Globalfields Director Marta Simonetti supported the design of two private equity funds for Absolute Energy Capital in 2017. Absolute Energy Capital is a London and Rome-based investment organisation registered with the Financial Conduct Authority (UK). Its investments target the delivery of smart, flexible and distributed energy systems that can handle renewable energy generation (on-grid and off-grid) alongside battery storage. These integrated systems can provide universal energy access and productive energy to rural populations in emerging markets. The assignment was presented and shortlisted as part of the programme “Pitch for the Planet: Mobilising Funds at Scale” within the private sector window of the Green Climate Fund.
The assignment centred around the structuring of blended equity participation alongside A and B shares from private as well as public investors, for a first phase “Impact Fund”, initially focused on sub-Saharan Africa. The Fund invest in local developers, thus bringing training, technical and financial capacity as well as accountabilities to local populations. In addition, these investments are set to foster economic development and social impacts through the growth of the local market for clean energy generation, with ‘champions developers’ projected to become the ‘utilities of the future’ thanks to the constant link between clean energy generation and utilisation of this energy for spin-off economic activities in the retail, commercial and agricultural sectors. The local developers are also tasked with the development, building and the overall operations of the projects in the long term.
This is the productive energy ‘revolution’, with clean energy generation and greenhouse gas emission reduction being not goals in themselves but also the means to sustainable environmental and human development.
The second phase of this assignment involved the structuring of a second “Infrastructure Asset Fund”, that will buy and lease back the operating assets built in phase 1 back to the developers at competitive terms that will be consistent with the de-risked nature of the projects at that stage. Such structure allows for the “re-injection” of proceeds from the sale of the operating assets into additional clean energy projects, thus generating significant leverage and replicability. At this stage, the risk profile of the Infrastructure Asset Fund is changed from high to low risk, as the investments move from first entry / local developers support to investments only in operating assets, which represent a lower risk, longer-term investment. This is meant to attract capital from patient (long-term) investors, such as pension funds, insurance funds and institutional investors.
The financial structure of the assignment, with its mixed equity participation, is meant to foster the opening up of new markets, in particular in the off-grid and battery storage market, bringing reliable and clean energy in underserved areas of countries. In addition, the two successive phases are meant to build and expand upon a new set of asset class, thus generating significant local wealth and capacity.
This case study was written by Marta Simonetti, Founder and Managing Director of Globalfields. Visit Marta's bio or contact us today to discuss this project.