Chinese renewables fund seals second close on $480m

CGN Private Equity Fund Management Company has reached a second close for its CGN Capital Partners Infrastructure Fund III on 3.2 billion yuan ($479 million; €425 million).

The Shenzhen-based firm aims to close the renewable energy-focused vehicle, which has a 5 billion yuan target, in the fourth quarter of this year, CGN Fund III chief investment officer Raymond Fung told Infrastructure Investor.

The fund is backed by Chinese and Hong Kong-based financial institutions, including the Industrial and Commercial Bank of China, the Agricultural Bank of China, the Postal Savings Bank of China, the People’s Insurance Company of China and two of China’s largest asset management companies.

More than half of the commitments so far come from banks, with the rest provided by insurers, asset managers and corporate entities. The fund is sponsored by CGN Group, China’s largest nuclear power operator, and managed by JIDA Capital, an investment and advisory firm owned by New Zealand-based Morrison & Co.

“We’re looking to invite the remaining top-tier Chinese institutions to come on board, and extend the invitation to international investors,” added Fung.

The CGN executive explained that a number of international investors had raised concerns regarding the fund’s alleged concentration. Its mandate only covers renewable energy assets in China.

Fung argued that having a specialist investment approach is the best way to secure value-for-money deals, especially given the depth of the renewables market in the country.

The fund will look to invest in operating assets in the wind, hydro and solar power sectors which offer sustainable yields and moderate capital growth over a medium-term investment horizon.

Since its first close in August 2015, Fung said, the vehicle has completed due diligence on more than 900MW of renewable energy assets, committed to invest 830 million yuan in 267MW of projects, and is conducting due diligence on another 800MW of assets. The fund, which typically looks for deals worth $10-$50 million, is likely to close four investments by October, he added.

CGN PE Fund I and Fund II, both closed in 2010, are invested in nuclear power stations and natural resources respectively.