Solar Investment Group to create new fund for renewable energy power plants

Solar Investment Group SIF, a Luxembourg-based regulated Fund, is planning a new, 25 year, Infrastructure Fund focused on acquiring renewable energy power plants. The Fund, called Real Asset Energy Fund (RAEF), will be the third Fund managed by the Team and, subject to regulatory approval, will begin investing in Q1 2013.

The RAEF will acquire power plants once the construction phase is complete and will manage them until the end of their industrial life (typically 20 years). The Fund will invest in a relatively large number (30-35) of medium sized power plants in 5 to 6 key strategic markets (including Germany, USA and Italy) to diversify risk and optimize returns. Investments will be focused mainly on fuel-independent, mature technologies (such as wind and solar) that have stable revenues and limited operating complexity.

Renewable energy power plants generate cash flow by selling electricity to the grid at prices that are supported by long-term government backed incentive schemes or Power Purchase Agreements with state-owned or private utilities. RAEF’s team will actively manage the asset companies to obtain a stable flow of distributions that will be passed on to investors. RAEF aims to pay an annual dividend of 8-10% whilst protecting the principal investment, which will be returned to investors at the termination of the Fund. Most Renewable Energy and Infrastructure Funds have significant volatility derived from a Fund life that is misaligned with the underlying assets. RAEF will not be forced to sell assets after 7-10 years and therefore will be almost entirely uncorrelated with the market, unlike the mainstream asset classes normally preferred by long-term investors: Infrastructure, Real Estate, Bonds and Equities.

The Fund has been designed specifically to meet the requirements of institutional investors including Pension Funds, Insurance Companies, Sovereign Wealth Funds, as well as large Family Offices, Endowments and Foundations that are risk-averse and require stable long-term returns that match their investment horizon. RAEF will also offer an annual window of liquidity to meet unexpected needs of investors over the 25 year period.

The Management aims to raise €500m and to complete RAEF’s funding by Q1 2013.