KGAL’s renewables fund hits €382m on second close

The German manager’s €500m ESPF4 vehicle has added five investors and expects to complete fundraising by the end of the year.

German fund manager KGAL has reached a second close on its fourth renewable energy fund, bringing its total size to €382 million.

The ESPF4 vehicle has attracted a further five investors – two insurers, two pension funds and an investment manager, from Germany, the UK, France and the Netherlands. The second close builds on the €255 million first close recorded by the fund in July 2017 following commitments from two Dutch pension funds, a German insurer and €100 million by the European Investment Bank. KGAL is planning to close the fund by the end of the year.

ESPF4 was launched in July 2016 with a target of €500 million and a hard-cap of €600 million, aiming for returns between 8 and 12 percent. It plans to invest predominantly in wind, solar and hydropower in Europe, although has also highlighted storage and grid infrastructure as potential sectors. Investment volumes could total up to €1 billion with a maximum 50 percent leverage policy.

“We have already entered one share purchase agreement and four exclusivity agreements,” said Alexander Rietz, portfolio manager for the fund. These include solar investments in Spain and Italy with a capacity of up to 600MW, while KGAL also says it “is on the verge” of securing wind and hydropower deals in Scandinavia, a region it expects to account for about 30 percent of ESPF4’s investments.

KGAL has said that ESPF4 and its strategy was launched in response to shifting investor demands in the renewables space, seeking returns “no longer appropiate” in more developed markets.