Octopus eyes £250m first close for second renewables fund

UK asset manager Octopus Investments is eyeing a £250 million ($355 million, €286 million) first close for its latest renewables vehicle – Renewable Energy Income Partnership II – during the first half of the year, Infrastructure Investor has learnt.

REIP II is targeting £500 million with a £750 million hard-cap. The 25-year vehicle will be unlevered and is aiming for a gross IRR of between 6.5 percent and 7.5 percent. It will have a three-year investment period and is set to be seeded with a £100 million portfolio of operational UK solar assets. The fund can also invest in operational onshore wind and, while its focus is the UK, it can invest up to 20 percent outside the country.

The sophomore effort follows REIP I, which bought a £300 million portfolio of solar assets.

This week, Octopus released details of its latest deal, a landmark €23 million refinancing of five unsubsidised solar projects – with a 64MW capacity – in Italy’s Lazio region. The country’s MPS Capital Services Banca per le Imprese is providing the debt. In addition, Octopus is involved in the development of 110MW of subsidy-free solar in Italy which, when completed, will boost its portfolio in the country to 173MW.

“We’ve constructed a portfolio of assets that consistently exceed performance expectations and have now validated our plans to build large-scale grid parity solar in Italy with external project finance,” stated Matt Setchell, Octopus’s head of energy investments.

The refinancing follows two similar deals in 2017. Octopus has had a busy time since the fall of 2016, clinching five new investments, with a £470 million enterprise value, in 240MW of solar and onshore wind. Four of those deals were bilateral transactions.

Octopus is the largest UK renewables investor, employing 56 people in its energy team. It manages a portfolio with a £2.5 billion enterprise value and 2GW of installed capacity. It also owns 12 percent of the UK’s large-scale solar PV market.