Exclusive: CIC mulls direct investments in renewables

The Chinese sovereign fund, which is currently only exposed to the sector through third parties, is looking at assets including wind and solar projects.

China Investment Corporation, Beijing's $746 billion sovereign wealth fund, is looking to make direct investments in renewable energy projects as it seeks greater exposure to the sector, Infrastructure Investor has learnt. 

The fund is in the process of doing due diligence on a number of renewable assets, including wind and solar plants, in both developed and emerging markets, according to sources familiar with the matter. 

CIC’s exposure to renewable energy was so far limited to fund investments only. Direct investment in clean power is “a new area for CIC,” said a person close to the institution. 

The sovereign fund declined to comment on a possible revamp of its investment mandate.

It is understood that CIC has not yet outlined a clear strategy for investing in renewables, but is well aware of the growing flow of institutional capital now targeting the sector.

“More brownfield renewable opportunities have come to the market over the last few months. A number of operating assets are being commercialised as sellers seek to cash out or raise funds for future expansions,” said one source. 

“Renewable energy assets are attractive in terms of policy support and profit margins, and it would be a good fit as a long-term stable business in CIC’s portfolio. In the short term, however, uncertainties in the regulatory framework and political risk are the main concerns.”

Renewables could become a key tenet of CIC’s investment strategy at a time when governments are looking to boost clean energy generation in a bid to fight climate change, the people said. Other assets CIC has recently been looking at include roads and airports. 

At the same time, sources said CIC is starting to review its existing portfolio and investment strategy as a result of the UK's vote to leave the EU, though it is so far unclear in which direction the adjustments will eventually be made.

While a number of deals have been put on hold after a gap emerged between buyers' and sellers' expectations, quality assets in the UK remain attractive, an Asian investor commented.