Borealis Infrastructure invests in traditional and non-traditional infrastructure sectors; typically established businesses or assets that exhibit monopolistic qualities and produce strong, stable cash flows supported by regulation or long-term contracts with low-risk counterparties. We prefer to invest in large, mature operating assets requiring an equity investment of at least C$200 million although we will evaluate and participate in both greenfield opportunities and smaller investments on an opportunistic basis.
Borealis is a direct equity investor that expects to exercise active management in each of its investments. While we have acquired full ownership in a few select assets, we prefer to take non-controlling yet meaningful stakes in large infrastructure assets. In many infrastructure areas, we prefer to invest alongside a strategic investor that can bring operational expertise to the investment, both in evaluating its potential and in managing and improving its performance. In other cases, we will invest alongside other financial investors in an asset if we have a strong level of comfort with the existing management team at the asset level as well as the underlying business.
Borealis currently has investments located in Canada, the United States and the United Kingdom. While we will look opportunistically at infrastructure assets in any jurisdiction which exhibits a strong political and regulatory environment, given the breadth of opportunity and low political and regulatory risk that exists in our current markets, we expect that infrastructure assets located in North America and Western Europe will remain the focus of our efforts for the near term.
Borealis Infrastructure’s investment strategy is to acquire high-quality, large-scale infrastructure assets with predictable, stable underlying demand, preferably supported by regulation or by long-term price/volume contracts which ensure stable cash flow. Cash-on-cash return is a critical component of our total investment return. Our focus on cash yields, both in the short term and long term, and our long-term investment horizon leads us to evaluate prospective investments without assuming relatively high exit multiples. In addition, we seek to enhance our equity returns using only prudent levels of debt.
Borealis requires that each of its partners, including our operating partners, invest substantial equity in investments in which we are partnered. We strongly believe that this approach ensures alignment of interests and results in better ongoing corporate governance amongst the owners of the investment. Regardless of our form of partner, we will only pursue investments where we can significantly influence the strategic direction of the infrastructure asset. We typically do not acquire less than 25% ownership in any investment and always negotiate for management and control rights in order to have an active voice on all governance matters related to the asset and the business. This ensures that we have the rights necessary to provide direct and active oversight of our investments.
Borealis Infrastructure follows an established investment process which balances speed to market with the appropriate level of due diligence, risk management and management oversight. Once an investment opportunity is identified, we devote internal resources to carry out high-level due diligence activities including a preliminary assessment of investment opportunity, market and jurisdiction, regulatory environment and the potential for including partners in the investment opportunity.
Once initial due diligence on the investment opportunity is complete, Borealis senior management considers whether or not to formally pursue the opportunity. If an investment opportunity is approved by Borealis senior management, we will commence formal due diligence and an exhaustive industry/market review, including operational, financial and legal due diligence, management meetings and site visits as well as structuring and negotiating transaction documentation and developing a long-term asset management plan.
Borealis Infrastructure actively manages its investments in order to maximize cash income and capital returns over a long-term horizon. Once an investment is made, we play an active role at the board level of the asset in order to assist management in achieving goals that are beneficial to the business and its shareholders. We bring to investee companies the experience gained through managing a large infrastructure asset portfolio as well as the relationships we have with governments, lenders, other investors and members of the business community. We also play an active role in ensuring that each of our investments has the right management team in place with meaningful incentives that promote alignment with shareholders.
