CIP makes first geothermal investment with German move

The deal comes as the CIP III fund secures its first Asian LP ahead of an expected final close this month.

Copenhagen Infrastructure Partners has become the majority shareholder of German geothermal developer Deutsche Erdwärme, marking the firm’s first investment in the technology.

The Danish fund manager, which focuses on energy infrastructure, said it is looking to develop a portfolio of geothermal projects in Germany’s Upper Rhine valley with the geothermal developer. Felix Pahl, a vice president at CIP, has joined Deutsche Erdwärme as a managing director.

Deutsche Erdwärme has so far been granted permissions and performed exploratory work on four projects, according to its website. The geothermal projects will generate electricity by pumping up hot water of 100°C+ from a depth of three to five kilometres.

One of the projects, the planned 40MW GeoWärme Südpfalz, was rejected by local residents in a referendum in September. The other three sites were granted exploratory permissions in August 2015 and June 2016.

Germany has only about 25MW of operational geothermal capacity, according to latest statistics from the International Renewable Energy Association, although the government has been making a concerted push to increase this. Finnish private equity group Taaleri said in October it would finance a 30MW geothermal plant south of Munich worth €160 million, adding that the government is supporting development with a €252 per MWh subsidy.

CIP’s deal has been financed via its Copenhagen Infrastructure III fund, which held a sixth close on Dkr21 billion ($3.5 billion; €2.8 billion) in December, ahead of its €3 billion target and €3.5 billion hard-cap. CIP III follows on from the strategy of its predecessors in making both equity and junior debt.

The fund secured its first Asian LP this week after insurance group Taiwan Life confirmed a Dkr60 million commitment to the vehicle. CIP said in December that it expects to close the fund this month. Taiwan Life joins a group of about 30 investors in the fund, including Nordic pension funds, British pension schemes, Australia’s Catholic Superannuation Fund and Israeli insurance group Migdal.