Pension giants allocate nearly €600m to renewables

APG, Brunel and SAUL invest in European green energy as SocGen partners with EIB

APG, which runs more than €538bn for pension funds in the Netherlands, has just committed €250m to hydropower, the same week that UK pension investors Brunel and the Superannuation Arrangements of the University of London (SAUL) have announced a £277m allocation to UK renewables.

APG has partnered with Aquila Capital, an investment house specialising in sustainability and real assets, to invest in Norwegian hydropower firm Småkraft – bringing its total investment in the company to €550m. The money is invested on behalf of ABP, the pension provider for government and educational employees in the Netherlands.

Småkraft will use the investment to build new small-scale hydro plants as part of a bid to produce 2TWh of electricity by 2022.

“By increasing our commitment to Småkraft, we are enabling the European energy transition from fossil fuels, and contribute to reducing carbon emissions in line with the ambitions of our pension fund clients,” said Patrick Kanters, Managing Director for Global Real Assets at APG, which had €5.8bn in renewables at the end of last year.

Meanwhile, Greencoat Capital has bagged Brunel and SAUL as investors in its closed-end, private markets Renewable Income fund, which targets UK solar, wind and bioenergy, with some scope to invest in other green technologies such as renewable heat.

Brunel is the £30bn pension investment vehicle for 10 “likeminded” local authority pension funds in the UK,and has been pushing on climate change since its inception in 2017. SAUL provides pensions to ‘non-academic’ staff at the University of London and has assets of around £4bn. It was advised on the selection of Greencoat by investment advisor Redington, it said.

Also this week, Société Générale and the European Investment Bank (EIB), the investment arm of the EU, have reached an agreement on risk-sharing and co-funding for €240m of new solar and onshore wind in France. The focus is on smaller assets – those that don’t exceed €50m – with two wind projects run by independent power producer Valorem already agreed. SocGen selects projects and provides technical and financial analysis to the EIB, which may choose to participate via two channels: €80m of risk participation, guaranteed through the European Fund for Strategic Investments (more commonly known as the Juncker Plan) and €160m in disintermediated soft loans.

Meanwhile, S&P Global Ratings warned that the world’s largest offshore wind participants could have their credit quality negatively impacted by increasingly stringent power action processes, competition and technological advances.

Favourable pricing mechanisms and government support have contributed to strong growth in the offshore wind sector over the past decade, and lower-than-expected construction and operating costs. However, warns Massimo Schiavo, Credit Analyst at S&P, “reaching double-digit returns on projects has become more challenging as technology and project management matures. At the same time, we continue to see higher construction risks on large projects than on other renewable technologies. We therefore believe execution risks could jeopardize profitability going forward.”