Why renewable energy?
CR: The first investment is in partnership with Iona Capital to fund the greenfield development of new bio-energy plants and critically we are funding them to own them afterwards so we can take the long-term cashflows. We have committed £60m to the overall mandate but have initially drawn down £9m into the Leeming biogas plant. There is an element of capital growth through taking greenfield risk, but for us it is a way of getting long-term inflationlinked cashflows. There is also an element of renewable tariff underpinning that income so there is a degree of de-risking from that perspective. We are looking at sites which are pre-approved from a planning perspective and using existing triedand- tested technology, so we don’t believe we are taking technology risk.
How will the government’s removal of subsidies for biomass affect the investment?
CR: We have analysed that carefully and the specific biogas subsidies issue relates to much larger sites. We are looking at much smaller scale sites, small biogas generators. We structured the investment to make sure we retain control, so it isn’t a blind investment given to a third-party manager.
Outside of bio-energy, are there enough investable opportunities in infrastructure?
CR: There is an awful lot of foreign capital that has come from sovereign wealth funds, large pension funds from other countries and that is undoubtedly pushing pricing up. If you are looking for core UK infrastructure assets they are relatively expensive. That is why we are trying to be flexible in our approach. There is a huge overhang of need for infrastructure investment globally.
TD: At the moment there is a premium for liquidity and that means people are premium pricing liquid assets. Because we have recognised we don’t need daily liquidity, there has been a structural move over the last two or three years into more illiquids in order to achieve our target return of RPI plus 3-4%.
Why did you walk away from the Pensions Infrastructure Platform (PiP) having been a founding investor?
CR: LPFA withdrew reasonably early in the process when the direction of the travel appeared to be diverging between the risk/ return and the implementation
methodology that LPFA and PiP were seeking. There was no animosity and I would be surprised if we don’t collaborate in the future on an asset we want to buy together.
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