Canadian global investment giant Brookfield Infrastructure Partners LP has committed up to $15 billion (all figures US unless noted) for a 49 per cent stake in a massive Intel semiconductor fabrication facility under construction in Arizona.
In the Tuesday morning announcement, Brookfield (BIP-UN-T) says it has entered a definitive agreement with Intel to jointly fund the project. The transaction remains subject to numerous conditions, but is expected to close near the end of 2022.
Intel is retaining the remaining 51 per cent stake in the project, which is valued at about $30 billion. It will also retain operational control of the facilities.
Intel trumpeted the agreement as an industry first, providing it with an expanded capital base for manufacturing build-outs in an industry which requires significant up-front capital. It calls the initiative a semiconductor co-investment program, or SCIP, part of its Smart Capital program to free up additional funding for the semiconductor sector.
“Landmark” deal for Intel, Brookfield
“This landmark arrangement is an important step forward for Intel’s Smart Capital approach and builds on the momentum from the recent passage of the CHIPS Act in the U.S.,” said David Zinsner, Intel’s chief financial officer, in the announcement. “Semiconductor manufacturing is among the most capital-intensive industries in the world and Intel’s bold IDM 2.0 strategy demands a unique funding approach.
“Our agreement with Brookfield is a first for our industry and we expect it will allow us to increase flexibility while maintaining capacity on our balance sheet to create a more distributed and resilient supply chain.”
Intel is hoping to increase the scale and speed of its manufacturing capacity in response to several major government initiatives in the U.S. and Europe.
The U.S. CHIPS and Science Act unlocks up to $52 billion in incentives for the U.S. semiconductor industry. The European Chips Act has added an additional 15 billion euros to an existing 30 billion euros in public investments for new infrastructure.
From Brookfield’s perspective, the investment contributes to two key goals.
First, it supports the continued build-out of U.S. semiconductor manufacturing capabilities – a shortcoming which has been evident during the pandemic and is now heightened by increasing global tensions.
Brookfield Infrastructure expects to play a key role in assisting companies like Intel in onshoring part of the digital backbone of technology sector.
“By combining Brookfield’s access to large-scale capital with Intel’s industry leadership, we are furthering the advancement of leading semiconductor production capabilities,” Brookfield Infrastructure CEO Sam Pollock said in the Intel release.
“Leveraging our partnership experience in other industries, we are pleased to come together with Intel in this important investment that will form part of the long-term digital backbone of the global economy.”
Brookfield’s financing of the $15 billion
The multi-year capital expansion project joins Brookfield Infrastructure’s existing capital projects which near completion this year, including the Heartland Petrochemical Complex in Fort Saskatchewan and Phase 2 of an electricity transmission lines project in Brazil.
Concurrent with the transaction, Brookfield Infrastructure says it secured financing for a “significant portion” of its capital investment with Intel.
BIP’s equity portion, which it expects to be $500 to $750 million, is to be phased over the duration of construction.
Funding is expected to be sourced primarily from retained operating cash flow and proceeds from its capital recycling program, with the majority funded closer to facility commissioning.
Brookfield Infrastructure Partners is part of the Brookfield Asset Management group of companies, one of the largest global alternative asset managers. Brookfield and its affiliates have over $750 billion in assets under management.
Intel’s semiconductor fabrication development includes two plants in Chandler, Ariz., which are expected to be operational during 2024. They are expected to directly employ up to 3,000, with thousands more spinoff jobs for the local and regional economies.
It broke ground on construction in September 2021.