Infrastructure Capital Group raises $390.7m for new renewables fund

The Australian fund manager will target both domestic and offshore investors in 2019 as it seeks to raise a total of $723.5m for investments at home and in New Zealand.

Australian fund manager Infrastructure Capital Group has raised an additional A$150 million ($108.3 million; €95.4 million) for its third fund, the Australian Renewables Investment Fund, and will go back to the market to raise further capital in early 2019.

The additional capital commitments, including A$100 million from the Clean Energy Finance Corporation in its largest ever single equity investment in renewable energy to date, take the size of ARIF to A$540 million.

ICG will seek to raise approximately A$450 million next year to take the fund’s total capital to around A$1 billion. The vehicle is open-ended and is targeting “double-digit” returns, ICG managing director Tom Laidlaw told Infrastructure Investor.

ICG will deploy the capital in 2019 and 2020, with some potentially deployed in 2021 if the project is at an early stage.

The fund will focus on renewable energy assets in Australia and New Zealand, with battery storage “definitely” being considered alongside more traditional wind and solar projects, Laidlaw said. ICG has identified a pipeline of assets for investment but declined to disclose specifics on what it was targeting.

ICG will target both domestic and international investors for the raising in 2019, with Laidlaw saying that most interest to date had come from domestic superannuation funds, with some offshore interest. The fund’s launch was a direct reaction to a change in mentality from some investors, he said, who were increasingly focused on sustainability and emissions.

The renewable energy sector in Australia has experienced a record year for investment in 2018, according to figures published this week by the Clean Energy Council, despite uncertainty over federal energy policy. Laidlaw argued that federal government decisions were not dampening the renewable energy sector’s prospects.

“The macro environment at the political level doesn’t affect much at the grassroots investment level, or certainly not investment decisions,” he said. “A lot of people disagree with that, but we think there’s been enough consistent policy and enough consistent support for the sector that the market just gets on with it, and that’s exactly what’s been happening in the face of uncertainty around macro policy.

“We’re not too fussed by all the noise that’s out there and we think the sector’s got a long-term future.”

The main risks facing the sector, Laidlaw said, would come from areas such as technological change rather than policy.

“For example, two years ago no one would have said that batteries would change the way our grid operates. What’s next? We’re still learning about batteries and they’ll obviously improve, but there could be something else like that over the next five to 10 years,” he said.

“They’re the things we’ll lose more sleep over, [rather] than whatever government policy is.”

He added that government no longer needed to subsidise renewable energy projects as they had proved they could “stand on their own two feet” and the sector is “here to stay”.

CEFC said in a statement that its commitment to ARIF represented a 40 percent increase to its renewable equities portfolio, taking the total commitment to A$355 million.

Most of its funding has come via debt, with the organisation committing more than A$2 billion in debt finance since 2013. It announced a A$50 million senior debt commitment to Nexif Energy’s Lincoln Gap Wind Farm in South Australia earlier this week.