Interview with David Grose 2017

TEC Castlepines Corporation
Interview 2018

Hi David, thanks for joining us today. Could you tell us a bit about yourself and Castlepines?

Thanks so much for having me. My name is David Grose, and I am the founding partner and chief executive of Castlepines Corporation. I began my career as an investor in 1975 and have been working in the field ever since.

Castlepines Corporation is a private pension fund conjoined with public pension funds. We’re headquartered in Sydney, and we also operate representative offices in London, New York and Johannesburg.

Can you share some of Castlepines past projects?

Absolutely. Our investments are focused on infrastructure assets globally.

We have a €4B, 99-year rail project in Northern Europe, partnered with a government, which is very significant for term.

We recently launched an $800M project for barges to be created, built, fabricated in the West and sailed to coastal regions of Africa where we partner with the country utilities, i.e., the sovereigns themselves, in supplying rapid and lower-cost power to those countries. Initially, that $8000M was for two countries, but we are projected to create more than 30 of these incredible floating power plants of 180 MW each, which will total to more than $6.7B in the long run.

How is Castlepines’ equity structured?

We invest not only our own capital but partner capital. We are partnered with public pension funds and insurance companies who constantly offer us very substantial sums, many billions of dollars per year, for new projects. Our chief strength is the ability to syndicate large sums of capital to start a project from zero. We have built our reputation with our consortium of partners by bringing large sums of capital into play very rapidly.

What do you see as problems with the Western equity model?

Well, quite a lot. First of all, its overpriced. Secondly, 3, 5, and 7-year terms means it is inherently unstable. Thirdly – and I think most importantly -– its drowning in debt. And as we have discovered, this is dangerous for countries as well as companies.

So what, then, differentiates Castlepines from other investors?

The Castlepines model, at its core, is devoted to addressing each of these legitimate concerns, by actively reversing them in the way we do business.

We seek modest base-income only. We invest in 20-40 year cycles and can invest longer. . –- We favour use of pension equity only for these very long periods, and where we might ever use debt it will likewise be 20 – 40 year terms, as above all we would wish to avoid refinancing risk.. Traditional first mortgage debt in the well-utilised debt-equity model around the globe is not for us.

I will say this as well: our approach to investing is passive, or “non-interfering”. There is no active management in our involvement unless we’re invited in to comment. Finally, and very importantly in the eyes of many people, we actively seek to keep our base income as very low, as we believe that in the long run more profit is made for everyone, ourselves included, so we lose nothing whilst giving a project the time to breathe.

Now we can do all those good things because we manage risks. And we do that by insisting on investment grade counter-parties in a transaction. It’s essential. So, we look for investment-grade off takers who, of course, is our pension income. Secondly, investment-grade operators, and all operation and management functions, then feedstock- which is very critical, and EPC, which is construction. All these factors and strategies ensure that we are long-term, inexpensive, and free of traditional mortgage debt.

What is the Tunisia Economic City project?

Tunisia Economic City (TEC) is a major economic and urban development project on the Eastern coast of Tunisia. The goal of this joint endeavor is to build, in phases, modern and globally integrated city near current Enfidha to facilitate trade and cultural exchange, bolster tourism, and to position Tunisia as a new African banking and financial center.

Castlepines is one of the largest investors in TEC, invited by the Saudi royal family.

The TEC project was highly attractive for us because it aligns with one of our key tenets , which is to be non-interfering in nature. Castlepines leaves the operations and control of the project to the sponsor, which is who we believe to be right person to handle that in the right place.

TEC is a wonderful project and quite inspiring architecturally. The combination of local and international involvement gave us tremendous confidence as well. There is Tunisian contractor and labor content and involvement, as well as French and American companies taking part.

Essentially, TEC perfectly matches our criteria, and I believe it will be sustainable long-term and of tremendous benefit and service to the people of Tunisia. If it didn’t, we wouldn’t be there. All that said, it is being restructured due to the events of 2015 close by and so we must be patient to permit the developer to cure all of the complicated matters in such a large project.

That’s great. Thank you so much for your time.

Thank you. It was a pleasure.