Key Takeaways:
- KKR & Co. Inc. is increasing its investment in Canadian infrastructure, driven by the growing demand for digital and energy infrastructure projects.
- Canada’s stable rule of law, proximity to the US, and access to Asian and European markets make it an attractive destination for investors.
- KKR has invested in several Canadian energy infrastructure projects, including the Coastal GasLink pipeline and the Labrador Island Link transmission line.
- The company is also eyeing opportunities in the data-centre boom, driven by the growing demand for artificial intelligence and cloud computing services.
- Other major investors, such as EQT AB and IFM Investors, are also showing interest in Canadian projects and assets.
Introduction to KKR’s Infrastructure Investments
KKR & Co. Inc., a private-equity pioneer and one of the world’s largest asset managers, is increasing its investment in Canadian infrastructure. The company’s head of North American Infrastructure, Brandon Freiman, notes that the growing demand for digital and energy infrastructure projects has made Canada an attractive destination for investors. With its stable rule of law, proximity to the US, and access to Asian and European markets, Canada is well-positioned to attract investment in infrastructure projects.
KKR’s History of Infrastructure Investments
KKR launched its first dedicated infrastructure fund in 2011, and since then, its infrastructure assets have grown from $5 billion to $90 billion. The company has built a track record of deals in Canada, particularly in the energy sector. In 2014, KKR made its first deal worth over $1 billion with Calgary-based Veresen Inc., an energy infrastructure company that was later merged with Pembina Pipeline Corp. KKR still owns 40% of Pembina Gas Infrastructure and is exploring selling it for up to $7 billion.
Current Investment Opportunities
The current upheaval in global trade due to tariffs and political tensions has not deterred KKR from investing in Canadian infrastructure. Freiman notes that infrastructure investment is becoming increasingly essential, and key projects are unlikely to be knocked off course. KKR is betting on the growth of data-centre demand, LNG demand, and utility infrastructure, which will continue unabated despite trade tensions. The company is also eyeing opportunities in the data-centre boom, driven by the growing demand for artificial intelligence and cloud computing services.
Competition for Investment Dollars
KKR is not the only major investor showing interest in Canadian projects and assets. Swedish fund EQT AB and Australian fund manager IFM Investors are also expanding their presence in Canada. EQT AB, which manages €267 billion, is eyeing an expanded presence in Canada after a November visit that included a meeting with Prime Minister Mark Carney. IFM Investors, which manages $2.1 billion in Canadian assets, has opened an office in Toronto and plans to add to its portfolio.
KKR’s Business Strategy
KKR has shifted its business over time towards managing assets that produce regular cash flows, prized by shareholders. The company has built a large insurance business through its Global Atlantic Financial Group LLC subsidiary, which helps feed its growing credit business. KKR has also created a "strategic holdings" portfolio that holds 17 investments that the company wants to own long-term, beyond the typical life cycle of funds that sell assets after several years to return money to investors.
Canada’s Infrastructure Opportunities
Canada is trying to ramp up defence spending and push through a growing slate of infrastructure projects, including pipelines, liquefied natural gas (LNG), ports, and mining ventures. KKR and other international investors could be key sources of financing for these projects. Canada’s leaders are trying to shake a reputation for being slow to build LNG projects, and KKR is betting on the country’s natural gas "value chain," which includes gathering and processing facilities, pipelines, liquefaction sites, and transportation.
Data-Centre Boom
Canada has available land close to reliable energy to take part in the data-centre boom fuelling rapid advances in AI. The epicentre of the data-centre boom is in the US, especially for the megafacilities used to train new AI models built by tech giants such as OpenAI and Google. However, facilities that run those models and offer cloud computing services should provide an increasing opportunity for infrastructure investors in Canada, especially with the push to strengthen data sovereignty. The overall demand for data-centre capacity has been steadily climbing, and KKR is eyeing opportunities in this sector.