InstarAGF makes second investment via Fund II as it nears final close

The firm’s second infrastructure fund is targeting $1bn and has acquired a business aviation provider and a water infrastructure company servicing the midstream sector.

InstarAGF Asset Management has acquired a builder and operator of water infrastructure for the US midstream sector, investing through the firm’s second fund which is expected to close on more than $1 billion early next year.

The Toronto-based fund manager bought Oilfield Water Logistics for an undisclosed amount from private equity firm NGP Energy Capital Management, its affiliate NGP Energy Technology Partners and other private shareholders, according to a statement by InstarAGF.

InstarAGF invested alongside Canadian and international co-investors, the firm said.

InstarAGF committed capital for the transaction from the InstarAGF Essential Infrastructure II fund, according to a source familiar with the matter. The source added that the fund, which InstarAGF is currently raising, has nearly met its $1 billion fundraising target and is expected to surpass that at final close in the coming months.

InstarAGF declined to comment for this story. NGP did not respond to a request for comment.

OWL is based in Dallas and develops and operates water infrastructure supporting oil production primarily in the Permian Basin in western Texas. Founded in 2014, the company provides water gathering, transportation, reuse and disposal services to exploration and production companies.

The US midstream sector overall is benefiting from a need to build supporting infrastructure to manage oil production growth. Midstream assets are typically secured by contracts and provide investors with safer, more predictable cashflows than upstream investments in oil production, which carry commodity risk.

OWL is the second investment InstarAGF has made through InstarAGF Essential Infrastructure II. In August, the firm bought Leading Edge Jet Center, a business aviation provider based in Bend, Oregon.

InstarAGF is pursuing a mid-market, North America-focused strategy for investing its second fund, which held first close in January on $680 million. According to Infrastructure Investor data, the vehicle has raised $866.6 million to date. Target sectors include energy, utilities, civil infrastructure, aviation and port infrastructure, and logistics businesses. The firm is seeking deals between $100 million and $1 billion in enterprise value and aiming for net returns between 10 and 14 percent.

InstarAGF’s first fund closed on C$740 million ($554 million; €488.7 million) in June 2017. The firm’s portfolio includes a passenger terminal at Billy Bishop Toronto City Airport, Canadian district heating network Creative Energy and Florida-based port logistics processing company AMPORTS.