Mid Europa invests €60m in Czech solar operator

Mid Europa Partners, the London-based private equity firm focused on Central and Eastern Europe, has made its first investment in renewable energy since the firm decided to make it a core target sector nine months ago.

Private equity firm Mid Europa Partners has invested an initial €60 million of equity in Energy 21, a developer and operator of solar parks in the Czech Republic. In a statement, Mid Europa said it was in “advanced discussions” with a group of banks for the provision of a project finance facility.

Mid Europa last year decided to make renewable energy a target sector alongside established areas such as telecoms and healthcare. “We like defensive sectors,” says Mid Europa managing partner Thierry Baudon. “We’re not a big fan of market risk but we’re happy to take regulatory risk. Renewable energy fits the profile perfectly.” He adds that the firm has spent the last nine months “scouring the space” for an opportunity.

Baudon says that “by adopting a buy-and-build, consolidation approach in the renewable sector, it’s possible to achieve solid private equity returns from low-risk positions”. The ‘price’ he says is the “intensive work” involved in building a larger, region-wide company.

Energy 21 currently has an installed generation capacity of 26 megawatts, with a further 75 megawatts in development. Baudon says the firm has opportunities to grow into Slovenia and Bulgaria as well as various other Eastern European countries.

Mid Europa’s initial €60 million equity investment in the company has come from its €1.5 billion Fund III, which closed in October 2007. Baudon says that the firm is aiming for renewable energy commitments to account for ten percent of the fund’s size over the next one or two years, translating to €150 million.

In 2005, the Czech Republic introduced a generous feed-in-tariff, a policy mechanism designed to encourage the adoption of renewable energy sources. The country is attempting to meet its obligations as part of the European Union to produce 20 percent of energy from renewable sources by 2020.