Private equity reignites interest in renewables as attractive investment

Private equity investors are showing renewed interest in the renewables industry and playing an increasing role in plugging the funding gap.

Investment in renewables projects in the first half of the year has risen almost tenfold to £585 million compared with 2010, according to research by law firm McGrigors.

McGrigors’ analysis of statistics, compiled by investment data firm Preqin, has shown that the trend in the UK is reflected across Europe, where more than €2 billion (£1.7bn) has been raised for investment in renewable energy projects.

McGrigors released the data to coincide with the Scottish Low Carbon Investment (SLCI) conference which kicks off in Edinburgh today. It will be addressed by former US vice-president, Al Gore, tomorrow.

Euan McVicar, a partner in the energy and infrastructure practice at the firm, said: “These figures clearly demonstrate that private equity is well-placed to fill the project finance vacuum.”

In addition to signs of increasing investment, Scottish Enterprise produced a report yesterday which said that the knowledge and expertise of Scotland’s oil and gas supply chain could help reduce the costs of offshore wind operations by at least 20 per cent.

Some of the biggest players in the energy sector will convene at the SLCI conference over the next two days to discuss how the country can meet the Scottish Government’s ambitious target of having 80 per cent of Scottish electricity consumption to come from renewables by 2020.

Jorge Calvet, chairman and chief executive of Spanish wind turbine manufacturer Gamesa, will be at the conference to officially launch the firm’s £14 million research and design Centre at Strathclyde Business Park.

McGrigors said that a range of factors are combining to make the renewable sector more attractive to private equity.

“One of the biggest question marks hanging over this objective was how it would be paid for, and this data gives a clear indication of where at least one answer lies.

“Getting good returns for investors in the pervading economic environment has been difficult. PE houses, and other equity investors such as pension funds, have started looking at alternative assets, and renewables has emerged as one of the more attractive options. The technology is more proven, the infrastructure in many cases is up and running, and government commitment is clear and strong,” said McVicar.

“Earlier this year we saw Blackstone make significant investments into assets in the German North Sea. This is a global game in which the UK and Scotland in particular is competing with the likes of Germany, Spain and Denmark. We can’t afford to be complacent, and need to ensure that everything can be done to bring that war chest of investment into the UK.”

Also on Wednesday, Alan Somerville, head of energy at infrastructure outsourcing firm, Capita Symons, will unveil plans for a UK Centre for Transformation and Sustainability in Scotland. He will call on the property industry to “wake up” to the fact of higher energy costs and work to create a more effective capital environment to make buildings more efficient.

The SLCI conference, now in its second year, provides an international forum to discuss emerging renewable energy and other low-carbon market opportunities and challenges. The event is backed by Scottish Enterprise and organised by Edinburgh Chamber of Commerce.