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3i commits £150m to infrastructure fund

The London-listed global private equity firm has stepped up its limited partner activities with a substantial investment in I2, a UK-based infrastructure fund.

3i, the global private equity investor, has made a £150 million commitment to I2, an infrastructure fund in which Barclays Private Equity and SG Corporate & Investment Banking have also invested £150 million. With total capital of £450 million, I2 is now the largest fund operating in the secondary PFI market.

Launched in November 2003, I2 has built a portfolio of 29 operating infrastructure projects in the health, education, transport and ministry of defence (MOD) sectors, with a total investment value of £150 million. The fund invests in projects that benefit from long-term government-backed income streams that demonstrate low volatility.

3i has made a number of previous investments in infrastructure through its own funds, including Keolis, a £365 million acquisition of a French bus and train operator alongside SNCF, and Freightliner, a £92 million deal in the UK rail freight transportation industry.

Investing in I2 provides a great stepping stone for 3i to increase its participation in a growing portfolio of PFI assets

Cressida Hogg, director, 3i 

Cressida Hogg, a 3i director, said in a statement: “Investing in I2 provides a great stepping stone for 3i to increase its participation in a growing portfolio of PFI assets. 3i will benefit from I2’s first mover advantage and extensive investment pipeline.”

The PFI and PPP (public-private partnership) markets are demonstrating a strong demand for equity as debt liquidity has shrunk as a result of banks pulling out of the project finance sector. Aside from I2, other firms targeting PFI investment in the UK include Star Capital Partners, Innisfree, Henderson Private Capital and Noble Fund Managers.

The allocation to I2 is the fourth investment in external funds made by 3i over the last year. It made its first such investment when committing around $50 million to a $468 million fund raised by Japanese mid-market buyout firm MKS Partners in the second half of 2004. In April 2005, it stumped up $45 million of the $162 million raised at first closing by Beijing-based growth capital firm CDH China. Then in May, it accounted for the entire €100 million raised by Central European investor 3TS Capital Partners for its second fund.

At the time of the 3TS investment, 3i head of growth markets Chris Rowlands told PEO there were no immediate plans for further fund commitments, but he would not rule out such moves should they make strategic sense.