The Pipeline: KKR’s $21bn raise, US PPP rules outlined, Spain lays law for IFM

KKR raises $21bn, some incentives for US PPPs and UK regulated assets back in demand.

First look

Stacking up: KKR’s rapid fundraising success draws in LPs

KKR’s $21bn fundraising bonanza

Our recently published H1 2021 fundraising report showed an impressive $57 billion raised by closed-end funds, including $3.9 billion for KKR’s debut Asian infrastructure vehicle, currently the largest in the region.

Not included, however, were the most recent eye-watering amounts raised by the New-York based firm. In a Q2 earnings call last week, KKR revealed it has reached a first close of $14.2 billion on its Global Infrastructure Investors IV, already exceeding its $12 billion target. In addition, the firm announced it has now raised $7 billion for its open-end KKR Diversified Core Infrastructure Fund, which has secured deals such as Caruna and John Laing Group.

“We are off to a great start here and on our way to being a market leader in this large and growing space,” co-president and co-chief operating officer Scott C Nuttall said on the call. He added that more than 40 percent of the LPs that have committed to the core fund are new to the company. Those LPs are getting some introduction here.

US infra bill and PPPs: some carrot, not much stick

While the bipartisan Infrastructure Investment and Jobs Act continues to slowly make its way through the legislative process – if you fancy some light reading, here’s the full 2,702-page bill – PPPs have emerged as one of the tools in the toolbox. In fact, local authorities applying for federal loans to help cover transportation project costs of more than $750 million must conduct a value-for-money analysis on the PPP option. However, they are not obliged to use PPPs.

Asset recycling is also on the agenda and the bill requests a report be drawn up by the government with an analysis of how “increased use of [PPPs] and private investment in transportation improvements” would address such impediments while maintaining a public interest. There’s just one catch: the report is due no later than August 2024, the bill states.

The revolution will be a slow one, it seems.

IFM given green energy light

IFM Investors’ €5 billion bid for Spain-listed energy distribution and renewables giant Naturgy has been given the green light by the Spanish government, subject to several conditions.

In May, IFM’s offer to buy a 23 percent stake in the listed company had looked to be in jeopardy thanks to the Spanish government’s opposition to a bid that would increase foreign ownership of Naturgy-owned critical infrastructure assets. The company already counts GIP and CVC as shareholders.

The government has since had a change of heart. Provisos include a commitment from IFM to ensure it remains a listed firm for the next three years and to not divest any of its gas transmission and distribution assets.

With a happy government now hailing foreign investment and Naturgy recently pledging to invest €14 billion over the next five years to increase its core earnings by 30 percent, it seems IFM has beaten the Spanish opposition.

Asterion links data centre debt to ESG targets

Promoting ESG-friendly practices by linking performance to financing terms has become increasingly commonplace – particularly with GPs and subscription credit lines – although often on hard-to-define metrics.

However, the Nabiax data centre platform owned by Asterion Industrial Partners – which is based in Spain but has a significant presence in Latin America – has linked €320 million of project financing against three ESG indicators: increasing the percentage of power generated by renewable energy sources; reducing water consumption; and increasing the number of female employees in the workplace.

If Nabiax meets the goals it has agreed with BBVA, the bank co-ordinating this sustainable financing, it will benefit from more favourable financing terms. If it fails, it will be penalised. However, none of the parties involved have disclosed the agreed targets, the benefits nor the penalties related to this arrangement. None were immediately available for comment. 

Essentials

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Grapevine

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LP watch

Boris Johnson’s Big Bang theory

UK prime minister Boris Johnson and chancellor Rishi Sunak have thrown down the gauntlet in an open letter calling on UK institutional investors to step up and invest in UK long-term assets – infrastructure and start-ups in particular – in an effort to support the country’s economic recovery.

Johnson and Sunak pointed to Canadian and Australian pension funds that have invested in long-term and illiquid UK assets, “while UK institutional investors are under-represented in owning UK assets”, they said. “To seize the moment, we need an Investment Big Bang, to unlock the hundreds of billions of pounds sitting in UK institutional investors.”

To that end, the government is taking steps to facilitate LPs’ investment in long-term, illiquid assets, by reforming the cap on fees that DC schemes can charge, as well as the creation of superfunds.

Several industry members responded positively, noting the creation of the UK Infrastructure Bank, but called for a close collaboration between them and the government, as well as with all relevant stakeholders.

Challenge accepted, it seems.

Deals

Burning bright: Is interest in UK regulated assets coming back?

No UK let-up for Canadians

So, what of those deep-pocketed Canadian investors? Two days prior to Johnson’s and Sunak’s rallying cry, the Ontario Teachers’ Pension Plan and the Brookfield Super Core Infrastructure Fund had ploughed £1.2 billion ($1.7 billion; €1.4 billion) into UK core infrastructure, buying utility SSE’s 33.3 percent stake in gas distribution operator Scotia Gas Networks, owner of two of the UK’s eight gas distribution networks.

The pair are also buying the 16.7 percent stake owned by the Abu Dhabi Investment Authority to each become 37.5 percent shareholders in the company, with OTPP having previously owned 25 percent. They join another Canadian pension, OMERS Infrastructure, which owns 25 percent of the company.

With the SGN deal following National Grid’s £7.8 billion agreement in March to purchase Western Power Distribution, it seems UK regulated assets are making a comeback, regardless of the nationality of the buyers.


Today’s letter was prepared by Zak Bentley. Kalliope Gourntis, Daniel Kemp and Tharshini Ashokan also contributed

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