Stonepeak mulls larger deals with $5 bln Fund III

Stonepeak Infrastructure Partners might be eyeing larger deals with its latest fund, which is looking to raise at least $5 billion, due-diligence materials prepared by Hamilton Lane show.

Stonepeak will use Fund III to invest between $100 million and $1 billion of equity per deal, the Hamilton Lane memo says. Should it hit its $5 billion target, Fund III would be more than 40 percent larger than Fund II, which held a final close on $3.5 billion in early 2016.

“While remaining in the North American middle-market, Stonepeak will appropriately increase its target equity investment size to accommodate the larger fund,” the memo says.

Stonepeak’s first fund, which closed on $1.65 billion in 2013, typically allocated $50 million to $350 million equity per deal, according to a Fund II presentation the firm gave to Rhode Island State Investment Commission last year. A source with knowledge of the fund said Stonepeak’s earlier deals were actually much larger when capital provided by co-investors was taken into account, averaging around $600 million.

Stonepeak in February acquired a majority stake in data-center company Cologix for $500 million. The firm’s April 2016 investment in Sage Midstream Ventures, a midstream energy infrastructure company, was also sized at $500 million.

Stonepeak General Counsel Adrienne Saunders declined comment.

As with its previous funds, Stonepeak will invest Fund III in North American infrastructure assets in the midstream energy, power and utility, telecommunications, transportation and water sectors.

The firm’s first fund was netting a 14.3 percent internal rate of return and 1.3x multiple as of March 31, according to Hamilton Lane. Realized investments from Fund I had grossed a 37.7 percent IRR as of the same date.

Fund II, which is still in the early stages of its investment period, was marked at a net IRR of 31.2 percent. That fund had not exited any investments as of March 31.

Teachers’ Retirement System of Louisiana committed up to $50 million to Fund III at its meeting last week.

Michael Dorrell and Trent Vichie co-founded Stonepeak in 2011, having previously led Blackstone Group’s infrastructure tream. Prior to Blackstone, both co-founders worked at Macquarie Group.

Action Item: More on Stonepeak: https://stonepeakpartners.com/

A natural gas well platform owned by Encana north of Parachute, Colorado, on Dec. 8, 2014. Photo courtesy Reuters/Jim Urquhart