Overall, the trip reinforced our conviction in the European infrastructure opportunity. There's an increasingly clear distinction between companies and countries navigating the economic environment well, and those facing structural and political headwinds. As always, stock selection remains paramount given divergent regulatory outcomes, political risks, and capital allocation decisions.
This is the abridged version of the article, which can be read in full here.
1. Politics & economics
MEGA – make Europe great again… maybe not?
This time last year, European momentum was strong, driven by the Draghi reform agenda and newfound confidence from Germany's massive fiscal stimulus. A year on, that optimism is still there but waned. Germany's €500b infrastructure fund is committed and debt rules have been relaxed, but procurement bottlenecks, planning constraints and labour shortages mean the tailwind hasn't yet reached order books. The one area where the mood has genuinely shifted is strategic autonomy, with defence, energy and technology investment accelerating amid the hostility of the Trump administration toward its European allies.
Middle East conflict
The escalation of conflict in the Middle East revived memories of the energy crisis triggered by Russia's invasion of Ukraine, just as Europe had spent three years normalising inflation and building energy resilience. The European Central Bank has paused its rate-cutting cycle and turned more hawkish, while the European Commission has revised its 2026 eurozone growth forecast down to 0.9% from 1.2%. The silver lining: the conflict has injected fresh urgency into the strategic autonomy, defence and energy security agenda, with our utility names seeing increased political will to accelerate network and generation capacity, and our diversified infrastructure companies benefiting from higher defence spend via their contracting arms.
Election season returns to Europe
A recurring theme throughout our trip was the re-emergence of election risk as a factor shaping sentiment towards European infrastructure stocks. A concentration of elections over the next 12–24 months makes the political backdrop more consequential than it's been for a long time.
- France: election campaigning for the 2027 presidential contest is already gathering pace, against a backdrop of persistent fiscal strain and a deeply unpopular incumbent in President Macron.
- UK: the emergence of Andy Burnham as a left-wing successor to Keir Starmer has heightened risk for utilities, given his historically stronger pro-nationalisation stance.
- Spain: faces its own election cycle in 2027. Our conversations on the ground suggest this is likely to produce a shift to the right – broadly positive for listed infrastructure.
- Italy: continues to enjoy unusual political stability under Meloni, though cracks are beginning to show ahead of an election that must be held by December 2027.
2. Infrastructure
Toll roads: French uncertainty persists
The outlook for French toll road concessions remains the most significant concern for Vinci, Eiffage and Atlas Arteria, with no meaningful dialogue yet between concession operators and the government. Companies are preparing for a full retendering process ahead of expiry. French fiscal strain compounds the pressure: a long-distance transport infrastructure tax introduced in 2024 imposes a 4.6% levy on French revenues above €120m, while an extended corporate surtax takes the effective corporate tax rate to almost 36%.
US managed lanes favours incumbents, but challenges remain on contracting
Upcoming US managed lane tenders are a key growth opportunity for European infrastructure companies including Ferrovial, ACS, Vinci, Sacyr and Acciona, with the I-285E (Georgia) award expected this month and I-24S (Nashville) in September. Incumbent operators with existing US assets and established local contracting relationships hold a structural advantage, though an emerging labour availability risk could complicate bidding dynamics and targeted returns.
Greece stands out for infrastructure development
Greece's infrastructure investment opportunity is materially underappreciated, driven by the country's economic renaissance and an influx of EU fiscal stimulus. Gek Terna, one of our top five holdings, remains strongly positioned to capture this opportunity, with an established position in concessions and construction. Having seen the state of traffic on the company's Attiki Odos motorway, we believe its proposals for additional investment are more likely to be approved, given the currently adverse impact on GDP.
3. Utilities
UK political risk ramps up (again) but fundamentals intact
UK regulated utilities remain one of the most attractive investment propositions in our universe, with high growth, unprecedented investment plans and supportive regulation. But the resignation of Keir Starmer and emergence of Andy Burnham – set to become the sixth Prime Minister in seven years – have again increased risk premiums. We believe UK electricity networks are relatively insulated from government intervention but see greater risk for the water sector via dividend restrictions, increased fines, or tighter regulation.
Renewable auctions and ED3 regulatory determinations are key catalysts
The key near-term catalyst for UK generators is the AR8 Contracts for Difference (CfD) auction, which opens late July and has particular significance for SSE, which could bid up to 3GW of new capacity. Across networks, the RIIO-ED3 final regulatory determination for distribution networks, due at year end, will be key for National Grid, SSE, Iberdrola and Engie. We believe the regulator will again be constructive on returns to support much-needed grid investment.
Data centres are coming to Europe… slowly
European data centre demand is growing at roughly half the global rate, held back by grid congestion, connection timelines of up to 10 years and permitting complexity, as well as structurally higher energy costs. The consensus among the utilities and generators we met was to temper expectations, though EU data sovereignty rules could still drive some structural growth. For now, the fastest monetisation strategy for generators remains sales of grid-connected land.
US renewables environment remains mixed
European renewable developers including Enel, Iberdrola, RWE, Engie, Ørsted and EDPR are among the largest players in the US renewables market, which has been revitalised by data centre demand for power after being dented by earlier policy headwinds. Strategies vary: Engie is focused almost exclusively on utility-scale solar and batteries, RWE and Iberdrola continue both onshore wind and solar while avoiding federal land, and Enel has stepped back from greenfield development to focus on acquiring brownfield assets. The common theme is capital discipline and a preference for returns over growth.
Blackout remains topical in Spain, but Royal Decree is imminent
The April 2025 Iberian blackout continues to shape conversations with Spanish utilities, with CNMC's sanctioning process capped at €60m for transmission system operator Redeia and less for distributors. More significant is the delayed Royal Decree, now expected in early 2027, which would remove the existing statutory cap on electricity network investment – a change that would allow over €11b of capex by distributors including Iberdrola, Endesa and EDP.
4. Airports
Jet fuel supply risk overstated, but fuel inflation will continue to have longstanding impacts
Jet fuel availability risk, heavily flagged in airline earnings calls following the Middle East supply disruption, hasn't materialised – management teams were explicit this had been overstated by airlines as a commercial negotiating tool. That said, jet fuel prices are still up ~65% year to date, a headwind for passenger growth via higher ticket prices, and capacity cuts across European airports look set to continue. Fraport has been the most impacted given its reliance on Lufthansa, while we believe Aena remains well placed given its main customer Ryanair has been less affected, with traffic growing 4% year-on-year.
European Entry / Exit System (EES) will be a headwind over the coming months
Airports and airlines have become increasingly vocal about the delays caused by the EU's new biometric EES, which was designed to improve immigration efficiency but has so far had the opposite effect, a risk we experienced firsthand when we nearly missed our own meeting with Zurich airport. With peak summer season now imminent, we expect extended queues, missed connections and reputational damage to remain a near-term overhang for the sector.
5. Communications
MNO consolidation low risk, but drawn out process will impact sentiment
Consolidation among mobile network operators has long been a key concern for tower companies, as mergers streamline networks and reduce tenants. We continue to believe the financial risks are overstated given strong contractual protections and regulatory scrutiny, but the French MNO consolidation – the largest in Europe to date – is proving a drawn-out saga for Cellnex and other tower companies, with the process likely to take several years.
Italian market will have more clarity with imminent injunction resolution
The Italian telco market has been dominated by termination notices sent to Inwit by anchor tenants Telecom Italia and Fastweb. Injunction proceedings are fast approaching resolution, with initial decisions expected by end of July. Our overall expectation is for a negotiated agreement requiring some concession to the existing contract which would remove an overhang for the sector.
6. Portfolio positions
This trip reinforced our ongoing conviction in European infrastructure, while helping sharpen our views on individual names. Despite macro and political headwinds, the core fundamentals across key sectors remain intact.
- Utilities: We remain positive on European utilities, particularly those driven by growth in electricity networks. The UK and Italy remain our preferred jurisdictions for regulated network exposure, supported by inflation protection, proactive regulators and, in the UK, strong Regulatory Asset Base (RAB) growth.
- Airports: Despite the ongoing Middle East conflict, select European airports remain attractive. Aena remains one of our preferred positions, while Fraport, our other core pick, remains compelling having reached a critical free cash flow inflection.
- Diversified: We continue to favour a mix of growth and value. Gek Terna, leveraged to the Greek macro renaissance, is one of our highest conviction positions, while we see strong value in Vinci given the majority of its earnings sit outside France.
- Communications: We have grown more cautious in recent months, reducing our exposure to European towers given the ongoing legal battles in Italy and the French consolidation overhang.
As always, we maintain a diversified portfolio of high-quality infrastructure names globally, and currently believe Europe is offering an incredibly attractive mix of quality and value with strong relative policy and thematic tailwinds.
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The content contained in this article represents the opinions of the authors. The authors may hold either long or short positions in securities of various companies discussed in the article. This commentary in no way constitutes a solicitation of business or investment advice. It is intended solely as an avenue for the authors to express their personal views on investing and for the entertainment of the reader.