Vestas takes a piece of CIP

Copenhagen Infrastructure Partners has agreed to sell a 25 percent stake in the firm to Danish wind turbine manufacturer Vestas for a total consideration of €500 million.

“We wanted to strengthen our capital base in order to accelerate our growth and increase our co-investments,” CIP partner Steen Lønberg Jørgensen told Infrastructure Investor, explaining the firm’s decision to sell a minority stake.

“We want to co-invest more into our own funds, to innovate and develop faster than we’ve been able to do in the past 10 years,” he said, adding that CIP expects the renewables market to grow even faster in the next couple of decades than it has in the last 10 years.

The reason, according to Jørgensen, is both the sharp reduction in cost of renewables technologies and governments stepping up plans with regards to energy transition, particularly in the past three to six months as they look to kick-start their economies after covid-19.

The €500 million will be split into an upfront payment of €180 million, while the remaining €320 million will be provided as an earn out payment. Details regarding KPIs and a timeframe for when the earn out payment will be determined were not disclosed and Jørgensen declined to comment.

As a minority shareholder, Vestas will sit on the board of CIP Holding, which will, along with CIP partners, decide on the firm’s strategic direction.

“However, in terms of portfolio management, investment management, project design, supplier selection and contracting finance – that is 100 percent CIP; Vestas will not be involved in any of that,” Jørgensen said.

“This was very important to us and to Vestas. We don’t have rights to Vestas’ projects and they don’t have rights to providing turbines for our projects.”

New Energy Transition Fund

Part of the proceeds from the transaction will be used to launch a new Energy Transition Fund in the first half of 2021.

CIP will invest a “significant” amount in the new fund, Jørgensen said, adding that it would be around 2 percent of the fund’s target size, which is expected to be around $2.5 billion.

According to a statement, the fund will invest in Power-to-X projects, that is, projects that convert surplus electric power into other energy sources.

One example is the Murchison Renewable Hydrogen Project in Australia, a 5GW wind and solar plant that will convert the power produced into green hydrogen that will then be exported to Asian markets, primarily Japan and South Korea. It is being developed by Hydrogen Renewables Australia, a developer with whom CIP partnered last month.

“With the cost of renewables dropping 80-90 percent in the last decade, we are at a point where renewables can play a role in the decarbonisation of fuels and feedstocks, reducing emissions in sectors such as road transportation, aviation, industrial processing and agriculture,” Jørgensen said.

“Since the energy transition fund will invest at the forefront of market development – maybe it’ll be the first one to invest in large-scale power-to-ammonia in Europe for example – there will be some additional risks, which means the type of investments we make through this fund will have a higher risk profile.”

While energy storage will also be part of the new fund’s mandate it will be in technologies other than electricity storage or hydro pump storage in which CIP’s existing funds already invest and will continue to do so, including Copenhagen Infrastructure IV, which the firm is currently raising.

Part of the proceeds from the Vestas transaction will also be invested in CI IV, which as of September had raised €4 billion of its €5.5 billion target, becoming “the largest dedicated renewables fund globally”, according to the firm.