PEP raises A$1.4bn for Secure Assets Fund II

Clean Energy Finance Corporation has committed A$80m to SAF II, with PEP set to help portfolio companies make decarbonisation plans.

Pacific Equity Partners has reached a final close of A$1.4 billion ($944 million; €857 million) for the second iteration of its Secure Assets Fund, including an A$80 million commitment from the Clean Energy Finance Corporation (CEFC).

The closed-end Secure Assets Fund II launched in February 2022 with a target of A$1 billion and is following a similar strategy to that of its predecessor fund, pursuing investments in value-add mid-market infrastructure assets and infrastructure-like businesses across the transport, waste, utilities, renewable energy, digital and social infrastructure sectors.

CEFC is a new investor in PEP’s infrastructure platform. PEP will now work with SAF II portfolio companies on decarbonisation plans in line with reducing scope 1 and 2 emissions by 50 percent by 2030, before an ultimate target of net-zero scope 1 and 2 emissions by 2050.

PEP said it will also work with portfolio companies to try to reduce scope 3 emissions, and “will also look to drive further decarbonisation efforts across existing funds [to work with] companies seeking to meet the challenges of lowering their emissions”.

The first Secure Assets Fund launched in 2017 and was Sydney-headquartered private equity firm PEP’s first fund dedicated to infrastructure. Among its investments was the A$267 million acquisition of energy retailer Origin Energy’s smart metering business Acumen and the NZ$270 million ($171 million; €155 million) deal to acquire New Zealand smart metering firm Metrix, which PEP merged to form Intellihub Group.

The firm subsequently sold a 50 percent stake in Intellihub to Brookfield Asset Management in December 2021, with the remaining 50 percent stake rolled into a single-asset continuation fund.

CEFC, which celebrated its 10th anniversary in 2022, has increasingly pursued commitments to pooled infrastructure equity funds to drive portfolio-wide emissions reduction. As well as the commitment to SAF II, CEFC has invested A$150 million in Morrison & Co’s Growth Infrastructure Fund, another A$150 million in IFM InvestorsAustralian Infrastructure Fund, A$100 million into Macquarie Asset Management’s Australian Infrastructure Trust and A$72 million into the QIC Global Infrastructure Fund. The organisation has a requirement to make investments that are solely or mainly Australia-based.

Earlier this month, CEFC increased its mandate commitment to renewable energy and social infrastructure-focused debt fund manager Infradebt to A$150 million.

CEFC infrastructure director Julia Hinwood said in a statement: “PEP is ambitious about driving meaningful step changes to the emissions profile of portfolio assets, which have essential functions in our economy. Mid-market infrastructure assets in Australia are largely privately held and have a material impact on Australia’s emissions. Investing in this sector gives the CEFC the capacity to extend the impact of our finance to lower emissions across broad areas of our economy.”

PEP managing director Andrew Charlier said in a statement: “We see significant opportunities to invest in leading mid-market businesses that need support working through the energy transition and decarbonising their operations. Our investment focus remains on finding good businesses which will also benefit from moving towards a decarbonisation goal.

“We will not shy away from businesses with significant carbon emissions as every company is on a journey and we see an opportunity to work with them to identity opportunities to decarbonise.”

PEP has been contacted for further comment.

9/5/23: This article was amended to reflect that the A$1.4bn total raised was a final close.