycling in Australia. 

If there is a silver lining for those enthused and engaged about Australia going green, but who feel progress is lacking, it’s certainly found in the knowledge there is plenty of room in which much ground can be made up in the second half of the 2020s. 

Infragreen will be a notable business to watch within this space, given its significant ambitions, and the substantial work that remains to be done by the nation, and indeed the world, in getting to where it needs to be in going green.

FNArena’s dedicated ESG Focus news section zooms in on matters Environmental, Social & Governance (ESG) that are increasingly guiding investors preferences and decisions globally. For more news updates, past and future: 
https://www.fnarena.com/index.php/financial-news/daily-financial-news/category/esg-focus/

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