Singapore-based Armstrong Asset Management has brought the capital haul of its first fund to $130 million with a third close, well on its way to a $150 million final close that it expects to hold next month, according to a company statement.
This third close has seen three additional investors commit capital: the IFC Catalyst Fund – a fund of funds platform under the International Finance Corporation that seeks to address climate change in emerging markets – the Netherlands Development Finance Company (FMO) and Obviam on behalf of the Swiss Investment Fund for Emerging Markets (SIFEM).
IFC Catalyst Fund’s $20 million commitment comes in addition to another $20 million commitment from IFC itself in May. The May investment was the first by IFC into a private equity fund dedicated to clean energy in Southeast Asia. Altogether, the fund has seven investors at this point, according to Andrew Affleck, Armstrong managing partner.
For FMO and Obviam, this is their first commitment to an Armstrong fund.
The Armstrong Clean Energy Fund will focus on small-scale renewable energy and resource efficiency projects across Southeast Asia, and has already announced its first two deals: a strategic cooperation launched in April with energy developer Symbior Solar Siam to develop and operate a 30MW portfolio of six small-scale solar power plants in central and northeast Thailand; and a $30 million investment into a portfolio of solar and biogas power projects across Thailand, the Philippines and Indonesia run by Annex Power, a renewable energy group focused on Southeast Asia.
Affleck explained these investments will receive capital in stages, as and when they hit certain milestones, but the the capital allocated for these deals in their entirety constitutes about $40 million.
“The capital, expertise, and innovation [Armstrong] will bring to clean energy in Southeast Asia exemplifies the role private equity can play in helping to address climate change while generating financial returns,” Reyaz Ahmad, head of the IFC Catalyst Fund, said in the statement. Jurgen Rigterink, chief investment officer of FMO, added that Armstrong’s investment strategy “will change the energy matrix [in Southeast Asia] into a cleaner and more sustainable one.”
Southeast Asia as a region “has a great need for energy”, Affleck told Infrastructure Investor, since most of its fossil fuels are imported. Energy in the Philippines, for example, is largely dependent on diesel, which is more expensive than just installing solar panels. The up-front costs in setting up renewable energy projects has also dropped worldwide, partly thanks to China's aggressive expansion, and so the team at Armstrong decided that a Southeast Asia clean energy fund would be appropriate for the current climate, Affleck added.
Armstrong held a first close for this fund on $65 million in August 2012, with commitments coming from two European development finance institutions: GEEREF and DEG; and an unnamed Asia-based corporation. The 10-year Armstrong Fund expects to make a total of between 10 to 15 investments, each ranging from $5 million to $12 million and typically generating up to 10 megawatts from renewable energy sources of solar, hydro, wind or biogas.