Octopus Australia – the specialist renewable energy developer and fund manager, and subsidiary of UK-headquartered Octopus Group – has completed a second round of fundraising for its open-end Octopus Australia Sustainable Investments Fund (OASIS).
The raise includes a commitment from Rest, the A$75 billion ($48 billion; €45 billion) Australian superannuation fund, as well as follow-on commitments from existing investors Hostplus, the Clean Energy Finance Corporation and Sky Renewables. The latter is a vehicle backed by the UK’s NEST Pensions and other European investors. The existing investors all made commitments to OASIS’s first raise and have put in an additional A$200 million now, Octopus Australia said in a statement.
The combined capital raise takes the total funds raised by Octopus Australia across its renewables platform – which includes the Octopus Renewable Energy Opportunities (OREO) Fund that targets high-net-worth and wholesale investors – to A$550 million. A spokesman for the firm said the OREO Fund accounts for between 10-20 percent of the platform’s committed capital.
Octopus Australia launched its platform with a splash in mid-2022 with plans to build out its total portfolio, including equity and debt, to A$10 billion. Managing director Sam Reynolds told Infrastructure Investor following the latest raise that the firm is aiming to raise around A$4-5 billion of equity to support that ambition over the next five to six years.
The platform invests in the entire lifecycle of renewable energy projects, from development through to the construction phase and on to generation. It has been structured as an open-end vehicle to take advantage of this, Reynolds said.
“We found that closed-end structures are not long enough to cover the lifecycle of a renewable energy asset,” he said. “For example, for a wind asset we’ve invested in, you might be looking at five to six years of engagement with the community before another two to three years of construction. That puts you right up against the seven to 10 years’ life of a traditional closed-end fund.”
Reynolds said the firm intends to return to market with a further capital raise around November 2023, before a further raise in early 2024. He acknowledged that fundraising conditions were difficult despite the firm’s success.
“It has been really tough,” he said. “A lot of institutional investors are keeping their cash close to their chests. We have been successful as our product is unique and our returns are strong, but it’s been possibly the toughest market we’ve seen for 10 years.”
The firm declined to disclose target returns for the platform or the exact size of any individual investors’ commitment, including Rest’s. The CEFC previously revealed that it made an initial commitment to OASIS last year worth A$75 million.
Reynolds added that the firm has been strongly focused on securing grid connections for its assets, following months of headlines in Australia surrounding the challenges of connecting renewable energy assets to the grid. He pointed out that the firm’s two heads of investment were hired from AusNet, the operator of the electricity transmission network in Victoria, to ensure the firm had the requisite expertise in that area.
The Octopus Australia platform has invested in several assets already, managing a portfolio with an enterprise value of A$1 billion in operating and under-construction assets, A$4.2 billion of projects under development, and a further A$1.3 billion under exclusivity.
Reynolds said the platform planned to invest in one of Australia’s largest battery assets later this year, without providing further details.
Its existing investments include: the 333MW Darlington Point Solar Farm in New South Wales; the 180MW Dulacca Wind Farm in Queensland; the under-development 400MW Giffard Wind Farm in Victoria; the under-development 400MW Hay Plains Wind Farm in NSW; and a platform that is helping to develop Gippsland Renewable Energy Park, a multi-stage project to investigate the deployment of various technologies at utility-scale, including solar, wind, battery storage and green hydrogen.
The platform will also support and fund projects generated by Desert Springs Octopus, an Indigenous-owned joint venture launched by Octopus to bring infrastructure investment opportunities to Indigenous Australians across the country.
In a statement on its commitment, Rest chief investment officer Andrew Lill said: “OASIS is expected to enhance our members’ long-term financial interests and help shape Australia’s energy transition through a pipeline of solar, wind and storage infrastructure projects.
“This investment will also contribute to Rest’s objective to achieve a net-zero carbon footprint for the fund by 2050 and is a welcome continuation of our plan to increase our allocation to climate-related solutions.”