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Infrastructure investments in practice

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NFF Webinar, Wednesday 10 March 2021 Infrastructure investments in practice
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Page 1: Infrastructure investments in practice

NFF Webinar, Wednesday 10 March 2021

Infrastructure investments in practice

Page 2: Infrastructure investments in practice

2

KLP at a glance

2

• Mutual company – all client are owners;• Municipalities and counties

• State health enterprises such as regional health authorities

• Public sector enterprises

Market

position

• Total asset of NOK 800 billon

• Largest Norwegian life insurance company – third largest

financial institution

• Credit rating A-/A2

KLP

• Leading provider of defined occupational pension to public

sector and associated organizations

• Also offers pension fund services, defined contribution

pensions, banking, insurance and asset management

Solid public

ownership

KLP’s owners335 municipalities

9 Regions

27 State Health Enterprises

2300 Public sector companes

Over 1 000 000

people have a

relationship with KLP

473 000 active

members

245 000 with defined

benefits

322 000 pensioners

Page 3: Infrastructure investments in practice

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Main focus: Pension

3

• Good returns

• God

• service

Good serviceGood returns Low cost Good service

Vision: «The best partner for the days to come »

Page 4: Infrastructure investments in practice

4

Why invest in infrastructure?

• Long-term and stable

cash flows

• Renewable energy

• Diversification

• Duration

Inflation protection

Why not?

• Costly

• Complexity

• Transparency (lack of)

• New risks – uncertainty

• Liquidity (lack of)

• Unclear corporate governance

• Regulatory challenges

• Bubble tendencies

Page 5: Infrastructure investments in practice

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Sustainability goals

Achieve climate goals Sustainable

businesses and

economic activity

Sustainable urban

development and

infrastructure

Helth-promoting jobs

in the public sector

Page 6: Infrastructure investments in practice

6

Broadly diversified portfolio

Real estate

Norwegian

government

Global

government

Global large cap

Global credit

Norwegian

credit

Bonds

Held to maturity

External

Hedgefond

Global small cap

Bonds Listed

equities

Norwegian

Bu

ild

ing

blo

cks

Sweden

Private Equity Government

Emerging markets

RenewableNorwayHold-to-maturityGovernment

guaranteed

Municipalities

Unlisted

equities

Infrastructure &

Renewable

Impact

investments

Microfinance

Bank/finance

Money market Loans

Credit

Credit/FRN

Commercial

real estate

Syndicated

Bank loans

Mortgage

PPP

Denmark

UK (London)

Under

consideration

Seed Norway

Debt Equity

Internal hedge

funds

Renewable

Real estate

funds

Many building blocks can be split

between multiple portfolios e.g.

norwegian indexed equities and

norwegian actively managed

equities or real estate into various

sectors such as offices, hotels and

shopping centers

Page 7: Infrastructure investments in practice

7

KLP’s infrastructure debt mandates

Renewable

PPPPublic Private Partnerships (Norway)

• Separate loans, direct or co-investment with banks

Co-investing with DNB

• Global portfolio, mainly greenfield

Work in progress

• Global fund, mainly brownfield

Page 8: Infrastructure investments in practice

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KLP’s infrastructure equity mandates

• Investment requirements

• Stable, predictable cash flows driven by

underlying values

• Long duration based on long-term rights

or ownership

• Relatively low risk – often independent of

economic development

• Investment approaches

• Direct investments and partnership in

Norway (Nordic region)

• Mainly funds or partnership solutions

globally

Infrastructure &

Renewable

Infrastructure

Renewable

Renewable

• Investment requirements

• Renewable investments with impact in

developing countries

• Investment approaches

• Partnership with Norfund (Norwegian

Investment Fund for developing

countries)

Long term stable cash flows:

KLP Norfund Investments:

Page 9: Infrastructure investments in practice

Portfolio characteristics (Long term stable cash flow)• Good returns

Long Term Stable Cash Flow portfolio by sector

Electricity Distribution Renewable Energy Integrated Utilities Forestry Other

• NOK 11 bill

• 50/50 split between

direct investments

and fund/co-

investments

Page 10: Infrastructure investments in practice

Portfolio performance (Long term stable cash flow)

-5%

0%

5%

10%

15%

20%

25%

2017 2018 2019 2020

Performance vs. Benchmarks

KLP LTSCF Bench 1 Bench 2

• Good and stable

performance

• 10,6% last four years vs

9,3% for Norwegian

equitiues

Page 11: Infrastructure investments in practice

11

Investments in Long Term stable cash flows

Skaftåsen

(Foresight)

Page 12: Infrastructure investments in practice

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