Ostrum Asset Management has made a major infrastructure debt investment in German broadband networks.
Ostrum AM has invested in the senior secured debt tranche of a project to expand fibre-based broadband in rural areas of Germany. Ostrum is working alongside private equity sponsor EQT, a specialist infrastructure firm which has raised more than €60bn for projects since it was founded 25 years ago.
The rural broadband technology rollout fits with Germany’s aim to provide super-fast internet connectivity to all households and businesses by 2025. Celine Tercier, Head of Infrastructure Finance at Ostrum AM, says: “The expansion of broadband technology is particularly important at this time of crisis when remote working and collaborative technologies are being fast-tracked. State-of-the-art broadband networks will be essential in this shift.”
Ostrum’s investment is in line with its long-term strategy of investment in energy and digital transition. The debt provided by Ostrum has a seven-year maturity, and is part of total debt financing of around €1bn for the project.
The project is managed on the ground by Inexio, a fast-growing provider of fiber-optic internet connectivity for households and business customers in rural Germany. Inexio aims to provide connectivity to 2m Germany households by 2030.
The risks of the project are considered relatively low because of the stability of the German economy and of the conservatively-managed finances of German households. Usage risk is mitigated too, with Inexio pre-selling 40% of the expanded broadband network’s capacity.
The deal is the second by Ostrum in the German broadband sector following a similar transaction in 2019 with a rural broadband provider. Germany is one of the most attractive growth markets for fibre in Europe as the penetration rates are significantly lower than in other countries. In 2019, only 9% of German households had access to a “fibre-to-the-home” (FTTH) internet connection, compared to 73% in Sweden and 36% in the Netherlands.
FTTH is efficient and reliant because it is not subject to signal interference, even over long distances, as is the case with copper networks. It can provide download speeds of up to 5GB, compared with just 250MB for copper networks and 1GB for 5G. It has energy transition benefits in that it uses just a quarter of the electricity required for broadband over copper networks.
The deal with EQT was finalised in April 2020 despite the lockdown across Europe. “The final days of closing the deal were unusual,” says Tercier. “But we took our time despite the urgency of our deal partners, and completed our due diligence thoroughly as usual.”
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Ostrum Asset Management
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