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Capital Dynamics to Raise $800 Million for Clean Energy Funds
2010-12-16 02:28:11.282 GMT
By Stuart Biggs, Tomoko Yamazaki and Komaki Ito
Dec. 16 (Bloomberg) -- Capital Dynamics Inc., a Swiss
private equity firm with about $20 billion in assets, plans to
raise about $800 million over two years for two funds investing
in U.S., European and Australian renewable energy markets.
The company is focusing on infrastructure projects with
expected cash returns of 15 to 20 percent, managing director
Karl Olsoni said in an interview yesterday in Tokyo, where the
firm aims to raise as much as 20 percent of the funds. The firm
declined to provide details of existing funds including the
assets managed and investments.
Capital Dynamics is building on its fund-raising after
being chosen by the California Public Employees Retirement
System, the largest U.S. public pension plan, in October to take
over management of its $480 million Clean Energy & Technology
fund previously managed by Pacific Corporate Group. Renewable
energy is expected to provide about a third of the world's
electricity by 2035 compared with 18 percent in 2008, according
to the International Energy Agency, as governments seek ways to
prevent climate change caused by the burning of fossil fuels.
"There's a lot of momentum for renewables," Olsoni said.
"It really doesn't matter if you're politically left or right.
If you're right you like it for energy security and if you're
left you like it because it's clean and green."
While progress is being impeded by a lack of a global
agreement on curbing greenhouse gas emissions, the trend remains
in favor of renewable energy, Olsoni said. Investment in
environmental-technology companies grew 16 percent to $140
billion in the 12 months to Sept. 30, according to data compiled
by Bloomberg New Energy Finance.
Two weeks of United Nations-led talks that concluded in
Cancun last week failed to reach an agreement on a global
emissions target, while in the U.S., President Barack Obama said
he may be unable to cut U.S. greenhouse-gas emissions after
Republicans regained control of the House in Nov. 2 elections.
Republicans say they will seek to roll back Environmental
Protection Agency rules limiting carbon pollution, ease curbs on
coal mining and may try to block billions of dollars in federal
subsidies for clean power.
The WilderHill New Energy Global Innovation Index, an 87-
member benchmark of companies developing or using low-carbon
technologies, has fallen 16 percent in 2010 after rising 40
percent in 2009.
Even so, there are opportunities for generating returns in
renewable energy, Olsoni said, citing the use of Renewable
Portfolio Standards in the U.S., where individual states require
electricity providers to obtain a minimum percentage of power
from renewable energy by a specific date. A total of 24 states
plus the District of Columbia have issued binding targets, while
five other states have nonbinding goals.
Capital Dynamics is helping smaller companies win larger
energy contracts with high rates of returns up to 20 percent,
often with solar power in the U.S. states with renewable energy
targets, he said. The criteria currently rule out investing in
Japan, where the market is highly regulated and dominated by
companies including Tokyo Electric Power Co., Asia's largest
electricity generator, that already have the technology and
clout to win power contracts, Olsoni said.
'Good Cash Yields'
"Many energy projects throw off very good cash yields that
some Japanese investors might find attractive," he said, adding
that pension funds are showing interest. "These are long-life
assets that produce long-term cash flow."
Global installations of solar panels may more than double
to 15.8 gigawatts this year as developers set up systems to
benefit from government incentives, according to technology
researcher Isuppli. Demand may rise to 19.3 gigawatts in 2011,
Isuppli said last month.
Global coal-fired generation could drop one-third by 2035
in Western Europe and North America amid public opposition and
costs linked to carbon dioxide emissions, according to the
International Energy Agency's 2010 outlook. By contrast, wind
generation is poised to grow 8 percent annually, it said.
The sector isn't without risks, Olsoni said. Spain recently
cut subsidies to solar-thermal power plants and some wind farms
to limit the cost of electricity for consumers. The government
is seeking to reduce the impact of solar energy on electricity
bills as solar plants claimed more than half the 5 billion euros
($6.6 billion) in renewable-power subsidies in 2009 while
providing only about 11 percent of zero-emission power consumed.
Moody's Investors Service said yesterday it may lower the
country's Aa1 rating less than three months after the previous
cut. The country is "susceptible to further episodes of funding
stress," Moody's said, citing the 290 billion euros of
financing required next year by Spain's central government,
regional administrations and banks.
"Spain took the feed-in tariffs onto their fiscal balance
sheet and didn't pass the costs through to the utility customers
and that created a disconnect that was unsustainable," Olsoni
said. "If you have feed-in tariffs that are passed onto rate
payers as they probably should, you're on more solid footing."
For Related News and Information:
Today's top fund stories: TOP FUND <GO>
Top energy stories: ETOP <GO>
Solar power and California: TNI CA SOLAR <GO>
Renewable-energy top stories: TOP ENV <GO>
Renewable-energy IPO stories: TNI ALTNRG INI <GO>
Climate-change stories: NI CLIMATE <GO>
Most-read hedge fund news: MNI HEDGE <GO>
--Editors: Teo Chian Wei, Linus Chua.
To contact the reporters for this story:
Stuart Biggs in Tokyo at +81-3-3201-3093 or
Tomoko Yamazaki in Tokyo at +813-3201-3119 or
Komaki Ito in Tokyo at +81-3-3201-8871 or
To contact the editors responsible for this story:
Reed Landberg at +44-20-7330-7862 or
Andreea Papuc at +852-2977-6641 or