UK - The nascent UK Green Investment Bank has awarded one of its first mandates to a specialist investment firm that claims the traditional private equity fund structure is "outmoded".
Secretary of State for business Vince Cable announced Monday he had divided £80m (€98.3m) between two fund managers specialising in small-scale waste infrastructure, Greensphere Capital and AUM £650m Foresight Group. The tender attracted bids from 23 fund managers.
Greensphere Capital, which will receive £30m, will target match funding from overseas pension and sovereign wealth funds.
Managing partner Divya Seshamani, who previously managed direct infrastructure investments for Singapore sovereign wealth fund GIC, said: "We're tapping new sources of capital - not small UK funds."
Seshamani said the firm had opted to work with a few large, high-quality investors after concluding the private-equity fund model was obsolete for infrastructure investment.
"We didn't want to spend 21 months fundraising and then aligning disparate investors," she said. "If you build the right team, the right investors will come. We're after experienced long-term investors with the right thinking, not crazy money."
She said her team would seek out five or six investors at most, but pointed to differences between this co-investment model and a club deal, notably the avoidance of legal costs incurred by club investors.
Greensphere will work with developer EIDC on what are often small, underdeveloped projects in the waste infrastructure sub-sector.
UK Green Investments (UKGI), the vehicle investing for the Green Investment Bank ahead of state-aid approval from the European Commission, made the "fully commercial" capital commitments on the understanding that no individual investment is likely to exceed £15m.
"We have a clear strategy of how we want to do it," said Seshamani. "The investment discipline in some of the smaller scale infrastructure projects is not good enough. We're motivated by risk and return. We may be environmentalists at heart, but the approach is non-sentimental."
UKGI will target investments in offshore wind power, waste processing and recycling, waste-related energy and non-domestic energy efficiency.
The government will announce the result of a second, £100m tender for investment in infrastructure related to non-domestic energy, announced last month, in the summer.