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JLEN gets diversified exposure to new build assets

JLEN gets diversified exposure to new build assets – JLEN has made a €25m commitment to Foresight Energy Infrastructure Partners SCSp (“FEIP”), a Luxembourg limited partnership investment vehicle.

The majority of the partnership’s investments will be in construction-stage European renewable energy generation infrastructure such as wind farms and solar parks, and FEIP will also have an allocation to renewable enabling infrastructure such as energy storage, and transmission and distribution assets that complement technologies that generate power intermittently – as solar and wind do. FEIP has identified an initial portfolio that includes European construction-stage wind and solar assets and operational battery storage assets.

By investing in FEIP, JLEN can further diversify its geographic and technology exposure. At the same time, gaining an allocation to construction stage assets should allow JLEN to enhance its returns.

There is a limit on how much exposure JLEN can have to assets under construction. If it were funding projects by itself, it could only get exspoure to small number of projects, the fund allows it to diversify the construction risk over a wider range of assets.

JLEN’s commitment to FEIP also opens up the possibility of future co-investment opportunities (where JLEN can choose to invest directly in projects alongside FEIP.. JLEN will be excused from any FEIP investment that is not consistent with JLEN’s investment policy.

No double charging

Any management fees payable by FEIP in connection with JLEN’s commitment will be rebated to JLEN. A carried interest is due to the manager, subject to a hurdle rate.

[Investing in assets under construction is a trade off between risk and reward. By investing in this area, JLEN can capture some of the profit margin that usually goes to the developers of new projects. There is always a risk that things don’t go to plan, however. Equipment suppliers bear some of the risk but individual projects can still prove problematic. That’s why it makes sense to diversify this risk through a fund. This looks like a good move to us and is a welcome benefit of shifting the management contract to Foresight.]

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