Electricity in Finland: a COVID-resistant Sunsuper investment

In the seven years since its acquisition, Caruna has been an outstanding investment – delivering double-digit net returns for Sunsuper members.

Why do we invest in infrastructure?

While Sunsuper has been a long-standing investor in infrastructure assets – both here in Australia and globally – it is an asset class that has become increasingly popular among institutional investors. Over the last decade or more, long-term bond yields have been in more-or-less steady decline and so the long-term income streams provided by infrastructure assets have become even more attractive. Investors have become increasingly willing to pay higher prices for and accept lower expected returns from infrastructure assets. Even over the course of the COVID crisis, these assets have remained highly sought after.

How COVID resistant is infrastructure?

During COVID-19, there was quite a wide variation in the performance of Sunsuper’s infrastructure assets. Transport-related assets – most notably airports here in Australia and in the UK – saw their valuations reduce significantly. However, other assets fared much better. Our data centre exposures have benefitted from COVID-changes to everyday life, such as the surge in online shopping and remote working. Yet other assets suffered relatively little adverse impact – Caruna has been one such business.

Selling Caruna

In mid-2020, Sunsuper received an extremely attractive, unsolicited offer from a large European pension fund for part of our stake in Caruna at a price well above the carrying value of the asset.

After extensive consultation with our investment manager, First Sentier, we were willing to agree to the partial sale. However, as a reflection of the strength of demand for these assets in the current environment, two other buyers emerged offering to buy our full stake, further strengthening the case to sell. We subsequently agreed to the full sale of our interest alongside First Sentier.

The Caruna sale has now completed, generating substantial profits for Sunsuper members. The sale also provides Sunsuper’s investment team the opportunity to reinvest the sale proceeds in assets that are likely to generate higher returns than those implied by the sale price of Caruna.