Eiffel closes ‘innovative’ energy transition bridge debt fund on €350m

French asset manager Eiffel Investment Group has closed the first bridge debt fund for renewable energy projects above target on €350 million.

The Eiffel Energy Transition Fund was originally launched in 2017 with a €200 million target but the demand has “been much more than expected”, Pierre-Antoine Machelon, manager of the fund, told Infrastructure Investor.

The 10-year fund provides short-term pre-construction debt to renewable-energy and energy-efficiency projects across Europe, having already invested €233 million to date. The fund’s debt is redeemed once long-term financiers come in its place.

Machelon said investors should expect returns of about 5 percent, adding that, despite the greenfield nature of the fund, institutional investors were attracted by its risk-reward nature. The fund contained 10 institutional investors such as Aviva France, Credit Mutuel, MAIF and ProBTP, as well as garnering €40 million each from the European Investment Bank and French energy agency ADEME.

“To [institutional investors], it was a good balance between being sure they were investing ‘green’ and having a very good risk-reward,” he explained. “This fund provides a much higher rate than long-term debt and investors get a nice return for risk which is well-managed. We provide short-term risk, with the projects themselves securitised and collateralised.”

Projects are financed by the fund through special purpose vehicles, with Eiffel committed to invest any amount between €1 million and €50 million per project. The bulk of the portfolio financed by the fund to date is dominated by solar sites in France with 10 percent of all new solar capacity in in country in 2017 financed by Eiffel. In addition, four biomass plants in the UK and energy efficiency projects in Spain and Croatia have also been recipients, with nearly 300MW financed in total.

“Before launching the fund, we tried it three times on an ad-hoc basis with single developers,” said Machelon. “We tried the concept and saw it helped the developers. We first set this up in 2012 and did further deals in 2014 and 2015. We then convinced the EIB – it took a year – and said it would really help to set up this kind of fund. We then created it in April 2017. Developers are not sure they need a [bridge loan] but as soon as they’ve used it, they’re happy with it and they want to get more.”

Eiffel said its “innovative” fund will allow about €1.5 billion to be invested across the energy transition sector over 10 years. Eiffel’s debt has maturities of between six and 36 months.