Actis is set to invest $1.8 billion of its fifth energy fund – about 40 percent of the fund’s generation book – in natural gas, Neil Brown, head of Actis’s investor relations group, told New Private Markets.
The firm also announced the final close of its fifth flagship energy fund at $4.7 billion and has raised $1.3 billion in co-investments. Around 60 percent of the generation book will go to renewables.
Natural gas is a fossil fuel but less carbon intensive than coal. It is often considered a bridging fuel in the energy transition and can reduce coal reliance in parts of Asia-Pacific, reports affiliate title Infrastructure Investor (registration or subscription required).
“We’ll be investing in markets where renewables aren’t viable or the provision of gas is important to building the power system,” said Brown. “We take the view that natural gas is a legitimate bridging fuel.”
Actis’s strategy includes building projects and acquiring existing infrastructure and will invest primarily in Asia-Pacific and Latin American markets, Brown added. “Gas has a role to play in most of our markets because most are relatively immature. They are oftentimes starved of power,” said Brown. “We need to anchor the stability of gas power stations so you can then build out a renewables capability. Eventually, there will come a point when gas becomes a less important part of the mix as we move to renewables.”
What do LPs think?
Actis received “a lot of scrutiny” from investors over natural gas assets, said Brown. These questions were primarily about whether natural gas assets would retain their value over time. Some LPs “drilled in on the environmental questions,” said Brown. “But there’s a lot that are looking at it commercially and saying, ‘The world is moving to renewables. Can I assume that my gas asset today is worth anything? Can you sell this asset when I want to exit it?’”
The fund has over 50 LPs, more than 15 of which committed over $100 million. Around 30 percent came from the US; 27 percent from Europe, 24 percent from the Middle East and 17 percent from Asia-Pacific.