Offerings

European Energy Infrastructure

Overview

This Luxembourg Fund, managed by our team, is diversified across investment-grade Europe (excluding Switzerland). The fund has a duration of 25 years with a possible five-year extension. Over 30 international institutional investors are part of the European fund.

Investing into proven technologies

The fund’s strategy is to target economically relevant energy infrastructure assets in European investment grade countries (excluding Switzerland). Investments are made along the entire value chain, including power generation and storage, energy transmission as well as energy distribution. Only proven technologies are considered; the fund may not invest directly in coal or nuclear power. Brownfield assets represent at least 75% of the gross asset value, and greenfield assets up to 25%. Merchant risk, when involved, is hedged when feasible and economically viable.

Further diversification benefits are achieved by deploying capital into assets with different technologies, with different underlying economic models and with exposure to different counterparties. The focus is on investments alongside leading edge industrial partners (such as power utilities) or public entities (such as municipalities or state owned companies).

Targeting economically relevant energy infrastructure assets in Europe

Long-term focus

Focus on long-term, cash-flow oriented energy infrastructure investments in investment-grade Europe

Close collaboration

Close collaboration with industrial partners and public entities, leading to an extended set of opportunities

Existing commitments

More than 80% of the fund target size of EUR 1 billion has been reached, with commitments from around 30 long-term investors

Visible opportunities

High visibility on the future portfolio, with attractive, proprietary opportunities in the advanced due diligence stage

High cash yield

Attractive return target in EUR and high cash yield, based on the geographically and technologically diversified portfolio

Attractive investment categories available across investment-grade Europe

Wider geographic reach allows selection of most attractive technologies across geographies, additionally contributing to diversification of regulatory risk exposure while focusing on legally and politically stable jurisdictions.

Source: EIP

Pursuing a hold-to-maturity asset strategy

Fundamentally, the fund pursues a hold-to-maturity strategy. Given the fund’s lifetime of 25 years with a potential five-year extension period, certain assets, especially renewable assets like wind farms or photovoltaic power plants, will be amortized to zero – while other asset types, such as grid or hydropower assets, will last longer than the fund and will be valued on an ongoing basis.

Considering the long-term holding period, expected returns are primarily driven by dividend yield and, to a lesser extent, by capital appreciation. Capital appreciation is mainly attributable to organic growth stemming from retained earnings that are reinvested into the company rather than distributed directly (for example, assets whose returns are driven by a regulatory asset base). Valuation gains may also materialize thanks to our proactive deal origination approach, resulting in attractive buy-in valuation metrics.

Strategic and cost benefits of the long duration of the fund

Infrastructure by its nature has a long life; assets in the renewables space have a typical lifetime between 20 and 30 years. The lifetime of the fund has been structured to reflect this characteristic, allowing it to hold the assets over the full useful life and thereby reducing or eliminating any potential exit risks. Furthermore, this can enable investors to benefit from the “golden end” of assets that continue to operate past their initial projected lifespan.

Since investors typically aim to reinvest into the same asset class, holding assets over a longer period of time can help to avoid or reduce the significance of transaction costs. This strategy also helps us to align with many of our industrial partners, such as utilities, with the ultimate possibility to further collaborate and develop new opportunities.