I Squared eyes LNG sector after raising $15bn

A leading infrastructure investor is eyeing the liquefied natural gas sector after raising a new $15bn fund, capitalising on Europe’s search for energy supply alternatives to Russia.

I Squared Capital is among a handful of private capital firms dedicated to infrastructure investment. In the past decade the Miami-based group has grown to $34bn in assets, 40 per cent of them in the energy sector.

Gautam Bhandari, an I Squared managing partner, said new LNG export projects would gain momentum as the EU aims to displace Russian gas and as energy demand grows in Asia.

“The reconfiguration of liquefied natural gas supplies from the US and Canada to Europe and Asia is a big investment theme,” Bhandari said in an interview. “There is a significant need for new investment.”

He noted that three or four multibillion-dollar projects sought to raise financing this year.

I Squared Capital on Thursday announced the $15bn closing of its third flagship infrastructure fund. The fund exceeded an initial target by 25 per cent as institutional investors ploughed money into infrastructure assets in search of yield and investments protected from rising inflation, the buyout group said.

I Squared was co-founded in 2012 by Sadek Wahba, a former World Bank economist who led Morgan Stanley’s infrastructure investment business, along with managing partners Adil Rahmathulla and Bhandari.

The EU seeks to reduce its dependence on Russian fossil fuels after Vladimir Putin’s invasion of Ukraine. The bloc has set a goal of an extra 50bn cubic metres of gas from the US by 2030, which would dent Russian sales that total 155bn cubic metres.

Washington has approved a dozen new export projects with a total capacity of 206bn cubic metres a year — about twice its current capacity — but they need to be backed by gas purchase contracts and financing before they can proceed.

“You have seen increasing momentum for investors and regulators to make the projects possible,” Bhandari said.

I Squared is a large investor in Venture Global LNG, a private company that recently opened the Calcasieu Pass gas export terminal in Louisiana and is developing others in the state for a total investment of more than $20bn.

Private investment firms have been some of the largest financiers to LNG export projects. A consortium of Blackstone Group and Brookfield controls about 42 per cent of Cheniere Energy Partners, the publicly traded group that owns Sabine Pass, the first LNG export terminal to open in the mainland US.

In 2019, Brookfield also bought a 25 per cent stake in Cove Point LNG, an export terminal in Maryland built by utility Dominion Energy. Global Infrastructure Partners financed the construction of Texas-based Freeport LNG, selling its 25 per cent stake to Japan-based utility Jera for $2.5bn in late 2021.

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