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Exclusive: Ara Partners raising $500M infrastructure fund

Illustration of a train with freight cars made of hundred dollar bills.

Illustration: Aïda Amer/Axios

Ara Partners, a private equity firm focused on industrial decarbonization, is raising $500 million for its first infrastructure fund, Axios has learned.

Why it matters: The fund will target infrastructure needed to connect different parts of the low-carbon value chain.

State of play: Ara Partners is one of the few climate investors willing to back startups building low-carbon fuels plants and other capital-intensive projects often seen as too risky by other funders.

The latest: The Houston-based firm plans to close its debut infrastructure fund in Q3, the person familiar with the raise tells Axios.

  • It began raising last year. LPs include insurance companies and pension funds.

Catch up quick: Infrastructure funds make large investments in physical projects that promise low but reliable long-term returns.

  • Such funds are often in the billions. Ara plans to expand the reach of its $500 million infrastructure vehicle by co-investing with its LPs.
  • The approach not only doubles each check Ara writes but also reduces fund fees for LPs that might otherwise hesitate to back a firm's first-time fund.

What's next: Ara plans to back eight to 10 companies through the fund, typically as lead investor.

  • It will invest in or acquire existing assets that are generating cash flows but not at their full potential.

It's so far acquired majority stakes in two companies developing biofuels rail terminals: Lincoln Terminal Holdings in Greenville, South Carolina; and USD Clean Fuels in Houston.

  • "They've got some terminals, but the plan is to build more," the person familiar says.
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