Around half of investors in BNP Paribas’ Clean Energy Fund – which closed this week at €427 million ($568 million) – are making their first investments in renewables, according to the head of the French bank’s clean energy investing arm.
“Investors, particularly in the insurance sector, have been looking at [renewables] more closely over the last 12 months,” Joost Bergsma, CEO of BNP Paribas Clean Energy Partners told Environmental Finance. “It’s good news for people working in environmental finance that there’s still appetite for the sector.”
The fund closed above target – BNP Paribas had been hoping to raise between €300 million and €400 million into the fund – making it one of the largest European renewable energy infrastructure funds.
The renewables sector has been in the doldrums amid poor performance this year by clean energy stocks, uncertainty about support in the US for renewables and concerns that governments in Europe, particularly Spain, were about to retroactively reduce renewable energy tariffs.
However, Bergsma said that investors were attracted by the fund’s high levels of cash yields and relatively low levels of risk, focused as it is on investing in projects using proven technologies in mature and “transparent” markets in Europe.
“Investors increasingly recognise that renewable energy infrastructure is an important part of the economy and therefore it should be part of their portfolios,” he said.
Investors include pension funds, insurance companies and local authorities, with two-thirds from the Netherlands, Belgium, Germany, UK and Sweden, and the remainder from Japan and elsewhere in Asia. BNP did market the fund to US investors, but Bergsma said a combination of their preference for dollar-denominated investments and concerns about the stability of European renewables regulation proved a deterent.
“Clearly, US investors are a bit more sceptical about something state-supported,” he said. “And they’re further afield – they’re going to be more cautious than, for example, a French investor” about European renewable energy regimes.
Indications earlier this year that Spain was set to reverse its previously attractive solar feed-in tariffs, including for operational projects, “did not help” in marketing the fund. “But the sector is more mature than three or four years ago … Investors recognise that even if one government was to renege on its commitments, it doesn’t hit the whole sector,” he added.
The fund invests in construction and operational clean energy infrastructure assets in onshore wind, solar photovoltaic, biomass and small-scale hydro power, and has made six investments already, in Italian solar power and French and Irish wind farms. It typically invests €20 million-40 million in equity per investment, leveraged with €60 million-80 million in project financing.
The fund has a 10-year life and is expected to return 15% per annum to investors.
By. Mark Nicholls
Source: Environmental Finance