PensionDanmark, a pension fund with around €14 billion ($20 billion) under management, has made its second investment in offshore wind farms and is planning more.
A consortium led by PensionDanmark is paying Dong Energy DKK 6 billion ($1.1 billion) for a 50% stake in the 400MW Anholt offshore wind farm. Situated off the east coast of Denmark, Anholt is the country’s largest wind project. It is expected to begin generation next year and to be completed in 2013.
PensionDanmark will have a 30% share of the project and its consortium partner PKA, a Danish administration company for occupational pension funds, will have 20%. The payment to Dong will be made in four installments between late 2011 and the end of 2013. The funds will take over responsibility for operation and earnings from the facility, in proportion to their interests, from 1 April 2014.
The announcement follows PensionDanmark’s purchase of a 50% stake in another Danish offshore wind farm – Nysted – in September last year.
Investments in wind farms are very attractive to long-term investors such as PensionDanmark, said CEO Torben Pedersen. Wind and solar investments “can generate a return in line with what we expect from the equity market. But the risk and sensitivity to the global business cycle is significantly lower than with equity investments,” he added.
“The stable and predictable return comes from the government-guaranteed fixed feed-in tariff, that ensures that the first 12 years of electricity production from Anholt can be sold at prices that are already known,” Pedersen explained.
The fund aims to increase its investments in infrastructure to 10% of assets under management from their current level of 6%, he noted: “Therefore we expect to close more of this type of deal”.
Such funding from institutional investors is vital if the EU is to meet its ambitious target of generating 20% of its energy from renewable sources by 2020, according to power industry executives.
Without this injection of long-term capital, the scale of investment required to reach this target would pose a daunting challenge to energy companies’ balance sheets, they say.
By. Graham Cooper
Source: Environmental Finance