Copenhagen Infrastructure Partners is looking to raise 12 billion euros ($13 billion) to invest in renewable energy, making it one of the largest funds ever dedicated to transitioning away from fossil fuels.
The Danish fund manager hit its first close of 5.6 billion euros and already has investors lined up for more than double that amount in the next 12 months, managing partner Jakob Baruël Poulsen said in an interview. It’s a significant boost for the renewable energy sector, which needs an exponential increase in capital to meet climate targets, just as rising interest rates threaten yields.
“Every time we create a new fund, it doubles,” said Baruël Poulsen. “The main objective of the fund is to obtain a good return. The secondary benefit is that we have a material contribution to fighting the climate problem, which is one of the biggest problems that human beings have ever faced.”
Record investment in renewables will rise further as governments seek to reduce reliance on climate-warming hydrocarbons. The CIP sees an improvement in spending more on renewables as green energy becomes more cost-competitive with fossil fuels, governments tighten support for development and energy prices rise.
“I have now been in this business for 25 years and it is very clear that the renewable energy market has never been more attractive than it is now,” said Baruël Poulsen.
The fund is the fifth of its kind raised by CIP since the investment manager was founded in 2012. When fully subscribed, it will be significantly larger than its predecessor, which started with €1.5 billion and s ‘has expanded to 7,000 million euros during the fundraising. process
CIP’s flagship funds only invest in renewable energy assets developed by the company. That sets it apart from other giant green investment funds, such as Brookfield Asset Management Ltd., which buy already-built projects and include a broader range of technologies such as nuclear power.
Business model
Baruël Poulsen started CIP with three partners after helping build the offshore wind business at what is now Orsted A/S. The company uses the business model they perfected at the Danish public utility: maximizing returns by developing large renewable energy projects from the ground up and then selling assets like offshore wind farms, while keeping a stake to profit of electricity sales.
CIP’s investments include the first commercial-scale offshore wind farm in the US, one of the largest wind farms in Spain, and a growing portfolio of offshore wind projects from Taiwan and Ireland to California.
The new fund will be a mix of about one-third offshore wind, one-third onshore wind and solar, and one-third what CIP calls “niche” technologies that include battery storage and transmission. Most of the projects will use around 50% of the debt, together with the capital of the fund, which will mean a total investment of around 24 billion euros.
The fund aims for an annual return of 10% to 12%, according to Baruël Poulsen. That’s up from the 8% to 10% expected from previous funds, though they’ve beaten those metrics in the past, he said.
Consistent approach
The bright investment outlook comes as oil majors such as Shell Plc and BP Plc pull back from aggressive pushes into renewable energy, particularly offshore wind, because their executives say the returns are too high low
This stop-and-start approach can doom these companies to failure in the green transition, Baruël Poulsen said, adding that CIP’s success comes from consistency. This means getting in early and spending only on the best projects.
“It’s not a business where you can be in and out all the time,” he said. “It simply won’t be a good business for you because you will always buy at high prices and get the worst projects on the market. The key to achieving good projects is to be consistent”.
–With the help of Christian Wienberg.
