Platform PE vs Mid-Market PE - Infra
In Infra PE, how is platform investing different than asset level Mid Market investing? Say you’re buying a platform operating and constructing several renewables through the platform vs buying a single renewable project. Isn’t the mid market asset level approach more interesting and a better learning experience as you dig deeper into the individual assets? Whereas in the platform approach you may not dig as deep and a lot of the asset management is focused & relying on management to execute on the growth? Hence, a lot of focus on corporate governance rather than typical investment due diligence? Curious to hear what others think?
Bump
I work in the space. My understanding is PE groups that acquire interest in renewables platform operate a lot more similarly to traditional corporate/buyout PE than asset level infra PE. If you want to look at assets, you should not work in one of the platform groups.
What type of due diligence you would do for platforms and how is it different than asset level infra PE?
I work in Infra PE.
Platform deals are typically funds that have a capital gains strategy (seed a platform, build capacity / pipeline, de-risk and sell in 5-7 years with considerable yield compression). the type of diligence you do is similar to anything else - to seed the platform you will usually need to be looking at specific assets to acquire on day 1, as well as the management team, pipeline etc. you will also be on the board of course so any new acquisitions / capital required will need to go through your IC. At the early stage at least, I liken this to a hybrid growth equity / PE strategy.
When investing in specific brownfield assets you obviously have more information to be more granular, and the thought process is similar to any other industry, just with an infra specific lens. This strategy often falls into a cash yield strategy for a fund as opposed to capital gains.
It really helps to do both I think to round your skill set, and acquiring brownfield assets helps you think like your buyers when you’re developing platforms. No one is better than the other though, and different firms (and often different funds within those firms) tend to focus more on one vs the other.
Depends on what you mean by "more interesting" - yes, specific asset diligence will be more granular / probably give you a deeper understanding of the nitty gritty inputs (e.g., looking at wind studies, the specific equipment and what that means for power generation, etc.). We still got in the weeds when looking at platforms however, and built our models using asset-specific buildups.
IMO the bigger difference in skillset and diligence is where in the development cycle are you focused. Earlier stage stuff tends be higher level assumptions / diligence but much more strategic and interesting (where are the most attractive spots to place assets, what's going on from a regulatory standpoint, what new technologies can we leverage, etc.) vs. just acquiring a fully operational wind farm that is going pump out a certain volume of energy and sell it for a certain price.
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