Fundraising - MAY 7, 2015

Aquila Capital launches European hydropower fund

by Andrea Waitrovich

Aquila Capital has launched the Aquila European Hydropower Fund, which the firm claims is the world’s first dedicated European hydropower fund, inviting pension funds and insurers to invest in as much as €1 billion ($1.1 billion) of assets.

The fund will invest across different geographic regions, climates and topographies but predominantly in Scandinavia and other European Union member states.

The supply network to distribute hydropower across Europe continues to be developed. For example, in January, Norway announced it was close to an agreement for a €2 billion ($2.3 billion) investment to build a 700-kilometer underwater powerline to supply the United Kingdom. Norway already supplies Denmark and the Netherlands with subsea interconnectors and is planning to build another, a 500-kilometer line to Germany.

“Hydropower is the leading source of renewable energy and accounted for around 12 percent of Europe’s total net electricity production and 60 percent of that produced from renewable resources in 2012,” said Oldrik Verloop, co-head of hydropower at Aquila Capital, in a statement. “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. The launch of this fund underlines Aquila Capital’s credentials as a leading financial investor in renewable energy.”

According to the firm’s research, investors are attracted to hydropower because it offers long-term stable cash flows (66 percent); overall portfolio diversification (55 percent); renewable portfolio diversification (45 percent); an inflation hedge (38 percent); and attractive IRRs (38 percent).

Hydropower accounts for 16 percent of all electricity generated globally. Key advantages are: it produces clean electricity at low cost and supports the politically and socially desired transition to carbon-neutral energy; it has among the best conversion efficiencies of all energy sources, with an efficiency factor of between 90 percent and 95 percent; it has low operational expenditures, and there is no direct exposure to commodity prices; it is predictable and can largely be matched to demand, which is crucial in stabilizing the power grid; and, if well maintained, hydropower can generate electricity for many decades.

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