First State Investments, a leading global asset manager and subsidiary of Japan’s Mitsubishi UFJ Trust and Banking Corporation, with $148 billion in AUM invested across listed and direct infrastructure and other asset classes, is taking a big stake in California’s wind energy market. The company has announced that it will acquire a 40% share in Terra-Gen, an owner, operator and developer of utility-scale renewable and clean energy assets across the Western United States. The seller is Energy Capital Partners, a private equity investor in unlisted North American energy infrastructure assets, which has owned Terra-Gen since 2015.

Price and other deal terms were not made public.

Founded in 2007, Terra-Gen operates more than 1.3 GV of utility-scale wind, solar and geothermal generation plants, as well as energy storage facilities, having more than doubled its operating footprint since ECP’s initial investment in 2015.

California story

Access to the California wind power market—currently the largest, most advanced renewable energy market in the United States—was the primary driver for the acquisition. Terra-Gen also has several operating and advanced stage development battery storage projects that are well-placed to capitalize on California’s rising need for flexible dispatch resources.

“Terra-Gen has a strong, established and diverse platform of renewable energy assets, along with a demonstrated track record of developing and operating projects in California and other attractive markets,” said John Ma, head of FSI’s direct infrastructure team in North America. “We are excited to partner with ECP and the management team to help execute Terra-Gen’s business plan.”

“California is undergoing a transformation of its power generation resources from a majority of natural gas plants to renewables and battery storage, driven by ambitious energy and environmental policy initiatives,” said Jim Pagano, CEO of Terra-Gen. “As a leading infrastructure investor, FSI is committed to working with us to help realize Terra-Gen’s growth opportunities.”

Terra-Gen marks the third direct investment in U.S. infrastructure for FSI, whose unlisted global infrastructure portfolio totals $8 billion, focused primarily in mid-market companies in transportation, utility and renewable energies.

Third stake

In August 2019, FSI made its first direct infrastructure investment in the U.S. with the acquisition of Patriot Rail and Ports, a short line railroad holding company. Earlier this year, it acquired a stake in California’s Rialto Bioenergy Facility (RBF)—the largest organic waste-the-energy facility in North America—from waste recovery technology firm Anaergia Services.

Since 2005, ECP has raised more than $20 billion in commitments, which it has used to build and acquire investment platforms in equity and credit infrastructure assets across multiple energy sub-sectors. ECP’s portfolio favors natural gas power generation, renewables and storage solution, environmental infrastructure and midstream, with emphasis on clean energy transition. The company avoids more volatile energy sub-sectors like exploration and production.

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