AustralianSuper, QIC back sustainable infra platform Generate Capital

The investors participated in a $1bn-plus fundraising round alongside the UK Railway Pension Scheme and AP2, with QIC’s investment bringing its Global Infrastructure Fund close to full deployment.

Generate Capital, a US-based platform that invests in distributed energy and sustainable infrastructure, has secured more than $1 billion in investment in an equity fundraising round.

Among the investors that participated were QIC, AustralianSuper, the UK Railway Pension Scheme and Swedish pension AP2, with the fundraising round closing just before the end of December 2019.

Generate Capital owns, operates and finances infrastructure in the battery storage, distributed and community solar, energy efficiency, electric vehicle infrastructure, fuel cells, wastewater treatment, distributed desalination and anaerobic digestion sectors, by working with more than 25 partners in North America.

It did not disclose how much capital each individual investor has committed to the fundraising, but AustralianSuper’s Derek Chu, senior investments director, infrastructure, and QIC’s Ross Israel, head of global infrastructure, have joined the company’s board of directors as part of the transaction.

QIC confirmed to Infrastructure Investor that it has made its investment through the QIC Global Infrastructure Fund. Israel said that the fund was now “pretty much” fully deployed with a possibility that QIC could make some smaller bolt-on acquisitions to existing assets in the fund in future.

The QIC Global Infrastructure Fund is a A$2.35 billion ($1.6 billion; €1.4 billion) vehicle that closed in March 2017. Generate Capital is the tenth asset that the fund has invested in.

Its other investments include stakes of varying sizes in Hobart Airport, Brussels Airport, the Port of Melbourne, northern Australian marine logistics business Sea Swift, and Western Australia-based distributed energy firm Pacific Energy. The fund also entered into a 50-year partnership to invest in Northeastern University’s parking system in the US in January 2019.

Israel said that Generate Capital fits QIC’s thematic investment strategy of distributed energy and that the fund manager had been tracking the US firm’s progress for some time.

“The real benefit of Generate is it owns and manages a series of distributed, sustainable infrastructure assets. It has a very customer-centric model, which is a very important aspect for us and it’s investing in the mid-market space where there’s still opportunity for returns,” he said.

“In the US particularly, where returns in the regulated space have been very tight, this represented a core-plus investment that was diversifying for the QGIF portfolio, adding geographic exposure [to the US market] as well as sectoral breadth.”

On the attractiveness of a platform approach to distributed energy and sustainable infrastructure, Israel said: “A lot of the projects are small in this space because it’s still fairly immature. There’s a lot of greenfield risk in some of those projects, so getting to scale is challenging if you’re seeking to deploy a certain amount of capital.

“Also, the management and experience to do this in a repeatable and consistent manner would require quite a large team [to execute single-asset transactions].”