HgCapital highlights alternative energy attraction

By Martin Arnold, Private Equity Correspondent
Published: February 1 2010 02:00
Private equity's growing interest in renewable energy will be underlined today as HgCapital announces three investments in wind and solar power projects worth a total of €300m (£260m), including one of the UK's biggest onshore wind farms.
HgCapital Renewable Power Partners, the renewable energy fund raised by the group three years ago, has bought 50 per cent of Scout Moor, a wind farm near Manchester, from its developer Peel Energy.
Scout Moor, which opened in 2008, has 26 turbines producing 65MW of electricity, enough to power about 40,000 homes. It is the biggest onshore wind farm in England.
Tom Murley, head of HgCapital's renewable energy team, said Scout Moor could be the first of many investments by the private equity group in the UK in partnership with Peel Energy, one of the country's leading renewable energy developers.
"Peel Energy has a substantial pipeline of energy projects in development," said Mr Murley. "We are hoping there will be other projects where we could match their strong development expertise and our strong financing expertise."
Despite well-known difficulties in securing planning approval for onshore wind farms, Mr Murley said the UK was one of Europe's most attractive markets for investing in wind power, not least because of its gusty weather and market-based pricing.
"The UK provides a different risk-return profile, as you have to accept some market risk on a deal, but fundamentally it is a very good regime and a very good wind resource."
HgCapital has invested in 111MW of operational UK wind projects, 44MW fully consented and awaiting construction, and 150MW in development.
It has also added two more deals to its portfolio of seven Spanish solar power projects. It invested with its Madrid-based partner Plenium Partners in a 12MW project in Castilla La Mancha and an 8MW project being built in Murcia.
Mercurio Solar, the UK private equity group's Spanish solar photovoltaic power portfolio, generates 61MW in total, making it the third largest in Europe.
HgCapital invested €70m of equity in the three deals, taking its €300m renewable power fund - the biggest of its kind in Europe - close to being fully invested, forcing it to raise a new pool of money soon.
Meanwhile, Frog Capital, the UK venture capital group with funds of €100m, will today announce an investment in agri.capital, one of Europe's largest biogas producers.
Frog, which specialises in cleantech, IT and digital media investments, paid €3m to an existing investor in agri.capital, which is based in Germany and has 46 electricity production sites generating 29MW and three gas-to-grid sites producing 7MW.
Copyright The Financial Times Limited 2010.