Instos are going harder and earlier on renewables deals, despite project risks
ESG conscious investors in the Australian renewable energy sector are paying top dollar and buying earlier, despite challenges getting projects off the ground.
The sluggish pace for development of greenfield renewables projects in Australia has not dented investor appetite in the sector. Instead, the growing amount of institutional investors with stringent ESG metrics to satisfy has created the opposite effect - resulting in an oversupply of capital chasing a smaller number of projects, according to dealmakers and industry experts.
But with higher prices depressing returns for operating wind and solar farms, institutional investors are also targeting projects earlier on in their development lifecycle in a bid to maximise yields and ensure they have access to a pipeline of investment opportunities.
“Long-term investors are prepared to come in as early as possible,” says Clean Energy Investor Group CEO Simon Corbell, a former Australian Capital Territory energy minister. “There’s a lot of capital available to manage the development risk and businesses are seeing this as a good way to make sure they have the pipeline they need to satisfy their investment mandate. But it’s got to be the right type of pipeline.”
One investment banker who spoke on the condition of anonymity told Capital Brief that with larger amounts of capital to deploy, institutional investors need to commit larger amounts to a single transaction, which has boosted demand for multi-asset portfolios.
