Equis raises $1.7b for Asia energy, infrastructure investments

The private equity firm closed its first fund at $647 million in late 2012. LPs in Fund I account for $990 million - or 58% - of the new capital raised, with two development finance institutions, Germany's DEG and the Netherlands' FMO, as well as MassMutual and Partners Group, among those re-upping.

Their capital has gone into Equis Asia Fund II - which has done a first and final close after less than six months in the market, having increased its hard cap from $900 million after LP demand substantially exceeded capacity - and the two additional vehicles that increase the capital available for Fund I investments.

"We still have a year to run on our first fund in terms of the investment period, and rather than finance everything through Fund II, our investors preferred to do a follow-on with respect to the capital requirements for existing portfolio companies," said David Russell, CEO of Equis. "We can do this because we control the platforms - we set up these utility businesses and employ and mentor the staff within them."

It was decided that a $300 million top-up was sufficient to cover the capital needs of these companies for the coming year. An additional $400 million has been raised for two investments - solar generation platform Japan Solar and Energon, an India and Southeast Asia-focused wind energy platform - simply because of their rapid growth. Direct co-investment was the only way Equis could deliver the capital required without exceeding the diversification limits to which the funds are subject.

Japan Solar was created in early 2014 by Equis in tandem with Partners Group as well as Babson Capital, LGsuper and Qantas Superannuation. The platform, which is run by a local team called Nippon Renewable Energy (NRE), received an initial equity investment of $250 million but now the capital commitment stands at $720 million.

Japan appealed because it offered a combination of a reliable regulatory regime and sufficient available projects to build a scalable business. Following the Fukushima disaster in 2011, the country has sought to ease its dependency on nuclear power and rolled out numerous incentives for alternative energy producers. NRE now claims to be one of Japans' largest solar generation utilities.

Other Fund I investments include a gas distribution and storage business in China as well as solar, telecom infrastructure and biofuels assets in Southeast Asia. The private equity firm recently closed on one of the first regulated bioethanol facilities in the Philippines. Equis employs more than 315 professionals across its various platforms, including 117 construction and operational engineers and 55 investment and business development professionals.

Excluding the $400 million that is going into Japan Solar and Energon, Fund I has generated approximately $350 million in co-investment for LPs. Russell expects similar opportunities in Fund II, which will follow the same platform-oriented strategy. The vehicle will be deployed over a 3-4 year period and three investments have already been closed, accounting for up to 37% of the corpus.

There will be a $100 million follow-on investment in Japan Solar; $120 million for InfraEdge, a platform that owns and manages infrastructure assets for Indian township projects being developed by Dutch pension fund APG; and $20 million of an initial $150 million commitment for an Asia hydropower platform. Known as Hydreq, it wants to extend its India-dominated portfolio into Southeast Asia and become one of the region's largest independent power producers in the hydro space.

"We bottom-up benchmark and target our sectors," Russell added. "That process, and forming management teams that attack those strategies, can take anything from six to 24 months. Once we get to that point of the first investment we have already identified the strengths and weaknesses of the sector, why we need to be there, and the management team we control. It is then a very quick process of deploying capital into multiple asset strategies."

North American LPs account for around 25% of commitments to Fund II, with 40% from Europe and 30% from Asia Pacific. 

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