Alternative asset manager Aquila Capital has launched what it claims is the world’s first dedicated European hydropower fund for institutional investors.
The Aquila Capital European Hydropower Fund is a Sicav-Sif domiciled in Luxembourg, with a minimum investment size of €10 million. The Fund will invest across a range of geographies, with a particular focus on Scandinavia and other European Union member states.
The fund offers institutional investors access to a balanced and diversified portfolio of European hydropower assets. Its objective is to deliver an internal rate of return of 7-9% and long-term stable cash yields, with low volatility and independence from traditional asset classes and government subsidies.
According to a study carried out by Aquila Capital among 61 institutional investors across Europe in February 2015, only 7% of institutions are currently exposed to hydropower, compared with 37% to solar and 29% to wind. However, just over half (52%) of institutional investors say they are committed to diversifying or increasing their exposure to renewables.
Aquila Capital also recently reported that the overall proportion of European institutional investors with exposure to renewable energy assets has actually almost doubled over the last year.
The firm’s February research also revealed that the most common concerns about investing in hydropower are the lack of quality investment opportunities and a ‘shortage of managers with a track record’, both cited by 42% of respondents.
Factors that attracted investors to hydropower included long-term stable cash flows, portfolio diversification and an inflation hedge.
Oldrik Verloop, co-head of hydro at Aquila Capital, says: “Hydropower is the leading source of renewable energy and accounted for around 12% of Europe’s total net electricity production and 60% of that produced from renewable resources in 2012.
“The combined drivers of rising global energy demand and diminishing fossil fuels make it an attractive investment opportunity for institutional investors, who are seeking to future-proof their portfolios and will increasingly diversify into alternative, real assets such as hydropower.”
Aquila Capital, which manages assets of over €8.4 billion, has worked with hydropower investments since 2009 and has over 50 hydropower plants currently under management.
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