First look

Norges Bank finds infra in the red

Attempts to persuade the fossil-fuel-funded Norwegian SWF NBIM to substantially increase its allocation to unlisted infrastructure beyond the current 0.1 percent may be hampered by a 17.7 percent loss accrued by such investments so far this year.

“A higher cost of capital adversely affected the value of the investments during the period,” NBIM’s half-year report noted, presenting an unrealised loss of NKr3.31 billion ($303.5 million; €279.9 million) on a portfolio worth NKr19.73 billion.

Operational assets include about 137MW of Spanish onshore wind farms and shares in two North Sea offshore wind farms. NBIM also has a 16.6 percent share in the not-yet-commissioned German 960MW He Dreiht offshore wind farm, also in the North Sea.

The loss comes at an inopportune time as the SWF has embarked on a spending spree this year, buying a 37.5 percent share in the British Race Bank offshore wind farm and a portfolio of Spanish and Portuguese onshore wind and solar projects under construction.

Net income from NBIM’s infra operations has been only 62 percent of what it was in H1 last year, as power prices have trended lower, particularly in Spain.

The old ‘diversify or die’ comes to mind.

Is PFI set for a return?

With the new Labour government in the UK now firmly ensconced around the cabinet table at 10 Downing Street, ministers in the Treasury are turning their attention to how they can fund a pipeline of large infrastructure projects after Chancellor Rachel Reeves identified a “hole” in the nation’s finances worth around £22 billion ($28 billion; €26 billion).

Private finance looks set to have a major role to play, although Reeves has apparently ruled out directly reviving the private finance initiative that was created the last time a Labour government came to power, or even its successor PF2.

Rather, according to a report in The Guardian, she is said to be considering a programme that would see investors bid to finance all or part of a project – starting with the planned Lower Thames Crossing – in exchange for a management contract that could last 125 years, or perhaps indefinitely.

A potential new meaning for long-term investment, then – but certainly one that sounds somewhat like its predecessor…

All that is AI is not green

Despite some shaky developments for AI recently, investors in the data centre and energy worlds continue to grapple with the power demand of AI data centre facilities, which is expected to grow by 160 percent by 2030, according to Goldman Sachs Research.

Goldman Sachs’ predictions point to a 10 percent rise in US natural gas consumption as a result. While some data centre operators have committed to remaining green, it would appear a significant number of US-based data centre companies are looking to natural gas as the solution.

In its recent Q2 earnings call, US pipeline group Energy Transfer said it’s “in discussions with multiple data centres of different sizes” across the country.

“Some of them or many of them want to put generation on site and wanting as much as two or three hundred thousand [cubic feet],” said co-chief executive officer Mackie McCrea. “We see that going up astronomically, we think we could increase the demand here for electricity over the next six to eight years, about 30,000 or 40,000MW at least.”

Fellow gas infrastructure group Williams Companies’ chief executive Alan Armstrong also said in its recent earnings call the company is “overwhelmed with the number of requests” by data centre groups.

Leave some for the grid, will you?

Grapevine

“We emphatically say at the Department of Energy that yes, yes we will [have enough energy for AI]”

US energy secretary Jennifer Granholm tries to answer the above question

Deals

CPP’s taste for energy

Months after Canadian pension giant CPP Investments teamed up with Global Infrastructure Partners to acquire US utility Allete, the appetite for a broad US energy exposure has increased, with CPP last week plunging $843 million for a minority stake in the Blackstone-owned Tallgrass Energy.

The Denver-based Tallgrass owns 10,000 miles of pipeline assets across 14 states. It has also in recent years branched out into developing carbon capture and hydrogen projects, although these are at relatively early stages.

Blackstone, which was already the majority shareholder, last month bought a further 30.2 percent stake in the company from Spanish group Enagas for $1.1 billion. A source with knowledge of the deal told The Pipeline that a portion of this has now been subsequently sold on to CPP.

Tallgrass was the first investment from Blackstone Infrastructure Partners. When Blackstone took a controlling stake in 2019 it was “a rare opportunity to invest in a large-scale US midstream infrastructure platform”, according to Blackstone infra chief Sean Klimczak. Now, it plays a “dual role in delivering against growing energy needs and increasing decarbonisation opportunities,” said Bill Rogers, managing director, global head of sustainable energies at CPP.

How times have changed.

LS Power’s $2.5bn renewables haul

LS Power is set to acquire the renewable energy business of TSX- and NYSE-listed Algonquin Power and Utilities Corp in a deal valued up to $2.5 billion.

The acquisition includes 44 wind and solar assets across the US and Canada with more than 3GW of capacity, and an 8GW development pipeline of wind, solar, battery storage and renewable natural gas projects.

Algonquin’s assets will build upon LS Power’s current portfolio of more than 19GW of energy projects.

“We believe this platform will play a significant role in meeting the challenges of rising electric demand and advancing the energy transition,” LS Power CEO Paul Segal said in a statement.

The deal is part of Algonquin transition to become a pure-play regulated utility. It is Algonquin’s second large divestment to an infra fund this year, after offloading a 42.2 percent stake in Atlantica Sustainable Infrastructure to ECP in May.

It comes as LS Power’s latest fund, LS Power Equity Partners V, approaches its $2.5 billion target after reaching $2.3 billion in January.

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