Spotlight: Catalyst Private Equity

Q: Why did you decide to launch your renewables fund?

ER: We launched the fund in July 2016. There's a wave of renewable energy infrastructure activity in the region. We became engaged in renewable energy infrastructure through our first fund [in 2006] which was a Middle East and North Africa energy, water and technology fund.

We're at the beginning – the first projects were struck in Jordan a couple of years ago – of a regional wave and we feel that there's a gap in terms of local project development and investment capacity. This results in an opportunity to fill that gap in what we feel are the mid-sized renewable infrastructure projects.

Q: How much are you looking to raise?

ER: We've already raised $47.7 million from the European Investment Bank’s Global Energy Efficiency and Renewable Energy Fund, DEG Invest, FMO and Finnfund, and we're looking to raise another $52 million. Our first three solar projects in Jordan are secured and by taking 50 percent equity in each of the projects alongside co-investors, we'll be funding close to 1GW of capacity – that’s our goal. At least 60 percent of this will be in Jordan, whose currency is pegged to the US dollar, so that is underlying our investment.

Q: What types of investors will you be targeting for the remainder of the fund?

ER: There's been interest from emerging market clean energy funds of funds as well as international corporates, whether they're the pension funds of those corporates or the more strategic utility-type. That's the primary focus. Our final close will probably be in the second half of 2017.

Q: Do you see Jordan, where you’ve invested a lot, as a growing market?

ER: Jordan's doing great and I think it is the regional leader in solar PV. There's a very strong regulatory framework in Jordan and it's commercially viable for the private sector, in addition to the government's [solar] programme. There's regulation that allows for what is called 'wheeling' – having a separate location in terms of your electric consumption versus your generation – which is mostly directed towards the private sector. The first two rounds of [tendered] projects are bankable and the first round has been commissioned.

Q: Where else will you be looking to invest?

ER: The Middle East and North Africa in general, but we're primarily focused on Jordan. Other countries would directly include Morocco, Tunisia and Egypt and indirectly through a portfolio company in other countries, alongside others. In our pipeline, one of the companies we're looking at is an Australian company that's active regionally. It's a developer/EPC owner.

Q: What do you see as the greatest challenges for clean energy in the MENA region?

ER: The biggest challenge is the grid’s ability to benefit from renewable energy due to interconnection availability and grid stability issues. We are already facing this in Jordan.

However, this challenge also provides an opportunity for the smart distribution of allocations geographically in terms of technology types, smart grids and storage.

Q: What needs to be done to help with private financing for projects?

ER: We feel that for large-scale projects there is no gap, but for small or mid-scale projects local banks and experienced renewable energy equity investors are required.