The Real Asset Energy Fund, a Luxembourg-based renewables fund, plans to raise as much as 500 million euros ($646 million) by June to invest in at least 30 plants as solar and wind farms are added from Italy to the U.S.
The 25-year fund has raised 100 million euros of the total since May from U.S., German and Italian investors, founding partner Luca Concone said in an interview in London. It’s targeting 250 million euros by the end of this year, he said.
RAEF is seeking to tap the growing renewables market as nations promote ways to cut polluting emissions, reduce fossil-fuel imports and meet targets for clean-power production. Global investment in the industry was a record $280 billion last year, 13 percent up on 2010 and more than five times the $53 billion achieved in 2004, according to Bloomberg New Energy Finance.
“By regulation, this fund must invest in a minimum of four different countries, though it will probably be more like five to six in the end to diversify risk,” Concone said. “We must be risk-averse every step of the way because in 25 years the changes are massive.”
The fund will invest in at least three technologies and a minimum of 30 power plants, including solar and onshore wind. At least 80 percent of the investments will support facilities that are already generating power and are connected to the grid and receiving the relevant subsidies for clean-energy production.
Projects of 25 megawatts to 50 megawatts would be a “sweet spot,” Concone said. Geographically, RAEF will invest in the largest markets: Germany, Italy, the U.S. and the U.K. It’s also considering Poland, Turkey and Canada because their renewables markets are developing, he said.
RAEF, a subsidiary fund of Solar Investment Group SIF, has been designed to attract institutional investors including pension funds, insurance companies, large family offices and long-term sovereign funds. The fact that wind and solar farms typically operate for 20 to 25 years means Concone’s 25-year fund can hold a project for its entire lifespan, reducing the volatility associated with selling an asset mid-life, he said.
RAEF will return a dividend of 8 percent to 10 percent a year, like a bond, and return the capital at the end of maturity without selling the assets, according to Concone. Its portfolio will comprise about 75 percent debt and the remainder equity.