First Reserve: Infra, cleantech drive LP renewables appetite

Techonologically-driven investments and less-risky infrastructure deals stand out as the two main opportunities within the sector, with overall LP appetite for renewables ranging from ‘cautiously optimistic to skeptical’, First Reserve managing director Chris Hearn said at a conference in New York.

Limited partner appetites for renewable energy investments are concentrating around risky, tech-heavy investments and less-risky infrastructure-type investments, with not much interest for assets in between those two categories.

That's according to First Reserve Managing Director Chris Hearn, who spoke at a conference in New York on Wednesday. 

Chris Hearn

Riskier investments, such as new technologies for biofules and other clean or renewable energy sources, are attractive to investors such as venture capital firms, which invest in risky, early-stage ventures that have yet to prove their business plans. Infrastructure investors, on the other hand, typically seek out existing assets with stable, predictable cashflows.

Hearn said this bifurcation was “driving most of the feedback that we get from our investor conversations”, which range from investors who are “cautiously optimistic to skeptical” about the sector overall.

To win over limited partners, Hearn said there is a “need to demonstrate a higher bar” of opportunity for the sector than just its “headline aspects”, such as political support for subsidies and other favorable regulatory treatment for renewables.

Hearn, who joined First Reserve in 2008 from Credit Suisse, is one of two managing directors on the firm’s energy infrastructure team, which seeks to bring an infrastructure-style of investing to the wider sector of energy in which First Reserve has been active for 25 years, according to its website.

Hearn added the energy industry “lends itself very well” to infrastructure and he sees a “tremendous amount of opportunity” in the sector.