The Clean Energy Finance Corporation, Australia’s state-backed green financier, has taken a 50 percent stake in a newly-established fund manager, Warada Capital.
Warada has been founded as a 50-50 joint venture between the CEFC and financial advisory firm Ironstone Capital, which has experience in the renewable energy sector. The deal represents both organisations’ first foray into funds management.
CEFC has committed working capital to help establish Warada and has made up to A$100 million ($70.1 million; €61.7 million) available for investments through the business.
The new entity will be headed by chief executive Alistair Craib, a partner at Ironstone Capital. He previously helped establish UBS Infrastructure Asset Management and was chief executive of the UBS-controlled Collgar Wind Farm in Western Australia.
Jeremy Don, who previously worked for Deutsche Asset Management and PwC, will be chief operating officer.
Craib told Infrastructure Investor that Warada would seek capital from institutions other than CEFC in due course, though he declined to outline a more specific timeline.
“The overall intent of the vehicle is to not only promote the development of renewable energy and energy-efficiency technologies, but to provide a platform for other investors to participate in the sector,” he said.
“There’s obviously a large demand for this type of investment on a risk-adjusted basis. However, it’s not always the easiest sector to participate in as there’s quite a few technical complexities. So we will, at the right time, be actively seeking further capital.”
This is the first time CEFC has taken an equity stake in a fund management business. Its equity lead Rory Lonergan said it had done so because it wanted to have greater influence over the projects it was financing.
“We want to continue to support the development of the renewable energy sector [and] continue to support initiatives to help build out the grid and help with grid security,” he said.
“We found that, as a house that was primarily a lender, we needed to expand our capabilities into that early-stage [development] space. We were looking for a partner that had complementary skills to our finance and investing skills.”
Craib and Lonergan said CEFC and Ironstone Capital had collaborated on several deals and developed a good working relationship.
“While we have been primarily an advisory house, the individuals within Ironstone have got investment experience, and asset ownership, construction and asset management experience,” said Craib. “We see this as a natural extension with a fantastic partner.”
He said Warada would be “opportunity agnostic” and would look at both brownfield and greenfield developments, and that its early pipeline was weighted towards the latter.
However, Craib added that as “an aspiring funds manager” Warada would “need to participate as appropriate” in competitive processes for brownfield assets.
He said the firm had a “healthy pipeline” and was in talks over a wind farm project in Victoria and a pumped hydro storage scheme.
“There’s obviously a lot of evolution in the energy market in Australia, from generation and demand perspectives, so we’ll need to adapt,” he said. “But it’s clearly a sector that’s on the march globally, so we see no shortage of opportunities focusing on generation, grid enhancement, and early-stage storage.”
Lonergan said CEFC would be open to committing further capital should the venture work well: “We think A$100 million at this point is a significant commitment. We’re open as a business to growing and seeing if we can support it further.”
Neither Craib nor Lonergan would be drawn on targeted returns, other than to say that investments would target “appropriate risk-adjusted returns for [each] asset at its stage of development”.
Warada will focus exclusively on investments in Australia. According to a statement, it will also target energy-related investments in the natural resources, transport and agricultural sectors.
The fund manager’s name is derived from an indigenous word for Waratah, a native Australian flower known for its adaptability.