First look

Meridiam to plug secondaries market for stake sale?
Antin Infrastructure Partners made a splash last year with its IPO on the Paris stock exchange. Now, it appears another French manager is considering selling a stake in itself. According to Bloomberg, Meridiam has tapped an adviser to help sell a 20 percent stake to an outside investor, with sale proceeds to be used to help grow the business.

Unlike Antin, though, Meridiam does not appear to be considering a public listing, but rather a sale through the burgeoning secondaries market. If it were to go forward, Meridiam would join the ranks of GP-led transactions, responsible for $60 billion to $65 billion of the $130 billion in secondaries deals recorded last year.

The Pipeline contacted Meridiam, but no one was available for comment in time for publication.

Meridiam has amassed some €15 billion in assets under management across several funds. In addition to its Europe and North America focused flagships, it now has vehicles targeting Africa, the energy transition, urban resilience and green growth equity.

Brookfield bets on CCS as US legislation boosts sector
The start of this month saw Brookfield’s Global Transition Fund strike a deal with oil and natural gas company California Resources Corporation to make an initial $500 million commitment to fund carbon capture and sequestration projects targeted by the firm. CRC is looking for up to $2.5 billion in capital for such projects to meet its 2027 goals, with Brookfield willing to invest an additional $1 billion through its JV with the company to fund them.

The first CCS project in the JV is CRC’s 26R reservoir in the Elk Hills Field, which was contributed to the partnership at a value of $10 per metric ton, to be paid in three instalments.

That was just a few days before events last weekend in the US saw senators approve the Inflation Reduction Act, one of the most significant pieces of climate legislation in US history. This included increasing the value of the 45Q tax credit for CCS to $85 per ton, up from the current $50 per ton.

The Brookfield deal was the $15 billion fund’s second investment in CCS. With legislative weight thrown behind the technology, it may well not be the last.

Patria is full steam ahead on infra
Patria Investments was big on infrastructure during its Q2 earnings call last week. Its fourth infra fund is finishing its investment cycle, with its fifth flagship due to launch this year. Fund V – which will also feature a sidecar dedicated to renewables – is expected to hold a first close in late 2022, with a final close earmarked for September 2023.

The firm expects investor demand to make Fund V some 50 percent larger than Fund IV, which closed on $2 billion in 2020. The increased size comes on the back of growing global appetite for inflation-proof assets, like infrastructure, as well as the geopolitical situation, with international sanctions boosting interest in Latin America.

Additionally, the firm raised 200 million reais ($38.76 million; €37.56 million) for its second core infra fund, while its infra credit vehicle – targeting “$800 million to $1 billion” – secured anchor commitments from a local public institution ($100 million) and an international public institution ($150 million).

Patria’s existing funds generated net IRRs of 28 percent (Fund IV) and 12 percent (Fund III). The firm credits this high performance with an increase in valuations in renewable energy, data centres and toll roads.

If the firm keeps hitting its marks, it’ll be a real thrill for Brazil.

Grapevine

“They want to be in data centres where it’s sourced by green energy. And it’s not woke speak, right? This is like hardcore reality”

CEO Marc Ganzi highlights client demand for clean energy in DigitalBridge’s recent Q2 earnings call

LP watch

The ‘A list’ that is unlisted infrastructure
With the asset class often considered to be a ‘safe haven’ in times of trouble – and there’s plenty of it these days with an ongoing energy crisis, high inflation and palpable volatility – it’s probably not surprising that a recent survey has once again found that a large chunk of investors plans to increase their infrastructure exposure in the next five years.

The survey in question was carried out by real assets manager Patrizia in Q2, when it consulted more than 100 European LPs. Roughly two-thirds (64 percent) of those surveyed “expect to increase the proportion of infrastructure relative to other asset classes over the next five years, of which 20 percent are planning an increase of more than 10 percent”, the firm said in a statement.

As for how these investors prefer to access the asset class – infrastructure equity funds and going direct topped the list with 48 percent and 33 percent, respectively. Institutional investors “seem to be less familiar with alternative investment options such as funds for listed infrastructure (10 percent) or funds-of-funds (6 percent)”.

In terms of subsectors, renewable energy once again reigned supreme, with nearly 80 percent of investors looking to increase their weighting in the space.

It seems infrastructure continues to have its ‘red carpet’ moment.

Deals

Asset recycling
Macquarie Asset Management is poised to enter the UK’s waste and recycling sector, building on deals in other markets, including its A$2.3 billion ($1.6 billion; €1.6 billion) take-private of Australian firm Bingo Industries in 2021.

The firm has agreed to acquire the UK waste business of Suez for €2.4 billion, making it the beneficiary of a direction from the UK’s Competition and Markets Authority that French waste group Veolia must sell either its own or Suez’s UK waste business. The sale is a condition of a merger between the world’s two largest water and waste groups, which was agreed in 2021.

As part of that deal, a ‘new Suez’ was carved out that retained the previous firm’s French water and waste operations alongside other international assets. The new Suez retains a right of first refusal over any disposals such as this, but Veolia clearly hopes the deal will appease the CMA and draw a line under its hostile takeover of the old Suez.

MAM will also hope UK authorities are satisfied. That would ensure the only waste it deals with will be that processed by its acquisitions – rather than any time it has put into the bid…

Partners Group sells off major stake in USIC
Switzerland-based firm Partners Group has sold a 50 percent stake in utility location services provider United States Infrastructure Corporation, in a transaction valuing the business at an enterprise value of $4.1 billion.

The firm sold the major stake to US private equity firm Kohlberg & Company and intends to retain the remaining 50 percent stake in the business. According to a statement, new partners, including funds managed by Neuberger Berman, invested alongside Kohlberg in the acquisition.

The Indianapolis-headquartered USIC works across a range of utility markets – including telecom, gas and water – locating and marking sub-surface pipes, cables and fibre on behalf of public utilities. It has 1,300 customers across the US and Canada. Founded in 2008 and acquired by Partners Group in 2017, the business has seen its EBITDA increase 77 percent since it was taken over by the firm.

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