CEFC confirms largest equity backing for renewables in bid to spur interest from institutional investors

13 December 2018

The CEFC has confirmed its largest equity investment in renewables, with a $100 million commitment designed to encourage institutional investors to further lift their exposure to renewables.

The CEFC investment in the Australian Renewables Income Fund (ARIF), managed by Australian asset manager Infrastructure Capital Group (ICG),^* represents an almost 40 per cent increase in the CEFC’s renewables equity portfolio, which now stands at $355 million.

ARIF will focus on proven large-scale wind and solar technologies, as well as emerging opportunities in energy-from-waste, large-scale battery storage and pumped hydro.

The CEFC has committed more than $2 billion in debt finance to accelerate the development of almost three gigawatts of renewable energy since it began investing in 2013.

To complement the maturing debt market for renewables, the CEFC is continuing its strategy of increasing the flow of equity finance into a diverse range of large-scale renewables opportunities, tapping into the substantial resources of institutional investors and superannuation funds.

“It’s been exciting to see Australia’s renewable energy sector achieve significant growth in recent years, delivering substantial new investment in regional Australia and producing lower cost and cleaner electricity,” CEFC CEO Ian Learmonth said.

“However, renewables still represent less than 20 per cent of total electricity generation, highlighting the very large investment opportunity in order to deliver a clean energy electricity grid. Our investment in the Australian Renewables Income Fund is about creating new opportunities for institutional investors to take a larger role in our clean energy transition.

“Through ARIF, investors will have exposure to a broad range of renewable energy technologies, providing attractive options to deepen their exposure to clean energy opportunities.”

ICG Managing Director Tom Laidlaw said the unlisted Australian Renewables Income Fund has received strong initial support from institutional investors to build on its portfolio of renewable energy assets in Australia.

ARIF will invest in operating assets as well as new developments, enhancing returns for investors.

“ICG has invested in renewable energy assets on behalf of investors since 2007, over which time institutional demand has grown significantly,” Mr Laidlaw said.

“ARIF offers investors access to a high-quality portfolio of operating renewable energy assets and a platform for future growth in the sector. It is a portfolio that has been built over an extended period and is designed to provide investors with a diversified exposure across the sector.”

According to the Responsible Investment Association Australasia (RIAA), responsible investors accounted for 55.5 per cent of professionally managed assets in Australia in 2017, valued at $866 billion.  The RIAA also reported that responsible investments outperformed other investments across large cap Australian and international share funds, as well as multi-sector growth funds.

CEFC Equity lead Rory Lonergan said: “Institutional investors are expressing an increasing appetite for environmentally responsible investment opportunities, alongside heightened scrutiny on the climate risk issues within their portfolios. We see an important opportunity here to expand the availability of tailored renewable energy investment options for investors, and to respond to the expectations of fund members.

“It’s also critical that we increase the amount of finance available for large-scale renewable energy projects, especially at the early stage of development. These projects require a strong capital base and a long-term commitment to investment returns, making them ideally suited to institutional investors.

“While there are currently limited fund style opportunities for institutional investors to get equity exposure to renewable energy assets, we expect this investment class to continue to grow in the future as renewables deliver a larger share of our energy generation.”

In addition to the ARIF investment, the CEFC has also made renewable energy related equity investments with Palisade Investment Partners, the Foresight Group and HRL Morrison & Co.

^{*Foresight Group became manager of ARIF when it purchased Infrastructure Capital Group in 2022. The CEFC extended its investment in ARIF in 2023 to $175 million.}

ABOUT INFRASTRUCTURE CAPITAL GROUP (ICG)

Infrastructure Capital Group is an independent Australian-based infrastructure fund manager. Established in 2000, ICG is 100% staff owned with offices in Melbourne, Sydney, Perth and Darwin.  ICG manages approximately $2 billion of capital for investors across a number of investment vehicles including: the Diversified Infrastructure Trust (DIT), the Energy Infrastructure Trust (EIT), the Australian Renewable Income Fund (ARIF) and separate accounts.