Hong Kong-based JIDA Capital Partners and the private equity arm of energy firm China General Nuclear Power have cancelled plans to jointly launch a $1 billion fund focused on renewables in China, JIDA’s founding partner and chief investment officer Raymond Fung told Infrastructure Investor.
JIDA will instead move on to launch the new vehicle alone, he said.
“[CGN Private Equity Fund Management] has changed strategy and would like to focus on building captive funds focused on complementing CGN’s industrial strategy,” Fung said.
“Going forward, JIDA is unlikely to work with CGNPE to launch new funds.”
The firms jointly launched CGN Capital Partners Infrastructure Fund III in 2015. The vehicle reached final close on $525 million two years later. In June, JIDA announced that the two firms were planning to launch a renewables-focused vehicle.
Fung said he expected the break-up to be welcomed by LPs: “During our partnership with CGNPE, we maintained our independence and were professionally-run, but questions about being a captive fund were raised by LPs in the past.”
He also stressed that losing CGNPE as a partner would not affect JIDA’s capacity to generate dealflow. “Having invested over 1GW in China, our team members have established a strong reputation in the market as a preferred capital partner in the country,” he said.
According to Fung, CGNPE will remain actively engaged in the management of Fund III.
CGN and CGNPE did not reply to requests for comment.
JIDA is planning to launch the new $1 billion strategy during the first quarter of 2020.
“We are currently talking with several potential anchor investors from China and abroad, and expect to finish this process before the end of the year,” he said, adding that several of the LPs that backed Fund III are willing to return as investors.
Investors in Fund III include China Three Gorges, Industrial and Commercial Bank of China, Agricultural Bank of China, Postal Savings Bank of China, China Cinda Asset Management, China Huarong Asset Management, the People’s Insurance Company of China and a “UK-listed global utility”, according to statements from JIDA.
The new vehicle will be launched as the Chinese government is working towards eliminating renewables subsidies and achieving grid parity across clean energy sources.
“We believe that China’s moving away from subsidies in renewables is an opportunity,” Fung said. “It will root out unprofessional developers, while investors like us, with strong industrial competency, which can help developers, will benefit from the move.”
JIDA is currently completing the deployment of Fund III, and is aiming to add approximately 130MW of capacity through the purchase of early-stage construction and late-stage development assets by year-end, raising the portfolio’s capacity to around 1GW, Fung said.
“The portfolio currently has a large amount of operating and under-construction assets, and investors wanted to see more growth assets added to it,” he added. JIDA declined to say how much of Fund III’s capital is left to deploy.
Fung said the firm will start receiving non-binding offers for Fund III’s portfolio during the second half of November.
He declined to provide an estimated figure for the portfolio, but he has previously told Infrastructure Investor that the fund’s final value could range between $1.7 billion and $1.8 billion, and could generate gross returns of more than 30 percent for its LPs.
JIDA Capital is a renewables-focused fund manager owned by its management team and New Zealand investment manager Morrison & Co.