In September 2012, Union Investment launched a broadly diversified institutional infrastructure fund which will invest in renewable energy, with the emphasis on European wind farms. Some EUR 50 million of institutional capital was raised in the first round of financing, enabling the fund to acquire the first wind projects in the pipeline and commence operations on schedule.
In terms of investment law, the fund is a Specialised Investment Fund (SIF) structured as a Luxembourg investment company with variable share capital (SICAV). “This particular design is especially suitable for institutional investors who are seeking fungible investment opportunities in the form of securities or structured as debt finance,” explains Dr Christoph Schumacher ( photo) a member of the management team at Union Investment Institutional Property GmbH, which is supporting the new investment concept in a service provider role.
Union Investment sees infrastructure funds as a strategic growth segment. “We want to gradually open up the infrastructure segment for our investors by means of this product, which focuses on the technologies of the future,” added Schumacher. The fund’s portfolio is targeted at investments in core European countries, primarily Germany, France and the UK. Investments in Scandinavia and Poland can also be included on a selective basis. The focus will be on wind farms, making up around 70% of total assets. An investment of up to 30% in photovoltaic systems is also planned, since they are an ideal complement to the portfolio both from a technology viewpoint and with regard to risk diversification. At the end of the approximately three-year investment phase it is expected that the fund will be invested in more than 20 wind farms and in a number of solar parks as per the target allocation. The focus will be on large contiguous wind farms on dry land (onshore projects). Since this technology has been tried and tested, the risk is much lower than with offshore projects. Total investment is expected to be around one billion euros. Some EUR 300 million is earmarked from the equity capital managed by Union Investment. The rest will be contributed in the form of debt finance by the participating project companies, which will operate the wind farms and solar parks. An average long-term target yield of six to eight per cent of equity capital is expected; the minimum investment is EUR 2.5 million.
In recent years, Union Investment has engaged intensively with the challenges presented by managing energy investments. “We deliberately chose wind energy as the focus when designing the product due to the economies of scale,” commented Schumacher. “With geothermal power the economic benefits are still questionable relative to the high costs and risks incurred in test drillings, while the market for biogas plants is simply too small at present.”
Fonte: CS della Società