Energy transition infrastructure comprises the essential assets required to decarbonise energy systems and meet net-zero targets, while ensuring energy security. These assets support renewable energy production and transition fuels, along with the necessary supporting activities – such as storage, distribution, and maintenance – that bring energy to market efficiently and with minimal carbon impact. Cordiant has been investing in the energy transition sector since 2016, targeting underserved, mid-market platforms to support greenfield projects, particularly in solar, wind, geothermal and energy storage platforms.
The International Energy Agency forecasts that global electricity demand will rise sharply due to population growth, income increases, and the electrification of more end users. This demand must be met while also meeting the requirements of energy security and the imperative of net zero. With emissions needing to be reduced by 45% b 2030 and reach net zero by 2050 to limit climate change and energy sovereignty and resilience of supply is becoming a profound question of national security, investment across the spectrum of transitional energy infrastructure now more than ever is critical.
Cordiant applies its middle market, operationally focused approach to support the transition toward more sustainable and localised energy sources. We invest in experienced teams and platforms, providing the capital they need to develop and scale their operations. Our focus spans various offtake strategies, including long-term contracts, spot sales, and captive supply agreements. Cordiant’s team has invested across a spectrum of markets in Europe, and some of our most significant investing successes have come in smaller national or regional markets that had not been receiving the attention they deserved.
Robot Revolution
“During a gold rush, sell shovels” is a time-honoured business strategy. And it could equally apply to investors’ Klondike-like scramble for renewable assets and digital communications, as the world transitions to greener energy and the growth of data transmission continues to expand.
“Whereas a lot of asset managers might chase assets like wind turbines, we use our industry expertise, to capitalize on opportunities in servicing these assets and supplying them, especially in the offshore space,” said Stephen Foss, Cordiant Capital’s managing director and Co-Head of the firm’s Energy Transition Infrastructure team.
A deal to provide ROVOP, one of the world’s largest independent remotely operated vehicle providers, with a $25 million senior secured credit facility, is a case in point. As global concerns about carbon emissions intensify, investors have been pouring money into renewable energy, particularly offshore wind turbines. ROVOP builds and operates the subsea robots needed to monitor, service, construct and maintain them.
“Some funds might shy away from robots because they are more difficult to understand than the turbines themselves. But they are an essential asset for the industry–if only because there aren’t many people who can dive to extreme depths and costs escalate,” added Foss.
Historically, ROVOP’s business–which replaces expensive and dangerous deep-sea activities by saturation divers–has been dominated by the oil & gas industry in areas such as the UK’s North Sea, Africa and the Gulf States. Now, a significant and growing portion of ROVOP’s sales are derived from monitoring and repairing offshore wind farms–as well as undersea fibre cables and natural gas installations–spread across the US, UK, Africa, Asia and the Middle East. As demand for offshore wind, natural gas, and fibre grows to meet the demands of Net Zero government targets, energy security and the online economy, so will demand for remotely operated vehicles and their highly skilled work force.
A long period of underinvestment in the energy services sector provides another tailwind as supermajors, independent producers and their contractors scramble to bring assets on stream in the wake of Russia’s invasion of Ukraine. Apart from rosy expansion prospects, higher demand for robots means Cordiant investors benefit from the added security which comes from having more valuable collateral.
“ROVOP is seeing record demand for its services, and Cordiant’s investment means we’re better placed than ever to take advantage of increasing international demand for subsea robotics in both renewable and traditional energy sectors,” said ROVOP CEO Neil Potter. “This investment solidly positions ROVOP for further growth as we continue to invest in our fleet and our people.”
Outside of energy, ROVOP, as a servicer of underwater fibre optic cables, is a crucial part of the plumbing that makes the internet work. “These systems are hard asset infrastructure, which aligns with Cordiant’s investment thesis and criteria,” explained Foss.
“There are secondary benefits, too. Investing in a services company gives us a window into what’s happening in all these industries–for example, we hear about new builds for subsea fibre cables which provides us with increased market intelligence,” said Foss.
ROVOP’s success means Cordiant is hunting other adjacent energy-related opportunities. This includes monitoring drones, support services like shipping to get crews out to rigs and turbines, and potentially manufacturers who supply parts and machinery.
“You have to look at the angles if you want to spot the potential for better returns–and in this space we believe it’s the suppliers who need the growth capital and that our team’s industry knowledge and speed of execution makes us more attractive than a traditional bank lender,” concluded Foss.
