tom murley hg capital giff oecd 12 06 2014
DESCRIPTION
Mobilising capital to build a stronger, greener economy Presentation to the OECD, Paris 12th June 2014 Rob Cormie Chief Operating OfficerTRANSCRIPT
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
© Copyright 2013 HgCapital 3 Sector expert investors supporting management to grow industry champions
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
© Copyright 2013 HgCapital 4 Sector expert investors supporting management to grow industry champions
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
© Copyright 2013 HgCapital 5 Sector expert investors supporting management to grow industry champions
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
© Copyright 2013 HgCapital 6 Sector expert investors supporting management to grow industry champions
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)
Source: Proprietary HgCapital research.
Investment Trends
© Copyright 2013 HgCapital 7 Sector expert investors supporting management to grow industry champions
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
Source: Proprietary HgCapital research.
© Copyright 2013 HgCapital 8 Sector expert investors supporting management to grow industry champions
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
Source: Proprietary HgCapital research.
© Copyright 2013 HgCapital 9 Sector expert investors supporting management to grow industry champions
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)
Source: Proprietary HgCapital research.
Investment Trends
INSTITUTIONAL EQUITY INVESTMENT IN EU RENEWABLE PROJECTS(€ MM.) REVENUE SOURCE (semi-merchant = UK)
© Copyright 2013 HgCapital 10 Sector expert investors supporting management to grow industry champions
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
Source: Proprietary HgCapital research.
© Copyright 2013 HgCapital 11 Sector expert investors supporting management to grow industry champions
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
© Copyright 2013 HgCapital 12 Sector expert investors supporting management to grow industry champions
€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
Source: Proprietary HgCapital research.
© Copyright 2013 HgCapital 13 Sector expert investors supporting management to grow industry champions
€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
Source: Proprietary HgCapital research.
© Copyright 2013 HgCapital 14 Sector expert investors supporting management to grow industry champions
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.
© Copyright 2013 HgCapital 15 Sector expert investors supporting management to grow industry champions
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.