Barings closed its first private infrastructure investment in Saudi Arabia, marking a significant expansion for the firm’s EMEA infrastructure group into the Middle East, according to a LinkedIn post from Mike Freno, and a subsequent announcement by Barings Global Private Credit.
The investment supports ACWA Power’s Rabigh 3 desalination facility, a project intended to expand critical energy and water assets in the region. The deal signals Barings’ growing commitment to infrastructure development in Saudi Arabia, a market attracting increasing attention from institutional investors.
Richard Parker, Head of EMEA Infrastructure at Barings, has outlined the firm’s approach to infrastructure debt, emphasizing a disciplined definition of “infrastructure” and the importance of selectivity, particularly within the rapidly expanding digital infrastructure subsector. Parker, a Managing Director based in London, leads a team responsible for structuring and underwriting non-recourse structured finance transactions in infrastructure, power, and energy, according to Barings’ website.
Infrastructure debt is gaining prominence due to its resilience, diversification benefits, and compelling risk-adjusted returns, particularly in an environment marked by economic uncertainty and evolving energy systems. Historically, infrastructure assets have demonstrated low correlation to broader macroeconomic cycles and lower default rates compared to other asset classes, making them attractive to institutional investors.
Parker defines infrastructure as tangible real assets with long-term, contracted cashflow and monopolistic or near-monopolistic market positions. He cautioned against including assets financed with high leverage – typically five to six times EBITDA – that lack these core characteristics, as their risk profile can resemble highly leveraged corporate credit. Barings categorizes infrastructure assets into six sectors: social infrastructure, power generation, economic infrastructure, utilities and pipelines, digital infrastructure, and midstream and storage.
The firm prioritizes avoiding “definition drift” into areas with commodity price exposure, unproven technologies, or reliance on speculative adoption. Parker specifically cited concerns with early-stage fiber roll-outs and co-location data centers lacking long-term contracts, despite potentially appealing headline yields.
While North America and Europe currently account for approximately 95 percent of Barings’ deal flow, the Middle East is becoming increasingly attractive. The US market is heavily weighted towards energy assets, while Europe offers greater sector diversity, including transportation and midstream assets. Banks’ increasing constraints due to ESG considerations are creating opportunities for institutional lenders in Europe, particularly in the midstream sector.
Looking ahead, Barings anticipates continued growth in digital infrastructure, driven by demand for data centers and the associated power requirements. Renewables, gas-fired plants, and nuclear energy are expected to play key roles in meeting these energy demands. Grid modernization and electrification, including EV charging infrastructure, are also identified as areas for significant investment.
Barings invests in both investment-grade and high-yield infrastructure debt. Investment-grade debt, representing 80-90 percent of the market, is favored by insurance clients, while high-yield debt is managed through commingled funds. The firm often participates in both stages of a business’s development, financing it on a high-yield basis initially and then refinancing into investment-grade debt as the credit profile improves.
