Macquarie Infrastructure and Real Assets has closed its first dedicated renewable energy fund on €1.6 billion.
The Macquarie Green Investment Group Renewable Energy Fund 2 closed about 18 months after its launch in 2019 with a target of €1 billion. The fund is Macquarie’s first dedicated renewables fund since its takeover of the GIG, with the group closing the world’s only dedicated offshore wind fund on £1.1 billion ($1.5 billion; €1.2 billion) in January 2017 when still under the guise of the Green Investment Bank and owned by the UK government. The fund has since been renamed to MGREF1.
Despite large parts of the GIG’s work under Macquarie targeting pre-final investment decision projects, MGREF2 targets investments in construction-stage and operational projects in Europe, the US and other markets such as Taiwan and Australia.
“We saw an increase in interest and demand from our investors to have a strategy that invests in renewable energy and specifically in wind and solar in mature markets,” explained Leigh Harrison, head of EMEA at Macquarie Infrastructure and Real Assets. “The GIG and the fund can and will co-invest, particularly on construction opportunities, where that makes sense.”
Harrison declined to state the returns being targeted by the fund, although sources indicated at the time of its launch it would be eyeing an 8-9 percent IRR. It currently has two investments under its belt, with a 10 percent stake in the 576MW Gwynt y Mor offshore windfarm in the UK and a 50 percent stake in a 268MW residential rooftop solar portfolio in the US.
“Our approach will be to manage projects from construction and through their operational phase,” added Harrison. “MGREF2’s predecessor is a 25-year vehicle. We replicated that fund as we think it’s a good hold period for these types of assets.”
Harrison said expected drivers for the fund include the number of greener rebuild pledges by governments across the world, while about €22 billion per year is expected to trade in the renewable energy secondary markets per year.
He added that about 60 percent of MGREF2’s 32 investors originated from the UK and Germany, while other investors included insurers, pension funds and sovereign wealth funds from elsewhere in Europe, Asia-Pacific and North America.
The investor pool included a €101 million commitment from Border to Coast, the UK pension pool currently investing £1.4 billion raised from its members for its latest infrastructure investment cycle. Ian Sandiford, senior portfolio manager at Border to Coast, told Infrastructure Investor he had previously looked at investing with the group through the offshore wind fund, although refrained as it waited for the privatisation process to finish.
“Then coming together with Macquarie and the benefits of both their organisations in a single house was particularly appealing,” he added. “While expectation was that the fund would be more focused on Europe, they have the skillset and capability to invest globally so that appealed to us.”
The pension pool has also invested in the Stonepeak Global Renewables Fund and Sandiford said the specialisation aspect also appealed to the fund, as did the fund’s 25-year term, balancing the Stonepeak vehicle’s shorter time horizon.
“We can see the advantage of managers who have a specialisation in the renewables sector in terms of their ability to drive value creation. We were keen to ensure we had the exposure to renewables and with a generalist fund there was no guarantee,” Sandiford explained. “This 25-year fund will get involved in the construction phase and hold for its economic life and for us, that was a big attraction.”