The boss of First Reserve Corporation, the world’s largest energy-focused private equity firm, believes that China will be the most important player in mobilising the $26 trillion-worth of investment needed to modernise and grow the energy sector globally over the next 20 years.
Speaking to delegates at the PEI Global Energy Forum in London on Wednesday, Bill Macauley, the chairman and chief executive of Greenwich, Connecticut-based First Reserve, said that the capital currently available to the largest energy-focused private equity firms today totals around $80 billion, based on figures in PEI Media’s list of the largest private equity firms in the world, the PEI 300. This is merely a “rounding error” compared to the vast sums needed after more than 20 years of under-investment, he said.
Global energy infrastructure: massive investment needed
Of the $26 trillion investment figure quoted by Macauley, the vast majority – around $20 trillion – needs to go into infrastructure, while just $6 trillion is needed for exploration.
The infrastructure spend is needed to both renew existing plants and facilities and to increase capacity. Half of the investment should be destined to emerging markets, said Macauley.
While private equity will play a role in addressing the global shortfall in energy investment, it will pale in comparison to the spend mobilised by developing nations, in particular China. “China’s investment in this space has already surpassed that of the private equity industry,” said Macauley.
The role played by governments worldwide in addressing the need for energy investment would most likely come in the renewable and green space, said Macauley, as this tends to be a more expensive way of producing energy.
First Reserve is the 11th largest private equity firm in the world according to the latest PEI 300 ranking. Having closed its Fund XII on $9 billion in April, it has raised more than $20 billion in the last five years.