The Pipeline: CapDyn’s new £600m fund, UK offshore wind troubles, CIP gets first CIO

Capital Dynamics’ new £600 million UK fund, UK offshore wind under threat and CIP gets its first CIO. Welcome to The Pipeline, the start-the-week briefing for our valued subscribers only.

First look

Attracting the wind: Capital Dynamics launches new UK renewables fund (Source: Getty)

CapDyn back in UK hunt with £600m fund
Capital Dynamics is back in the UK market with Capital Dynamics Clean Energy UK Fund, seeking £600 million ($715 million; €676 million), according to documents from the Strathclyde Pension Fund.

The pension committed £60 million to the vehicle, which is targeting wind, solar and battery storage assets. Feeling ambitious, a 10-12 percent net IRR is slated for the vehicle, along with a 6-8 percent cash yield for the 10-year fund. A vast majority of the fund is set to be invested in assets at a late-stage development and construction-ready phase.

CE UK is CapDyn’s first UK-dedicated vehicle since the £400 million Clean Energy and Infrastructure VIII, which Strathclyde injected £40 million into in 2019 and is “performing well”, according to the pension fund.

Fortunes have been mixed for CapDyn since. It closed Clean Energy Infrastructure IX on €521 million above a €300 million target five months ago, although it is believed CEI X -launched in parallel – was shelved after a key person clause was triggered following the departures of managing directors Tim Short and Benoit Allehaut to KKR at the start of 2021.

UK offshore projects hit rough waters
Somewhat less optimistic on UK renewables is Ørsted, one of the largest developers of UK offshore wind, which has called for tax breaks if it is to continue development of the 2.9GW Hornsea Three wind farm in the North Sea.

The £8 billion project is assured a fixed price for its electricity output worth around £45/MWh after last summer’s contract for difference auction, but the auction’s projects are “all in jeopardy” because of increased prices, Duncan Clark, head of Ørsted UK, told The Times (paywall).

The combination of increased interest rates and supply chain prices means that this price may no longer be enough to make the project viable and the company, alongside Sweden’s Vattenfall, is calling on the government to offer tax breaks on investments similar to those seen in the oil and gas sector.

Maybe a tax break will be easier to catch than a break.

Set for take-off again?

Gone are the days of travel restrictions and empty terminals. As travel levels have rapidly recovered to their pre-pandemic days, so too has investor sentiment – at least, according to the latest report from Fitch Ratings.

While we previously reported in January that airports – along with other core transportation assets – would face trouble in 2023, President Biden has been quick to prove us wrong. At the end of February, his administration released $1 billion in funds from the Bipartisan Infrastructure Law to go towards upgrades at 99 US airports.

According to Fitch, these funds will offset the rising costs of capital, which have been sky high in recent months.

That, coupled with airports’ history of minimal loan defaults and support from airlines, is enough to convince Seth Lehman, a senior director at Fitch Ratings. “Airports survived the great recession, airline bankruptcies and the covid pandemic,” he told The Pipeline. “[They have] had some volatility at this point in time, but long-term resiliency; they really are among the leaders [in safe assets] for transportation.”

Will they become trophy assets once more?

Legal & General boosts EM debt fund
By acquiring a significant minority stake in ImpactA Global, Legal & General Capital, the insurer’s alternative assets platform, is making an impact in multiple ways. The first and most direct is its backing of a women-led impact investment advisory firm. Headquartered in London, ImpactA is founded by two JPMorgan veterans – Isabella da Costa Mendes and Victoria Miles.

Indirectly, Legal & General’s investment, financial details of which it declined to disclose, will support ImpactA’s mission of providing debt financing for sustainable infrastructure in Latin America and Africa. The firm has launched an infrastructure debt fund focused exclusively on emerging markets, that will address three key sectors: clean energy and renewables; sustainable mobility; health and water. The 10-year fund “will provide senior debt alongside official sector creditors and some mezzanine debt”, da Costa Mendes told The Pipeline, adding that the average ticket size will range from between $15 million-$30 million.

But, in addition to the above, we expect Legal & General’s backing had another positive impact: it gave ImpactA’s founders further cause for celebrating International Women’s Day.

They said it

“It’s a slush fund meant to benefit one constituency, but not anyone else. There will be a lot of cronyism”

Gary Palmer, a Republican congressman for Alabama and member of the House Energy and Commerce Committee, takes aim at the Greenhouse Gas Reduction Fund – a national US green bank – proposed in the Inflation Reduction Act.

Who’s hiring

CIP’s first CIO is Ørsted’s former deputy CEO
Martin Neubert, who is currently on gardening leave, will join Copenhagen Infrastructure Partners as group chief investment officer this summer.

The move will be a return to private markets for Neubert, who spent three years at Bain Capital in Munich before joining what was then DONG Energy.

Neubert left Ørsted early October following a re-organisation that split his commercial division into three regional ones. At Ørsted, Neubert had been second-in-command to CEO Mads Nipper and wrote in his ‘Farewell Ørsted’ LinkedIn post that the new organisation was co-designed by the two of them.

At CIP, Neubert will be responsible for developing the CIO role “across new and existing fund strategies” for CIP’s investment portfolio, while also leveraging off his offshore wind experience. Neubert will become partner and a member of the CIP management board.

CIP has €19 billion of AUM and its next flagship fund, Copenhagen Infrastructure Partners V, is targeting €12 billion.


Laying the groundwork: CIP takes steps in South Africa (Source: Getty)

South African deal is a first for CIP
But away from its flagship fund and before Neubert’s arrival, CIP has acquired a majority share in Cape Town-based Mulilo Energy Holdings through its New Markets Fund I.

To date, Mulilo has developed and delivered 440MW of operating wind and solar projects and the company has an 8 percent market share of South Africa’s renewables sector. Its pipeline has 25GW across onshore wind, solar PV and storage.

Niels Holst, partner at CIP and head of NMF I, said in a statement: “We are certain that we can accelerate the positive trajectory of the company. CIP is committed to working closely with local stakeholders to rapidly deploy renewable energy projects in South Africa and make a positive contribution to the green transition, local employment and developing world leading capabilities in South Africa.”

The New Markets Fund I closed on €1 billion in November 2019 and is backed by mostly Danish pension funds. Two weeks ago, the fund partnered with developer Viviid Renewables to develop more than 1.8GW of greenfield renewable energy projects in India.

Today’s letter was prepared by Zak BentleyKalliope Gourntis, Isabel O’Brien and Anne-Louise Stranne Petersen also contributed