Research Reveals Pension Schemes are Increasing Their Exposure to Infrastructure

New research from specialist finance house Aurium Capital Markets (Aurium), reveals that between 2014 and 2015, the number of pension schemes with investments in infrastructure increased by 36%. As an illustration of this market dynamic, Aurium is today announcing that it has raised £270 million, which includes over £100 million from institutional pension funds.

It’s particularly targeting the pensions sector as it says it’s increasing its exposure in infrastructure.  Its analysis found 136 pension schemes with direct investment in infrastructure projects in 2014, and last year this increased to 185.  Those schemes identified as investing in infrastructure last year included Australian Government Future Fund; Canadian Forces Pension Plan, John Lewis Partnership; Pensionskasse Post; Ontario Municipal Employees Retirement System and The Pension Protection Fund.

Aurium, which provides investors with access to innovative investment opportunities, has warned that the UK government’s recent announcement to phase out all coal fired stations within ten years, has dramatically increased the chances of the UK having blackouts and energy security issues.

It says the coal announcement will actually place an increased reliance on renewable energy projects.  Combined with falling long term infrastructure costs in this sector, rising power prices and the fact that the UK is behind on its emission reduction charges, as well as being a responsible way to fill the energy gap, the sector is an increasingly attractive long-term investment for pension plans and other institutional investors, notwithstanding the phasing out of investment subsidies.

Steven Blase, Partner Aurium Capital Markets said: “We are seeing more and more pension schemes investing in infrastructure, and we believe green energy projects here are very attractive for them.  Not only do they improve the ‘green’ impact of their portfolios, they can pay an attractive return and there is very little correlation with mainstream asset classes.

We have already helped raise £200m to help build and acquire a portfolio of major biomass and Energy from Waste (EfW) plants in the UK, and we are looking to raise further funds for more projects in this area.”

Aurium, which was rated by InfraNews as the No 1 UK solar debt provider and No 2 provider of debt in the UK renewables sector overall for 2014/2015, has delivered mid teen returns to its investors from the sector.

Aurium addresses a fundamental barrier facing developers of UK renewable projects: a lack of specialist finance. It assesses risk based on the unique nature of renewable projects rather than more traditional metrics, delivering liquidity regardless of the stage of the project (e.g. construction finance), the speed of turnaround (i.e. weeks not months) or the size of the project (i.e. too small for larger institutions).

In October this year, Aurium sponsored the launch of Bioenergy Infrastructure Group (BIG), a platform established to invest in the construction of biomass and EfW plants in the UK.

BIG has recently agreed to build a 21.5 MW EfW plant at Ince Park, Cheshire with a construction value of £87 million and also a £200 million 25 MW plant in Hull, East Yorkshire. The latter is expected to operational by January 2018 and will be the first Refuse Derived Fuel (RDF) based advanced combustion technology plant supported by the Government’s new Contracts for Difference (CfD) arrangements.  CfDs aim to help stimulate investment in green energy developments to achieve carbon reduction targets by guaranteeing a fixed price for generators supplying energy.