Brazil's XP Investimentos on the lookout for more infrastructure assets

Brazilian investment giant XP Investimentos is looking to expand investments in infrastructure assets, after surprising the market by winning a concession to manage two airports.

Through asset management fund XP Infra IV, the group won the airports serving Campo de Marte in São Paulo state and Jacarepaguá in Rio de Janeiro during an auction this month. The company bid in a consortium with France’s Egis.

XP is also interested in other infrastructure areas, mainly in the sanitation area, as Túlio Machado, head of infrastructure investments at XP Asset, says in this interview with BNamericas.

BNamericas: What are XP's plans for the infrastructure area?

Machado: XP Asset plans to keep growing at a fast pace, as we have done in recent years.

BNamericas: How is XP Asset structured to invest in infrastructure assets? 

Machado: The area was created in 2018 and we currently have three investment funds focused on infrastructure, in which we look at the energy, sanitation, transport and telecommunications sectors. 

We are involved in all our investee companies, so we participate in the administrative team of the companies.

BNamericas: Recently, the XP Infra IV fund won the concession for Campo de Marte and Jacarepaguá airports. How many shareholders does the fund have currently and what is its value?

Machado: There are more than 5,000 shareholders, and the fund totals 305mn reais [US$60.4mn].

BNamericas: Do you expect to increase the value of this fund dedicated to infrastructure?

Machado: The idea is that, in the short or medium term, as we find new assets, we can make new offers.

Thus, the fund grows and allows us to diversify our portfolio, which is interesting from a resource management point of view.

The fund has the authorization to increase its capital to 2bn reais and we like to invest up to 200mn reais per asset so that investments are not too concentrated. We don’t have a planned date for the next capital raising. Our strategy is to find assets and then go to the market to raise cash.

BNamericas: In addition to the airport sector, what other infrastructure segments do you plan to invest in? Why?

Machado: XP Asset's infrastructure funds can operate in all infrastructure segments, electricity, transport, sanitation and telecommunications.

We would love to get into sanitation, because we believe in the sector and we see many opportunities ahead.

BNamericas: What are your plans for Campo de Marte and Jacarepaguá airports? What will be the value creation strategy of these assets?

Machado: In the short term, we have already started to put together the organization plan of operations, selecting executives for leadership positions, and mapping processes, to be able to put the operation in our hands.

Then, in the medium and long term, we will make the changes and put the new secondary revenue plans into practice. 

There are many possibilities for the two airports, from the construction of last mile warehouses to the best use of shops, colleges and even hospitals that already exist and pay rent to the airports. In addition, we will invest in technology in order to equip the two airports and bring more safety and comfort to pilots and passengers. There's a long way to go, but we're planning it right now.

BNamericas: Is XP interested in evaluating infrastructure assets in other countries? 

Machado: At the moment we don’t have investment plans outside Brazil, in the future we can consider that.

BNamericas: In times of high interest rates globally, are infrastructure assets in Brazil a good option for long-term returns? Why?

Machado: We believe this is a good time to invest in infrastructure. In Brazil, there is a huge pipeline of opportunities. Infrastructure assets are resilient and adjusted for inflation, so in our view it’s a good time to invest in infrastructure.