Sustainable Development Capital LLP, an energy efficiency and low-carbon investor, plans to set up a financing vehicle like the U.K.’s Green Investment Bank with the government of an Asian nation that it declined to identify.
The operation will be “not dissimilar” to the U.K. bank, Chief Executive Officer Jonathan Maxwell said in an interview, referring to the 3 billion-pound ($4.9 billion) government lender that’s seeking to spur funding for green technology.
“One common theme we’re seeing, and this fund of the U.K. GIB is an interesting phenomenon happening in other markets, is that governments generally are focusing on energy security as well as energy savings,” he said. “If you’re going to set up a solution which is scalable and replicable, then partnerships with the government in the region are very important.”
SDCL entered a venture with First Eastern Investment Group, a Hong Kong-based private equity infrastructure business, in February to boost operations in Asia. The firm, based in London, develops and invests in projects across the region including Singapore, China and Brunei, according to Maxwell.
“Energy saving is even more of an imperative in power deficit countries in Asia,” said Vandana Gombar, an analyst at Bloomberg New Energy Finance. “So-called ‘negawatts’ generated could mean slashing thousands of megawatts of demand in countries like India,” she said, refering to the savings.
India is setting up a trading market for energy-savings and two state-backed funds to support efficiency, she said. Japan has laws to spur conservation and others in the region plan efficiency initiatives and energy saving companies, Gombar said.
SDCL in August received 50 million pounds from the Green Investment Bank to start a fund for projects that curb energy waste and costs. The firm is raising another 50 million pounds and last month made a first investment in Kingspan Group Plc to finance measures to cut energy use at its industrial facilities.
Demand for energy efficiency and government support has grown “extremely rapidly” in the past two to three years, partly because of rising power and fuel prices, Maxwell said.
The fund will probably invest in 20 to 30 projects.
“We’re hoping to disclose another deal within our group during this month and then the first quarter should be quite busy,” Maxwell said. “An important category is the industrial building retrofit opportunity and we’re working not only on a series of follow-on investments for Kingspan but also with other clients,” with a deal with a state client expected by year-end.
SDCL sees interest in combined heat and power plants for buildings and is studying lighting efficiency deals. It plans a deal on lighting in the first quarter with a non-state company.
The fund invests its equity in projects to cover all costs and its customer then pays returns for any energy savings.