Ara Partners eyes industrial decarbonisation for new infra strategy

Houston-headquartered private equity group Ara Partners is planning to bring its industrial decarbonisation strategy from its private equity funds to a new dedicated infrastructure programme.

I February, the group hired Churchill George Yong as a partner to lead the effort, with Yong having previously spent nine years at Arclight Capital Partners as managing director working on industrial power and energy transition deals.

“I’ve led multiple transactions in recent years where it became apparent to me that enabling decarbonisation was synonymous with improving profitability in those businesses. Impact and returns generation are no longer mutually exclusive. That’s really where Ara comes in,” Yong told Infrastructure Investor.

“The focus on the industrial sector will really enable the strategy to have a disproportionate impact on all things decarbonisation, relative to the broader market. More than 40 percent of all global emissions come from the industrial sector but in my view, are underserved from an investment standpoint when it comes to decarbonisation, especially when you compare it to something like renewable power generation and electrification.”

Ara’s private equity strategy has focused on industrial and manufacturing, green fuels, food and agriculture sectors. It closed its second fund last year on $1.1 billion, having previously been targeting $650 million. Yong referred to Gidara Energy, a biofuels company owned by the private equity strategy, as one area in which the infrastructure programme could head, bringing a more infrastructure-style capital to such investments.

“That’s the first bucket of opportunities,” he explained. “We’re also strong believers that there are large swathes of existing infrastructure that need to be pivoted, repurposed or invested to really serve the future low-carbon economy and that will be really capital intensive and will require significant investment from folks with substantial decarbonisation experience, such as Ara.”

Yong added that the infrastructure strategy will benefit from the focus on impact by the private equity funds, which has developed in-house technical and operational capabilities, as well as measurability standards for carbon reporting, which he said investors are clamouring for.

Asked if the programme should be seen as more of an infrastructure or an impact strategy, he responded: “I expect our strategy will be viewed as an infrastructure strategy but there will be a very significant impact component with it.”

Yong added that Ara already has access to capital to begin investing, although declined to comment when asked about any potential fundraising. He said the firm expects to operate in the mid-market, investing between $50 million and $200 million in equity ticket sizes in North America and Western Europe.

Ara was founded in 2017 by Charles Cherington and Troy Thacker. The group closed its first fund on $400 million in May 2020. The company also has offices in Boston and Dublin.