‘Extraordinary’ infra drives Blackstone to $35bn
Amid all the chatter around a slower fundraising environment and redemptions in Blackstone‘s BREIT vehicle, infrastructure has once again bucked the trend, with the firm announcing its best fundraising quarter in 2022 for infrastructure, raising an additional $3.2 billion in Q4 for Blackstone Infrastructure Partners. This latest haul brings the fund’s size to $35 billion, with $9.7 billion raised last year.
While the fund has an initial target of $40 billion – and is matched by Saudi Arabia’s Public Investment Fund up to half that amount – Blackstone president Jon Gray said in its earnings call that BIP will “grow to be much, much larger than it is today” and that the “response from investors broadly has been extraordinary”.
Also extraordinary is the 19 percent net IRR displayed by the 2017-vintage BIP, which nominally targets 10 percent, only somewhat boosted by listed infrastructure bets. “The key reason [for success] is performance drives inflows,” said Gray. “[Performance] is really remarkable for a fund that has a much lower targeted return, so that’s obviously attractive.”
Our inflationary environment clearly brings inflated performance for Blackstone.
ArcLight toasts $407m continuation fund success
After closing its first continuation fund in July 2021, ArcLight Capital Partners has developed a taste for the structure: last week, it closed its second such vehicle with $407 million of commitments for midstream infrastructure group Third Coast.
The final close follows an initial July 2022 close, during which the continuation fund acquired the remaining 25.1 percent of Third Coast from ArcLight Energy Partners Fund V. Subsequent closings have added firepower for follow-on growth opportunities, ArcLight said.
Third Coast was formed in 2019 when American Midstream merged with Fund V and subsequently changed its name to Third Coast. Its portfolio includes 1,200 miles of interstate and intrastate pipelines.
“Third Coast provides a critical link in the domestic energy value chain connecting the prolific and low-carbon Gulf of Mexico production basin to Gulf Coast customers and markets,” said Joe Alves, managing director at ArcLight.
Arclight’s continuation vehicle is an example of a growing pocket of infrastructure capital. Unlike the broader secondary market, the infrastructure secondary market grew in 2022, recording $7.7 billion in transactions, 57 percent of which were GP-leds, according to a report this month from Evercore.
SUSI raises over a quarter of new energy efficiency fund
SUSI Partners has hit a first close of €132 million for its third energy-efficiency focused vehicle. The 15-year credit fund is targeting €400 million and has been backed in its first close by institutional investors from the Nordics, Germany, Austria and Switzerland, including significant re-ups.
The SUSI Energy Efficiency and Transition Credit Fund differs from its two predecessors since it will also invest in assets such as self-consumption solar PV, heat pumps and smart metering, in addition to the traditional energy efficiency measures the first two targeted. It will focus on deals in Europe but can invest in other OECD countries.
The fundraise comes on the back of 2022, during which SUSI increased its asset base by 20 percent to €1.9 billion. It is still in market for its $250 million Asia Energy Transition Fund, set to close before the summer, and its evergreen equity fund, the SUSI Energy Transition Fund.
Busy times for one of the energy transition’s earliest movers.
Toll of inflation
Infrastructure assets’ theoretical inflation-hedging characteristics have once again collided with the reality of the cost-of-living crisis. This latest clash occurred Down Under last week, as the increasing cost of inflation-linked tolls became a political issue.
With a state election looming in March, New South Wales premier Dominic Perrottet unveiled a Toll Relief Rebate Scheme that will allow drivers who spend more than A$375 ($266; €245) per year on tolls to claim up to 40 percent of the cost back (up to a maximum of A$750) from the government – ie, the taxpayer.
This is in stark contrast to the approach taken in Portugal recently, where the government stepped in to ensure tolls rose below the rate of inflation, with concessionaires having to bear some of the shortfall themselves.
Under the NSW government’s policy, Transurban, the listed monopolistic toll road owner in Sydney – along with its consortium partners, including several pension and superannuation funds – will receive its tolls in full instead.
Probably not the way the government envisioned privatisation working…
“There is no time to lose on charging infrastructure, but the Conservatives are asleep at the wheel.”
Britain’s shadow transport secretary Louise Haigh criticises the government after figures revealed fewer than 9,000 public EV chargers were installed in the UK last year
Bharadwaj takes the helm at IFM’s European infra team
Deepa Bharadwaj has been promoted to become the new head of Europe, infrastructure at IFM Investors, following Christian Seymour’s retirement.
At IFM, she is one of 16 in the infrastructure senior team. IFM has a total of 36 infrastructure assets of which 14 are in Europe/UK.
Bharadwaj said she is “confident our portfolio is well positioned and diversified enough to benefit from the big macros themes – decarbonisation, digitalisation and population growth – and we will continue to pursue opportunities within these high conviction areas”.
Bharadwaj joined IFM in 2017 and has been based in London since 2019. She was educated in New York and began her career in banking, culminating with the role as global head for power, transportation and infrastructure at Standard Chartered.
Call to arms for North American LPs
Institutional allocations to infrastructure are markedly lower in North America than in APAC and Europe, according to an Aviva Investors analysis based on answers collected from 500 institutional managers from across the globe in late 2022.
The analysis finds that only 3.7 percent of North American allocations are in infrastructure debt, compared to 11 percent in APAC and 8.9 percent in Europe.
Allocations to equity investments in infrastructure are also lower in North America than elsewhere, with 12.6 percentage in North America, 15 percent in APAC and 14.1 percent in Europe.
Globally, infrastructure equity allocations are projected to rise to 14 percent of AUM by 2024, up from 13 percent today. Social infrastructure could see strong returns, as the report saw 73 percent of investors suggesting that this asset class would produce a positive social impact.
More room on this gravy train, yet.
Axium takes landmark Canadian site from CIP
Montreal-based Axium Infrastructure has acquired Travers Solar, Canada’s largest operating solar project, from Copenhagen Infrastructure Partners.
The 465MW project in Alberta was CIP’s first investment in the country and became operational late last year. The deal will see Copenhagen Infrastructure Fund IV sell its 100 percent interest in Travers Solar, which comes with a 15-year PPA for 400MW, representing 86 percent of the project’s capacity. As well as being Canada’s largest solar site, Travers Solar is Canada’s largest non-hydro renewable energy project.
According to a statement from Axium, the firm has acquired the project through “one of its managed funds”. Its latest fund, launched last September, is Axium Infrastructure Canada II, which has so far reached $1.14 billion.
Today’s letter was prepared by Zak Bentley. Bruno Alves, Daniel Kemp, Tharshini Ashokan and Anne-Louise Stranne Petersen also contributed.
*An earlier version misattributed secondaries data in our second item to Jefferies. The data in question actually came from a report from Evercore. We apologise for the mistake.