Private investment in infrastructure: trends and developments

Data centres and electricity

The infrastructure landscape in 2024 was dominated by an AI-driven boom in data centre development. Significant capital is required to meet the unprecedented demand for data centres, and 2024 saw intense capital-raising activity dominated by large transactions raising billions of dollars. For example, in 2024, CyrusOne, backed by KKR and Global Infrastructure Partners, raised US$9.7 billion of debt capital to fund its expansion, Vantage Data Centers completed a US$9.2 billion equity investment led by DigitalBridge and Silver Lake and, in Canada, eStruxture completed a C$1.8 billion investment led by Fengate Asset Management. Infralogic reported that eight of the top ten greenfield financings in 2024 with disclosed valuations were data center deals. We expect that this trend will continue unabated through 2025.

While the global data centre market is currently dominated by the United States, the availability of adequate electricity and land to accommodate increasing data centre demand in the United States has become constrained. We expect that Canada will increasingly become a focus for data centre development as developers look to new geographies to meet the growing demand, particularly given relative low electricity prices in certain regions, access to renewable and clean electricity resources, and Canada’s relatively cool climate¹.

A new public policy focus at the federal and provincial levels in Canada should also help drive that trend. For example, the government of Alberta’s AI Data Centres Strategy² aims to attract data centre investment to the province and in November, eStruxture announced that it will be building a 90MW hyperscale facility, which will be Alberta’s largest and most advanced data centre to date.

We expect that the growth in data centres will also drive investment in the electricity sector. Data centres consume a staggering amount of electricity: in 2022, data centres consumed approximately 1% of the total electricity used in Canada, and this figure is expected to increase rapidly in the coming years³. As data centre growth continues, there will be an increasing need for additional electricity generation capacity to meet high power demands, in addition to an expansion in storage, distribution and transmission capacity. 

Investment tax credit financing

In 2023, the Government of Canada provided a significant incentive boost to project developers and investors in new eligible clean energy or other green projects, by making available valuable refundable investment tax credits (ITCs) as a response-in-kind to the United States’ Inflation Reduction Act. The material impact of ITCs on project economics has led to a wide range of sophisticated activity in infrastructure and energy investing, including as it relates to transaction structuring, commercial arrangements with project constituents and especially bridge financing, all of which will continue in the year ahead.

Lenders are increasingly willing to provide loans to project proponents against ITC receivables. This is a result of, among other factors, the enactment of ITC legislation and parties gaining more experience with ITCs and having had more time to take lessons from similar financing practices in the United States. Transacting parties are also finding creative strategies to de-risk these financings, including through the use of ITC insurance policies, which we expect will play a significant role in ITC bridge financings over the near term. 

Platform strategies

Not only are infrastructure investors allocating more capital to renewables—they are also shifting focus from one-off plays to platform growth. Many are looking to acquire or finance a developer with a pipeline of assets that can produce thousands of renewable energy megawatts. This maturing of the space is most noticeable among institutional investors, as was seen with HOOPP’s investment in utility scale solar and energy storage developer Pine Gate Renewables earlier this year (read more about the transaction).

Large-scale procurement processes

Governmental bodies in many Canadian provinces have undertaken or announced large-scale energy generation, storage and transmission procurement processes. In Ontario, the Independent Electricity System Operator is in the process of executing its LT2 RFP, a cadenced series of procurements which will target the acquisition of approximately up to 14 TWh of annual generation from eligible energy-producing resources and up to 1,600 MW through the acquisition of eligible capacity resources. Earlier this year in British Columbia, BC Hydro issued a “call for power” to acquire approximately 3,000 GWh of clean electricity annually, and intends to issue additional calls for power approximately every two years. These procurement processes complement a robust secondary market for clean power generation and transmission assets and present a recurring opportunity of unprecedented scale for sponsors to partner with developers and Indigenous partners on new builds.