DENMARK - Labour-market pension funds PensionDanmark and PKA have invested DKK6bn (€800m) in a half-share of what will be the world's second-largest offshore wind farm.
The deal should produce a return in line with equity investments, but with lower risk and cyclical sensitivity, according to PensionDanmark's chief executive Torben Möger Pedersen.
The two pension funds have together bought a 50% stake in the Anholt offshore wind farm from DONG Energy. PensionDanmark has taken a 30% stake while PKA is acquiring 20%.
Möger Pedersen said the investment was the next big step after its acquisition of 50% of Nysted offshore wind farm in 2010.
He said: "Denmark is in the necessary transition toward renewable energy, which in this case is well united with an attractive return on our members' pension savings."
He said investments in wind farms made perfect sense from an investment perspective, especially with bond yields at just above 3%, and expectations of a very volatile equity market over the next few years.
"In light of this, investments in solar and wind energy are very attractive to a long-term investor as PensionDanmark," he said.
"These types of investments can generate a return in line with what we expect from the equity market. But the risk and sensitivity to the global business cycle is significantly lower than with equity investments."
PKA chief executive Peter Damgaard Jensen added: "PKA has for several years made climate part of its investments - also when it comes to infrastructure. We are, of course, doing this to make money to the members' pension savings, but we also wish to take a social responsibility."
Consisting of 111 wind turbines and with an output of 400MW, the Anholt facility - located off the northwest coast of Jutland - will be Denmark's biggest wind farm. By the time it is completed in 2013, it will become the second largest wind farm in the world in terms of output.
"In the aftermath of the financial crises - and with the upcoming Solvency II regulation to come into effect - not many investors can undertake these types of illiquid investments," said Möger Pedersen.
"PensionDanmark has the capital, as well as the internal expertise and resources, to undertake this type of investment."
The London Array wind farm, due for completion in 2012, will at that point be the world's largest off shore wind farm. It is to generate 630MW, with the output from 175 wind turbines boosted by offshore and onshore substations.
The Anholt wind farm is expected to start generating power in 2012. In 2013, it will be producing equivalent to the annual electricity consumption of 400,000 Danish households, or 4% of Denmark's total electricity consumption, PensionDanmark said.
Dutch asset manager PGGM late last year announced it was buying a 25% share in a wind farm in the Irish Sea.