New fund will launch £100m hydro projects in Scotland

TWO of the best-known names in Scottish asset management are teaming up with the Duke of Westminster’s Grosvenor outfit to fund £100 million-worth of hydro-electric power projects north of the Border.

Henry Chaplin, who led the management buyout of Noble Corporate Management from Noble Group, and Artemis Fund Managers founder Mark Tyndall have launched an 
investment vehicle, CT Hydro, to manage their stakes.

CT Hydro and Grosvenor’s Wheatsheaf Investments will together pump £15m into a joint venture with Gilkes Energy, one of the largest companies operating in the hydro sector, which makes turbines and builds power stations.

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Chaplin expects that the fund will unlock a further £45m of debt finance from banks over the next five years, which – together with cash from the owners of the estates on which the hydro schemes will be built – will fund some £100m-worth of projects.

The two Edinburgh-based investors, who are acting in a private capacity rather than on behalf of their respective firms, expect to be involved with about 15 schemes over the next five years.

Figures from Highlands and Islands Enterprise show that Scotland’s 145 hydro-electric schemes have the capacity to generate 1.5 gigawatts of 
power, enough to meet 6 per cent of the country’s electricity needs.

Chaplin told Scotland on Sunday: “Gilkes is the best-known player in the market and one that the banks are comfortable doing business with. They build turbines 
but also do everything from guiding schemes through the planning process to building, operation and maintenance.”

The joint venture has already invested in a £7m project at Ederline near Loch Awe, which is expected to start operating in January 2014, and a £2.3m scheme at Frenich near Loch Tummel, which will connect to the grid in April.

Chaplin said they would 
invest in schemes producing between 400 kilowatts and two megawatts of power.

They will be supporting “run-of-river” schemes, which take water out of rivers and then return it, rather than projects that involve building dams.

Jenny Hogan, director of policy at trade body Scottish Renewables, said: “This announcement is a good example of the ongoing investment in Scotland’s hydro sector and will support the development of a number of schemes around the country, creating more jobs in a technology that continues to play a vital role in our energy mix.”

News of the investment fund’s launch comes just days after the Co-operative Bank 
revealed that it had lent £232m to 17 renewable energy projects in the first half of 2012 and has nearly tripled the amount of cash it has handed out over the past 12 months.

Chaplin said: “We’ve put up a significant amount of money, so it means we can move quickly.

“In terms of scale of return, the feed-in tariff is designed to provide 6-8 per cent return on equity, but we hope to do a little better than that by putting in a good-quality system and looking after it properly.

“With the right financing, that return can be improved a little; but we’re not talking about radical returns here, we’re talking about long-term, inflation-linked returns. We’re not in it for the fast buck, we’re in for the long term.”

James Sutcliffe, renewable energy manager at the Co-operative Bank, added: “Undoubtedly, demand for renewable projects is at an all-time high.”