Southern Cross Venture Partners, named manager of the fund by the Australian government in December, plans to invest in three or four companies by the end of 2012, Mark Bonnar, investment director of the company, said in an interview yesterday in Sydney. Southern Cross, with funds from Australia and a Chinese venture capital fund, expects to put as much as A$20 million into each investment, he said.
The fund is part of Australia’s plan to drive investment in wind, solar, geothermal and other clean-energy technologies. Australia, the developed world’s biggest per-capita polluter according to the government, has set a target of generating 20 percent of its power from renewable energy sources by the end of the decade. The nation also will start charging polluters for their carbon emissions in July to reduce dependence on fossil fuels and fight climate change.
“We’ve got to put this money to work and start to prove to people that there’s a solid pipeline of companies in this market,” Bonnar said, declining to identify the first investments because they haven’t been completed. “This market is capital constrained, not opportunity constrained.”
The market value of the 74 stocks in the ACT Australian CleanTech Index, which measures the performance of the country’s listed renewable energy companies, plunged to A$7.8 billion in April from a peak of A$16.3 billion in 2007.
“One reason people have tended not to invest heavily in Australia is because it’s a small market and it’s hard to build a business as compared to the U.S. or China or even Europe,” said Bonnar, former investment director at Cleantech Ventures, a Victoria-based fund manager. “When you are taking on management risk, technology risk, execution risk, you don’t want market risk too, and that’s what we’ve had here.”
The venture capital fund, an initial price of A$23 a metric ton on Australian carbon emissions and further government initiatives to spur investment should aid the industry, helping to demonstrate it can deliver consistent returns, he said. The government’s A$10 billion Clean Energy Finance Corp. is set to start in July 2013.
Softbank China Venture Capital provided half of the investment in the fund managed by Bonnar, matching Australia’s A$100 million commitment, Resources Minister Martin Ferguson said in December.
Southern Cross, which has offices in Sydney and Silicon Valley and manages more than A$400 million in assets, is interested in investing in biomass plants and power projects located at mines, Bonnar said.
Southern Cross’s previous investments have included Mantara Inc., a New Jersey-based developer of technology for the hedge fund industry, Mocana Corp., a software company in San Francisco, and Pygg, which allows users to send and receive money through their Twitter accounts, according to its website.
“How do you build a A$200 million, A$300 million business in Australia?” Bonnar said. “It’s very hard, but if we can access overseas markets, the U.S. and China predominantly, we can start to build those sizes of companies.”
Ferguson, the energy minister, said in December that the venture capital fund will help companies reduce the costs of renewable energy in Australia and overcome reluctance among investors who perceive the technologies as too risky.
Driven by hydro and wind projects, renewable energy contributed 9.6 percent of Australia’s electricity production in the year ended in October, up from 8.7 percent the prior year, according to the Clean Energy Council, an industry group.
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