Citing hydropower’s greater efficiency compared to other renewables like wind and solar, Dutch pension fund asset manager APG has committed €250m to a new private equity fund that will invest in existing and new hydropower plants across Europe.
The fund comes from Aquila Capital, a Hamburg-based private equity firm, and will be capitalised to €500m via debt financing. Aquila will act as the fund’s advisor and provide the operational management of the hydropower plants selected.
Aquila said investments would be made predominantly in the Nordic countries, followed by opportunities in other EU member states as well as Turkey. “Aquila maintains a significant pipeline in those markets, and we are confident that the first investment will be made within the next three months,” said Oldrik Verloop, Head of Business Development for the Benelux countries.
Patrick Kanters, Managing Director for Infrastructure at APG, said that for the Dutch asset manager, “hydropower ticks the right boxes for us in terms of the risk-return profile, the high cash-flow visibility and sustainability.” According to APG, hydropower plants have an efficiency ratio of 95% compared with 50% for wind power facilities and 20% for solar ones.
APG, which looks after €369bn in pension assets, also said the return on hydropower plants in Europe could be in the “high single digits,” though this depended on avariety of factors, including plant locations, electricity prices and regulatory risks.
Even so, Aquila will hope to boost the fund’s return through leverage. Verloop said: “Hydopower is an attractive proposition for investors looking for stable long-term inflation protected yields to match pension liabilities.”
The announcement comes as La Caisse de dépot et placement du Québec (La Caisse), which manages C$200.1bn (€136.8bn) in assets from mainly public pension plans, said it had acquired a 24.7% stake in Invenergy Wind, a developer of renewable projects. Financial details were not disclosed.
The move follows La Caisse’s recent minority investment in Invenergy’s wind farm portfolio, which comprises 11 projects in the US and three in Canada. “When we first invested in the company’s wind farms, we were impressed by the strong management team and the quality of the projects in the portfolio,” said Macky Tall, Senior Vice President for Infrastructure at Montreal-based La Caisse.
Tall added: “With this transaction, we continue to strengthen our partnership and increase our exposure to the US, a promising market for years to come.” Chicago-based Invenergy has developed renewable power projects that have a combined capacity of 5000 MW.