Cresta’s VP, Wesley Brown, Explains How Infrastructure Can Make or Break Your Acquisition

Why worry about infrastructure for middle-market energy acquisitions? Wesley Brown of Cresta Fund Management recently joined Weaver, East West Bank and Seaport Global at their Energy Leadership Series Breakfast to explain the potential ripple effects infrastructure can have on risk and return.

Cresta Fund Management is a middle-market private equity firm focused on energy, chemical and water sectors of the market. Headquartered in Dallas, Cresta was founded in 2016 by energy infrastructure professionals who have spent more than 11 years together developing, operating and financing energy infrastructure.

Brown defined infrastructure as the physical components of interrelated systems that provide commodities and services essential to sustaining market activity. These components are:

• Essential to economic activity
• Difficult to replicate
• Long-lived

Typical infrastructure elements by industry include:

• Regulated utilities: Gas/electric/water utilities
• Energy: Pipelines, storage, power grids
• Transportation: Airports, toll roads, parking lots
• Telecommunications: Wireless towers, data centers, cable networks
• Waste & wastewater: Waste companies, water treatment and distribution systems
• Social: Schools, hospitals, courthouses

Strong infrastructure not only facilitates the creation of new companies, it enables them to focus on profit-making activities. Brown explained not only infrastructure sector and asset types, but also typical investment strategies. After highlighting the importance of evaluating risk and return profiles, and emphasizing key risk considerations, he walked through a few recent case studies.

Evaluating infrastructure risk and return involves a combination of credit and private equity perspectives. These perspectives are equally important in underwriting downside protection and upside growth potential. Ultimately, Brown said, contracts are only part of underwriting risk and return profiles, but market fundamentals and assets are essential to underwriting long-term value.

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