Deal spotlight: Keyword for private equity giants: infrastructure

The team at

ImpactAlpha

ImpactAlpha, February 9 — It was Infrastructure Week in private equity. 

As the private equity earnings cycle gets underway, Apollo, KKR and Brookfield emphasized infrastructure, renewable power and the energy transition as they looked forward to a rebound in dealmaking this year. 

“Institutional investor focus has pivoted to asset classes that offer current income, inflation protection, and access to areas of secular growth, namely credit, infrastructure and sustainability,” said Apollo’s Scott Kleinman. Apollo this week kicked off its second Clean Transition fund less than a year after launching its $4 billion first fund as part of a $50 billion climate strategy.

“There is a fundamental rethink going on as to the difference between public and private,” added Apollo’s Marc Rowan. “I believe we are going to see a substantial pivot from institutions where they begin to think about private… as just another investment that has a little less liquidity.” 

KKR said the value of its infrastructure portfolio was up 18% last year. “We are actively fundraising for our infrastructure strategy, and [we] expect to launch fundraising for our Americas private equity strategy later in the year,” said KKR’s Robert Lewin.

KKR recently closed its $6.4 billion infrastructure fund in the Asia Pacific region, where the firm sees growth in infrastructure and sustainable energy, “driven by rising domestic consumption and productivity, rapid urbanization, and an enormous emerging middle class,” said KKR’s Hardik Shah

BlackRock earlier this year snapped up Global Infrastructure Partners, an infrastructure investor in energy, transport, digital infrastructure and waste management. The deal was valued at $12.5 billion. 

Green infrastructure

Brookfield, which is sitting on over $100 billion in dry power, this week announced the $10 billion first close of its second Global Transition Fund. The fund could raise as much as $25 billion and has identified a pipeline of investment opportunities. Brookfield late last year closed on its $30 billion Brookfield Infrastructure Fund. 

“Infrastructure, renewable power and energy transition are expected to be among the fastest growing alternative sectors,” Brookfield’s Bruce Flatt said during this week’s earnings call. “Governments, corporates and other stakeholders [with] net-zero targets are grappling with energy security, supply chain resilience and meeting the exponentially growing demand for data [and] these challenges will require trillions of capital investment.”

“We were an early mover into these areas after we identified decarbonization, deglobalization and digitalization as mega trends that were shaping the global economy.”

At the COP28 climate summit, the Canadian announced a partnership with the UAE’s new $30 billion ALTÉRRA fund to manage a new multi-billion dollar “Catalytic Transition Fund” to invest in energy transition, industrial decarbonization, sustainable living and climate technologies in emerging markets. 

The fund is anchored with a $1 billion catalytic commitment from ALTÉRRA, to absorb some of the risk in emerging markets and attract commercial investors. The partners hope to raise over $20 billion. Brookfield’s second Global Transition Fund also received a $2 billion commitment from ALTÉRRA.