Australia's PEP ups target for latest secure assets fund

The step up in size – the fund launched in February 2022 with a target of AUD 1bn, as AVCJ reported at the time – was reported by Infralogic, AVCJ’s sister publication, citing two sources familiar with the situation. PEP declined to comment. Infralogic added that the deal currently being pursued is a bilateral transaction with a seller that could not get the price it wanted in an auction earlier this year.

LPs in Fund II will again be a mix of global infrastructure investors from North America, Asia Pacific, Europe, and the Middle East. However, the likes of sovereign wealth funds and insurers are expected to feature more prominently than in Fund I.

PEP launched the secure assets strategy in 2018 to pursue opportunities that generate infrastructure-like annuity income yet offer opportunities for private equity-style operational improvement. A separate fund – with its own risk-return profile – was thought necessary because these assets were typically picked off by managers with a lower cost of capital.

The fund closed in 2020 with a corpus of AUD 660m, including AUD 300m in committed co-investment that PEP could allocate to deals at its discretion. Co-investment opportunities were also offered to LPs on traditional terms. Fund II will not feature a committed co-investment pool.

The debut investment from Fund I was a carve-out of Origin Energy’s smart electricity meter business, which was then combined with Landis+Gyr’s smart meter unit. The enterprise value on entry was AUD 397m. PEP supported a nationwide meter rollout and last year sold a 50% stake to Brookfield Asset Management at a valuation of AUD 3.2bn (USD 2.3bn) in August 2022. The other 50% was transferred to a single-asset continuation fund.

Energy became a key theme in Fund I, with PEP also investing in Winconnect, a provider of utility services to multi-tenanted buildings, and remote energy infrastructure player Zenith Energy. Winconnect was sold last year to Origin. Other investments included poultry farm operator Agright.

Fund II is expected to prioritise energy, social infrastructure, transport, and logistics.

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