The Pipeline: Infra’s pendulum swing, ex-OMERS infra chief takes new reins, EQT’s smart move

Infra’s pendulum swing

Cautious optimism was the overwhelming vibe at the Infrastructure Investor Network’s America Forum in New York last week, and it seems GPs are being cautious in deployment too, with some looking to find additional protections when committing equity, according to Nick Hertlein, managing director at Stonepeak.

“From the lens of a renewable energy investor, the last three years has been extraordinarily volatile. I think going into 2020/21, perhaps the pendulum swung away from value preservation and risk management and the focus was on value creation,” Hertlein, last week featured in Infrastructure Investor‘s Rising Stars, told the network.

“Since then, especially in the renewables landscape, although I think you’ve seen this play out across infrastructure, interest rates are up, supply chain issues have really ripped up business plans that were put in stone in 2021 and I think that’s sitting in the back of every GP’s mind as you look to deploy capital in 2024 and into 2025. I think that pendulum has absolutely swung back to value preservation.”

He added: “The natural result of that is that preferred equity, and other ways to derisk transactions, have really been at the forefront.”

Nothing wrong with conservative capital in infrastructure, of course.

AI’s financing acceleration

Quynh Tran, Sumitomo Mitsui Banking Corporation’s deputy head of American structured finance, who also spoke at the event, told the audience that the bank’s first data centre deal came eight years ago.

Tran noted the developer was extremely excited by, what was at the time, the largest lease ever signed by a developer: 25MW.

“Fast forward and we were doing smaller transactions, maybe two, three a year, until about early 2022,” Tran said.

Suddenly, leases were for 100MW to 300MW. Tran estimated that since March 2022, SMBC had led $31 billion in data centre financing.

“That is just construction financing, not acquisition financing, not revolvers,” she emphasised. “But the more interesting fact is that 70 percent of that has been in 2024 and a lot of that has been driven by AI.”

Luckily, AI is here to help predict the economic impact of AI.

Eversource powering up for second climate fund

Eversource Capital, a joint venture between Everstone Capital and Lightsource BP, has launched its second fund, Eversource Climate Investment Partners II, with a target of $900 million.

According to a public information summary by the US International Development Finance Corporation, which has committed up to $50 million, Fund II will build upon the strategy of its predecessor, the Green Growth Equity Fund, by investing in companies addressing critical climate adaptation and mitigation challenges.

Fund II will focus primarily on India, with additional investments in South and Southeast Asia, with sectors of investment including renewable energy, energy transition technologies, electric mobility, circular economy initiatives, water management and sustainable agriculture.

In 2018, Eversource won the mandate to manage the Green Growth Equity Fund, the first investment from the fund of funds strategy of India’s National Investment and Infrastructure Fund.

GGEF reached a final close on $741 million in 2022 with investors including British International Investment and Dutch development bank FMO and was billed as the largest-ever climate impact fund raised in India.

BNP Paribas launches €750m low-carbon fund

Paris-headquartered BNP Paribas AM has announced the launch of its inaugural low-carbon equity strategy, BNP Paribas Low Carbon Transition Infra Equity Fund I. The BNP Paribas Group has provided €400 million in an anchor commitment, taking the fund some way towards its €750 million target.

The fund aims for minority participation in eight to 12 European investments within the core plus and value-add segment. The focus for the Article 8 fund is on energy transition projects, including new sectors such as batteries, hydrogen and carbon capture.

Seed investments so far include a minority stake in an Italian renewables developer, Absolute Energy, majority-owned by I Squared Capital, and a co-controlling stake alongside Mirova in French rooftop PV developer Arkolia.

BNP Paribas has two other infra funds in the market: BNP Paribas European Junior Infrastructure Debt Fund II, BNP Paribas Climate Impact Infrastructure Debt, both launched in the past 12 months.

That anchor commitment should ease the fundraising travails, though.

Grapevine

“We already have new nuclear. It’s called solar.”