Downing plots up to 15 investments after $158m close on flexible power fund

The Downing Flexible Generation Fund is the investment manager’s first institutional vehicle for infrastructure and is focused on the UK market.

UK-based investment manager Downing has reached a £125 million ($158.1 million; €138.6 million) final close on a fund dedicated to investing in flexible power generation in the UK.

The Downing Flexible Generation Fund will focus on acquiring gas-peaking assets, with the first deals planned for the current quarter. Downing said it has exclusivity on several assets with a total generating capacity of more than 200MW, while it is also conducting due diligence on further assets with capacity of 140MW.

The fund expects to make between 10 and 15 investments over the next three years, which Downing estimates to total about 300MW of capacity. Ticket prices are expected to range between £5 million and £15 million.

The firm said the increase of renewable energy in the UK’s system has created a new asset class in flexible generation, in which “gas-peakers play a significant role”.

Gas-peaker projects have been particularly successful in securing contracts in the UK’s capacity-market auctions. The latter were introduced in 2014, providing payments to generators to ensure standby power is available when demand is high or when intermittent generation is unavailable. However, the payments were deemed illegal state aid by the European Court of Justice in November and the system is now suspended pending changes to the system. Market sources expect slight changes to the payment system rather than a complete abolition of the contracts.

Despite the Downing team making more than 100 energy investments to date across sectors, the fund is Downing’s first dedicated infrastructure fund for institutional investors and was described by Shane Swords, the group’s head of institutional fundraising, as a “significant step forward in our institutional product development”.

Downing last year announced a partnership with battery group Pivot Power to build a 2GW network of grid-scale batteries and rapid electric vehicle charging stations across the UK. The company plans to raise funds from institutional investors to support the initiative.