Zug, Switzerland-headquartered Partners Group is looking to increase its deal origination and sourcing capabilities amid rising completion for infrastructure assets, Michael Barben, co-head of the firm’s infrastructure business, told Infrastructure Investor.
The €31.6 billion asset manager, which today released its half-yearly appraisal of alternative asset classes, in the report underlined the unabated appetite for infrastructure among institutional investors and sounded a note of caution about high prices reached during recent auctions. These were often backed by “optimistic assumptions about growth and regulatory support”, it observed, with assets trading at valuations implying returns at or below 8 percent.
Barben singled out Australia’s Queensland Motorways, bought at about 27x EBITDA, and Fortum’s electricity networks in Finland, acquired at a 17x EBITDA, as examples of possibly over-enthusiastic valuations. He noted that the proceeds from these transactions largely exceeded what the sellers initially expected, which led him to wonder what value-add strategies and efficiency gains the new owners had in mind to make these assets more profitable businesses.
In that context, he reckoned Partners Group’s infrastructure due diligence team would likely grow from 25 people now to about 30 in a year, in a bid to “chart a course away from crowded waters”.
That would be done by profiting from the segmented nature of infrastructure markets and using the flexibility of the firm’s mandate to find opportunities in less-explored areas. An example was Japanese solar, Barben said, in which Partners Group is currently investing through a joint-venture with Equis Funds Group.
Opportunities would also arise in emerging markets, where the firm saw potential for buying platform companies and sizing them up through buy and build strategies, as well as in greenfield public-private partnership projects (PPPs), where a more significant premium could be captured and construction risks minimised through appropriate structuring.
Secondaries was another area of interest, with the firm screening about $3 billion of secondary deal volume and closing three such transactions to date.
Earlier this month, the firm announced the opening of its third US office in Houston, Texas, bringing its total number of locations worldwide to 18. The move aims to provide Partners Group with a platform to further explore energy opportunities in the Americas.