Renewable energy has emerged as a significant sector within the infrastructure industry over recent years. A total of 116 deals were reported by unlisted infrastructure fund managers in 2012 involving renewable energy assets, with further deals expected to come to light over the course of the next few months. In the period 2007-2012, the sector has experienced an 81.25% increase in the number of deals, with a peak of 151 transactions in 2011. This article charts the rise of renewable energy infrastructure from a promising new sector to a key investment opportunity sector.
Renewable energy infrastructure fundraising has continued to grow after the financial crisis, with a number of high profile fund closures between 2008 and 2012 which included renewable energy within their investment strategy. The $4.3bn Energy Capital Partners II and the $4.1bn EIG Energy Fund XV, which reached final closes in August 2010 and April 2011 respectively, both consider renewable energy to be a core aspect of their investment strategy. The largest infrastructure fund of all time, the $8.25bn Global Infrastructure Partners II, which closed in October 2012, is another fund which includes renewable energy within its investment remit, again pointing to the opportunities that the renewable energy sector offers.
HgCapital Renewable Power Partners Fund II is the largest pure renewable energy infrastructure fund ever raised, having reached a final close in December 2011 on €542mn. Currently, 69% of the 137 unlisted infrastructure funds in market incorporate renewable energy in their investment strategy, targeting $44.2bn in total capital. Thirty-four (25%) of the unlisted infrastructure funds currently in market focus on renewable energy solely, and account for $8.5bn of the total capital sought.
The majority of renewable energy deals completed since 2007 have been located in Europe, with 64% of all deals recorded in this region. This is unsurprising when considering that 48% of renewable energy-focused funds closed in the same period primarily focused on European investments. Europe is likely to remain a key area for this type of investment due to plans laid down in March 2007 by the European Renewable Energy Commission to generate 20% of final energy consumption from renewable energy sources by 2020. In addition, the growing prominence of climate change globally is a driving factor behind the growth in renewable energy deal flow and will remain so in the coming years. As a result, the renewable energy infrastructure sector is likely to remain a key industry sector for fund managers in 2013 and over the coming years.