Steady, Knowable Investing 

Jeff Rosenbaum, BBA ’00, shares his insights on the future of energy and powerful investing

Jeff Rosenbaum likes a sure bet. A partner at King Street Capital Management since September, Rosenbaum specializes in energy infrastructure investing. He follows the money and other key demand drivers, and he considers population growth and replacing worn-out equipment as good investment opportunities. 

Rosenbaum, who graduated first in his business honors class, started working on Wall Street nearly 25 years ago. Before joining King Street, an investment firm managing $26 billion, as a partner and member of its global investment committee, Rosenbaum was most recently president of NextEra Energy Investments, the direct investments arm of one of the largest U.S. energy infrastructure firms. He also worked at Elliott Management, York Capital Management, the D.E. Shaw Group, and Blackstone. 

Rosenbaum gives back, too, serving on the Dean’s Advisory Council at McCombs and on UT’s Development Board. He shared his insights on investing in utilities, power, and infrastructure. 

What trends do you see in power generation and infrastructure, and what projects attract you?

The trends we look for are simple. Where are people moving? Where there is population growth, there are more businesses and more demand for infrastructure. We also look for replacing antiquated infrastructure, perhaps like undergrounding more powerlines in Houston. 

We also look at jurisdictions that have supportive regulation that promotes growth, and something we can invest in today, like converting old technologies to renewables. Anything that needs investment and provides predictable and attractive risk-adjusted returns. We also look for strong management teams and boards and strong stakeholder support and alignment. One thing about investing in highly regulated industries: You’re not looking to benefit just the shareholder; you also want to benefit employees, customers, broader municipalities, and regulators. Ultimately, if you get that right, the shareholder benefits.

Do you invest in green energy?

We look at wind and solar, and we think that trend will continue, in a more-balanced way. The main issue with renewables is they are intermittent, not firm resources. That means the wind doesn’t blow and the sun doesn’t shine 24 hours a day. This creates timing and location mismatches between generating resources and end demand. We think we’ll need traditional fossil energy sources for a long time. While we won’t likely see new coal plants, there will be new gas plants. And battery storage will be the next wave—storing the electrons from wind and solar generation to use at different times.

My personal view is: The most interesting way to invest in renewables is not in wind or solar but in transmission. To facilitate moving the electrons from where they are generated to where they need to go. We see a need to build significant amounts of new long-haul transmission and local distribution. Our mandate is steady, knowable investments, so that’s where we tend to participate.

Tell us more about battery storage.

Electricity is in highest demand 16 hours a day, five days a week, with less demand on weekends. For example, the wind blows hard at night in Kansas, and if you can match a battery with that resource, you can take an intermittent resource like wind and turn it into a firm resource with battery storage. But to do that at true utility scale and make it broadly deployable on a cost-effective basis will not be available in the near term. 

What innovations are on investors’ radar?

Data centers and artificial intelligence. New data centers are focused on being close to electric interconnections so they have access to transmission lines, and with AI, we know that power demand will be through the roof for a long time. 

What else is important to understand about investing in infrastructure?

What’s important is understanding the complexities of investing in highly regulated business. Also, understanding stakeholder-conscious investing—being fully accountable to customers, employees, regulators, and legislators—or else you will likely fail miserably. We also look for dislocations creating investment opportunities, like wildfires, hurricanes, and anything driving the need for real capital investment. Finally, we look where the money goes. When Toyota moved to Dallas and Silicon Valley moved to Austin—where the money is going, the infrastructure is going.