[PE Now] Private Equity Pours into AI Infrastructure... Data Center and Energy Assets in High Demand

Domestic and Global PEs Flock to SK Group’s AI Infrastructure Sale
Exit Strategies Become Key as Investment Horizon and Asset Lifecycles Diverge

This year, infrastructure projects have become a core component of private equity fund (PEF) deals. In the past, deals primarily focused on waste management and environmental sectors, but recently, transactions have shifted toward energy and data centers. In particular, SK Group’s asset reallocation strategy has resulted in the sale of energy generation and infrastructure assets, creating new opportunities for private equity (PE) management firms this year.

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Domestic and Global PEs Show Strong Interest in the K-Infrastructure Market

“SK Horizon,” an AI infrastructure specialist established by separating SK Broadband’s data center and submarine cable divisions, has attracted keen interest from both domestic and international PE firms. On August 27, SK Telecom disclosed this structural reorganization through a regulatory announcement. The IMM Investment-Stonebridge Capital consortium and the global private equity firm Kohlberg Kravis Roberts (KKR) acquired 20% and 29% stakes in SK Horizon, respectively. By selling existing and new shares to these investors, SK Horizon attracted approximately 3.08 trillion won in investment.

KKR, which established the renewable energy joint venture “Eclipse” with SK, also announced in the same month that it had acquired 43.10% management control of SK Eturnix, previously held by SK Discovery and Hahn & Company. The joint venture reportedly received new business units, including SK E&S and SK Ecoplant’s renewable energy operations, to serve as an integrated renewable energy platform. In June, a consortium of Stick Alternative Asset Management and Korea Investment Private Equity acquired 49% of SK Multiutility and Ulsan GPS for 1.6 trillion won.

Kyungja Lee, Senior Research Fellow at Samsung Securities, said, “Large domestic conglomerates are selling capital-intensive energy generation and infrastructure assets to focus their resources on growth businesses such as semiconductors, batteries, and AI. Under pressure to reallocate capital, PEs are seizing the opportunity to expand infrastructure assets.”

This trend is also evident in global markets. Blackstone, a global PE, expanded its investment in Invenergy, a leading U.S. renewable energy company, in 2023. Blackstone had invested about $3 billion in Invenergy during 2021–2022, then added another $1 billion for a total investment of $4 billion. The firm also continued its business in this sector by acquiring the data center REIT QTS in 2021. According to Samjong KPMG, there were 822 deals worth $149.2 billion in the global energy and natural resources sector in the first half of this year, accounting for 14.5% of all sectors.

Demand and Policy Support... Institutional Investors Also Expand Infrastructure Investments

AI stands at the center of PEs’ increasing focus on domestic infrastructure. As the era of AI advances, the data center market is growing rapidly, driving upward revisions to power demand forecasts. Recently, the Power Supply and Demand Planning Subcommittee of the Basic Electricity Plan Oversight Committee projected that maximum power demand in 2040, reflecting three mega-projects—semiconductors, AI data centers, and physical AI—will reach between 158.4 GW (base scenario) and 165.0 GW (high scenario). This is an increase of 26.6–26.8 GW compared to the forecast presented in April.

Government policy is also providing a strong foundation. After announcing the “Private Investment Activation Plan” in 2024, the government expanded its scope and scale of support this year. The five-year target for private investment projects was raised from 30 trillion won to 100 trillion won. The focus for infrastructure projects shifted from delayed construction projects to new businesses, such as AI data centers and power grids.

Policy funds are also being directed toward infrastructure. A prime example is the National Growth Fund. From this year, the National Growth Fund will allocate 30 trillion won annually over five years, with confirmed support already for projects such as the offshore wind power project in Sinan, Jeonnam, Samsung Electronics’ Pyeongtaek P5 (fifth plant), Smilegate Data Center, and Naver Data Center (DC) expansion.

Limited partners (LPs), who play a critical role in PE funding, are also moving to increase their focus on infrastructure. For example, the National Pension Service and the Military Mutual Aid Association are reinforcing or establishing dedicated teams in this area. Senior Research Fellow Lee noted, “As exit delays in alternative investments have led to a ‘dividend drought,’ LPs are now placing greater importance on distributions that match final Internal Rate of Return (IRR) expectations. Specifically, there is a clear shift in funds away from underperforming real estate and PE strategies toward private debt and infrastructure.”

However, infrastructure investments by PEs are not without risks. The average investment period for PEs is 5 to 10 years, but the lifespan of infrastructure assets is even longer, underlining the need for well-crafted exit strategies. Additionally, since infrastructure assets do not typically yield high returns, this also needs to be factored in as a crucial consideration during investment.

Boram Lee, Partner at EY-Parthenon who has participated in numerous PE infrastructure deal advisories, stated, “Because infrastructure assets are large-scale by nature, investors should set clear exit timelines and consider both domestic and global PEs as potential buyers. Since growth and profitability in this sector are generally not as high as in other industries, it is essential to thoroughly review whether stable cash flow is secured and to carefully plan the capital structure to fully leverage financial effects.”

This content was produced with the assistance of AI translation services.