The New Market Forces Driving Renewable Energy Infrastructure | Portfolio Manager Views

Colin: Welcome to Portfolio Manager Views. Today we're looking at private markets investing, and we're going to focus on infrastructure: an asset class that's playing an increasingly important role in our society - but also for investors today.

My name is Colin Lynch. I'm a managing director, and I have the pleasure of leading our private markets group here at TD Asset Management. Today, I'm joined by Danny Hong, who's a vice president and director on our infrastructure team. Welcome, Danny.

Danny: Pleased to be here. Thanks, Colin.

Colin: Excellent. Well, today we're going to take a look at infrastructure - and we're in a very dynamic environment overall. However, for the private markets, we know lots of stuff is happening in the world. Geopolitical tensions. We see inflation. We've seen the impact in other areas, in private markets, whether it's real estate - today, we see a bit more focus on private credit.

And I think the lesson has been: You really have to look at the strategies in each of these markets to understand how they will perform, because they will perform differently depending on the risk. I think that's probably true for infrastructure, but infrastructure as well has been in a more stable environment, I would say, over the last 5 to 10 years.

Perhaps add to that a little bit. Help us get a sense of what the environment for infrastructure today looks like.

Danny: It's a dynamic environment for sure, Colin. So, just looking back, last year we had the US election, tariff war, Liberation Day, policy changes in the US - including phasing out the Inflation Reduction Act - and that means volatility in the market.

Despite that, infrastructure has continued to perform well in 2025. And looking to 2026: Lots of geopolitical concerns, but infrastructure continues to deliver a strong risk-adjusted return. So it's an asset class that we quite like.

Colin: And why has it really delivered those strong risk-adjusted returns? They're certainly very attractive to investors, but what has really propelled the ability of the asset class to do that?

Danny: Taking a step back, if we look at what infrastructure essentially means, it's real assets that have a physical component providing an essential service to local communities.

So think:

• Power generation in the form of traditional wind and solar
• The transmission lines that deliver those electrons to the local communities
• Transportation in terms of airports, toll roads, marine ports - how people move and get their goods on a daily basis
• And also digital infrastructure relative to data centers, fiber optic networks and cell towers - how we consume our digital content.

These are real assets with a big physical footprint, often long-dated, useful life with inflation-linked cash flow. And that's the stability in the infrastructure asset class.

Colin: You've mentioned a few different themes there. One of those themes over the past several years has been the energy transition.

If you think about the big 3Ds:

1. Deglobalization
2. Decarbonization
3. Digitization

…we also have domestic supply considerations and the like.

Tell us how the last few months, if any, have really changed how you look at the asset class - or has it been really more of the same, in terms of, "These themes have been there, and we expect those themes to persist going forward."

Danny: There are a couple of things that are different, and a couple of things that still continues to be the same.

Generally, there's still a lot of momentum behind infrastructure as an asset class, and that continuation of stable return that's linked to inflation hedge cash flows - but I would say for very different reasons.

And over the last couple of years, we have seen a lot of capital going into - call it "aspirational goals" - under net zero or energy transition. That's been a good driver of infrastructure asset class growth over that same period.

But, looking forward, it's really the necessity that's driving the infrastructure growth. So, think:

• Energy security
• Supply chain resiliency
• Future-proofing our infrastructure

So those are different drivers of infrastructure, but ultimately the same core in terms of how infrastructure gets constructed, operated, delivered.

Colin: Interesting. So, let's hit a little bit about the operation part.

If you go all the way back to - call it the inception of institutional investors' interest in the asset class - we would think of it like assets. You buy a toll road, Toll Road operates and it produces some income. And I think this story is a bit more nuanced.

In particular,  there's the opportunity to create platforms and to scale those platforms and to drive the efficiency, the effectiveness, and the growth of those platforms.

Perhaps talk a little bit about that. Tell us why that's an important factor in the infrastructure return story.

Danny: Yeah. So, relative to our infrastructure strategy, we're really attracted and investing in what we call platform companies. And what they are essentially is a pool of operating assets that's physical, already generating stable cash on a long-term basis with that consistent yield component - but also with local management teams in place that can help go out, acquire newer assets, develop assets, often times at a creative rate to compound infrastructure return, that's double digit on a long-term basis.

So, platforms have operating assets, management expertise that's often local, technical, commercial, and then with that growth component of adding additional assets for attractive long-term risk-adjusted returns.

Colin: That's really cool, I think. So, give us a sense of what you've accomplished by doing that: the size and scale in terms of where you started and where you've built to today.

Danny: So, one example would be our Silicon Ranch Corporation platform down in Nashville, Tennessee. This is actually our first investment in our infrastructure strategy.

Back in 2014 when we first invested in this company - it's a solar operator and also developer down in the US - it had about 50 megawatts of assets and megawatts (meaning that's the equivalent energy that's produced).

Currently, the company has just north of three gigawatts of operating portfolio with another four gigawatts of pipeline coming in the coming years.

So, very substantial growth that we have experienced over the last ten plus years. And the management team that's on the ground has a business plan to further that growth in the coming years.

Colin: Yeah. And so, if 50 megawatts, to - call it 3000 of these megawatts today, with another 4000 to come - and then, I think a megawatt is equivalent to, I think, 20,000 -

Danny: So, 50 megawatts, for example, would be about 10,000 homes. And so, three gigawatts is a substantial amount of power that can generate small cities.

Colin: Amazing. And then our portfolio has a lot of people actually at the portfolio companies running all of these different assets. How many people are doing this?

Danny: We have about 3000 - north of 3000 - management team operators on the ground across the globe, including Canada, the United States and Western Europe.

So we really rely on the operators on the ground to further our agenda of operational excellence, the growth component, and delivering the infrastructure results. That's good for the stakeholders but also good for investors.

Colin: Amazing. So, one of the themes that is talked about a lot today is AI and the growth of AI - the transformation of our society in many different respects for AI.

And then, of course, people talk a lot about it as it relates to infrastructure: data centres.

So perhaps give us some of your thoughts about that theme:

• How important are data centres in terms of infrastructure investors?
• Are there any risks that people should be considering as they look at the data centres, the broader concept of AI?
• What's the impact for infrastructure and infrastructure investors?

Danny: So, AI is definitely here to stay. We have seen it make a big impact on our daily lives, whether that's work, personal - it's here to stay.

Now, the question is: Can you invest in AI? And is that a reasonable investment? And that's a question that we ask ourselves on a daily basis.

So, what we have seen is: There's a lot of high expectation relative to AI investments on the infrastructure side - relating to data centres, potentially fiber networks - with high growth assumptions. So oftentimes 20% growth on an annual basis for the next 20 years.

And that may be true, but that's a very aggressive goal. So, the approach that we have taken is: Really think about AI as a theme - and how do we get exposure to that theme?

So, a couple examples would be:

We have built infrastructure to enable the AI movements, meaning - in the example of Silicon Ranch Corporation - they actually have signed a 100 megawatts of power purchase agreement with Meta in South Carolina last August, to provide power to their South Carolina data centre. So, that's kind-of how we get exposure.

In addition to that, we have an energy storage platform in Calgary, Alberta, that's building large-scale battery storage that can provide reliability and redundancy services to the grid - so that they can go out and build additional data centres in the province of Alberta.

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