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Morrison & Co fund shifts from digital infra to energy and water

Morrison & Co’s new open-ended infra fund has turned its focus to energy and water acquisitions after it spent USD 2bn of its initial USD 3bn raising on the data and telecommunications sector, said Gordon Hay, head of core infrastructure funds. 

Established in October 2021, the Morrison & Co Infrastructure Partnership (MCO IP) fund’s latest investment is with a global renewable energy investment platform, starting with a wind farm under construction in Canada, which will form the basis for a new renewable energy vehicle.  

Like many platform deals, this will allow the fund to deploy more capital in new projects as they are developed – including in Australia – rather than having to acquire multiple projects once they reach financial close. 

"From a portfolio point of view, having built a solid foundation in digital during 2022, our focus is now on building out some energy transition type exposures, and potentially water," Hay told Infralogic. "We have established a renewables platform beginning with a relationship with a global renewable energy investment platform,” he added, without revealing their name or the assets. 

“Through that relationship, in September, we acquired a construction phase wind farm in Canada and there's a pipeline of other projects coming through there as well that provides a clear runway to add some high-quality renewables assets to MCO IP’s substantially digital portfolio,” said Hay. 

The platform's three investments so far include the previously ASX-listed Australian last-mile fibre business Uniti, which along with Brookfield and Commonwealth Super Corp, MCO IP acquired for AUD 3.7bn (USD 2.6bn); a 33.3% stake in Spanish wholesale business fibre company Lyntia alongside AXA and Swiss Life for USD 2bn; as well as a joint USD 975m deal with Australian Retirement Trust and funds to acquire US fibre infrastructure provider Fiberlight, managed by UBS Asset Management. 

“Whereas energy transition is all about the effort to avoid the worst impacts of climate change, the opportunity in water is more about dealing with the unavoidable consequences of climate change: increasing drought, increasing flood, and the need to transfer water across regions more so than has been the case previously,” Hay said. 

A study commissioned by the Queensland government released late last year recommended establishing several WATER (Water, Agri-Business, Technology and Energy Regional Development) zones in the state. These would better capture high rainfall in the state's tropical region, which can be used to produce power, as well as for use in agriculture and new industries including green hydrogen and minerals for battery manufacture. 

The study also recommended building additional pipelines to transfer water between regions to help mitigate the impact of climate change resulting in one area suffering from drought while another has a surplus. 

The separate, Morrison & Co managed Utilities Trust of Australia (UTA) owns 40% of Sydney Desalination Plant, which at some point is likely to require further investment to double in capacity, and 50% of South East Water in the UK. UTA is not investing in new assets, but it can tip more money into existing investments.