German life insurer eyes steady returns as it steps up renewables investment

CEO expects returns of 6% from wind acquisition

Württembergische Leben (WürttLeben), the midsize German life insurer, has acquired three onshore wind parks in Germany as part of a new investment strategy oriented more toward renewables.

The 32MW parks in Lower Saxony, Saxony-Anhalt and Brandenburg were acquired from Eurowind Energy, a Danish wind power project developer, for €41m.

WürttLeben said the investment, from which it expects annual returns of 6%, would be the first of many in the renewables sector. “Given that our policies have yield guarantees, it behoves us to find investment opportunities like renewables which are not correlated to capital markets yet provide us with steady returns,” said WürttLeben CEO Norbert Heinen.

German life insurance policies currently guarantee a yield of 1.75% on paid-in savings. German Bunds, the bedrock of institutional investment in the country, are currently yielding around one percent. Equity markets, meanwhile, are tumbling amid the worsening of the European debt crisis.

Elaborating on the returns claim, Heinen said renewable technologies like wind parks lasted for decades and that the power they generated was sold in many cases at fixed prices. Germany’s system of fixed feed-in tariffs for renewables has been in place since 2000.All told, WürttLeben plans to commit €150m – or 0.5% of total assets – annually to renewable technologies. Its exposure to the sector had previously been limited to a €110m fund which primarily invested in solar power.

Of the future money earmarked for renewables, the insurer plans to directly invest as much of it as possible. “This depends of course on market conditions, so we’re keeping funds as a second option,” a spokesman told Responsible Investor.

Elsewhere in Germany, investment firm KGAL announced that it has closed its European Sustainable Power Fund 2 at €500m. KGAL, which is owned by Commerzbank, BayernLB, HASPA Finanzholding and Sal. Oppenheim, said the fund offers institutional investors “a diversified portfolio of wind and solar power”, with the main focus on wind. The investors were not named but included insurers, pension funds, family offices, foundations and a leading European research institution.

Earlier this year, German reinsurance giant Munich Re announced plans to invest about €2.5bn over the next few years in renewable energy assets such as wind farms, solar projects and new electricity grids.