Armstrong Asset Management’s Southeast Asia-focused clean energy fund is committing $22.5 million (nearly 14 percent of its $164 million total investment capital) to mini-hydropower projects generating 50 megawatts (MW) led by Jakarta-listed construction company PT Nusa Konstruksi Enjiniring Tbk (NKE) in Indonesia.
The projects are at various stages of the permitting process and include a 5MW project in Java and three projects totaling 21MW in Jakarta, due to be operational by the end of the second quarter of 2016 and end of 2016 respectively.
Djohan Halim, president and director of PT Inti Duta Energi (PIE), NKE’s subsidiary specialising in mini-hydropower, said about PIE and Armstrong’s partnership: “We share a commitment to the potential and the need for rapid growth in the development of clean, efficient and low risk energy solutions.”
The Indonesian government has recently reviewed feed-in-tariffs for biomass, biogas, municipal waste and hydropower plants with a generation capacity of less than 10MW, making it one of the most attractive renewable energy sectors in Southeast Asia.
According to Michael McNeill, a partner at Armstrong Asset Management: “Mini-hydro plants are a mature technology which have a long asset life and entail low operational costs. They present relatively low environmental risks and are less disruptive for existing grid infrastructure than larger plants.”
McNeill also stressed the attractions of a diversified portfolio, avoiding exposure to a single large asset.
However, mini-hydropower also means long construction times and higher geotechnical risks (e.g. compared with ground-mounted solar projects), the firm points out. Furthermore, “one needs a good pipeline to be able to achieve scale for exit,” McNeill added.
Armstrong Asset Management specialises in small-scale infrastructure projects. It achieved a final close on its debut clean energy fund in November 2013 with institutional investors including IFC, DEG, FMO, Proparco, SIFEM, GEERE and Unigestion. This is the fund’s fourth investment since its 2013 close. The company has invested alongside renewable energy companies Annex Power, Symbior Elements, and Blue Circle.
NKE is an Indonesian publicly listed company operating in civil engineering and construction works. Since its establishment in 1982, NKE has successfully completed over 200 infrastructure projects and over 250 building projects across Indonesia, including the 180MW Asahan 1 hydro-electric power plant in Sumatra.