Pension Consortium Buys Half of Wind Project for $1.13 Billion

(March 28, 2011) — Dong Energy, the privately-held Danish energy group, has said that a consortium consisting of PensionDanmark and PKA have acquired 50% of the energy producer’s Anholt offshore wind farms for about $1.13 billion.

PensionDanmark is the lead investor in the consortium and will acquire a 30% stake in the farm, while PKA will acquire a 20% stake, according to the oil, gas, and power producer. Dong Energy has signed a 15-year contract with PensionDanmark and PKA on operation and planned maintenance of the farm.

“Dong Energy commits to constructing the Anholt offshore wind farm at a fixed price and by a fixed date,” the firm said.

In mid-2010, the energy producer said it would build the Anholt wind farm by the end of 2013 in its mission to rely less on fossil fuels and more on wind power production.

The support by the Danish pension insurance groups may reflect greater acceptance of clean energy as an investment among institutional investors. Denmark, which is leading the charge toward greater clean energy research, has one of the most advanced wind turbine technologies. “We expect to invest even more in this area. I think we will see a drive to invest in this area from other institutional investors too,” ATP CEO Lars Rohde told Reuters in 2009, after the scheme made its first entry into clean energy with a $400 million investment in a renewable energy private equity fund. “It all depends on what is available. There are not that many funds out there, at least not suitable for institutional investors. The message from me is: if these opportunities arise, we will certainly be there.”

Investment consultants have witnessed heightened interest among institutional investors in allocating to renewable energy. “There is significant investment by institutional investors and corporate investors globally, reflecting the migration of the energy infrastructure and development of renewable alternatives in the US. Institutional investors have played a major role in that process and are continuing to do so,” Jennifer Urdan and Alexandra Readey of Cambridge Associates told aiCIO.

According to Craig Metrick, Principal and US Head of Responsible Investment for Mercer, the consultancy’s clients are generally investing more heavily in renewable energy and clean tech through private equity funds. “In Europe, however, there may be more direct deals than there are in the US,” he told aiCIO, noting that investing directly in clean tech requires a different level of due diligence. “In the US, funds may have the expertise to invest directly but it is more time and resource efficient to invest via private equity funds.”

Furthermore, Metrick noted that one of the reasons that US institutional investors have not been as aggressive in investing in renewable energy compared to their European counterparts is because of a lack of legislation. “In Europe, there are certain regimes for reducing carbon emissions, fostering a better legislative environment, whereas the debate on climate change and renewable energy has been very politicized in the US.”