To better understand energy infrastructure’s relatively strong ability to pass through inflation, we present three examples from Energy Infrastructure Partners’ portfolio: Swissgrid, the Swiss electrical grid and transmission system operator; Boralex France, an onshore wind platform; and Fluxys, an operator of liquefied natural gas terminals, gas pipelines and gas storage.

Swissgrid, the owner and operator of Switzerland’s high-voltage transmission grid, operates under a highly regulated, stable earnings and cash flow model. Its earnings are based on a weighted average cost of capital (WACC) mechanism, providing a stable return on capital regardless of business performance. Swissgrid can pass on all costs related to regulated activities to customers, with cost forecasts made annually to determine grid tariffs. Despite a delay in passing through unforeseen inflation changes, Swissgrid can adjust tariff levels in subsequent years, effectively shielding its revenues from long-term inflation effects.

Boralex France, the largest private player in the French onshore wind power industry, operates around 70 wind farms and a few solar power plants, with a strong development pipeline. The majority of its sites operate under France’s feed-in tariff, a fixed price guaranteed for 20 years that is 30% linked to inflation. After the feed-in tariff contract expires, the business model shifts to a market-based model, allowing revenues to naturally fluctuate with inflation. For new projects, Boralex France can bid for a feed-in tariff based on construction costs and required return on capital.

Fluxys, a leading European gas transmission and storage operator, operates a 24,000 km pipeline network and four liquefied natural gas (LNG) terminals. Its operations span various jurisdictions, business models, and technologies, each with different inflation protection mechanisms, diversifying risk at the group level. Shippers using capacity at Fluxys’s LNG import terminal at Dunkerque sign contracts linked directly to inflation, and Fluxys can fully pass through terminal operating expenses to capacity offtakers. In Belgium and Germany, where Fluxys operates gas transport pipelines, the company earns a regulated return, with inflation pass-through mechanisms varying by country.