Australia's PEP considers infrastructure fund

The GP is in talks with existing LPs regarding the strategy and sources familiar with the situation said that it is too early to be specific on fund size. The Australian Financial Review reported that the target would be A$1 billion ($797 million).

AVCJ understands that Paul Foster, who left his role as head of infrastructure for Australia and New Zealand at AMP Capital Investors in 2015, is working with PEP on the new initiative. Various existing members of the private equity firm’s investment team are also involved. The GP declined to comment.

PEP has participated in the energy infrastructure segment before, notably through distributed power provider Energy Developments (EDL). It acquired a majority stake in the business in 2010 for A$343 million or A$2.75 per share, but there was no privatization. An exit came five years later when Duet Group bought EDL for an enterprise valuation of A$1.92 billion, or A$8.00 per share.

Other infrastructure-related deals have been considered since then – with a view to taking a similar active management approach – but cost of capital is an obstacle, according to one source. It is difficult to compete with strategic players and infrastructure specialists that can underwrite to a lower return than a traditional buyout fund, and therefore bid more aggressively for assets.

PEP was linked to renewable energy platform Pacific Hydro in 2015 and freight operator Genesee & Wyoming Australia last year. The former was sold to China’s State Power Investment Corporation (SPIC), while the latter went to Macquarie Infrastructure & Real Assets (MIRA).

The private equity firm closed its fifth buyout fund at the hard cap of A$2.1 billion in 2015. Fund IV, which had a corpus of A$4 billion, was considerably bigger but it included A$1.3 billion in non-discretionary co-investment capital allocated on a pro-rata basis. Co-investment is discretionary for Fund V so there was no need for the sidecar.

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• Topics
• Australasia
• Infrastructure
• Infrastructure
• Fundraising
• Australia
• Pacific Equity Partners