Global Infrastructure Partners (GIP) is expecting a broad sell-off of assets in its second fund, GIP II, over the next two years in response to the growing demand for infrastructure assets, Chairman and Managing Partner Adebayo Ogunlesi said in a presentation to the Oregon Investment Council (OIC) last month.
GIP II expects to sell five to six of its portfolio companies by the end of 2019 and the balance, with the exception of one, by 2020, Ogunlesi said, adding that GIP III could also start selling assets by then.
The presentation was given in connection with GIP successfully raising a USD 400m commitment for its fourth fund, GIP IV, from the OIC’s OPERF Alternatives portfolio.
The GIP II fund has so far delivered gross returns of 32% and net returns of 21%, but Ogunlesi projected final gross returns of mid-to-high 20% and net returns of low-to-mid 20% range once the fund is fully exited.
GIP exited its 50.01% stake in Gatwick Airport over the holidays as it struck a GBP 2.9bn deal with France’s Vinci Airports.
Prior to that transaction, GIP I and II have distributed USD 14bn to investors, as a result of 13 exits, with a gross multiple of invested capital of 2.6x and gross IRR of 25.1%, according to the 12 December presentation materials.
GIP II owns full or partial equity stakes in the following assets, according to Inframation Deals: Edinburgh Airport (80.9%), Guacolda 608MW Coal-Fired Power Plant (49.99%), Hess Infrastructure Partners (50%), TIL Group, Pacific National Rail, Saeta Yield 689MW Renewables portfolio (24.4% stake), Gode Wind I (50%), Freeport LNG (25%), and Competitive Power Ventures (57.53%).
Ogunlesi touted Edinburgh Airport as a turnaround story as the business had earnings of GBP 30bn at the time of acquisition from GIP, a number that has since grown to GBP 120bn. He said one regret was GIP’s investment in Guacolda, a Chilean coal-fired plant, which has been written down by 80% after renewable generation created challenges.
In presentation materials presented to the board, GIP said it expected a first close on 14 December for GIP IV and is targeting a gross internal rate of return of 15% to 20%. The fund is seeking USD 17.5bn with a USD 20bn hard cap.
GIP IV’s focus will be on large-scale complex transactions which should “provide less competition and more opportunities for operational value creation,” according to presentation materials. The fund will have a five-year investment period, and 10-year duration with up to two one-year extensions at GIP’s discretion.
OIC has been a consistent investor to GIP funds including GIP II (USD 150m), Global Infrastructure Capital Solutions Fund (2014) and GIP III (USD 400m).