Good day, ladies and gentlemen, and welcome to the presentation of Bridgepoint, adding Energy Capital Partners to the Bridgepoint Group. At this time, all participants are in listen-only mode. Later, we will conduct a question and answer session through the phone lines, and instructions will follow at that time. Participants can also submit questions through the webcast page using the Ask a Question button. I would like to remind all participants that this call is being recorded. I will now hand over to William Jackson, Executive Chairman, Bridgepoint Group plc, to open the presentation. Please go ahead.
Thanks, Danae. Good morning, everybody, and thank you for joining us at short notice for this call. I'm William Jackson, Bridgepoint's chairman, and I'm joined this morning by Raoul Hughes and Adam Jones. Veterans of these calls will know them well. And I'm delighted to introduce this morning Doug Kimmelman, head of ECP. Today, we're announcing the next step in the strategy that we set out very clearly at the time of our IPO in July 2021, with the addition of ECP to the Bridgepoint platform. We've talked at some length about the criteria for adding what we've described as a third leg to Bridgepoint, and I think if those of you who remember the March results will know we used ECP as something as a case study, given the well-documented speculation about our firms coming together.
The ECP transaction fully meets the key financial and strategic gatekeeping criteria that we flagged to shareholders since the IPO, and actually, that we set out at our annual results meeting earlier this year. Crucially, it's accretive to our shareholders from day one of completion, and we're expecting that to be probably early 2024, with regulatory compliance. As a reminder, Bridgepoint's success to date has been built based on building a diversified alternative assets platform, with total immersion in the middle market space and scale in that area. Over the last two decades, our company has expanded successfully, both within private equity and private credit, and it's done this both organically and with important additions, which have successfully been integrated and added to the team, driving both long-term shareholder value and investor returns.
Today's announcement is the latest step in that strategy. It significantly broadens Bridgepoint's product offering, its market presence, and importantly, our bench of talent. It further develops a great investment platform, which already has resources not typically seen in middle-market firms. Why am I excited about today's news? Well, as you're gonna hear from Doug a little bit in a second, ECP is a great business. It's got really strong growth prospects in a fantastic space, and the transaction structure that we've announced this morning is designed to ensure that there's really deep alignment between both parties. The combination materially enhances Bridgepoint's financial metrics with increased earnings diversity, quality, and quantum, as well as providing a very significant step up in AUM. It also brings us strong commercial benefits.
It adds a really first-rate investment team with huge depth of sector experience in the high-growth energy transition field, and it delivers strong and highly complementary client relationships and valuable new geographic presence and perspectives. Like many of the best transactions we do for our own fund investors, this transaction is also the product of a really long dialogue. Doug and I have known each other for many years, and we've spent over a year talking to the team with Raoul and other colleagues in ECP. So we know each other really well, and as Doug will tell you, the ECP team is highly committed to this project. Like Bridgepoint today, ECP has an impressive, performance-driven and value-based culture. That's why, in my mind, Bridgepoint and ECP are a really great fit at a people level.
Most importantly, we believe that this combination creates real value for our shareholders. From completion, it's accretive across FRE, fee-related earnings, EBITDA, and net income per share. It enhances and diversifies the group's earnings, and it improves our margins. Now, Raoul's gonna take you through a lot of detail on the transaction metrics, but a key element is the alignment that I mentioned earlier. That is embedded in the transaction terms. A significant element of the GBP 835 million consideration in this transaction is in shares. Now, with our shares trading where they do, you might well ask: Is that a good thing economically for Bridgepoint shareholders? Importantly, ECP and Bridgepoint fixed the number of shares involved in this transaction at the beginning of this year.
So, so the notional enterprise value of both companies has moved up and down with the Bridgepoint share price over that period. That means that the transaction terms, net of the cash element, have, in effect, tracked the broader market during recent volatility. And this also means that based on the current share price of Bridgepoint, both businesses are valued at broadly the same 2024 PE, when we expect the transaction to complete. And when you look out to 2025, with ECP's growth and with the cash element of the transaction, ECP moves to a discount to Bridgepoint share price. Further shareholder alignment also comes with an important earn-out running to 2027. That's payable on the delivery of above-plan performance. And importantly, as we had with the Bridgepoint IPO originally, there are staggered lockup provisions for the ECP management team, as you'd expect.
The transaction is both accretive and very cash generative. And reflecting this, the Bridgepoint board has decided that it will be extending the buyback that we announced earlier this year. This is to take advantage of the value that we currently see in Bridgepoint shares. Adam's gonna talk a little bit more detail about this later. The board's confidence in the value of our shares is based on Bridgepoint's underlying balance sheet value, which we dissected in some detail at the March results, and our company's trading outlook, which is also materially enhanced by the financial impact of this combination. It's really very significant. It adds EUR 19 billion of AUM to the group. It creates a EUR 57 billion global alternative asset manager with a middle market focus. Fee-related earnings grow significantly.
If you just use 2022 as an example, ECP adds over 60% to FRE, and would have given a combined figure of GBP 121 million. FRE margin is materially enhanced, growing from 31% to 36% if you use those combined 2022 numbers. And critically, the transaction delivers accretion on completion of more than 20% on an FRE per share basis, and high single digit accretion on an earnings per share basis. Now, the combination of ECP and Bridgepoint's business moves the group forward significantly. And together with our AUM growth since the IPO, it means that we're continuing to evolve the way we manage our business.
As background to this, if you look at our successful track record of adding new teams to our platform, it's important to remember that central to Bridgepoint's progress has been making sure that each of our investment strategies have standalone investment teams that contribute to, rather than draw from, other parts of the investing organization. Importantly, this also applies to the depth of our leadership team. As Bridgepoint continues to grow organically and by adding teams, I will be splitting my own role as Chairman and Chief Executive of the group. I'm gonna continue to focus on my role as Chair of the PLC, and of course, on Bridgepoint's core PE business. Raoul will be taking on the role of Chief Executive Officer from the 1st of October 2023, and becomes an executive director of the group board.
Those of you who know Raoul well will know that he's deeply experienced and has a long Bridgepoint leadership track record. In the past, he's run our operations and our business strategy, and he's been a key architect, both of the success of Bridgepoint credit strategy and the addition and discussions with Doug and the team in ECP. He will, of course, be joining the ECP board alongside our CIO at Bridgepoint, Xavier Robert. But ECP's team will also strengthen Bridgepoint. That's very important. Doug will join Bridgepoint's executive leadership team, along with Managing Partner, Tyler Reeder. Pete Labbat, also a managing partner at ECP, is gonna be joining the Bridgepoint Talent and Rewards Committee. And together, this provides the group with a committed and deeply experienced management team, drawn from both ECP and Bridgepoint, to drive growth and to drive shareholder value.
Now, just a brief word on why infrastructure. We outlined at the IPO that strategically, we would look to diversify Bridgepoint within the alternative asset space into either infrastructure or real estate investing. Infrastructure is the fastest growing asset class within private markets, with something like $1.3 trillion of AUM, having grown at 15% a year since 2010. It's a really fast growth area, and Doug's gonna talk to that. And as you can see from the right-hand side, part of this slide here, there are huge structural tailwinds underpinning that growth. So it's a natural space for Bridgepoint to enter, as we previewed in 2021. So I'm gonna stop there without stealing more of Doug's thunder. The ECP team is always keen to stress their New Jersey roots.
For those of you who don't know about New Jersey, it means that they're straightforward, and they do what they say they're gonna do. And they aren't shy with coming forward with their own opinions, I'll tell you that. So I'll hand over to Doug to give you a more detailed view of what ECP is all about. Doug?
Thank you, William. Thank you very much, and very exciting to be here, today to meet with all of you. I'm certainly excited about the opportunity to join forces with Bridgepoint and accelerate the growth of both of our firms, as well as to broaden the equity ownership throughout all of ECP. It is very clear that our firms share a culture of collaboration, ethical integrity, and investment excellence. Let me give you a few words about who we are at ECP and what we do. We have a team of 86. We're a leading North American infrastructure investor with a near 20-year record of investing in the fast-growing energy transition and environmental sectors. We have a market-leading position in power generation, renewables-...
Battery storage, and environmental infrastructure, sectors that are really critical drivers in the global decarbonization effort, with forecast annual investment expected to reach $1.9 trillion. Our motivation is high to combine forces with Bridgepoint. Our complementary and non-overlapping platforms uniquely provide multiple new avenues of growth for both of our firms, especially as we operate in distinct geographies. Obviously, we largely in North America and Bridgepoint in Europe. We both have outstanding lists of global investors with limited overlap, so there's a huge cross-selling opportunity. We are so proud of our team, that we believe has the deepest and longest investing track record in the energy transition sector, with now the opportunity to expand that investing expertise globally. High on my list is our plan to distribute public equity broadly across our team, allowing us to attract and retain the best talent.
We're very proud that we plan to distribute approximately 30% of the equity received in this combination to our broader team. The excitement that this has created in our hallways is unmistakable, and upon closing, we will become the group's second-largest shareholder, so we certainly have a deep motivation to move the needle and creatively grow the combined firm and the share price. We are not cashing out. We are doubling down on the growth opportunity in front of us, which is quite exciting. Now, within the energy transition, within infrastructure, this sector is really the, arguably, the fastest-growing subsegment. And ECP, or ECP, after several decades, we're really a pioneer in the space, with our team having invested in the area since the 1990s.
I was a partner at Goldman Sachs and was with the firm for 22 years before founding ECP and helped to build Goldman's risk management and investing business in electricity. So for me, a total of 40 years in the electricity and environmental sectors. ECP's domain network, our deal sourcing capability, and our investing expertise is deep, having been built over several decades. The heightened societal demand globally for clean energy and an energy transition is certainly driving so many of these investment opportunities, as well as the public sector support, with numerous supportive policies such as the $400 billion Inflation Reduction Act in the U.S.
So across our AUM of EUR 19 billion, as William mentioned, we are market leaders in power generation, renewables, battery storage, and environmental infrastructure, and we are the largest independent owner of U.S power-generating capacity, and we're a top three independent owner of renewable capacity in North America. So, for example, our multiple portfolio companies provide nearly half of the electricity generation in California and 35% of their renewable capacity, which makes us the largest provider to the largest state in the United States. Our team of 15 partners and more than 40 investment professionals, we've produced a consistent track record, delivering gross multiple of invested capital of roughly 2x since 2010, in our current sector focus, which has been de-risked by a very high cash yield to our investors, which has averaged annually about 10%.
Our Fund 4 is ranked as a first quartile performer on a net IRR basis and is listed by Preqin as one of the top-performing infrastructure funds. Fundraising for our next flagship fund, our fifth fund, is going very well. We've already raised roughly $3.8 billion of the $4 billion target size, and our final close is expected in early 2024. While we have not been immune to the more challenging fundraising environment experienced generally, the energy transition area is a high priority for investors, leading to confidence that we could exceed Fund 5's fundraising target. Turning now to our investment approach across these target sectors, we mainly focus on the following spaces. First, renewables and storage: wind, solar, geothermal, hydro, and energy storage solutions. Our second, environmental infrastructure. Think environmental cleanup projects, recycling, waste management, beneficial reuse, waste disposal and processing, and waste to energy.
So many opportunities as we all strive for a circular economy, as high spending is certainly needed to clean up the world as we transition from this old energy to a sustainable future. Next, sustainability, efficiency, and reliability. Across this sector, think energy efficiency, renewable natural gas, carbon capture, digital infrastructure, hydrogen fuel, as well as downstream infrastructure. This is a sector that I could spend an enormous amount of time going through all of the nuanced opportunities that we're seeing in these areas. And our last sector, importantly, power generation. Natural gas-fired power generation as the transition solution as the world develops more storage solutions to improve the intermittency inherent in renewables. So like Bridgepoint, we are a value add, hands-on investor.
We have clear investment parameters, including targeting mid- to high-teens returns for our investors, perhaps a touch lower than private equity, but certainly highly attractive on a risk-adjusted basis. Hard assets, real assets that are critical to society and have an inflation and downside protection that many investors are looking for in this environment. A focus on risk management, particularly in relation to commodity price risk. Our roots go back to developing risk systems to manage electricity when it deregulated in the U.S. in the late 1990s. And really, a yield distribution that I mentioned, so focusing on sourcing and structuring investments with a high free cash flow component that we distribute annually to investors, thereby reducing the terminal value component of an investment. The core of ECP, of our business, ECP's business, which represents about 75% of our fee-paying AUM, are our flagship funds.
Our latest Fund 5, which I mentioned, is about to surpass its $4 billion target and has already deployed 40% of the target fund size. Given this pace of deployment, we're certainly well on track to launch Fund 6 in 2025. In recent years, we've also had considerable success with continuation funds. For example, in 2021, we raised a $1.2 billion continuation fund to acquire Fund 3's remaining 50% stake in Terra-Gen, which is a leading U.S. renewables platform. Then in 2022, we raised another $1.6 billion continuation fund for Calpine. Calpine is the leading power generation portfolio in the U.S. across natural gas, renewables, and now storage projects. All important electricity projects for reliability in both funds 3 and fund 4 are invested in.
Both of these continuation funds have generated IRRs over 20%. Calpine, for example, has grown its annual EBITDA from about $1.8 billion to nearly $3 billion in just over five years of our ownership, and that's a really good example of the high cash generation dynamics currently in the power generation sector. Work is underway to evaluate the launch of a third continuation fund in the not-too-distant future. Perhaps our highest growth sector that I'm happy to speak a little bit about is our credit business. We recently made an important strategic move by more than doubling the size of our credit team and adding two industry-leading veterans to our partnership.
They previously built a $5 billion infrastructure credit business for GIP, Global Infrastructure Partners, and are already helping to expand our credit business with a fee-paying loan sourcing agreement that has the potential to reach up to $2.5 billion with a third-party investor in place, and they're currently launching a senior lending fund. Private credit has been one of the most attractive growth areas in the alternative space lately, and I'm sure we will find a great ability to expand alongside the existing Bridgepoint credit team. So in summary, our firm is performing very well in a sector of the market that is experiencing dramatic growth. Now, let me pass it over to Raoul, who's going to tell you more about this combination.
Thanks, Doug. Now, before going into some of the detail on the transaction terms, let me briefly touch on the five key points that demonstrate the benefits this partnership delivers for Bridgepoint and our shareholders. Value-added infrastructure is highly complementary to our established private equity and private debt platforms, and the combination reinforces Bridgepoint's position as a global leader in mid-market private assets investing, while adding scale and diversification. Within this market, ECP is a leader that positions them extremely well when we think about the immense tailwinds that stem from global decarbonization and moves towards enhancing energy security. The two firms are a great fit. On the distribution side, we bring together two mature platforms, with ECP's existing relationships with over 200 of the world's biggest investors. The people, office, and industrial networks complement each other perfectly.
We also see real strategic upside and top-line synergies, which we'll cover shortly. Financially, the transaction immediately enhances the group's quality of earnings. The FRE proportion of EBITDA and margins both step up materially, and we expect the transaction to deliver greater than 20% FRE accretion per share and high single-digit EPS accretion from the completion, with both increasing materially thereafter, and these are both calculated on the basis of the existing consensus forecasts in the market for Bridgepoint and a conservative guidance case, the ECP, that Adam will talk through in a minute. The enlarged group will have three separate complementary pillars: private equity, credit, and infrastructure, supported by a shared, well-invested support platform that is capable of supporting the enlarged group, enhancing our ability to amortize the cost of this platform over a larger AUM and grow FRE margin.
Importantly, this transaction doesn't impact how ECP will be run day-to-day. ECP's investment processes will remain unchanged, with Doug and the ECP leadership team all committing to the enlarged business for the long term. Both Bridgepoint and ECP stand to benefit from the transaction by accelerating the firm's respective growth ambitions in Europe and North America and capitalizing on the new collective strengths, synergies, and cross-fertilization opportunities. For ECP, Bridgepoint's deep European office network and connections will create further investment opportunities to grow its presence in continental Europe. For Bridgepoint, ECP's North American brand, market presence, and domain knowledge brings added critical mass to our existing platform in that region. For example, ECP generates significant deal flow that falls outside their infrastructure mandate, but could well fit with Bridgepoint's private equity products. Of course, there is the opportunity to deepen relationships with combined client bases over time.
Now, we see significant long-term potential here. Now, turning to the transaction terms. As William has said, a share, the share, as the share component was fixed earlier in the negotiations, at today's share price, it results in an enterprise value of $835 million, with the Bridgepoint consideration comprising $293 million of cash paid to the existing shareholders and $235 million Bridgepoint shares, of which $185 million will be allocated to existing shareholders. And really importantly, as Doug mentions, $50 million will be restricted PLC stock units issued to equitize ECP's wider employee base. This is a really important component of the transaction for us, as I know it is for Doug, and it ensures enhanced alignment for the medium term.
In addition, the existing $225 million of ECP debt will either remain in place or be refinanced, depending on discussions ahead of completion. Importantly, Bridgepoint has sufficient resources from existing cash and debt facilities to fund the cash element of the transaction and, if appropriate, refinance this debt facility at completion. In addition, deferred equity consideration, of which a larger portion is contingent on performance, will also be made available as follows: A further $30 million shares are reserved for future award issues to ECP hires and promotions within the team, with issuances phased no faster than $10 million per annum from 2025 onwards. This structure is consistent with the future enfranchisement we introduced as part of our own IPO with the Burgundy Partnership.
In addition, and equally importantly, there is an earn-out component of up to a further 55 million shares issued, depending on the growth of ECP's management fees by 2027. Importantly, the business needs to deliver management fee growth somewhat in excess of that set out in the guidance, that Adam will talk you through in a minute, for the earn-out to trigger, and obviously considerably in excess of it, for the upper end of the threshold to be reached. As such, the earn-out, for the earn-out to be achieved, the transaction will need to be incrementally accretive to Bridgepoint shareholders, as you'd expect. Overall, ECP employees will effectively own 19% of the equity on day one, providing significant alignment of interests with the broader team here at Bridgepoint.
As we have said previously, there are multiple revenue streams in alternative asset businesses, and any transaction will have a unique mixture of historic and future carried interest and fund investments. In this case, the proportion of these increases in the future compared to the past, and these numbers are set out on the slide. Now, let me pass you to Adam to cover the guidance and the impact on earnings.
Thanks, Raoul. Good morning, everyone. I'd now like to give some detailed financial guidance for ECP. Just for clarification, there is no change to the Bridgepoint-specific guidance we gave as part of our interim results in late July, and for convenience, we've included that guidance in the appendix. Like Bridgepoint, ECP is in the final stages of fundraising on its flagship fund, ECP V, and obviously consistent with Bridgepoint Europe VII , ECP V is expecting to have its final close in early 2024. And we remain fully confident that both strategies will continue to raise further capital over the remaining period of time. As Doug indicated, ECP V is now significantly de-risked, having raised around 95%, or approximately $3.8 billion of its $4 billion fundraising target.
On a run rate basis at the target fund size, it will contribute around GBP 37 million of management fees each year. ECP V began investing in mid-2022 and has now invested $1.6 billion, or about 40% of that target fund size. The pace of deployment is consistent with Bridgepoint's own equity strategies of 3+ years, so we do anticipate that the successor fund, ECP VI, will start to generate fees before the end of 2025, which obviously will then result in a further material step up in management fees. The newly formed infrastructure credit team has made good progress with, Doug mentioned the $2.5 billion loan sourcing agreement already in place, and is obviously currently raising for a senior lending fund with associated SMAs, targeting at least $2 billion of capital.
Management fees on those strategies will be earned on invested capital, and the expectation deployment across both strategies is approximately $1 billion in 2024, and $1.25 billion in 2025. With management fees expected to average around 70 basis points across both of those credit strategies, we'd anticipate year one management fees of around GBP 3 million. Additionally, ECP is evaluating opportunities to both monetize existing continuation funds and launch new ones. The current run rate of management fees is approximately GBP 15 million a year from the two funds already in place. We'd expect that fee stream to remain stable in the medium term, with new funds replacing existing ones. ECP does anticipate launching a third continuation fund in the near future.
In aggregate, those funds are expected to deliver around GBP 55 million of management fees in 2024, so significant change of profile of activity from 2022. Not dissimilar to Bridgepoint's equity funds, those management fees will obviously be partially offset by the run-off of existing funds, although the run-off profile is longer for ECP, given the longer hold nature of those underlying investments. For ease, we have included a fund level summary on fee-paying AUM and fee rates in the appendix, but I would like to emphasize that, like Bridgepoint, ECP fee margins are expected to remain stable and unchanged. Now, turning to investment returns, we expect that investment income and carry will represent 20%-25% of total revenues in the medium term.
Although we do anticipate the result of the expected carry distributions from ECP Fund IV, the investment income contribution may exceed that 20%-25% level in the next two years, 2024 and 2025. Now, let's turn to operating costs. They were GBP 41 million in 2022, and they're expected to grow by approximately 25% in 2023, reflecting the investment in the infrastructure credit team as that strategy ramps up. Beyond 2023, we'd anticipate high single-digit growth in operating expenses for the short term, and that reflects the ongoing investment in the significant growth initiatives that ECP has in front of it. Now, let's look at margins.
Medium-term guidance for FRE margin is in the 45%-50% range, although 2024 is likely to be at the lower end of that range, reflecting the usual margin profile of an infrastructure cycle ahead of the management fee ramping up in 2025 upon the activation of ECP Fund Six. Medium-term guidance for EBITDA margin is in the 60%-65% range as the investment returns ramp up. Expenses below EBITDA are to be limited, are limited, and they will include interest expense on the ECP's existing debt. That's roughly GBP 10 million of interest expense. Charges for occupancy cost, depreciation, amortization, that's roughly GBP 4 million a year. And as a result of the strategic partnership with Sumitomo Mitsui Trust Bank, there will also be a minority interest expense, which we have modeled around 5% of FRE.
Finally, the effective tax rate for ECP as an onshore US corporate taxpayer, is expected to be around 20%. Now, I'd like to clarify the transaction's impact on the group's earning profile. ECP will immediately enhance this, in increasing group margins, shifting the revenue mix towards recurring management fees, and improving the diversification profile of fee income. To illustrate this very clearly, we have restated Bridgepoint's 2022 results with the impact of ECP. You can see the FRE margin for the enlarged group would have been 36%, compared to 31% standalone. Fee-related earnings would have contributed 61% of the combined group's EBITDA in 2022, compared to 53% standalone.
Management fees as a proportion of total revenues within the combined group increased slightly, but more importantly, the addition of a third leg to the platform materially diversifies revenues, and that reduces the impact of cyclicality inherent in the PE strategy, which many of you mentioned, and it will help smooth total earnings growth through successive investment cycles. Finally, I'd like to just provide a brief update on the share buyback program and clarify future dividends. We're currently 85% of the way through the GBP 50 million share buyback program that we announced in January this year. As William advised, once this is complete, we plan to begin a further GBP 50 million buyback program, given the attractive value prospects of the enlarged company and, of course, our commitment to drive shareholder returns.
We have just announced an interim dividend of 4.4 pence per share, totaling a GBP 35 million distribution. That'll be payable later this month. To clarify, we expect to announce a further dividend, final 2023 dividend of 4.4 pence per share, to be paid in May 2024, after the announcement of our full year results. In combination with the share buyback programs, from today, we will be returning total capital of around GBP 140 million to shareholders over the next nine months, which I think really does underscore the growth and cash generation that is inherent in our business model. Finally, just to clarify, the accretion metrics that we have disclosed today do not reflect the impact of this new share buyback program. With that, I'll hand back to Raoul.
Thanks, Adam. The transaction also provides multiple near- and medium-term growth upside opportunities within ECP that aren't included in the guidance. We haven't included these in the guidance, given their stage, evolution, and that we can't commit specific time frames. Now, they won't all happen as outlined on this slide, but the core message I want to leave you with is that we're really excited by the further growth for ECP within the Bridgepoint platform, and indeed, the synergistic growth opportunities the wider firm will have beyond the formal guidance that we can give the market now. Just to pick up on a couple of examples, an open-ended core infrastructure vehicle is a natural extension from added value investing, not least as ECP has a good track record of building infra platforms and selling them on to core focused investors.
The foundations for this are already up and running with a core infrastructure, separately managed account. Secondly, expansion into the Asia Pacific region. In markets such as Japan, where there is a huge opportunity for energy transition investment, ECP already has an agreement in place to launch an investment vehicle in partnership with SMTB. Finally, we see real potential for the combined business to look to launch crossover funds between added value infrastructure and classic private equity at some point. Of course, this is in addition to the combined platform growing the origination capabilities within the businesses themselves. Before we talk about the next steps and William concludes, I'd like to leave you with a point on culture. I've said consistently in conversations with investors that as people businesses, cultural compatibility is critical in any alternatives industry M&A.
We spent well over a year with Doug and the ECP team, so we know each other pretty well, and I'm very confident about the cultural mixture of the businesses. There's a real overlap in mindset. Both firms have long longevity of talent, combined with strong lateral hires. Both are collegiate, broadly spread teams, and both put investors first. Personally, I'm hugely excited about the prospect of being able to participate in the writing of the next chapter of the Bridgepoint ECP story together. So let's move to the next steps. The ECP acquisition will be a Class 1 transaction under the listing rules, so Bridgepoint shareholder approval is required, and the board unanimously recommends that shareholders vote in favor of the transaction.
A circular will be released in due course, and it is expected that the general meeting will take place in October to seek the required approvals. The senior Bridgepoint employees who've been working on the transaction and the five non-executive directors have also given irrevocable undertakings to vote their shares in favor of the resolutions. In total, these irrevocables cover 26% of the issued share capital. There are some other conditions to the transaction in addition to shareholder approval, including regulatory approvals and consents from investors in some ECP funds. As a result, it is expected the transaction will close in the first quarter of 2024. With that, I'll hand you back to William to conclude.
Great. Thanks, Ralph. We've covered a heck of a lot of material this morning. We wanted to make sure that everybody had a really deep insight into this combination. As I said earlier, Bridgepoint's success to date has been based on being a diversified alternatives platform with total immersion, knowledge, and expertise in the middle market. Our company has a strong track record of successfully expanding within private equity and private credit. Organically, we've seen a big growth since the IPO and by adding new teams and businesses. That gives us a lot of confidence that we can successfully come together with Doug and the team on the platform to the benefit of both our shareholders and importantly, our fund investors. ECP broadens our product offering, it deepens our market presence, and it deepens, importantly, the bench of talent.
As Doug has said, Bridgepoint brings a lot to ECP as well. So the transaction delivers on the strategy that we laid out at the IPO. And importantly, as you've heard through the presentation, it'll be highly accretive on earnings enhancing whilst improving margins. So hopefully that gives you a sense of why we think the transaction is a compelling proposition for our shareholders. With that, I'm going to open it up for questions. So Danae, if... Over back to manage those questions.
Of course, sir. Ladies and gentlemen, we will now begin the question-and-answer session. If you would like to ask a question, please press star and then one. We will begin with questions from the phone lines, followed by questions received via the webcast page. As a reminder, participants can submit written questions using the Ask a Question button on the webcast page. Again, if you would like to ask a question on the conference call, please press star and then one. The first question that we have is from Arnaud Giblat from BNP Paribas. Please go ahead.
Yeah, good morning. Thank you for the presentation. A couple of questions for me. First of all, can we start with fund five? I understand the $4 billion target. Have you set a hard cap? And typically, historically, what has been your fundraising versus target versus hard cap? And secondly, if I think about the next fund, obviously, that's gonna be a function of the pace of deployment. So what does the pipeline look like? What is the typical fund cycle length in the infra category? That'd be useful to know.
Thanks, Arnaud. That, that's one for Doug.
Yes.
Or two for Doug.
Two for me. Thank you very much. So, the current fund five that we're in the market on, as you've heard, we've raised approximately $3.8 billion of the $4 billion target. The hard cap is $6 billion. Historically, I believe we've hit our hard cap in virtually all of our funds. Our fundraising will stay open until Q1 of 2024, and so, we expect the number to grow from where we are today. We've already invested 40% of this fund, so it's moving along at a very nice pace. We're generally allowed to raise a new fund once we hit 75% invested. Our pipeline of transactions, investments that we're looking at is large.
So, you know, we're moving in that direction before too long to start thinking about that next fund.
Ralph, do you want to add something to the modeling that we've done on this transaction?
Yeah.
It's important.
Fantastic, Doug, with you, that was obviously fantastic and confidence. From a guidance perspective and a modeling perspective, we've assumed that the $4 billion target is the number that's raised for the fund, just for the avoidance of doubt.
I think that's important in the context of the overall group numbers. Arnaud, does that answer your question? Questions.
All right. That, that's very, you know, very, very helpful. If I may follow up as well, you highlighted the opportunity to do credit on the infrastructure side. I think you flagged a number of hirings. Do you see immediate opportunity to leverage existing capabilities at Bridgepoint to accelerate this growth?
Yes. Well, you know, we've expanded into the U.K. We've completed three transactions in the U.K, which has given us confidence that we can move beyond our North American roots. For example, we recently completed the take private of company Biffa, which most of you know very well. So we are very keen to expand our investing opportunities in continental Europe. We certainly know the assets. We understand the energy transition, just given the deep asset ownership that we have. We certainly are quite aware of the massive energy challenges that are faced throughout Europe. What we don't have is fulsome country understanding, fulsome networks of connections throughout continental Europe and the deep roots and teams that Bridgepoint has, I think, can complement our industry knowledge.
And so we very much look to start broadening our examination of continental Europe, and I'm highly confident that you will see us making investments, and it's a big part of what this partnership brings.
Doug, there are definitely good linkages between your credit business and the Bridgepoint credit business.
Yeah, absolutely, on the credit side. And, you know, we've been in the credit for some time, but we've just talked about the very significant expansion, and I'd like to say our teams are already complementing each other very well, and I think it's gonna be a catalyst for both of us to grow those credit businesses nicely into the future.
Arnaud, any other questions from you?
That's it. Thank you very much.
Great. Thanks. Danae, next question.
Thank you. Just a reminder, if you would like to ask a question, please press star and then one now. The next question we have comes from Angeliki Bairaktari from J.P. Morgan. Please go ahead.
Morning, Angeliki.
Good morning, and thank you. Good morning. Thank you very much for taking my questions. Just a few on my side, please. First of all, with regards to the flagship fund of ECP, I was wondering if you can give us some guidance on what is the potential to scale that up. So for example, what sort of size could we have in mind potentially for the next vintage? And sort of what would be, you know, sort of the aspirational size that these flagship could reach perhaps over the next five, 10 years. Then, in terms of the guidance on management fees, just one clarification, please.
I heard that you said that there could be $55 million management fees from fund five and also the continuation fund and the credit fund. So I just wanted to understand whether these are additional to the $89 million management fees that you show that ECP had in 2022, or whether we should take something out, given that in 2022, there were already some fees in from ECP V there. So I'm just effectively trying to get to a pro forma sort of management fee number, if you are able to clarify that.
And then, with regards to the cash component, to the cash consideration, I was wondering, do you plan to draw on the RCF, or you plan to finance this entirely from the existing cash that you have on balance sheet and any retained earnings until the end of the year? Thank you.
Okay. Well, why don't you take the first question, Doug, on potential size of future funds?
Yeah, I guess what I'll say, if you just look at our history, going back to when our firm was founded all the way back in 2005. Our first fund was about $2.25 billion, then we went to about $4.25 billion in fund two. Fund three was $5 billion. Interestingly, fund four, we had a very large co-invest. We were funding a large acquisition of Calpine. We did $3.3 billion in the fund and $3.5 billion of co-invest, so $6.8 billion at that time. And we've launched fund five at a $4 billion target and a $6 billion hard cap.
And so I think what you should take from that is prudent and measured growth as we go from one fund to the next. We are focused on achieving excellent investment returns for our LPs. And if you produce excellent returns, you have the opportunity to raise more funds. And so we are not looking for giant quantum leaps in fund size. So I think that measured approach that we've taken historically is one that we will take into the future. So hopefully that answers a little bit on the trend.
Okay. Adam, do you want to take the guidance question, then Raoul can cover the transaction structure?
Yeah, absolutely. Yeah, the point of my comments, Angeliki, was just to clarify, obviously, the vast majority of the GBP 89 million of management fees that you referenced for 2022 comes from funds three and four, the flagship funds. So I was trying to just clarify the scale of the activity of the newer funds. For clarification, in 2022, as you said, that there were some management fees from ECP V.
That number's approximately GBP 15 million, and at the run rate for the fund, at the $4 billion target, as Raoul indicated, that would add a further GBP 22 million incremental management fees in 2023 for that run rate of 37 that I gave you before. The continuation funds are sort of broadly stable, you know, a small step up, I think, from into 2023 and 2024. And clearly, the 2022 numbers didn't have any of the credit infrastructure activities, and as I said, I think the first-year target base of GBP 3 million is sensible. So between the incremental funds on ECP V and the credit, you'd expect that probably a sensible estimate of step-up management fees in 2022 is about GBP 25 million of that 55.
There'll obviously be then some modest fee compression from the sell-off of the older funds 3 and 4, but in the round, I think that's probably not even 10%. So you're aggregating to about GBP 20 million incrementally in 2023.
... cash from that construction round?
Yeah. So, both businesses are highly cash generative. We have a structure in place that enables us to have a combination of our cash and our balance sheet, together with the RCF facility, is more than adequate to fund the takeout of ECP's existing debt facilities, provide the cash funding for the consideration, and also continue the share buyback program that we've announced this morning. How that ends up in a mixture at completion rather depends upon where we end up with ECP's existing debt facility. So, our expectation is it may well stay in place and transfer across, but that will be subject to discussions with the lenders over the course of the next few months.
the whether or not we actually need to draw on the RCF for a short-term period around completion will rather depend on whether we're taking that out or whether that's staying in place. But I think the important point is that within the existing committed group resources, if that debt did need to be taken out, we've got plenty of sort of liquidity to do to take the debt out, to fund the cash consideration, and to continue the buyback program we've announced.
Okay, any follow-ups on, on that, Angeliki?
That's very clear. Thank you very much.
Okay. Next question is the third one.
The next question is from Bruce Hamilton, from Morgan Stanley. Please go ahead.
Hi there. Morning. Can you hear me?
Yep. Yep.
Perfect. Sorry. So first question, just on the sort of size, the typical number of deals and sort of equity ticket size for ECP transactions. I mean, obviously, you're saying this will sort of deepen and strengthen your broader sort of mid-market capability. So I'm just trying to check. If we're thinking about opportunities in Europe, are we talking sort of similar sizes to, you know, where Bridgepoint typically writes tickets on the PE side? And then secondly, obviously, you've given us, you know, lots of helpful guidance to think around what business looks like in 2024, 2025, and clearly, you know, potential upside, depending on hard cap and so forth. Investors are also giving you the return on invested capital.
So can you give us a sense what that might seem to be to the accretion in 2024 or looking out to 2024, 2025, where we would be on sort of return on invested capital? Thank you.
Doug, do you want to go first?
Yes. So generally, you'll see us doing between 10 and 15 investment platforms per fund. You know, we generally like to keep the size, say, no more than 10%-15% of the total fund size in any one transaction. We've been very successful with many of our LP investors of having them support us with co-invest, and we've done over GBP 7 billion of co-invest. So rather than doing a transaction, you know, one individual transaction that dominates a fund, we'd rather bring in our LPs as co-investors to help us keep a nice, broad diversification in the investment portfolios.
Increasingly, our LP investors certainly have an appetite for co-invest, and I think they view ECP very positively, that we've thrown off such a high degree of co-invest in our funds. So I think that that, you know, general approach will continue. We certainly, you know, have the appetite and ability to look in continental Europe now. We've already done in the current fund five this take private of Biffa, which was in the neighborhood of a $500 million investment into that platform. But I think we wouldn't change kind of the relative size of transaction that we would be targeting as we look a little bit beyond our existing
So it fits very neatly together with Bridgepoint equity strategies. Bruce, do you want to just clarify, when you talk about return on invested capital, do you mean that on the fund level or a corporate level, or … I slightly missed.
Yes, I'm into the corporate level, so, you know, if I take, you know, what you think the earnings might look like on your, you know, from ECP on 2024, 2025, relative to the, you know, the sort of GBP 835 million or, you know, the spend on the transaction, are you getting to, you know, double-digit return on the invested capital?
Ralph, do you want to take that?
I guess where we if you look at the multiples that we're paying, our calculation, the multiple that we're paying based upon the full cost for the Bridgepoint business and the guidance case for ECP, results in paying broadly the equivalent multiple in 2024 and a lower multiple in 2025. The growth of the relative businesses, that drives the multiple. The result of this is EPS per share accretion at the FRE level, comfortably in excess of 20% in the medium term. So it really raises well above that over the next two or three years. And at a sort of a bottom line EPS level, based upon the consensus, it's high single digit initially and raising above that.
So we feel that that is a sort of our proxy of how we're looking at the attractiveness of the transaction. We think that does drive material incremental shareholder returns. And as a sort of and also being looking at an efficient balance sheet, we have looked at alternative uses of capital over and above buying the transaction, and we're confident, based upon the outlook for the combined business, that this generates a material it should be generating a materially higher shareholder return and options of returning capital, including greater buybacks.
Great, very helpful. Thank you.
Any other questions, Bruce?
No, no, that's great. That's, that's, good help. Thank you.
Okay, well, we'll move to the next question, if there is one.
There are no further questions on the conference line.
Okay.
We will now address the questions submitted via the webcast page. I will now hand over to Adam Key to read out the written questions.
Thank you. And we have one written question from Alexander Ticia at Bank of America: "Could you provide more details on the Energy Transition Opportunities Fund, a renewable power fund SMA, in terms of fee structure, size, and timeline? Thank you.
Well, you know, I'll talk about in general, you know, we focus on our flagship funds and we supplement that from time to time with separately managed accounts. I think you have in the, you know, that Adam has given you some sense of what those average management fee levels was just, say, a tad below 1.5%, is what is averaged in the funds in terms of what the management fee percentage is in that. And I think that equates across, you know, all the different things that we will do in our equity products.
Separately managed accounts, they're all very bespoke, they're all very different, very different, certainly not competing with our flagship funds in terms of looking at maybe little different risk returns. And the fee arrangements that we put together, I'll say, are very bespoke as well. But we see a growing opportunity. We have a large SMA in place on the equity side. A lot of our investors are looking us to focus on different niches within the energy transition, and so that's an area of growth for us.
Okay. Thanks very much, Doug, for that. Any other questions, Adam? No, I think that brings to an end this morning's briefing. Thank you very much for joining us. Of course, if you have further questions as you get into the materials, please do feel free to call Adam Key, and he can help answer some of those questions. With that, we'll close for today. Goodbye from London.