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.”

For further reading:
Ostrum Asset Management
An affiliate of Natixis Investment Managers
French Public Limited liability company with board of Directors
Share capital €27 772 359
Regulated by the Autorité des Marchés Financiers (AMF) under no. GP 18000014
RCS Paris n° 525 192 753
43 avenue Pierre Mendès France
75013 Paris

Natixis Investment Managers
RCS Paris 453 952 681
Share Capital: €178 251 690
43 avenue Pierre Mendès France
75013 Paris

This communication is for information only and is intended for investment service providers or other Professional Clients. The analyses and opinions referenced herein represent the subjective views of the author as referenced unless stated otherwise and are subject to change. There can be no assurance that developments will transpire as may be forecasted in this material. 

Copyright © 2020 Natixis Investment Managers S.A. – All rights reserved