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The Renewable Energy Infrastructure Market

by Paul Bishop

  • 15 Feb 2012
  • INF

The traditional energy sector is a core focus for many unlisted infrastructure fund managers with 79% of the 146 unlisted infrastructure funds currently on the road looking to gain exposure to energy infrastructure in some way.  However, issues such a climate change and the diminishing supply of natural resources are increasing global demand for alternative sources of energy.  As governments around the world attempt to address these issues, a growing number of investment opportunities are becoming available in the green and renewable energy sectors.

Preqin is tracking 106 funds which focus solely on investments within the renewable energy sector 40 of these funds are currently on the road seeking capital commitments with a mean fund target size of USD 282 million.  The majority of these vehicles target investments within the European market (53%), followed by funds primarily focused on the US (25%) and in Asia/Rest of World (23%).  This suggests that Europe is the centre of the renewable energy investment market with interests in the sector growing in other regions.

The number of renewable energy-focused funds reaching a final close per year since 2003 has remained relatively constant, with 51 funds closing during the period, raising an aggregate $13.9bn.  The global financial crisis resulted in a decline in general infrastructure fundraising in 2009, although the market has picked up since with seven funds reaching a final close in 2010 and 10 closing in 2011, raising an aggregate $1.2bn and $3.7bn respectively.  This shows that demand for renewable energy infrastructure assets is steadily increasing and has bypassed pre-crisis levels.

From an investor perspective, the growing number of cleantech and renewable energy infrastructure funds coming to market is a testament to the growing institutional investor appetite for exposure to such assets.  Preqin’s Infrastructure Online database currently features profiles for 1,416 active infrastructure investors, 45% of which have either previously invested in a fund targeting renewable energy assets or would consider doing so in future.  In terms of investor type, public pension plans are the most prominent type of investor in renewable energy opportunities, representing 23% of investors with a preference for such assets.  Other significant players include private sector pension plans (13%), insurance companies (8%), asset managers (8%), banks (10%), and foundations (7%).

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