Investments

New Zealand Gas Transmission and Distribution Utility

new-zealand-gas-transmission

Type: Co-investment
Date: June 2016
Sector: Utilities
Geography: New Zealand

Overview

  • Gas transmission and distribution utility that operates in the North Island of New Zealand
  • The high pressure transmission system consists of underground pipelines and above ground station facilities serving gas shippers, with the end users including a variety of important New Zealand industries including electricity generation, dairy, meat processing, steel, refining and fertilizer
  • The lower pressure distribution system consists of over 60,000 connections, and primarily serves residential customers in cities and towns

Investment Rationale

  • Highly predicable, inflation-linked, regulated cash flows with high yield
  • Monopolistic position and low operating complexity
  • Investment made alongside a trusted, experienced fund partner
  • Scope for regulatory outperformance and potential for additional growth
  • Critical national infrastructure

European Storage Facility

european-storage

Type: Co-investment
Date: June 2016
Sector: Bulk Liquid Storage
Geography: Europe

Overview

  • Diversified bulk liquid storage terminal headquartered in Europe in a strategically important location
  • Industrial, blue-chip customers with strong credit ratings with medium and long-term contracts
  • Well-advanced growth and expansion opportunities, primarily with existing customers looking to utilize more capacity at the facilities

Investment Rationale

  • Long-term stable cash flows through a high proportion of long-term contracted, inflation-linked, take-or-pay contracts. 100% historical renewal rate of customer contracts
  • High barriers to entry given capital intensity of industry, strategic port location with limited availability of additional land and importance of long-term track record of reliable service
  • High level of integration with key customers
  • Trusted and experienced fund partners

European Pipeline and Storage

european-pipeline

Type: Direct Investment
Date: March 2016
Sector: Pipeline and Storage
Geography: Europe

Overview

  • Large refined oil logistics operator with a quasi-monopolistic network of transportation and storage assets
  • Global leader in the efficiency, automation, and integration of the entire network, providing customers instantaneous delivery of products
  • Increased focus on its internationalization strategy to generate additional growth going forward

Investment Rationale

  • High barriers to entry due to quasi-monopolistic characteristics providing strong pricing power
  • Well managed asset with a very conservative capital structure
  • Majority of revenues supported by inflation-linked contracts with creditworthy counterparties
  • Board seat representation
  • Exclusive bilateral negotiation with likeminded institutional seller

U.S. Telecom

us-telecom

Type:  Co-investment
Date:  October 2015
Sector:  Telecommunication
Geography: United States

Overview

  • Leading provider of outdoor and indoor distributed network systems (“DNS”) networks for wireless carriers in North America
  • The technology provides the “backbone” of wireless communication infrastructure, primarily in urban and indoor environments
  • The Company is a registered telecommunications utility with operations in 35 states

Investment Rationale

  • Long-term contracted cash flows with fixed escalators
  • High barriers to entry due the critical importance of network coverage and performance as well as high switching costs and operational barriers
  • Strong market fundamentals as wireless data traffic is projected to increase at ~50% per year for the foreseeable future, and revenues in the DNS market expected to triple over the next four years
  • Co-investment with trusted and experienced fund partner

U.S Renewable Platform

us-renewable-platform

Type: Co-investment
Date: September 2015
Sector: Energy
Geography: United States

Overview

  • Joint venture between a renewable specialist, and a GP focused on acquiring a portfolio of renewable assets in the U.S. and Canada
  • Targets the deployment of equity in small and mid-size renewable projects and portfolios
  • Currently invested in a portfolio of renewable assets that are operational and providing cash flow

Investment Rationale

  • Unique strategy to build platform by acquiring smaller sized projects and add value through contracting power and improving efficiencies
  • Experienced investment partners and management team
  • Favourable market dynamics, with long-term useful asset lives and ability to enter into long-term power purchase agreements
  • Supportive political and regulatory environment with incentives for renewable energy sources

U.S. Midstream System

us-midstream

Type: Co-investment
Date: August 2015
Sector: Energy
Geography: United States

Asset Overview

  • A midstream JV with a U.S. corporate entity focused on oil production in the Bakken/Three-Forks shale play located in the Williston Basin
  • A package of midstream assets including a gathering system, gas plant, truck and rail facilities and rail oil cars
  • The corporate entity is to provide a tariff structure adjusted based on volume and capital deployed for the first 10-years and a renewal option for a second 10-year period

Investment Rationale

  • Well structured off-take agreement with investment grade counterparty in their largest production region
  • No direct commodity price or volumetric exposure as this remains with the upstream producer. Fees can be calculated annually to true-up for variances
  • Exposure to some of the best acreage within the Bakken. The upstream producer has a significant inventory of 1st and 2nd quintile wells to drill
  • Investment alongside an experienced partner in the sector

U.K. Water and Sewerage Utility

water-and-sewerage

Type: Direct Investment
Date: September 2013, August 2015
Sector: Utilities
Geography: United Kingdom

Asset Overview

  • One of 10 water and sewerage companies in the United Kingdom
  • Regulatory license to supply water and/or wastewater treatment services to over 4.4 million customers within a designated area in the southeast of England
  • The company is regulated by OFWAT in an established and well understood regulatory framework

Investment Rationale

  • Monopolistic provider of essential service within the company’s license area
  • Long-term inflation linked cash flows
  • Opportunity to invest at a discount to industry comparables and recent transactions
  • The company is positioned for growth with the support of a recently renewed and strengthened management team
  • Investment made as part of a toe-hold strategy for future investments (first follow-on completed in August 2015)

U.S. LNG Facility

lng-facility

Type: Co-investment
Date: March 2015
Sector: Energy
Geography: United States

Asset Overview

  • Liquefied natural gas (“LNG”) export facility located on the US Gulf Coast
  • Construction period commenced in April 2015, with initial operations expected in 2019
  • The investment is in the form of convertible notes, which are convertible into equity following completion of construction

Investment Rationale

  • Early access to the US LNG export sector with competitive market positioning
  • One of the largest LNG facilities approved by the FERC to date
  • Well-structured debt transaction with downside protection while maintaining the potential to participate on the upside
  • Signed long-term take or pay contracts with investment grade offtakers
  • Investment alongside an experienced partner in the sector

Water Desalination Plant

water-desalination

Type: Co-investment
Date: July 2013
Sector: Utilities
Geography: United States

Asset Overview

  • A 30-year availability-based contract to provide water to residents of San Diego County through a newly built desalination plant
  • Project completed in December 2015 and operations are underway
  • The plant delivers clean drinking water to over 3 million local residents (7% of San Diego County water supply)

Investment Rationale

  • Region prone to drought and water shortages, new sources of freshwater are in high demand
  • The project is expected to deliver stable, long-term cash flows through an availability-based contract structure
  • Fully negotiated, date-certain and fixed price EPC contract helps reduce and manage construction-stage risk
  • Scarcity value given limited number of investable desalination facilities in North America
  • Investment alongside a trusted and experienced fund partner and developer in the sector

Joint Venture with Infrastructure P3 Developer

plenary-photo

Type: Joint Venture
Date: 2010, 2013, 2014
Sector: Social Infrastructure
Geography: Canada, United States

Overview

  • Caledon’s clients were seeking long-term, low risk opportunities as intial investments for their portfolios and Caledon recommended social infrastructure
  • Caledon evaluated the market and conducted discussions with several infrastructure developers with the goal of forming a joint venture
  • Caledon analyzed, structured and negotiated a strategic partnership with a leading developer to invest in its current portfolio with exclusivity over future projects
  • As a result of the success and rapid pace of deployment of the first Canadian vehicle structured in 2010, Caledon structured a follow-on vehicle in 2013 and a US vehicle in 2014

Investment Rationale

  • Preferential access to assets not typically available to non-strategic institutional investors
  • Attractive economics and investment structure
  • Long-term exposure to a stable asset class offering attractive risk-adjusted returns
  • Currently 14 investments have been made

Infrastructure Fund Commitments

Global Infrastructure Fund

global-diversified

Type: Fund
Date: November 2015
Strategy: Core
Geography: Australia, New Zealand, Europe

Overview

  • Existing relationship with the fund manager having previously partnered together
  • Recently restructured fund with a refined strategy to pursue core infrastructure assets at attractive risk adjusted returns
  • Open-end fund with historically strong performance and significant cash yield
  • Attractive valuations, particularly in light of existing market environment

Investment Rationale

  • Well-established infrastructure platform supported by the global presence and resources of one of Australia’s largest financial institutions
  • Minimum J-curve given no fees on commitments and quick drawdown
  • Ability to club Caledon clients together on enhanced terms
  • Attractive co-investment terms

First Time Independent Global Infrastructure Fund

global-infrastructure

Type: Fund
Date: May 2014
Strategy: Core Plus
Geography: Global

Asset Overview

  • Caledon identified a new fund investment opportunity for its clients in mid-2013
  • The Fund was targeting energy, utilities and transport assets with a focus on North America, Europe, and select high growth economies
  • Caledon led the diligence, negotiation and closing of the fund investment for its clients

Investment Rationale

  • Caledon recognized the opportunity to create a strategic relationship with a newly formed independent manager with extensive infrastructure experience
  • Ability to club Caledon clients together on enhanced terms
  • Attractive co-investment terms

Secondary in an Open-Ended Infrastructure Fund

secondary

Type: Secondary
Date: January 2013
Strategy: Core
Geography: OECD

Overview

  • Caledon was approached by the seller’s agent in November 2012
  • The seller had a $50 million interest in the fund and was looking to sell half its position as it was overcommitted to the infrastructure asset class
  • Caledon was able to negotiate a discount to the most recent NAV (including adjustments for distributions)

Customized Caledon Solution

  • Offered the opportunity to access an open-ended fund with an existing diversified portfolio of high-quality infrastructure assets
  • Acquiring the interest on a secondary basis enabled purchaser to avoid the queue
  • Opportunistic purchase terms including a discount, reduction of purchase price for distributions and no requirement to pay certain fund fees
  • Provided the opportunity for potential future co-investment opportunities with the manager