Tom murley hg capital giff oecd 12 06 2014

OECD GREEN INVESTMENT FINANCING FORUM Paris, 12-13 June 2014 Mobilising capital from institutional investors: opportunities and challenges for green investment banks Trends in Institutional Investment in EU Renewable Energy Projects Tom Murley Head of Renewable Energy, HgCapital

© Copyright 2013 HgCapital 2 Sector expert investors supporting management to grow industry champions

• Europe’s largest pure-play renewable energy infrastructure investor

• Renewables sector established 2004

• €900 million of institutional equity capital raised since 2006

• Backed by leading global institutional investors

• Dedicated team with 70+ years power sector experience

• Part of HgCapital, a leading European Private Equity Firm

• Founded in 1989

• Over €8 billion of capital committed to 7 funds since 2000

• Equity for growth buyouts and renewable energy infrastructure

• Owned by partners and employees

HgCapital Background Europe’s largest pure-play renewable energy fund manager

€900 million of equity, invested in over 70 projects with over €2 billion in value

Firm Snapshot


35,374

49,416

43,768

57,73559,305

44,103

23,739

3,762

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

2007 2008 2009 2010 2011 2012 2013 2014

€M

illion

s

EU Refinancing

EU M&A

EU New Build

EU: Macroeconomic and regulatory risks and finance shortage stalling growth

EU RENEWABLE PROJECT INVESTMENT – NEW BUILD AND EXISTING ASSETS, DEBT, EQUITY, M&A, REFINANCING (2007-2014)

Source: Bloomberg / New Energy Finance


OBJECTIVE Map institutional / financial investor equity investment activity in EU renewable energy projects and infrastructure companies since 2004

DATA COLLECTED AND ANALZED

>450investments, €18 billion equity investments by >90 financial investors, including >20 Dedicated renewable infrastructure funds 3 Dedicated renewable private equity funds 25 General infrastructure funds 2 Hedge funds 5 General private equity funds >20 Direct investors – pension funds, large family offices and insurance companies, average AUM>€10

billion 6 listed renewables funds UK Green Investment Bank (direct equity investments only)

Excluded German and Danish retail investor funds Regional and small sector funds with <€75m or less in capital (e.g. small solar funds) UK EIS and VCT funds (e.g. Octopus) Small family offices making a few investments

SOURCES AND METHOLOGIES

Sources: Prequin, Bloomberg New Energy Finance, New World Energy Network, Sparkspread, Infrastructure Journal, Fund Manager Websites, HgCapital discussions, Fund manager conference presentations

Equity invested based on reported data sources, or if not reported using standard industry comparable (e.g. average selling price of German wind farms circa€1.6m/MW and 75% average gearing, average Italian solar pv deal equity circa €600k per MW). +/- 5% error on deployment.

Institutional equity investment in EU renewables 2004-2014 Dataset and methodology


274 345 450 540691

812

1,111

4,096

2,011

4,160

3,346

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Other

Public Bank

Renewable PE Fund

Hedge Fund

General PE Fund

Listed Renewable Fund

Infrastructure Fund

Insurance/Pension Fund

Unlisted Renewables Fund

Rapid growth in institutional equity investment

Source: Proprietary HgCapital research.

INSTITUTIONAL EQUITY INVESTMENT IN EU RENEWABLE PROJECTS (€ MM.) BY INVESTOR TYPE

Investment Trends


274 345 450 540691

812

1,111

4,096

2,011

4,160

3,346

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

UK

Sweden

Spain

Ireland

Italy

Germany

France

Denmark

Other

INSTITUTIONAL EQUITY INVESTMENT IN EU RENEWABLE PROJECTS (€ MM.) BY COUNTRY

Shift to Northern Europe (and the UK in particular)


Investment Trends


274 345 450 540691

812

1,111

4,096

2,011

4,160

3,346

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Operating & Construction

Development

Operating & Development

No Construction Risk

Operating

Construction Risk

Strong institutional preference for operating projects (2013 and 2014 construction skewed by a few large offshore wind deals)

Investment Trends

INSTITUTIONAL EQUITY INVESTMENT IN EU RENEWABLE PROJECTS(€ MM.) PROJECT STATUS



274 345 450 540691

812

1,111

4,096

2,011

4,160

3,346

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Project Debt

Dev Cap

P2P

Growth Cap IPP

Project Equity

Strong institutional preference for project-level equity

Investment Trends

INSTITUTIONAL EQUITY INVESTMENT IN EU RENEWABLE PROJECTS(€ MM.) TYPE OF CAPITAL



274 345 450 540691

812

1,111

4,096

2,011

4,160

3,346

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Merchant

Semi Merchant

Feed In Tariff

Strong institutional preference FITs and UK RO (Semi-merchant = UK RO and Italian Wind)


Investment Trends

INSTITUTIONAL EQUITY INVESTMENT IN EU RENEWABLE PROJECTS(€ MM.) REVENUE SOURCE (semi-merchant = UK)


274 345 450 540691

812

1,111

4,096

2,011

4,160

3,346

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Offshore Trans

Hydro

Biomass

Biogas

Solar Thermal

Solar PV

Offshore Wind

Onshore Wind

Strong institutional preference onshore wind, followed by offshore wind and PV

Investment Trends

INSTITUTIONAL EQUITY INVESTMENT IN EU RENEWABLE PROJECTS(€ MM.) TECHNOLOGY



Institutional investors – stage / risk profiles differ among investors

PENSION FUNDS/ INSURANCE LISTED FUND/PUBLIC BANK & OTHERS (€ MM.)

GENERAL INFRASTRUCTURE FUNDS (€ MM.)

RENEWABLE INFRASTRUCTURE,PE AND HEDGE FUNDS (€ MM.)

Source: Proprietary HgCapital research. Others include funds of funds

0

500

1,000

1,500

2,000

2,500

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

OperatingNo Construction RiskOperating & DevelopmentDevelopmentConstruction Risk

0

5001,0001,5002,0002,500

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

0

500

1,000

1,500

2,000

2,500

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014


€0

€500

€1,000

€1,500

€2,000

€2,500

€3,000

€3,500

€4,000

€4,500

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

EU Renewable Financial InvestorsInvestment by Ownership Share 2004-14

By Equity Invested (€MM)Minority

Majority

More minority interests as direct investors and GIBs emerge

Investment Trends



€0

€1,000

€2,000

€3,000

€4,000

€5,000

€6,000

Unlisted RenewablesFund

Insurance/PensionFund

Infrastructure Fund Listed RenewableFund

General PE Fund Hedge Fund Renewable PE Fund Other Public Bank

EU Renewable Financial InvestorsInvestment by Ownership Share 2004-14

By Equity Invested (€MM) Minority

Majority

Direct investors and GIBs favour minorities

Investment Trends



12

4

7

910

1112

16

20

23

12

4

67

11

14

0

5

10

15

20

25

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

Number of Fund M

anagers and Direct InvestorsCu

mul

ativ

e Fu

nds R

aise

d &

Cum

ulat

ive

Dire

ct In

vest

men

ts

(€M

illio

ns)

Cumulative Listed Funds Raised

Cumulative Direct Investment

Cumulative Private Funds Raised

Number of Fund Managers

Number of Direct Investors

Institutional investors increasing in number and capital

EVOLUTION OF EU RENEWABLE POWER SECTOR INVESTMENT (2002 – 2014)

Source: Preqin & Proprietary HgCapital research.


23

45

6

910

11

13

15 15

0

2

4

6

8

10

12

14

16

$0

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

$70,000

$80,000

$90,000

Number of Fund M

anagersCum

ulativ

e Fun

ds R

aised

$ M

illion

s Cumulative Funds RaisedNumber of Fund Managers

We have seen a similar pattern before

EVOLUTION OF US POWER SECTOR INVESTMENT FUNDS (1987 – 2014)

Source: Preqin & Proprietary HgCapital research.

Environment

Tom murley hg capital giff oecd 12 06 2014