Local Authority Pension Schemes Increase Exposure to Infrastructure

New research from specialist finance house Aurium Capital Markets (Aurium), identified 19 local authority pension schemes with direct investment in infrastructure in 2014 and 2015, but the amount they had invested here increased by 27% between these two years.

Aurium, which has raised nearly £300 million from institutional investors to help fund UK renewable energy projects, says that out of the 19 local authority schemes reviewed, only three – East Sussex County Council Pension Fund, the London Borough of Barking and Dagenham Superannuation Fund, and the Royal County of Berkshire Pension Fund – reduced their exposure here between 2014 and 2015.  All 16 other local authority schemes increased their direct exposure to infrastructure, with The Northern Ireland Local Government Officers Superannuation Committee Pension Scheme and the Cornwall Council Pension Scheme increasing by 1,522.36% and 125.56% respectively.

Aurium expects Local Authority Pension Schemes to continue to increase their exposure to infrastructure.  Not only is it an attractive asset class, the government also announced last year that it’s going to work with the 89 investment funds that together constitute the Local Government Pension Scheme to create six British Wealth funds, which will increase their ability to invest in local infrastructure projects.

Steven Blase, Partner Aurium Capital Markets said: “We expect institutional  investors to grow their exposure to infrastructure over the next few years as they increasingly look for investments that pay a consistently attractive return that have little or no correlation to the stock markets.  Local authority pension schemes are already big investors here, and we expect them to become even bigger.”

Aurium has 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.