Institutional investors bid high on LatAm infra

In search of greater returns, institutional investors (II) from all around the globe seem to be increasingly prepared to take on greater risk. One example of this is a rising appetite for direct investment in Latin American infrastructure, with 2019 figures being three times higher than the full previous year.

 

So great is the hunger for higher yields, that fewer institutional investors seem to remain in part cautious of the regional challenges and have taken direct equity investments off their plate. Contrary to the overall trend, IJInvestor data suggests that in 2019 a smaller fraction of institutional investment has been eased by a mediating infrastructure fund.

 

IJInvestor and IJGlobal data show that most of the Latin American transactions that had an institutional involvement for the past five years were mainly in the M&A space. This could be explained not only by the participation of infrastructure funds but, compared to the US for example, attracting investors from abroad.

Transaction Name

Value ($m)

Sector

Country

Financial close date

Fund/Institutional investor

Privatisation of 90% in Transportadora Associada de Gas (TAG)

                        8,298

Oil & Gas

Brazil

13/06/2019

CDPQ

Acquisition of 90% in Nova Transportadora do Sudeste (NTS)

                        4,230

Oil & Gas

Brazil

04/04/2017

Brookfield Infrastructure Fund III

Privatisation of 57.6% Stake in Isagen

                        1,926

Power

Colombia

20/01/2016

Brookfield Infrastructure Fund III

Acquisition of a Majority Stake in Ascenty

                        1,800

Telecoms

Brazil

19/12/2018

Brookfield Infrastructure Partners

Acquisition of InterGen Mexican Portfolio (2.2GW)

                        1,357

Multiple

Mexico

25/04/2018

Actis Energy 4

Acquisition of 80% of Enel's Mexican Renewables Portfolio (1.7GW)

                        1,350

Renewables

Mexico

25/10/2017

CDPQ

Acquisition of 35.9% in VLI

                        1,210

Transport

Brazil

14/04/2014

Fundo de Investimento do FGTS

Acquisition of Duke Energy's Latin American Business

                        1,200

Power

Multiple

19/12/2016

ISQ Global Infrastructure Fund

Acquisition of Inkia Energy's Latin American and Caribbean Businesses

                        1,200

Renewables

Multiple

31/12/2017

ISQ Global Infrastructure Fund II

Acquisition of Pemex Exploracion y Producto Oil & Gas Assets

                      1,195

Oil & Gas

Mexico

16/06/2016

CDPQ


According to IJGlobal and IJInvestor’s top 10 deals involving a fund or an institutional investor, the most active among all were Canada's Caisse de dépôt et placement du Québec and Brookfield Infrastructure, followed by US-based I Squared Capital.

Over the last two years, CDPQ and Brookfield have both engaged in acquiring, among other, some key gas transport infrastructure in Brazil, with the acquisition of controlling stakes in Transportadora Associada de Gas (TAG) and Nova Transportadora do Sudeste (NTS), respectively. Furthermore, I Squared targeted the power and renewables sectors in a broader range of countries, while UK-based Actis, through its fourth fund, has snagged conventional power generation and midstream assets in Mexico.

 

Looking more closely at IJInvestor’s data on all infra funds targeting LatAm investments exclusively, it becomes clear that almost half of all LPs come from abroad with Europe still prevailing.

It could be said that infrastructure in LatAm will remain a critical growth engine and will provide more and more opportunities for risk lovers. With ongoing privatisations targeting the disposal of key power generation and distribution facilities, as well as gas pipelines, it seems that the potential for institutional investors in Latin America is largely untapped.

In July of this year (2019) Brazilian energy incumbent Petrobras put more stakes up for sale in a number of generation and distribution companies, some of which have already attracted foreign infra funds. IJGlobal and IJInvestor data suggest that currently the LatAm infra pipeline deals, involving institutional investors, totals more than $4.1 billion, with the biggest deal in it by far being the acquisition of 70% in Mexican toll-road company RCO by Spanish concession giant Abertis and Singapore sovereign wealth fund GIC.