Institutional Investors Increasingly Focus on Financing Clean Tech Projects such as Battery Storage & Renewables

Institutional investors increasingly are looking to make private market and infrastructure investments, and many of them are in the low-carbon energy space. In fact, 51% of infrastructure deals in 2017 were in the renewable energy industry space, a nine-point rise since 2008, according to Preqin.

Here’s a quick look at some of the more notable recent deals and investment activity.

The giant pension CalPERS is seeking more direct investments in renewable energy infrastructure projects, Managing Investment Director for Sustainable Investments Beth Richtman said in July. In May, the pension said it is creating a direct investing program to invest $13 billion in private equity opportunities annually.

CalPERS’s recent investments in renewable energy projects include:

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  • In 2016, acquiring 25% of Desert Sunlight Investment Holdings, which owns two big solar generation facilities near Palm Springs, California.
  • In November 2017, acquiring an 80% interest in Rocky Caney Wind, which owns two wind farms.

 

In August, the $153 billion Public Sector Pension Investment Board (PSP Investments), one of Canada’s largest pension investment managers, paired with Pattern Energy Group to invest in a wind project, acquiring the 147 megawatt Mont Sainte-Marguerite Wind power facility in Quebec. PSP paid $38 million for a 49% stake in the project. Mont Sainte-Marguerite operates under a 25-year power purchase agreement with Hydro-Quebec Distribution.

In July, the $180 billion Ontario Teachers’ Pension Plan (OTPP) committed $154 million in financing to behind-the-meter energy storage developer Stem. The money will let Stem acquire commercial and industrial energy storage projects across Ontario. The San Francisco-based company, which combines software and lithium-ion batteries to lower peak demand charges for businesses, says it has increased its project financing pool to more than $650 million and has 860 storage systems under management in the U.S., Canada and Japan.

OTPP also invested in Stem’s $26 million Series D round in January. Last year, the pension partnered with Massachusetts-based Anbaric Partners in a new joint venture that plans to build $2 billion worth of clean energy transmission and microgrid projects across North America. OTPP invested $75 million to gain a 40% stake in Anbaric.

In March, the $73 billion Ontario Municipal Employees Retirement System (OMERS) bought wind farm operator Leeward Renewable Energy from private equity firm ArcLight Capital Partners. Dallas-based Leeward owns and operates 19 wind farms across nine states, with a total installed capacity of approximately 1.7 gigawatts.

Recent Fundraising Activity

On August 21, asset management firm Capital Dynamics reached the final close for its Clean Energy and Infrastructure VII JV fund at $1.2 billion. The fund will invest in utility-scale renewable generation assets, typically through joint ventures with institutional investors. The primary equity investors in the fund are institutional investors APG Asset Management, CalSTRS and the Abu Dhabi Investment Authority.

The firm closed its CEI V fund earlier this year, also at $1.2 billion. That fund is invested in over 1.5 GW of solar projects across the U.S. Capital Dynamics manages a total of $4.8 billion in clean energy infrastructure, including the 15 largest solar farms in the U.S, it says. And in June, Capital Dynamics acquired 8Point3 Energy, a yieldco formed by First Solar and SunPower to operate solar energy projects across North America.

Other clean energy infrastructure fundraising activity

  • Blackstone Group is raising as much as $40 billion for its newest infrastructure fund, and says it may invest some of that money in renewables.
  • KKR is looking to raise $5 billion for its third infrastructure vehicle, KKR Global Infrastructure III. Investors include New York State Common Retirement and Minnesota State Board of Investment. The firm recently said that energy efficient consumption, renewable energy generation and electric transportation represent “the most significant investment opportunities of our time.”
  • Brookfield Asset Management expects to begin fundraising this year for a $10 billion fund that may include money for renewables. It recently created a joint venture to develop and operate commercial rooftop solar projects in China and is increasing its focus on renewable energy projects in India. In 2017, Brookfield Renewable Energy Partners acquired SunEdison’s yieldco TerraForm Global.
  • And in July 2017, BlackRock closed a fund dedicated to renewable energy assets (85% solar and 15% wind projects) with $1.65 billion in commitments secured from 67 institutional investors including the Orange County Employees Retirement System, the Minnesota State Board of Investment and the New Mexico State Investment Council.

 

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