GLOBAL - The US private equity firm Kohlberg Kravis Roberts (KKR) has formed a joint venture with Italian energy company Sorgenia to invest in wind parks in France, at a time when pension funds are looking to increase exposure to renewable energy.
The deal - which represents the first investment in renewable energy in Europe for KKR and the first investment made by its new infrastructure fund launched at the end of last year - will see the US private equity firm take a 50% stake in the joint venture.
Sorgenia, which will also manage the operation, will hold the remaining 50% interest.
The joint venture is based on an enterprise value of as much as €236m and will comprise around 153MW of wind farms already built by Sorgenia, as well as 95MW of wind parks in development.
Jesus Olmos, European head of KKR’s infrastructure business, said: “The wind parks in this joint venture are attractive, and core infrastructure assets provide long-term cash flow visibility.
“KKR aims to be an active investor across the entire energy spectrum, and this partnership with Sorgenia allows us to enhance our portfolio by investing in renewable energy, one of the most attractive and promising areas of infrastructure.”
Pension funds and fund managers have been increasing their investments in this sector over the years as part of their plan to diversify.
Robert Gardner, co-chief executive officer at the consultancy firm Redington said: “Renewable energy projects in the UK present two main investment opportunities. Firstly, they provide long-term high quality inflation linked cashflows and secondly, they match pension funds’ environmental, social, and corporate governance (ESG) strategy.”
This strategy has been facilitated by the agreement signed in 2007 by several European countries, which aimed to source 20% of their energy needs from renewables - including biomass, hydro, wind and solar power - by 2020.
Since then, many European governments have introduced a Feed-In-Tariff (FIT) regime to incentivise low-carbon energy production.
Under this regime, eligible renewable electricity generators, including homeowners and businesses, are paid a premium price for any renewable electricity they produce.
However, several countries such as Spain, France and Germany cut their FIT for solar PV plants regime last year, arguing that a large number of projects have already been developed.