Creating Compounding Value
How EQT Partners is supporting EdgeConneX and other digital infrastructure assets in the race to scale
EQT Partners operates under the ethos of creating value that begets more value. Can you elaborate on what that means in the context of the EQT Infrastructure branch of the company?
It means that we’re super focused on operational value creation in the company. We really spend a lot of time uncovering where are the value levers that we can pull and how we can unlock untapped value in the companies in which we invest. For example, take EdgeConneX. Our goal there was to help them develop a strong land bank of power. They didn’t have access to capital to do that before, and that’s what’s needed to be successful in that space. So, they really started to accelerate their growth when we invested five years ago. Now, we’re focused on enabling power capabilities across the entire portfolio. We’re working with our power companies and energy companies to provide integrated energy and data center solutions. We have strong relationships with all the utilities—in particular in Europe—so I’ve been helping them get grid access and grid power. So really our ethos surrounds honing in on the key value levers to help them scale. Joint procurement is a focus as well, to reduce costs. There are so many different levers we can go after. We call it the house of value creation: Obviously not everybody is relevant, and not everyone is relevant for every company, but we hone in on the ones that matter and make the biggest lasting impact.
Looking broadly at the EQT Infrastructure portfolio, what sort of companies or types of infrastructure are you targeting, and why?
We have four big sectors we look for in terms of our investments. Digital infrastructure is the biggest. Digitalization, now including artificial intelligence (AI), is a major area, and broadband has been a big trend for many years. We’ve been one of the first investors into fiber and into data centers. Our approach is that we try to identify long-term growth trends, and digital infrastructure has had some of the strongest growth trends.
Then we have energy and environmental sectors—investing around the increasing need for power. We expect significant acceleration of power demand over the coming years, plus general energy transition as part of that. Reducing carbon footprint of that power and increasing efficiency are top of mind.
Beyond that, we focus on transport and logistics, like electrification and re-industrialization trends that are driving increased logistics. Upgrades of aging infrastructure fall into this sector, too.
Lastly, we focus on social infrastructure, as we call it, which mostly surrounds healthcare-related topics like aging society and education.
Our investment in those four sectors is guided by three strategies. One is our value-add strategy, which invests in infrastructure companies that provide essential services to society and have predictable cash flows and well-protected business models. Then we have a longer-hold strategy that focuses on downside protection and applying EQT’s active ownership playbook to core infrastructure companies. Finally, we have a transition infrastructure strategy focused on scaling mid-market businesses.
When EQT Infrastructure acquired EdgeConneX five years ago, you mentioned that EQT had been following EdgeConneX’s growth into a top industry data center for some time. What was it about EdgeConneX that caught your attention, spoke to your vision, and drove you to form a partnership with them?
So many things! We really like their original edge business. Today that represents a small part of the business, but it’s kind of the nucleus, and we really like how EdgeConneX approaches edge in terms of content distribution and location-sensitive compute and storage. We also really like their focus on hyperscale, especially at a time when cloud was the main driver of growth. Their team itself is also a huge selling point: I spoke to many EdgeConneX clients, all of whom told me that this was a great team—very entrepreneurial, really focused on customer requirements, and very agile in management. So, when all their existing customers were incredibly positive and confirmed that they would love to do a lot more business with EdgeConneX, if they just had access to more capital, that was the obvious driver for our investment decision. We wanted to find a way to provide them with the capital needed to accelerate the growth.
How has your experience working with EdgeConneX been over the past five years, and how has it shaped your digital infrastructure investment, opinions, and strategies?
The EdgeConneX team has surpassed my expectations in every way one could possibly envisage. Not only do they beat the budget every year, but also—no matter how much we push them on having an ambitious budget—they do an incredible job in building global business. Initially they largely focused on the hyperscale side in Europe and the edge side in North America. Now, they have successfully expanded into pretty much every large-scale data center market globally: many markets in Asia, continued the growth in Europe, and nearly double the presence in North America, with AI driving growth there. They have also delivered constructing every data center on time (unless there were unforeseen circumstances), and I think customers really continue to appreciate working with them. So, it’s been a very, very positive experience, and we have doubled and tripled, if not quadrupled, on the original investment with them. Usually we tend to sell our businesses after five years, but with EdgeConneX, we’re actively looking for ways to continue working with them for a much, much longer period.
Building out AI factories requires a ton of capital, power connectivity, and, of course, data center capacity. How is EQT positioning its portfolio of infrastructure companies to help enable the global build out of AI factories?
In my capacity heading our data center activities as well as many of our energy activities, I’m in a quite unique position to support EdgeConneX with that. We’re very focused on providing both energy and data center solutions to clients. We have more than 130GW of energy projects across EQT globally—across Europe, North America, and Asia—and we’re looking to match that wherever we can with data centers. That’s a quite unique capability in addition to our capital sourcing capability. So, combining all that, we think we can offer very unique, integrated solutions to hyperscalers to address their AI infrastructure needs, and we think that ability will accelerate growth significantly for us.
Enabling AI while maintaining sustainability goals is often considered to be a major challenge. How does EQT achieve its sustainability goals while also investing in AI infrastructure?
We actually incorporate sustainability in everything we do. For example, our data centers focus are based on a closed circuit to avoid unnecessary water loss, as we’re focused on reducing water requirements. In terms of power solutions, we’re focused on reducing carbon emissions by enabling collaboration with our renewable companies, our battery storage businesses, and even the natural gas side, so we’re able to provide clients with integrated low-carbon solutions. So, we’re focused on both near-term and long-term reductions, but we’re also not looking to slow down AI growth. We think AI is a critical new technology that needs to scale and grow, but it can do so while we drive innovative and sustainable solutions through large-scale solar and wind developments, battery combinations, and natural gas.
Thinking about the future of digital infrastructure—at least as we can forecast it today—what sort of investments are you hoping to make in the coming years? Are there any specific markets or sectors of digital infrastructure that are either on your wishlist or that you think would gain considerable value from a partnership with EQT Infrastructure?
I think most businesses can get considerable value by working with EQT infrastructure, given the operational approach we have. If I have to choose investments and sectors, the number one priority for us is to scale AI-related infrastructure. Over the next decade, we’re going to be in a generational growth opportunity, and bringing together the different asset classes needed across data centers, energy, and fiber will be imperative. On the digital infrastructure side, we’re also very focused on newer digital infrastructure asset classes. For example, we recently invested in satellite ground stations, as we think satellite connectivity, especially low Earth orbit, is going to drive significant demand for broader, distributed ground stations. Other than that, I would say on the AI and research side is where we see the most imminent opportunity—and the size of the pie is huge. We’re talking trillions over the next five years that need to be invested.
Finally, thinking even bigger hypothetical picture, if you were speaking to the CEO of another data center or digital infrastructure company who was considering a partnership with a private equity firm, what advice would you give them about the process?
I would say the critical piece of advice in my view is that full transparency is a key enabler of fast decision making that allows us to take risks that may be difficult for others to take. I always know 100 percent of the information and statements I get are accurate and can be relied upon, and that is a massive advantage.
Full alignment of interests between the owners, the managers, and the companies is also key. I recommend really evaluating if a private equity firm is able to deliver more than just capital, as there are certain difficult situations that companies may need help with. At EQT, I think we’re adding significant value by enabling broader collaborations with hyperscalers and elevating the discussions to a much more strategic level—and I think that is much more difficult to do if you’re simply a vendor. That’s something we can do because we work closely together and across energy and data centers, and we’re also a big customer ourselves, so that helps these discussions.
ABOUT JAN VESELY
Jan Vesely joined EQT Partners in September 2010.
Prior to joining EQT Partners, Vesely worked as Analyst at Goldman Sachs in Frankfurt focusing on German and CEE transactions.
He holds a master’s degree in Business Administration from the University of Mannheim and Portland State University.
