Despite the economic slowdown in China, Japan and other Asian nations, renewable energy and clean technology infrastructure continued to grow in prominence across Asia this year. A multitude of factors could be responsible for this, including Japan’s move away from nuclear energy to alternative energy sources and the European Union striking a climate pact in October 2014.
The rising prominence of renewable energy and clean technology infrastructure exists against a backdrop of governments persistently grappling with economic uncertainties, dictating the larger role that private sector investments play in meeting financing gaps. At present, Preqin’s Infrastructure Online service tracks approximately 214 Asia-focused deals involving renewable and clean technology infrastructure assets, representing 17% of the Asian deals universe. The number of deals involving Asian renewable and clean technology infrastructure – which include biomass, hydropower, geothermal power, solar and wind power assets – has increased substantially over the years. There have been 102 renewable and clean technology infrastructure deals completed in the past four years, compared to just 67 deals in the period 2007 to 2010.
The increase in the number of deals in greenfield assets is perhaps the most encouraging aspect of the sector’s upward trend, as assets in this project stage add to the total number of renewable energy and clean technology assets and total capacity. As of December 2014, greenfield asset deals constituted the majority (73%) of renewable energy and clean technology deals in Asia. Comparing the proportion of deals in greenfield assets over a four-year period, the average proportion increases from 45% in 2007 to 2010 to 58% in the period 2011 to 2014.A recent Asian renewable energy deal involving greenfield assets is the acquisition of Gulpur Hydro Plant in Pakistan by a consortium of South Korea-based investors, in a deal amounting to $365mn.
Preqin’s Infrastructure Online service also covers 54 private closed-end Asia-focused funds that invest in clean technology and renewable energy infrastructure. Of this fund pool, 38 are now closed or liquidated, having raised an average of $440mn per vehicle. Perhaps indicative of asymmetric renewable energy investment needs, 128 Europe-focused funds have raised an average of $488mn, whereas North America-focused vehicles have raised a significant average of $1.3bn per fund.
When analyzing these 54 private closed-end Asia-focused funds by vintage year, there were more funds deploying capital from the 2012 vintage onwards. Only 21 vehicles have started making clean technology and renewable energy investments for funds with vintages 2007 to 2011, compared to the 25 private funds that have deployed capital for more recent vintages (2012 to 2014). The aggregate capital raised in recent years by Asia-focused funds also seems to suggest greater interest in the clean technology and renewable energy sector, with 2013 vintage Asia-focused funds raising a record $3.3bn, compared to $1.8bn in 2012 and $732mn in 2009.