Armstrong Asset Management has received the fourth commitment of a USD20m investment for its Armstrong South East Asia Clean Energy Fund from the International Finance Corporation (IFC), the private sector investment arm of the World Bank, to add to its first close of USD65m.
The fund, a newly established, independent private-equity vehicle providing development capital to small-scale renewable energy and resource efficiency projects in Southeast Asia, is targeting a final close of USD150m by August 2013. The earlier commitments totalling USD65m had come from two European development finance institutions, GEEREF and DEG, and an Asian-based corporation.
Melissa Kang, the principal investment officer and regional lead, East Asia Pacific for global private equity and investment funds at IFC, says: “The Armstrong Fund is meeting an ever growing need for climate change private equity in SE Asia, and we believe their investment strategy is well suited to these developing markets.”
“IFC’s track record of investing with emerging market managers at an early stage is second to none and Armstrong will benefit greatly from their experience and market knowledge”, says Andrew Affleck, the managing partner of Armstrong. “Currently, we have further soft commitments of USD63m, which is a good indication of the continued level of interest to date, but this interest is subject to further due diligence and legal documentation, so cannot be announced yet. However, we will cap the fund size based on what we feel is a realistic quantum to deploy over the next four years.”
Additional commitments to the fund are expected from European family offices, European institutional funds and a number of other development finance institutions.
On 13 May, Armstrong announced the fund’s first investment in the development and construction of a 30 MW portfolio of solar projects in Thailand with Hong Kong-based energy company Symbior Energy. In addition, Armstrong has a number of other mature pipeline deals, specifically in the solar and mini-hydro sectors, and is now aiming to commit to three to four deals during 2013.
“Over the last 12 months, the proposition for renewables in Southeast Asia has become even more compelling. Supply side costs have continued to decrease, meaning that in a number of project cases around the region, subsidies are not required in order to make the economics work,” says Affleck. “The increasing cost of diesel fuelled power, translating into peak costs of over 50 cents per kilowatt-hour, means that switching to solar and mini-hydro solutions is immediately more cost effective for long term sustainable supply.”
The 10-year Armstrong fund is investing in small-scale infrastructure projects in Thailand, Philippines, Vietnam, Indonesia and other Southeast Asian emerging markets. Typical projects sizes will generate power of up to 10 MW from renewable energy resources, such as solar, hydro and wind. The fund aims to make a total of between 10 to 15 investment deals, each ranging from USD5m to USD12m.
