Aquila Capital has launched the Aquila European Hydropower Fund offering institutional investors a regulated fund structure with the responsibility for sourcing and managing the assets delegated to a dedicated team of hydropower investment experts.
The Aquila European Hydropower Fund offers a solution for institutional investors who wish to obtain preferred access to a balanced and diversified portfolio of European hydropower assets. Its objective is to deliver an IRR of 7-9 per cent and long-term stable cash yields, low volatility and independence from traditional asset classes and government subsidies.
A new study commissioned by Aquila Capital reveals that currently 7 per cent of European institutional investors have any exposure to hydropower, compared with 37 per cent to solar and 29 per cent to wind. However, just over half (52 per cent) of institutional investors are committed to diversifying or increasing the size of their renewable portfolio.
The findings show that the most common objections to investing in hydropower are the lack of sizeable investment opportunities and a ‘shortage of managers with a track record’, both cited by 42 per cent of respondents.
Aquila Capital’s Fund addresses these concerns by providing investors with a regulated vehicle managed by a dedicated team of experts that has a proven track record in hydropower investments since 2009 and has over 50 hydropower plants currently under management with a total capacity of 922 Gwh.
According to the research, investors are attracted to hydropower because it offers long-term stable cash flows (66 per cent); overall portfolio diversification (55 per cent); renewable portfolio diversification (45 per cent); an inflation hedge (38 per cent); and attractive IRRs (38 per cent).
Oldrik Verloop, Co-Head of Hydro at Aquila Capital, says: “Hydropower is the leading source of renewable energy and accounted for around 12 per cent of Europe’s total net electricity production and 60 per cent of that produced from renewable resources in 2012.
“The combined drivers of rising global energy demand and diminishing fossil fuels make it an attractive investment opportunity for institutional investors, who are seeking to future-proof their portfolios and will increasingly diversify into alternative, real assets such as hydropower. The launch of this Fund underlines Aquila Capital’s credentials as a leading financial investor in renewable energy.”
The Fund will invest across different geographic regions, climates and topographies but predominately in Scandinavia and other European Union member states. The supply network to distribute hydropower across Europe continues to be developed. For example, it was announced in January this year that Norway was close to agreeing a EUR 2 billion investment to build a 700km underwater powerline to supply the UK. Norway already supplies Denmark and the Netherlands with subsea interconnectors and is planning to build another, 500km line to Germany.
