The Pipeline: Trump’s $1trn threat, CPP’s ‘mixed results’, Fidelity duo depart after 6 months

First look

Trump’s $1trn transition threat

Consultant Wood Mackenzie has sounded the alarm on a potential second Donald Trump presidency and its effect on the energy transition, and that’s with the Inflation Reduction Act remaining intact.

The sector could see a $1 trillion hit compared with Wood Mackenzie’s base case projection of about $7.7 trillion in investment for the US energy sector over 2023-50, should policy support for things such as low-carbon energy and infrastructure improvements weaken, it said in a report last week.

“It is not likely that the IRA will be fully repealed,” David Brown, director of Wood Mackenzie’s energy transition research, said. “However, a second Trump presidency would likely issue executive orders that would abandon the 2035 net-zero target for the power sector, establish softer emissions goals from the EPA, and issue tax credit regulations that could favour blue hydrogen.”

Weakened support from the Department of Energy Loan Program Office, fewer grid improvements and continued trade tension with China could impact power supply, while further falls in EV sales were also predicted.

Here’s to six months of uncertainty, then.

CPP’s ‘mixed results’ for infra

CPP Investments released its fiscal year 2024 report last week and the  infrastructure performance showed, by its own admission, “mixed results”.

Infrastructure generated a net return in fiscal 2024 of 2.6 percent and a five-year net return of 5.9 percent. The 2024 return was significantly below the 5.6 percent posted in 2023, which CPP said “were mostly due to foreign currency gains”.

“These investments were also negatively impacted by the increase in interest rates in recent years, however, to a lesser degree than other asset classes due to the inflation-hedging characteristics of the asset class,” the Canadian pension giant noted with regard to the 2024 results.

Dragging performance down were “select logistics assets” and utilities investments in Europe. Meanwhile, toll roads in Canada and Mexico and port services in the US drove positive performance, benefiting from increased traffic volumes and transportation activity, with CPP noting “the inflation protection features of these assets”.

At least pandemic-era struggles are over.

Fourth Impax flagship has final close at €439m

London-based Impax Asset Management has announced the final close of Impax New Energy Investors IV, with a total of €459 million raised, making it the GP’s largest fund to date.

However, the fund was launched as far back as August 2020 with a target of €500 million. Its predecessor raised €357 million in 2018, also chasing €500 million.

“Successfully closing the fund, close to its target size and approximately 30 percent larger than our last fund, is testament to the team’s ability to execute the investment strategy and deliver for our investors,” Daniel von Preyss, head of PE/infrastructure at Impax, said.

The value-add strategy is already invested across 10 platforms including German onshore wind, Italian solar PV and a renewables developer with operations in both Ireland and the US.

Somewhat unusual for a fund that has only just closed, the fund has had its first exit – a solar portfolio in the US. Only just walking, this fund is raring to run.

PAG raises $550m for debut solar fund

PAG, the Asia-Pacific asset manager best known in the region for its series of real estate funds, has closed its first vehicle focused on renewable energy investments.

The firm said that PAG REN I had collected $550 million from pensions, sovereign wealth funds and fund of funds investors from North America, Europe and the Middle East. Among them is Abu Dhabi’s Mubadala, which confirmed in a separate statement that it had made a “cornerstone investment” of an undisclosed amount to the platform.

While the fund has a mandate to invest in renewables assets across APAC, its primary focus will be on solar generation in Japan. The firm already manages a portfolio of more than 600MW of renewable energy assets in Japan, having invested more than $1.6 billion in the sector.

With foreign investors increasingly seeing Japan as an attractive destination to put capital to work, this is unlikely to be the last we hear of PAG in the country.

Grapevine

“Some projects are nothing more than good ideas and not financeable by anybody. Other projects are turned down because we think the market will finance them. And most of the time, we are right”

Ian Brown, head of banking and investments at the UK Infrastructure Bank, succinctly tells Infrastructure Investor about the opportunities on his desk

Who’s hiring leaving

Fidelity get cold feet on building a new infra team

It was only in December that we reported on Fidelity International’s ambitions for a new infrastructure unit. Now, this has been scrapped and the two people hired to head the equity and debt sides, respectively, Chantale Pelletier and Emma Haight, are out. Pelletier had joined from her role as global head of infrastructure at Schroders Capital, while Haight was previously a partner in the infrastructure debt team at Ares Management.

“Following a strategic review, Fidelity has decided not to proceed with manufacturing proprietary European direct lending and infrastructure investment capabilities but will partner with third parties to enable us to serve our current and future client needs. Unfortunately, some roles will be impacted by this decision,” states a Fidelity spokesperson.

The somewhat brutal change of heart follows the stepping down of co-CIO for fixed income, multi asset and private assets, Andrew McCaffery. Andrew Wells, current president of Fidelity Canada, will step in on an interim basis.

Fidelity’s new stance is – belatedly – in line with the wider industry view that has all but given up on organically growing infrastructure teams. Maybe Fidelity will be on the market for a small GP or a couple of platforms soon – if so, they won’t be the first this year, and possibly not the last.

Deals

Lotus adds spark to high-voltage transmission deal

Lotus Infrastructure Partners has been chosen, alongside Southern California Edison, by the California Independent System Operator to develop a new 30-mile, 500-kilovolt overhead transmission line in the Golden State.

Lotus – formerly the Starwood Energy unit – and SCE will develop, permit, finance, own, operate and maintain the new line, which will stretch from Serrano Substation in north-central Orange County to a substation in the vicinity of the retired San Onofre Nuclear Generating Station.

The project is estimated to have a cost of $503 million, according to CAISO. The agreement will see Lotus lead the project’s development, after which SCE will buy the entire project and lease 25 percent of the transmission capability to Lotus.

Such development responsibility does not faze Himanshu Saxena, chairman and CEO of Lotus, who said that “Lotus has been developing transmission assets for almost 20 years”, adding that “it is clear that there can be no energy transition without energy transmission”.

Shovels at the ready, then.

Today’s letter was prepared by Zak Bentley. Daniel Kemp and Anne-Louise Stranne Petersen also contributed.