Denham Capital is set to expand into infrastructure debt after a $2 billion partnership with Aflac Global Investments, asset manager of New York-based insurer Aflac.
The deal will see Denham invest Aflac’s capital into financing sustainable infrastructure assets across OECD countries, with about 80 percent reserved for investment-grade projects, Justin DeAngelis, partner in Denham’s sustainable infrastructure team, told Infrastructure Investor. He said the firm is categorising sustainable infrastructure as assets such as renewable power, battery storage, EV charging stations, energy efficient data centres and energy efficiency. Ticket sizes will initially be up to $125 million and investments will be screened by a methodology put together by Denham based on both the EU taxonomy and the UN’s sustainable development goals.
While the energy and resources-focused Denham has previously invested in renewable power via its equity platforms, the partnership represents its first move into the infrastructure credit spectrum.
“As we were looking at the evolution of the sustainable infrastructure market, we were looking at ways we could accelerate power investments in the market, both on the equity and debt side. We were looking for a partner to help us accelerate,” DeAngelis said. “We’re looking to bring on a team to help run that business on a day-to-day basis. The expectation is we’re going to increase that platform with other relationships over time in both a separate account and fund format. We are definitely open to other investors.”
He added that the geographic scope and risk allocation will likely increase over time and that the group was keen to invest in opportunities that were beyond just renewable power.
“We have seen a focus on carbon mitigation with a particular focus on electrification and the electrification of everything as a primary way to mitigate carbon emissions,” DeAngelis explained. “If the world is going to invest $10 trillion in renewable power, you absolutely have to have some type of infrastructure to support that because of its intermittency. As we have seen this evolution, our investment thesis is evolving with it.”
Aflac will also commit $100 million to a new Denham-managed equity fund targeting the same sustainable infrastructure space, which DeAngelis said is viewed as a successor to Denham’s International Power Fund. The latter primarily targeted renewable power projects. He declined to state a target for the upcoming vehicle but said it would focus on the mid-market.
“The equity fund will target the same sectors as the debt platform,” he outlined. “Geographically, the debt product is OECD-focused, while equity will be truly global.”
Denham, headquartered in Boston, has traditionally been focused on three sectors: power and renewables, metals and minerals, and oil and gas. Asked what the evolution to sustainable infrastructure means for the oil and gas business, DeAngelis responded: “We managed the business in three sectors. The other two sectors will continue as they have been.”