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Estelle Castres, Head of Institutional Sales at Natixis Investment Managers and Raphael Lance, Head of Energy Transition Funds at Mirova, explain why institutional investors have a key role to play in financing the energy transition, the key benefits they can expect investing in this ‘new core’ asset class, and where the new opportunities exist in next-generation energy infrastructure.

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The Billion Euro Energy Transition Investment Opportunity
Investing in the energy transition is not just beneficial: it is essential! Developing renewable energy, low carbon transportation and energy efficiency are the main levers that will help meet the goals set by the Paris Agreement. Institutional investors have a key role to play in financing the energy transition, which requires huge amount of capital.

Financing the energy transition means investing in tangible assets in power generation infrastructure such as wind farms, solar power plants, hydroelectric infrastructure and all associated storage solutions, as well as in energy use infrastructure: electric or hydrogen vehicle and fleets, as well as all the deployment of charging stations.

Energy transition infrastructure can offer access to a predictable, inflation-linked and stable cash flows with a low correlation to the economic cycles and financial markets. In a low interest rate environment, they can offer an attractive yield and k since building and commissioning times are much shorter than traditional infrastructures, they can offer a quicker return on investment. These investments are therefore an attractive tool for diversifying institutional clients’ portfolios.

There are massive requirements for financing: between now and 2030, nearly 1,700 billion euros are expected to be invested in Europe3. There are already a wide range of assets associated with energy transition infrastructure What’s more, with of the shift to low carbon mobility, there are a variety of different types of infrastructure and new energy technologies meaning this asset base is likely to become even more diversified.

Mirova is one of the top energy transition infrastructure investors in Europe3, with 20 years of experience in managing investment funds dedicated to the energy transition. Mirova manage 1.5 billion euros of assets invested on behalf of leading institutional investors in wind farms, solar plants, hydroelectric power, biomass, biogas, storage, electric mobility and soon in green hydrogen.

A Wide Range of Investment Opportunities
Involved from the very beginning in the financing of renewable-sourced energy production infrastructures, Mirova has a unique perspective on this market, contributing to projects that are new, whether in terms of technology, maturity or geography.

A Wide Range of Investment Opportunities


Mirova Energy Transition in a Nutshell

The opportunity

Investments to energy transition represent an opportunity for institutional investors to play a role in the fight against climate change. Renewable energy is one of the fastest growing segments within the infrastructure market and clean energy production, grid connection, storage and electric transportation represent a compelling investment opportunity in the move towards a low-carbon economy.

The rationale behind allocating to core and emerging infrastructures in the energy transition market

The energy infrastructure market offers several attractive features for investors:

  • A transition in motion: an increase of the share of renewable energy in energy consumption in the EU: from 9.6% in 2004 to c. 20% in 2020 –The European target is 32% by 20301 which would require massive investments of €1.7 trillion2 over the next 10 years
  • An evolving industry: 1) Competitiveness: the ever-falling clean energy production cost puts renewables at parity with conventional generation sources. 2) Innovation: growing number of solutions to the energy transmission, distribution & storage challenges enable integration of existing & emerging renewable technologies in energy systems. 3) Financing: mature renewable energy technologies allow a sound cash flow predictability.
  • A diversifying asset class, with low correlation to the business & capital market cycles and providing attractive yield potential
  • Long-term investments in tangible assets with relatively steady, low volatile, inflation-linked cash flows
  • Favorable treatment under Solvency II: SCR of 15% with look-through analysis vs. 49% for private equity type investments

Key competitive advantages

Mirova exhibits the following key competitive advantages:

Experienced investment team
  • 20+ years experience in structuring & managing energy transition infrastructure fund: one of the longest track records in Europe through 4 investment funds successfully raised and deployed amounting to 1.5B€ of AUM
  • 70+ transactions, representing 5.7GW of installed capacity financed in 10 European countries with 40 successful exits
  • All team members have a robust background in energy transition, core skills in financing, sourcing, structuring and in asset management
Pioneer in energy transition projects
  • Exposure to Core – Greenfield/ Brownfield infrastructure – and to corporate infrastructure through mobility or renewable developers, mainly in Europe
  • Long-term partnerships & co-investing with industrials to create a strong alignment of interests & secure proprietary deal flow
  • Responsive & flexible approach to deal structuring to best match the project developer’s expectations: equity and/or mezzanine
  • J curve mitigation through investments in quickly operational greenfield projects blended with operating brownfield assets or through mezzanine that enables quick value enhancement & cash flow generation allowing early repayment to investors
  • Merchant exposure managed through a diversified approach of electricity market mechanisms and securing regulated or private offtake agreements (PPA)
  • Mix of yield-driven & value creation performance (revenues from the asset ongoing operation ; investments sold within 7-10 years)
  • Hands-on approach to asset management: renegotiation of maintenance and operating contracts, refinancing capabilities, representation on the governing bodies of the project companies
An impact-driven approach
  • Build a 100% low-carbon, climate resilient (compatible with a 2°C1 climate scenario2) & maximising job creations
  • Pioneering lifecycle approach to environmental, social & biodiversity risks/opportunities assessment
  • Innovative opt-in impact scheme to finance non-profit projects related to fight against energy poverty & energy access & sponsor biodiversity research programmes

At a glance

  • Affiliate: Mirova
  • Type: Illiquid
  • Asset type: Core Infrastructure (70%-80%; equally invested across Greenfield and Brownfield) & Corporate Infrastructure (20%-30%)
  • Region: Europe and residually (max 10%) in OECD countries
  • Sector diversification: 1) Core Infrastructure: Solar PV, Hydro, Onshore & Offshore Wind, Biomass & Biogas, Mobility, Energy storage, Hydrogen, District heating. 2) Innovative Infrastructure: Storage, Grid and Mobility. 3) Corporate: Infrastructure: Mobility, Renewable developers.
  • Maturity: 12 years
  • Main risks: Capital loss, Economic, market, liquidity, project, credit, electricity network, operational, regulatory, counterparty & compliance risks
 

Discover the Thinking of Mirova on the Energy Transition:

Renewable Energy in Light of Grid Parity

The gradual reduction of public support measures is ushering renewable energies into a new era; that of autonomy on electricity trading markets.

  • June 30, 2021

Renewable Infrastructure as an Asset Class

One of the most important challenges for institutional investors is to deploy large amounts of capital and manage increasingly high liability commitments in an environment of low-yielding opportunities.

TTR Energy partners with five institutional investors to create independent electricity producer Hexagon Renewable Energy and acquire a portfolio of 19 wind projects in France

  • April 27, 2021

Green Hydrogen, A Catalyst for the Energy Transition

A multipurpose gas with outstanding energy properties: per kilo, as it contains 2.2 times more energy than natural gas, 2.75 times more than petrol and three times more than crude oil.

  • April 27, 2021

Mirova acquires a stake in Corsica Sole

  • April 21, 2021

Mirova and Banque des Territoires Announce Investment in the Clem’ Eco-Mobility Initiative: a Vehicle Sharing Platform for Businesses in Paris

  • April 6, 2021

Hydrogen Mobility Pioneer, Hype, is Entering a New Phase with HysetCo’s Acquisition of Major Taxi Firm Slota

  • March 10, 2021

Financing the Necessary Ecological Transition of Transport

The energy, industry, buildings and transport sectors together currently account for three quarters of global greenhouse gas emissions, with mobility alone representing no less than 24% of CO2 emissions caused by energy combustion.

  • March 2, 2021

Mirova Demonstrates Leading Edge Position in Area of Energy Transition Infrastructure

  • February 22, 2021

New Mirova Co-Investment Vehicle Participates in Major Renewable Infrastructure Project Alongside Engie and Credit Agricole Assurances

  • January 20, 2021

Electric Vehicle Charging Expert, DRIVECO Opens its Capital to Mirova

  • November 24, 2020

Opportunities in Next-Generation Energy Infrastructure

Investment opportunities in the energy transition are no longer limited to the mature solar and wind segments.

ENGIE and Mirova Partner to Accelerate Biogas Investments

  • April 29, 2020

Mirova awarded twice at the 2019 "Infrastructure Investor Awards"

  • March 30, 2020

Mirova Joins Akuo to Finance 132 MW of Wind Power in Poland

  • February 17, 2020

Final close at €857m for Mirova-Eurofideme 4

  • November 14, 2019

Mirova’s Goya project wins ‘europe wind deal of the year’ award at 2018 PFI awards

  • June 28, 2019

Mirova Eurofideme 4 hits first close at 250M€ to support the energy transition in Europe

  • December 17, 2018

Mirova acquires 25 MW solar photovoltaic project in Portugal

  • March 22, 2018

Energy Transition: Clean Investments for Yield-hungry Investors

Renewable energy is one of the fastest growing segment within the infrastructure market.

Watch

The Renewable Energy Market in Europe

VIDEO (4’18) – Raphael Lance, Head of Renewable Energy Funds at Mirova

Mirova wins 3rd award in a row at SIATI 2017 with Mirova-Eurofideme 3

  • June 26, 2017

Mirova EuroFideme 3 contributes to the funding of the Novillars Biomass Cogeneration Facility

  • December 5, 2016

Mirova and Valeco team up to support green power

  • November 14, 2016

Mirova obtains the new Energy and Ecological Transition for Climate label for three funds

  • June 14, 2016
1 Source : International Renewable Energy Agency (IRENA)'s Global Energy Transformation Report: A roadmap to 2050.

2 https://www.infrastructureinvestor.com/ii-50-infras-resilience-shines-through-in-its-fundraising/

3 Based on financial assumptions. These do not constitute a contractual commitment from Mirova and shall not engage its responsibility. Investments in real asset portfolios are reserved for specific investors, as defined by their respective regulatory documentation, and are mainly subject to loss of capital risk. Mirova reserves the right to modify the information presented at any time without notice, and in particular anything relating to the description of the investment process, which under no circumstances constitutes a commitment from Mirova.

Published in January 2021.

Mirova
Affiliate of Natixis Investment Managers French Public Limited liability company
Share Capital: €8,813,860
Regulated by the Autorité des Marchés Financiers (AMF) under n° GP 02014.
RCS Paris n° 394 648 216
59 avenue Pierre Mendès France
www.mirova.com

Natixis Investment Managers
RCS Paris 453 952 681
Share Capital: €178 251 690
43 avenue Pierre Mendès France
75013 Paris
www.im.natixis.com

This communication is for information only and is intended for investment service providers or other Professional Clients. The analyses and opinions referenced herein represent the subjective views of the author as referenced unless stated otherwise and are subject to change. There can be no assurance that developments will transpire as may be forecasted in this material.

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