The €369bn asset manager APG is planning to invest €500m in hydro-electric projects in a venture with alternative investment manager Aquila Capital.
APG is to participate with €250m in an investment vehicle – to be established by Aquila – for the purchase and development of hydro-electric plants.
The required capital is to be completed through bank loans.
Aquila Capital will be responsible for operational and portfolio management.
Patrick Kanters, APG’s managing director for global property and infrastructure, said: “Relatively few companies have the expertise and contacts required to anticipate the best investments options in this sector.”
APG’s decision to invest in hydro power has come as a surprise to some in the industry, particularly in light of the scheme’s recent decision not to invest in offshore wind farms in The Netherlands.
But hydro power, unlike offshore wind power, is largely free of subsidies and other government support.
Indeed, one risk that has pushed many institutionals away from sustainable energy projects to date has been the possibility that those subsidies will soon end.
Water power is also more efficient than wind power. Hydro-electric plants have an energy-efficiency ratio of up to 95%, considerably more than wind turbines (50%) or solar power (20%).
Kanters said APG was putting a lot of effort into finding infrastructure investments with sustainable characteristics.
“Hydro power is the most efficient of the traditional energy sources and complies with all our risk/return requirements, visible cash flows and a strong sustainability profile,” he said.
APG will also start investing in power lines in Latin America – mainly in Brasil and Chile – through a strategic alliance with Spanish energy firm Elecnor, which focuses on developing and operating power plants.
As part of its agreement, APG is to take a 49% stake, equating to €237m, in Celeo Redes, a full subsidiary of Elecnor’s concession subsidiary Celeo.
Both partners are committed to a joint investment of €372m over the next five years, Elecnor said.
Harmen Geers, spokesman for APG, said: “We are very pleased that, in Elecnor, we have found a reliable and expert partner for infrastructure investment in Latin America.
“Elecnor has been operating in the region for a long period and has already 8,000 kilometers of power line under management.”
Elecnor said the deal, pending regulatory approval, would increase power transmission through the combination of its expertise and market knowledge and APG’s scale and expertise on finance and asset management.
Currently, APG – the asset manager for the large civil service scheme ABP – has an infrastructure portfolio worth €5.5bn.
According to Geers, APG wants to increase its infrastructure holdings to at least €9bn in the coming years, depending on its ability to find and acquire the right investments.