IFM Investors has partnered with commodity trading company Trafigura to form Nala Renewables, a platform that aims to develop 2GW of renewable energy generation within the next five years.
Nala Renewables is a 50/50 joint venture that will build on the firms’ existing partnership in Impala Terminals. This existing JV owns and operates a network of terminals in Mexico, Spain and Peru that facilitate the movement of copper, lead and zinc around the globe.
IFM Investors global head of infrastructure Kyle Mangini told Infrastructure Investor that the new venture has an “aspirational” target of deploying $2 billion into greenfield and brownfield renewables projects.
Nala will focus on supplying energy to IFM’s assets, including Impala Terminals, with an initial focus on Europe, Asia and other emerging markets. The commodity trading company said in a statement that Nala would also build and operate projects next to Trafigura’s mining, port and smelting infrastructure assets worldwide, and that the renewable energy generated would be used to power some of those facilities.
Trafigura will contribute around 250MW of projects under early-stage development to the venture and provide a long-term offtake agreement to some of the assets on market terms.
“This is an extension of a strategy that IFM has been pursuing for a number of years, which is to self-generate where possible and be your own customer, effectively,” Mangini said. “We’ve got 12MW on site at Melbourne Airport, 6MW at Brisbane Airport, Alice Springs Airport is pretty much 100 per cent renewable – and we’ve got 150MW identified for Buckeye Partners in the US.”
Nala would be open to acquiring existing assets where this made sense, as well as developing greenfield assets on or next to the footprint of existing assets to which it will supply energy.
Although most assets will focus on supplying IFM’s existing portfolio, there is scope to broaden Nala’s approach over time.
“We’ve done some generating where we’ve put energy into the grid and that will be part of the longer-term strategy,” said Mangini. “And while the initial strategy is to focus on where we can generate, either on our existing footprint or adjacent to our assets, we won’t do this exclusively [in Australia]. We’re going to do it with other assets and, potentially, other partners.”
Mangini said that renewable energy had reached a “crossover point” in many markets because subsidies were no longer required.
“For a long time, you needed subsidies and that created a bit of sovereign risk, which manifested itself in a few markets,” he said. “But now we are at a point in the cost curve where, in some markets, you don’t need subsidies and that means it’s more economic to use renewables.
“As soon as that happens, the market will move in the direction [of renewables] organically. It’s not the same in all markets. In some, there is still a large focus on local [procurement], for example, where to participate you have to buy panels or turbines locally… which makes the price effectively higher.”
Trafigura said in a statement that a team of 15 was being recruited for Nala, which could grow over time as required and which Trafigura would support along with IFM.
Trafigura’s executive chairman and chief executive Jeremy Weir said in the statement: “The energy transition is driving the need, but also provides the opportunity to make strategic, long-term investments in renewable energy. The investments will provide synergies for our new power and renewables trading division which is going to become a significant pillar of our trading activity over the next few years and beyond and builds on our capabilities and understanding of other energy markets.”