Tuesday, July 23, 2024

Infrastructure Investor Awards 2023: Deal of the Year

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It was probably inevitable that eyebrows would be raised in the infrastructure investment industry when Brookfield Asset Management announced in mid-2022 that it would be investing in a chip manufacturing factory. Until then, no one would have considered a factory as an infrastructure asset. Since then, however, other GPs have followed with similar deals.

The Intel transaction closed in Q4 of 2022, with Brookfield committing up to $15 billion for a 49 percent stake in a semiconductor fabrication facility in Chandler, Arizona. The joint venture will total $30 billion. The capital will come from Brookfield’s infrastructure strategy.

“We looked at [Intel] and this structure [as] not dissimilar to how we looked at the data sector a number of years ago, where hyperscale companies were looking to have people build and finance data centres,” Sam Pollock, chief executive of Brookfield’s infrastructure business, told Infrastructure Investor when interviewed for our September 2023 cover story.

He also revealed the deal took about a year from origination to agreement and noted another unique feature of the transaction outside of the asset type: its payment structure, which protects Brookfield from any development costs as Intel has guaranteed payment for the entirety of the capital provided.

“Construction, production and commercialisation risk stays with Intel,” Pollock said. “That was their choice – to retain certain risks to bring down the cost of capital.” He also added that the CHIPS and Science Act was “a critical component of making the project itself financeable and economic for Intel”.

Changing tides 

The deal sits across a few macro trends in the infrastructure universe. First, the definition of infrastructure is expanding, and expanding rapidly. New digital and industrial assets are finding their way into portfolios that used to solely consist of pipelines and toll roads.

Second, there has been a major push to deglobalise supply chains by world governments, and the money has followed. GPs across continents are beginning to make investments with the aim of bringing manufacturing capacity back to “Western” countries, or at the very least, countries geopolitically aligned with the “West”. Reshoring chip manufacturing capacity to the US, specifically, is a key policy goal for the Biden administration.

And finally, the world is digitising, and there needs to be infrastructure behind the hardware and software that will lead that push. Digital infrastructure has proven to be a salient, powerful trend in the infrastructure sphere, encompassing far more than the average cell tower.

Not to mention the sheer size of the deal, with the value of Brookfield’s stake alone being larger than most funds. The average vehicle size in 2023 was $1.55 billion.

As for the other deals that followed Brookfield’s trailblazing move, they include Meridiam and Macquarie Asset Management investing in an EV car battery gigafactory in France, and Quinbrook Infrastructure Partners investing in a polysilicon manufacturing plant in Australia.

Should more deals like these follow in the infrastructure space, Brookfield will have proved once again its status as a trendsetter.


Second place:

CWP Renewables (Buyer: Squadron Energy; Seller: Partners Group)

Third place:

Atlantia (Blackstone, Edizione Holding, Fondazione CRT)

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