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JPMorgan Chase & Co. Message Board

  • bluecheese4u bluecheese4u Nov 18, 2012 12:08 AM Flag

    Pension funds look to wind farms to provide a steady, safe return

    Pension funds look to wind farms to provide a steady, safe return

    PensionDanmark will invest a further DKr12bn ($2.04bn) in renewables over the next five years, through an internal fund and a link-up with Copenhagen Infrastructure Partners.

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    Torben Möger Pedersen, managing director of PensionDanmark, tells Recharge: “If Europe wants to succeed with the planned transition into renewable energy, then it is necessary to find new ways to get the large pension funds to play a part.”

    The Danish pension fund has previously invested in offshore wind with Danish utility Dong Energy, in the Nysted (Rødsand 1) and Anholt projects, and Pedersen believes this investment model is something many other energy groups are investigating.

    With public budgets under pressure and banks reluctant to provide long-term financing for major projects, pension funds may just be the solution for large investment programmes in offshore wind and transmission networks as Europe moves towards a low-carbon economy, Pedersen believes.

    PensionDanmark manages total funds of about DKr130bn, which is forecast to increase to DKr180bn by 2018. The goal is to spend at least 10% of that on infrastructure, including offshore wind farms. The fund has already invested DKr6bn in offshore wind, which means it needs to find a profitable home for DKr12bn in the coming five years.

    “The biggest part of those investments will be within different forms of renewable energy, or systems that support renewable energy,” says Pedersen.

    PensionDanmark’s internal team intends to invest DKr6bn in offshore wind farms in northwest Europe, including projects in the Baltic, North and Irish seas. The other half will be invested through the co-operation with new fund manager Copenhagen Infrastructure Partners.

    Once this fund has completed its DKr6bn investment, a new fund will be established, with the possibility for other investors to participate. “This could be other pension funds,” says Pedersen.

    PensionDanmark’s aim is to get the best return for its members, but with low interest rates and volatile financial markets, investing pension funds in bonds and stock is not the best option.

    “That’s why we are looking at assets with a return well above the interest rate on bonds, but without taking on the risk of investing in listed shares. We have therefore identified a certain type of infrastructure project, especially within the energy area, which looks interesting to us as long-term investors,” says Pedersen.

    Predictions that offshore wind construction costs will fall also make such projects attractive.

    “We listen to the wind industry, and it is very optimistic about increasing the efficiency of turbines. Wind turbines are getting bigger, and that means costs per megawatt produced are coming down,” he explains.

    “But for us as investors it is decisive that there is a high level of public guarantees for the price of electricity being produced. That’s what makes the risk manageable for us.”

    Karin Jensen, Copenhagen

    Published: Friday, November 16 2012

    rechargenews

 
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