One week ago, German asset manager Prime Capital achieved the €202m first close of its Prime Green Energy Infrastructure Fund. This is one of a series of funds that has achieved a close in the last month, showing that investor interest in wind is alive and well.
For Mathias Bimberg, head of infrastructure at Prime Capital, the fact that the firm’s first infrastructure equity fund has reached a first close despite the global economic uncertainty is a vindication of its strategy.
In this article, we speak to him about the fund’s green investment strategy – including its close relationship with manufacturer Siemens Gamesa – and if political uncertainty might force it to change tack.
The Prime Green Energy Infrastructure Fund's goal is to invest in 100MW+ wind farms in Nordic countries, with a focus on assets in the later phases of development. It also invests exclusively in projects that use turbines from Siemens Gamesa. But why choose to narrow its focus so much?
Bimberg explains Prime Capital is targeting larger projects in the Nordics because it wants to invest in developments with the lowest levelised cost of energy (LCOE). Its preferred Nordic nations – mainly Norway and Sweden, but also Finland – offer large onshore wind projects of a size that are unusual in most of Europe, other than some regions of Scotland, Spain and eastern Europe. He says this protects investors against low power prices and so helps to tackle the most significant risk these projects face.
“This is for us a natural hedge against low power price environments, because other competing production facilities would have to be taken off the grid before ours,” he says.
Bimberg says that investing in projects that can operate on the lowest LCOE goes hand in hand with achieving a higher internal rate of return (IRR).
He says that good wind conditions, scalability of projects, and still relatively low development costs all contribute to the good economics, to which Prime Capital seeks to optimise all technical and commercial aspects of the wind farms. Bimberg says this means that the fund can achieve IRRs of 8%-10%, compared with the 6%-8% targeted by its rivals.
“We want to invest in big projects… because we get better pricing for investment and operating costs,” he says. “It’s a scale thing for us.”
The fund’s investments so far include the 290MW Nordlicht development in Norway, and the 254MW Stavro project in Sweden that reached financial close in November of last year. The investors in Stavro include a consortium of South Korean institutions, Siemens Financial Services and German pension fund Nordrheinische Ärzteversorgung.
Bimberg adds that the company has secured a "healthy" pipeline of projects that it aims to close in the next year, of which one in Sweden is imminent and will be executed along with investors in the fund.
Prime Capital sources the projects for its 1.2GW investment pipeline in collaboration with Siemens Gamesa.
Prime gets information about the upcoming project pipeline of Siemens Gamesa in the Nordics, and gets involved late in the development cycle to help optimise schemes. Bimberg says the partnership is non-exclusive and has a mechanism to ensure the fund pays competitive prices for equipment.
He says the partnership makes sense for business development because turbine makers get involved earlier in the development process and have knowledge of quality projects. Siemens Gamesa gets certainty over their order book with a partner able to fund projects, and the pair are also able to work closely on areas such as optimising technology for the site and thus improving wind yields.
The company is now looking to raise an additional €300m for the fund over the next 12 months, and it has a hard cap of €500m. For future funds, Prime Capital may look beyond the Nordics – although it will continue to focus on larger developments that give it economies of scale.
Part of this will be driven by government appetite for wind in the Nordics.
We spoke to Bimberg on the day the Norwegian government announced that it was set to bring in tighter regulations for onshore wind projects, which follows its decision in October to abandon a national wind plan.
“It is becoming more challenging at the moment undoubtedly,” he concedes, “but resistance has been there for a long time and we have learned very valuable lessons through our activities there, so that we can choose our investments carefully. Norway is experiencing high growth in electricity demand, and wind remains the lowest cost of production. Development will continue, even if at a slower pace compared to the unusually high one experienced in the last couple of years."
He added that he expects Finland and Sweden to continue with their moves towards carbon neutrality and support wind, and that Prime is also looking at opportunities in Iceland. It's clear the company isn't going cold on the Nordics.