Quinbrook Infrastructure Partners has reached a $2 billion final close on its Net Zero Power Fund, while also securing $1 billion in co-investment capital.
The vehicle, which was launched in 2021, targets renewable energy, battery storage and grid support projects in the US, UK and Australia, while it also introduced renewable-powered data centres to the strategy for the first time.
The fund is viewed as a successor to Quinbrook’s Low Carbon Power Fund, which closed on $1.6 billion in 2019. While about two-thirds of the investments will be in the US, most of the support for the fund came from the Nordics, UK, Western Europe and Australia, David Scaysbrook, Quinbrook’s co-founder and managing partner, told Infrastructure Investor. That includes a substantial commitment from Australian superannuation fund Rest. About 10 percent of the capital came from US and Canadian LPs, he added. Quinbrook saw New York-based managing director and head of capital formation Brian Chase depart this year towards the end of the fundraising process.
NZPF has made five investments to date, comprising US solar and storage developer Primergy Solar, data centre platform Rowan Digital Infrastructure, a 750MW Supernode energy storage project in Australia, US-based biogas group PurposeEnergy and Project Severn, a UK portfolio of two synchronous condensers.
The fund is planning to be fully committed within 12 months, Quinbrook said in a statement, and Scaysbrook said the firm is already planning its next vintage.
“We are a long way through design of the next fund, which we’re really excited about. The strategy for the next one has come to us a lot sooner than the Net Zero Power Fund,” Scaysbrook relayed. “In this market right now, we have an extremely clear and differentiated approach. We’re sticking to the same method. We’re taking the basic strategy of the Rowan platform and replicating it in other sectors.”
Contracts critical
Quinbrook’s expansion into the data centre solutions market came in early 2022 with the hiring of John Lucas as managing director, arriving from his role as head of renewables and energy procurement, Americas, at Amazon Web Services. Rowan is now developing a series of carbon-free data centres across the US.
“We had amazing success in delivering powered land using renewables and sustainable construction techniques for the hyperscale data centre operators. We’re just an infrastructure solutions provider, we’re not trying to operate the data centre,” said Scaysbrook. “We think the time is right for that because we feel the big data centre hyperscalers want to operate their own data centres and have this insatiable need for capacity.”
The Supernode battery storage project is also looking to address power supply in Queensland’s data centre market and has been a particular highlight for Scaysbrook and the fund’s investors.
“We were looking at the uniqueness of the location of the project and the way we can develop and construct these assets to attract long-term, contracted revenues,” he explained. “That’s been a first – to be able to do batteries under 12-to-15-year contracts with investment-grade counterparties and fully inflation-hedged. That’s as rare as can be. We call that an infrastructure battery, not a hedge fund battery. A lot of investors have said to us it’s the first time they’ve seen that contracted risk-mitigated battery exposure and are more comfortable with that.”
Such contracted revenues have been critical for the NZPF in a portfolio that is currently largely under construction, he stated. Overall, the portfolio is either halfway through construction or at an advanced stage.
“We don’t invest unless all of the investors’ invested capital is covered as a minimum during the contracted revenue period,” Scaysbrook outlined. “Despite how difficult fundraising was, the strategy was differentiated in the market, which is why we were able to get to the target and that’s the feedback we were getting from investors.”
The 10-year NZPF targets a net IRR of 12 percent, according to documents from the UK’s London Borough of Islington Pension Fund, which committed $100 million to NZPF and was also an LP in the Low Carbon Power Fund, which was generating a three-year IRR of 10.4 percent, as at the end of Q1 this year, according to the pension.
Quinbrook’s closing of the NZPF follows on the heels of a $600 million continuation fund raised earlier this year for a series of solar projects in Nevada. It also raised £620 million ($760 million; €717 million) for the UK-focused Renewables Impact Fund last year, seen as a separate strategy to NZPF and the Low Carbon Power Fund.