It is just over four years since Marguerite’s second flagship fund closed on €745 million, and last week the company announced that a pipeline of investments was in place for the company’s third fund now that the second one is fully invested.
The new fund, Marguerite III, is thought to be targeting €1 billion with a hard-cap of €1.5 billion, and to have raised nearly €700 million at its first close in late 2022.
Just like its predecessor, Marguerite III is a 10-year, Luxembourg-based fund, aimed at the mid-market with ticket sizes between €30 million and €100 million for its Europe-based investments. However, the investor base for this fund could include more private institutional investors than before.
“Our first fund in 2010 was backed by the European Investment Bank and a group of national promotional banks from across Europe, but it was set up as an independent, privately owned manager, though elements of the investment strategy were defined by public policy priorities. Then, for the second fund, more private institutional investors were involved, and that transition is continuing,” says Nicolas Merigo, chief executive of Marguerite.
Known Marguerite investors include what would now be the European Investment Fund, Bank Gospodarstwa Krajowego, Caisse des Dépôts et Consignations, Cassa Depositi e Prestiti, Kreditanstalt für Wiederaufbau, Instituto de Crédito Oficial and Pantheon. It is an investor base that, according to Merigo, is “happy and loyal”.
Business, and strategy, nearly as usual
Merigo shrugs off the potential difficulties of launching a fund in a climate of soaring interest rates, inflation and war: “It is business as usual. We started Fund I in 2010 just after the global financial crisis, and this is another crisis to some extent, but you can also see it as an opportunity. There is a huge impetus to expand investment in renewables, energy efficiency, and solutions to deal with the intermittency aspect of renewables.”
The focus on intermittency means that investment in hydrogen could be on the cards and even a “significant focus”.
“We’re looking at a lot of different hydrogen-related opportunities, obviously very cautiously because it’s at a stage of development where it still needs a lot of government support. But we think there will be opportunities,” he says.
Where hydrogen will fit into a strategy varying between core-plus and value-add is too early to tell, but Marguerite has taken chances on new technology before.
“We have been early movers in many sectors over the years. Offshore wind, fibre in France, we were among the first sponsors of project financed digital infrastructure deals in Europe, and we helped transfer the skills that we had obtained in doing project finance in other sectors into digital infrastructure.”
In the case of offshore, however, there is a sense of relief at the recent sale of a share in German offshore wind park Butendiek.
“The issue with offshore wind right now is the returns are not as attractive. It is possible that we will return to offshore wind, maybe floating or somewhere where it hasn’t been done yet and where the returns could be satisfactory for funds that we manage. But in general, the returns have moved down and of course that has led to us being able to sell Butendiek at a very good price,” says Merigo.
The willingness to take risks could well extend to geographies.
“Our focus is pan-European. We’ve invested in 15 different countries in Europe so far and have proven our ability to approach all different kinds of European countries with varying complexity and risk profiles,” says Merigo.
“Obviously, we are very cautious in non-Eurozone or less developed countries. Most of our investments in Marguerite II were in Western and Southern Europe, but we already have successful investments in Eastern Europe too.”
Developing the pipeline
The pipeline for Fund III is under development, with Marguerite’s collaboration with the Spanish company Recursos de la Biomasa, S.L., or Rebi, as an example. Rebi develops urban bio-heated network projects in Spain and Marguerite acquired a project from Rebi in October for Marguerite II and expects to invest in up to four similar projects for the third fund.
Furthermore, Fund III’s inaugural investment was announced last week as an up to €50 million allocation to Norwegian charging point operator Wattif EV.
“We’re very selective in terms of what projects we pursue, and with the management or development teams that we work with. This is illustrated in the fact that all our greenfield projects have essentially been completed on time and on budget, which is I think, proof that we have been quite effective in our choices,” Merigo says.
He stresses the success of the company’s integrated asset management approach to investment whereby the people in the investment team responsible for origination and execution are also responsible for asset management.
“Across Marguerite I, II and Pantheon, we made 33 investments and have sold 15 portfolio companies, delivering double-digit returns in line with the original targets and returned over €1 billion euros to our investors so far.”
The original Marguerite partners, David Harrison, William Pierson, Michael Dedieu and Nicolas Merigo are still together, along with most of the people hired early on. Marguerite has in excess of €1.7 billion in AUM.