Feb. 21 (Bloomberg) — HgCapital LLP, a private-equity
firm, is shifting the focus of its second clean-energy fund of
542 million euros ($716 million) to wind-power operations in
Scandinavia as it targets markets requiring lower subsidies.
The fund will invest in onshore wind in the region, where
larger facilities can be built with positive resources and low
subsidies in triple A-rated countries, Tom Murley, renewable
energy chief at HgCapital, said in an interview in London. It
isn’t currently studying solar photovoltaic projects, he said.
“There are a lot of projects in Scandinavia looking for
construction capital,” he said. “There aren’t many investors
who take construction risk and can write large equity cheques.”
Norway and Sweden began a common green-certificate market a
year ago to spur renewable investment. Electricity suppliers
must get a certain portion of power from low-carbon sources or
by purchasing green certificates that have a tradable value.
Allowing renewable certificates to trade freely between the
countries helps them meet clean power targets at lower cost.
HgCapital plans to build 300 to 400 megawatts of wind in
Sweden and Norway and 200 to 300 megawatts in Ireland. The fund
doesn’t chase tariffs, instead investing in areas that have the
best resources, Murley said. That cuts dependence on subsidies.
Sweden wants half of its energy to come from renewables by
2020, up from 47 percent now, and Norway is aiming for 67.5
percent. EON SE said Feb. 8 it planned to build hundreds of
megawatts of wind power in the two countries. Norway’s low
population density and strong winds allow larger and cheaper
projects than in Germany or Poland, and EON is planning nine
operations with capacity totaling as much as 1,500 megawatts.
‘Gravy Train’
While investing its second fund, HgCapital is also shedding
assets in the first, 300 million-euro fund, including Spanish
solar projects, smaller French wind farms and a wind development
in Sweden. It already sold its U.K. and Irish wind projects and
aims to offload remaining assets in 12 to 18 months. The process
is harder than before the economic crisis as buyers are cautious
and it takes longer to build and sell assets, Murley said.
HgCapital will probably return to the market to raise funds
in the next two to three years and may venture outside Western
Europe as some areas are saturated with renewables, he said.
Pressure on the industry to deliver at lower cost will rise
in the next five years as the “gravy train” of subsidies comes
to an end, Murley said. A “vast amount of money has been lost
in the sector, making it a harder and harder sell, especially
with the regulatory changes in Europe,” he said.
As a consequence, Murley expects to see a further downward
trend in fundraising for clean technologies this year.
Countries have to stop making retroactive tariff changes,
the industry has to cut reliance on subsidies, and investors
need to see positive returns to spur investment, he said.
To contact the reporter on this story:
Louise Downing in London at
ldowning4@bloomberg.net
To contact the editor responsible for this story:
Reed Landberg at
landberg@bloomberg.net
