Carlyle Holds First Close on $1B Infrastructure Fund

Firm: The Carlyle Group

Fund: Carlyle Infrastructure Partners

Target: $1 billion

Amount raised: $301 million (first close)

Advancing the cause of its newly formed infrastructure team, The Carlyle Group has held a $301 million first closing on its debut infrastructure fund, according to documents filed with the Securities and Exchange Commission. The closing puts the fund nearly a third of the way towards its $1 billion goal.

According to the SEC filing,14 investors made a minimum commitment of $10 million to Carlyle Infrastructure Partners , though this investment minimum can be waived. The Carlyle Group declined to comment on its fundraising. Taqa New World, also known as the Abu Dhabi National Energy Company of the United Arab Emirates, is a limited partner in the fund. The company, which held an IPO last year worth more than $163 million, has said it plans to invest up to $3.5 billion over the next two years to expand its foreign holdings.

Carlyle founded its infrastructure group earlier this year. The group is expected to invest in U.S. highways, toll roads and damns in deals ranging in transaction value from $100 million to $1 billion, both through public-private partnerships and other agreements. Infrastructure most commonly refers to large public works projects such as highways, toll roads and dams. Infrastructure projects tend to be very capital intensive, often requiring partnerships with government through public-private partnerships and concession agreements that involve the sharing of toll revenue.

Robert Dove, managing director of the infrastructure group, joined Carlyle after leading a financing and development team at contracting company Bechtel Enterprise that invested in public-private partnerships overseas. Fellow Managing Director Barry Gold was the former co-head of Citigroup/Salomon Smith Barney’s structured finance group. The two have six junior investment professionals working with them.

Carlyle has already been investing in infrastructure deals, including ones in Asia. Separate from its infrastructure group, Carlyle agreed to buy 50% of Xugong Group Construction Machinery Co., which makes construction machinery. It had initially sought to take an 85% stake in the company (see Buyouts, Oct. 23, 2006). But a high-profile campaign against the deal by Xugong competitor Sany Heavy Industries Co. convinced Carlyle to scale back the deal.

Infrastructure investing is growing more popular among buyout and private equity firms. Credit Suisse and General Electric launched a joint venture in which they will commit $1 billion to invest in such deals. The pair intend to split the commitment down the middle, contributing $500 million each (see Buyouts, June 12, 2006). The new initiative will target power-generation and transmission facilities, gas storage and pipelines, water assets, air traffic control, ports, railroads and toll roads.

Teachers’ Private Capital, the alternative investment arm of the Ontario Teachers’ Pension Plan, has invested almost $5 billion directly in infrastructure deals over the past four years. Other infrastructure enthusiasts include Goldman Sachs, which is reportedly raising a multi-billion-dollar infrastructure fund, and JPMorgan Asset Management, which announced this past February that it recruited Mark Weisdorf to head its infrastructure program to invest in essential assets and public services.

The infrastructure needs of the United States–its highways, railways, dams and bridges–are great and expected to grow. The American Society of Civil Engineers released a report last year that found that $1.6 trillion needs to be invested in the United States. Researchers at the Asia Development Bank found that Asia is likely to need $20 trillion and $30 trillion in infrastructure investments over the next 10 years. — M.S.