Aquila Capital’s new fund is ground-breaking for institutional investors in that it offers a regulated fund structure with the responsibility for sourcing and managing the assets delegated to a dedicated team of hydropower investment experts.The fund is a SICAV-SIF (S.A.) domiciled in Luxembourg. The minimum investment size is €10 million.
The fund's objective is to deliver an IRR of 7-9% and long-term stable cash yields, low volatility and independence from traditional asset classes and government subsidies.
The fund will invest across different geographic regions, climates and topographies but predominately in Scandinavia and other European Union member states.
The supply network to distribute hydropower across Europe continues to be developed. For example, it was announced in January this year that Norway was close to agreeing a €2 billion investment to build a 700 km underwater powerline to supply the UK. Norway already supplies Denmark and the Netherlands with subsea interconnectors and is planning to build another, 500km line to Germany.
A new study commissioned by Aquila Capital reveals that currently 7% of European institutional investors have any exposure to hydropower, compared with 37% to solar and 29% to wind. The findings show that the most common objections to investing in hydropower are the lack of sizeable investment opportunities and a ‘shortage of managers with a track record’.
According to the research, investors are attracted to hydropower because it offers long-term stable cash flows (66%); overall portfolio diversification (55%); renewable portfolio diversification (45%); an inflation hedge (38%); and attractive IRRs (38%).Oldrik Verloop, Co-Head of Hydro at Aquila Capital, said:
“Hydropower is the leading source of renewable energy and accounted for around 12% of Europe’s total net electricity production and 60% of that produced from renewable resources in 2012. 3
“The combined drivers of rising global energy demand and diminishing fossil fuels make it an attractive investment opportunity for institutional investors, who are seeking to future-proof their portfolios and will increasingly diversify into alternative, real assets such as hydropower. The launch of this Fund underlines Aquila Capital’s credentials as a leading financial investor in renewable energy.”