Exclusive: New Chinese renewables fund targets 15% IRR

Ming Yang, CGN and Shenzhen Energy have established a joint fund management company with a view to raising a $484m vehicle.

China Ming Yang Wind Power Group (Ming Yang), a Guangdong-based wind turbine manufacturer, has entered into a framework agreement with power companies including CGN Wind Energy, a subsidiary of China General Nuclear Power Group, and Shenzhen Energy Group to jointly invest in a fund management firm called Guangdong Oriental Millennium Renewable Energy Industry Fund Management (Oriental Millennium).

Upon the joint capital injection, Ming Yang will invest RMB28 million (€3.94 million; $4.4 million) in Oriental Millennium to acquire an approximately 28 percent stake in the company. The remainder will be shared evenly between CGN Wind, Shenzhen Energy and the management of Oriental Millennium, which will each invest RMB24 million in the firm, according to reports in the local press.

Once set up, Oriental Millennium will launch and manage a fund named Guangdong Renewable Energy Industry Fund (Guangdong Renewable Energy). The vehicle is hoping to raise total capital commitments of up to RMB3.08 billion. It is understood that CGN Wind, Shenzhen Energy and Ming Yang will invest RMB1 billion each in Guangdong Renewable Energy as limited partners.

While the fund’s primary objective is to seek investment opportunities in renewable energy projects or companies located in Guangdong province, Johnson Zhang, Ming Yang’s capital markets and investor relations director, told Infrastructure Investor that the team has now expanded its search and located potential projects across the country, such as a 100-megawatt (MW) wind farm in Guangxi and another 50MW wind farm in Henan.

Guangdong Finance Investment is also expected to make a capital commitment of RMB50 million to the fund on behalf of the Guangdong government. The investment period will span eight years, with a target net IRR set at 15 percent.

“We believe the fund will help generate synergistic effect by sharing resources and enlarging investment channels among industry players,” said Chuanwei Zhang, chairman and chief executive of Ming Yang.

Currently focused on designing and manufacturing wind turbines, Ming Yang believe the investment will bring potential opportunities for the development of downstream wind farms to be owned and operated by the company.