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PE pioneer Thomas H. Lee passes away; ArcLight’s Great River Hydro exit plus evolution of infrastructure investments

Good morning dealmakers, thank goodness it’s Friday!

It’s Obey Martin Manayiti here with the newsletter, and as usual, we are capping this week with a trend that caught my attention recently.

Today we are looking at eight water focused infrastructure deals and then turn to the ArcLight Capital Partners’ exit of Great River Hydro to Hydro-Québec for approximately $2 billion, and thoughts from Goldman Sachs executives on how infrastructure investing has evolved over the years from a “boring” space to a very competitive one.

Some sad news from Lee Equity Partners, which announced the passing of the firm’s founder and chairman, Thomas H. Lee. There’s more on all of this news, below.

Water, Water Everywhere: The appetite to upgrade the country’s battered infrastructure has been growing over the years among policy makers, investors, developers and other stakeholders. In 2021, President Joe Biden signed the bipartisan Infrastructure Investment and Jobs Act that is aimed at overhauling US infrastructure. Private equity firms have been busy too, picking up deals in the infrastructure space.

Boyne Capital, based in Miami, is partnering with management in acquiring McKee Utility Contractors, a water and sewer infrastructure services platform that focuses on pipeline installation, replacement, tunnelling, and boring for water, wastewater, and storm water utility customers.

Founded in 1978, McKee serves municipal and utility customers across expanding population centers in Texas, Oklahoma and Arkansas, presenting significant runway for continued growth.

“We look forward to partnering with the McKee team and helping them capitalize on the considerable market opportunity available to grow both organically and strategically, while continuing to offer best in class service to their blue-chip customer base,” said Roman Krislav, Boyne Capital managing director in a statement.

Hydro Power: ArcLight Capital Partners managing director Andrew Brannan told me in an interview earlier this week that long-term power sales contracts, coupled with other organic strategies, propelled the monetization of Great River Hydro, a Westborough, Massachusetts-based hydroelectricity provider that was sold to Hydro-Québec for approximately $2 billion in a deal that closed earlier this month.

Documents from MainePERS Private Market Investments, a co-investor in Great River Hydro, show that it generated an IRR of 41.3 percent.

Great River Hydro owns 13 hydroelectric generating stations with a total capacity of 589 megawatts along New England’s Connecticut and Deerfield rivers, as well as a portfolio of co-located battery storage and solar development projects, representing one of the largest conventional hydroelectric portfolios in New England.

The generated power can service more than 213,000 homes per year, the company said.

But to grow the company, ArcLight implemented three strategies upon acquisition. These are capitalizing the company, commercializing it, and overhauling the management team.

Infrastructure Assets: Once perceived as boring, the world of infrastructure assets has come to be one of the competitive and most sought-after investments, noted some Goldman Sachs Asset Management executives yesterday at a virtual media roundtable yesterday dubbed ‘Investing in the Evolution of Infrastructure’.

“When we started investing, infrastructure was considered quite boring, I think wrongly so because these businesses, by the way, are not at all boring,” said Philippe Camu, chairman and co-chief Investment Officer for Infrastructure at Goldman Sachs Asset Management, adding that there is a constant addition of new things that are coming on to what was deemed to be essential infrastructure over the years.

Infrastructure related deals are one of the areas that we are also keen to cover here at PE Hub.

Weekend listening. In the final episode of Private Markets and the end of Cheap Money, we hear from LPs and GPs who share what key indicators they keep their eyes on to help make sense of the rising interest rate environment.
 
You can listen to the podcast here.
 
Listen to the first four episodes in the series here.

Deeply missed: Lee Equity Partners shared some sad news following the death of the firm’s founder and chairman, Thomas H. Lee.

Here is a statement from the firm:

It is with deep sadness that we announce the passing of our Founder and Chairman, Thomas H. Lee. He was a great partner and wonderful friend whose vision will continue to influence us for many years to come.

Tom was a pioneering investor who helped create the private equity and leveraged buyout industry as we know it. Before founding Lee Equity Partners in 2006, Tom built Thomas H. Lee Partners (THL), which raised the largest private equity fund in the world in 2001 under Tom’s leadership. Since 1974, Tom has been responsible for investing over $15 billion of capital in hundreds of transactions. Tom’s long and distinguished career was highlighted by the many companies, entrepreneurs and investors who were his partners and friends over almost half a century of investing.

Tom, a prominent philanthropist, was committed to numerous charitable and educational organizations including his alma mater, Harvard College. Tom was passionate about providing access to care and supported this goal through his commitment to NYU Langone Medical Center. Tom loved New York City and was devoted to many of its most important arts and civic organizations. He served as a trustee of Lincoln Center for the Performing Arts, The Museum of Modern Art and the Whitney Museum of American Art, among others.

Tom’s determination, commitment and strategic vision will continue to inspire all of us at Lee Equity Partners. He was a leader, a friend, a partner, and our mentor. We know he will be proud as the firm continues on, with strength. We will work every day to meet the high standards he has set for us and the entire industry. On behalf of our employees, management teams and investment partners, we mourn his loss and extend our deepest sympathies to his family.

We ask that you please respect the family’s privacy during this very difficult time. If you have any questions, please don’t hesitate to reach out to any of the Partners at Lee Equity.

On behalf of PE Hub and Buyouts, we offer our condolences.

That’s it for me today.

Craig McGlashan, our PE Hub Europe editor, will be back on Monday with the Wire.

Have a good weekend.

Cheers,

Obey

Read the full wire commentary on PE Hub ...

Also of note (may require subscriptions)

PAI Partners and ECG go glamping with Vacanceselect: European Camping Group acquired campsite and mobile home operator Vacanceselect in a deal with an enterprise value of €1bn, according to sources close to the matter. (PE Hub Europe)

PE’s reputation is once again front of mind: Reports published by the UK’s Private Equity Reporting Group this week could sharpen the industry’s focus on transparency and disclosure. (Private Equity International)

Amid a flurry of deals starting to hit the market this year, a few LP portfolio sales from last year found their way to closure despite challenges in pricing. Lockheed Martin Investment Management closed a sale of a portfolio of LP fund stakes around year end, according to sources. (Secondaries)

Major investors ramp up engagement on cost-of-living crisis: LGIM, Fidelity International and Federated Hermes talk about efforts on treatment of workers, as issue looks set to feature prominently in 2023. (Responsible Investor)

Brookfield Asset Management, in partnership with MidOcean Energy, the global LNG platform owned and managed by EIG, has revised its take-private bid for the Australian Securities Exchange-listed energy generator and retailer Origin Energy. (Infrastructure Investor)

A proposed revision to the custody rule by the Securities and Exchange Commission would have a significant impact on mid-market, experts say, as the regulator tries to solve what one lawyer calls a “non-existent problem” by requiring more private assets to be held by a qualified custodian. (Private Funds CFO)