Stonepeak infrastructure fund raises $3.5bn

March 2016 | DEALFRONT | PRIVATE EQUITY & VENTURE CAPITAL

Financier Worldwide Magazine

Stonepeak Infrastructure Partners, a North America-focused private equity firm which specialises in infrastructure and middle market investments, has announced the completion of its fundraising for its second fund – Stonepeak Infrastructure Fund II – at its $3.5bn hard cap.

Having received investor subscriptions at the first close well in excess of the hard cap, the oversubscribed fund has increased Stonepeak’s total assets under management to $5.7bn, with the entire fundraising process being completed within six months.

Stonepeak has stated that Fund II will invest in a variety of infrastructure assets across the US and Canada with between $75m and $300m being earmarked for each transaction.

Founded in 2011 by Michael Dorrell and Trent Vichie (two former infrastructure investment division co-heads at Blackstone, the world’s largest alternative asset manager) and headquartered in New York, Stonepeak invests in businesses comprised of hard assets with leading market positions primarily in the following sectors: energy, power and renewables, transportation, utilities, water and communications. The company has been described as employing a conservative yet opportunistic approach to infrastructure investing.

“We faced a relatively expensive market for infrastructure assets during Fund I, meaning we had to be patient and come up with different ways to create value,” said Trent Vichie, Stonepeak’s co-founder and senior managing director. “Ultimately, we built a number of core infrastructure assets, such as the Carlsbad (California) Desalination Plant, in preference to buying assets that others had developed.”

The majority of the capital commitments to Fund II came from investors who also participated in Fund I. This previous fund (Stonepeak Infrastructure Fund I) closed at $1.65bn ($1.5bn above the initial hard cap) in October 2013 with investors praising Stonepeak’s focus and experience in North American middle market infrastructure, its compelling initial investments and strong pipeline of opportunities.

Since its commencement in October 2015, Fund II has followed a similar strategy to Fund I, with its primary focus being investment in North America mid-market infrastructure.

“We have witnessed a two-speed financial market over the past six months, with cracks in energy, power and high-yield credit on the one-hand, and strength (until very recently) in broader equity markets on the other,” said fellow Stonepeak co-founder and managing director Michael Dorrell. “We are pleased to be entering this market with significant capital, where high quality infrastructure businesses are facing capital shortages due to market dislocation.

“It is becoming a good time to invest in operating infrastructure businesses, and if cracks continue to widen, the situation for our investors will improve accordingly. We have the right sized team and fund to continue to deploy capital and work with management teams to drive increased value post investment.”

Among those to have invested in Stonepeak Infrastructure Fund II are the Teacher Retirement System of Texas, believed to have committed $250m, and the Washington State Investment Board with a $400m commitment. Additional funding came from the New Mexico Educational Retirement Board and the Maine Public Employees Retirement System.

For the duration of Fund II, Campbell Lutyens served as exclusive global placement agent and Simpson Thacher & Bartlett LLP served as US legal counsel.

Appreciative of the strong support that Fund II received from investors, Mr Vichie said: “We appreciate the confidence our investors have shown in our approach. Our strategy has been rewarded with significant investor support for our second fund and we look forward to pursuing the attractive opportunities we see for Fund II.”

Mr Vichie concluded by stating his belief that the size of Fund II aligns well with the investment opportunities before it and by reiterating Stonepeak’s commitment to focusing on high-quality infrastructure businesses in need of financial resources and operational expertise.

Fraser Tennant