Ahead of its mid-March first close, EnerCap has built a €1 billion-plus project pipeline for the fund, which is the first of its kind. The target region includes the 10 European Union member states in central and eastern Europe as well as the bordering countries of Bosnia-Herzegovina, Croatia, Macedonia, Serbia, Turkey and Ukraine. Some 80% of the fund’s capital will be used in the target region, with the balance available for projects in western Europe, the UK and Scandinavia. Investments will range from €5 million to €20 million, with maximum exposure to a single investment set at 20% of the total committed capital.
EnerCap is looking to generate a minimum gross internal rate of return of 25% on its investments, which will typically be exited within three to five years. Over the next six months investments include three wind power projects in Poland and Croatia, a bioethanol and biomass plant in the Czech Republic and a gas co-generation plant in Slovakia. Overall EnerCap estimates that the region needs to develop nearly 5,000 MW of capacity by 2010 at a cost of €10 billion if it is to meet the renewable energy targets set by the EU and the Kyoto Protocol. The fund is sponsored by Czech investment bank Kilcullen Kapital Partners, which has 12 years’ experience of providing investment banking services in central and eastern Europe. As part of its business model EnerCap has taken a stake in Austria’s CE Energy Holdings, a leading wind-farm developer in the region. In order to establish a track record for what is essentially a new asset class, having initially targeted €200 million, EnerCap has now reduced that to €100 million for the first fund. “We would rather start smaller even though our pipeline is in excess of €1 billion to get the money out in the next two years rather than taking three to four years potentially with €200 million,” says White, adding: “We believe that investors would rather see a faster investment and return cycle and the possibility to reinvest in a successor fund as well as attract new investors to a follow-on fund.” The term of the fund has also been trimmed, from 10 to seven years. “We have reduced the length of the fund as we are confident that this will again match our velocity of investments and return of capital,” says White.
