Axium buys ARES’ stake in Brooklyn Cogeneration plant

The 286MW facility has a power-purchase agreement with a local utility that expires in 2036.

Mid-market fund manager Axium Infrastructure has fully acquired a 286MW natural gas facility operating in an industrial park in New York City’s Brooklyn borough.

The Montreal-based investor acquired Brooklyn Navy Yard Cogeneration Partners, a holding company for the gas plant, which is equipped with a steam generator, located in a 300-acre industrial and shipping area in northwestern Brooklyn. Ares EIF, the power and energy infrastructure group associated with Ares Management, agreed to the sale for an undisclosed price after acquiring the asset in 2013.

Ares managed the Brooklyn power plant through its $1.7 billion EIF United States Power Fund IV. The firm manages five funds investing in power and energy infrastructure, focusing on electric generation, transmission facilities and midstream assets. It also manages six co-investment vehicles focused on US power and energy infrastructure, bringing the total capital raised to more than $5.75 billion.

Ares did not respond to a request for comment.

Ben Ellis, a vice-president at Axium, told Infrastructure Investor the firm used a combination of third-party debt and equity from one of its North American funds to acquire BNYCP. Regulatory filings show the firm is raising an investment vehicle named Axium Infrastructure NA IV. While the firm did not disclose the fund’s target size in the SEC filing, it did indicate that it had raised $353 million as of early April.

Brooklyn Navy Yard Cogeneration Partners sells nearly all the electricity the plant produces to local utility Consolidated Edison Company of New York through a power-purchase agreement that expires in 2036. It also supplies steam to ConEd, Brooklyn Navy Yard and the nearby Red Hook Waste Water Treatment Plant.

Ellis said stable cash flows and a long-term contract made the asset an attractive investment. When asked if Axium will hold BNYCP for the remainder of its PPA, he replied: “Axium has a buy-and-hold investment strategy.”

Axium says its strategy is to invest in sustainable, core infrastructure, mostly in the US and Canada. The firm manages dedicated infrastructure funds and had more than $2 billion in assets under management and $1 billion in co-investments as at 31 December 2017.

In April, Axium partnered French power company ENGIE to acquire a 99MW microgrid and district energy system that serves six Harvard-affiliated medical institutions in Boston. The two also partnered in 2017 for a $1 billion, 50-year public-private partnership agreement to operate and improve the efficiency of The Ohio State University’s utility system.