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Environmental Finance

Environmental Finance

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Europe's Largest Renewable Energy Fund Will Only Invest in Wind and Small Hydro

Europe’s largest renewable energy infrastructure fund is only investing in projects that are closest to being viable without government support, according to the fund’s manager.

“People still want clean and renewable energy. But there’s a change in what they are willing to pay for it,” said Tom Murley, London-based director and head of the renewable energy team at HgCapital.

Speaking to Environmental Finance following the financial close of a 20.5MW UK onshore wind project, Murley said that in an age of austerity – and when government support for renewables is constantly being questioned – the fund is investing in projects “closest to not needing regulatory support”. This is means onshore wind projects in the UK, Ireland, Sweden and Norway, and small hydro in France, Spain and Italy.

The fund aims to build clusters of assets, achieving economies of scale and gaining purchasing power with turbine manufacturers. “We look at the natural resources and find countries and places where we can do repeat projects,” he said.

HgCapital has invested in more than 50 EU renewable energy projects with a total value in excess of €1.5 billion ($1.9 billion). Last week, it announced the financial close of the 20.5MW Wandylaw wind project in Northumberland, for which HgCapital provided 100% of the equity for development and construction, and Royal Bank of Scotland arranged £36 million ($57 million) in construction and term loan project financing. Norwegian energy company Statkraft will buy the power and Renewable Obligation Certificates under a long?term contract.

Murley said he expects the cost of renewable energy installations to come down, while the cost of conventional power will go up. But whether renewables can be cost competitive with conventional power generation will also depend on subsidies provided to the latter, either direct or implicit. For example, governments are the de facto guarantors in the event of a nuclear disaster, providing nuclear operators with an insurance policy that could not be bought in the market.

Grid parity “is achievable within a decade” if subsidies are levellised across energy forms, Murley said – adding that renewables are already competitive in some markets.

Murley began managing renewables investment at HgCapital eight years ago, and has since raised about €850 million from European and US institutional investors, including several large pension funds.

The first Renewable Power Partners Fund closed in December 2006 at €300 million, while the second fund completed a €550 million fundraising in November 2011.

By. Christopher Cundy of Environmental Finance

Source: Environmental-Finance




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