Private equity firm KKR's first investments in European wind farms

Kohlberg Kravis Roberts (KKR), one of the world’s biggest private equity groups, has made its first European renewable energy investment by teaming up with an Italian power company building wind farms in France, according to the Financial Times.
 
The US group and Italy’s Sorgenia are to form a joint venture with assets that will include about 153 MW of wind production capacity that Sorgenia has built, and another 95 MW from farms at an advanced stage of development. Sorgenia will manage operations and the partners will have an equal share in the joint venture under the agreement, which is based on an enterprise value of about EUR236m ($342m).
 
The deal is by no means the largest for the European market in renewable energy, which covers power generated from naturally replenished sources, such as the sun and wind.
 
But it was one of the biggest deals in 2011 and continued a trend that had seen private equity firms, pension funds and other investors enter the renewables market in greater numbers over the past two years, said Eduardo Tabbush, European wind analyst at the Bloomberg New Energy Finance consultancy.
 
This new class of buyers had helped drive the acquisition of a total of 7.1 GW of wind operating assets in 2010, up from 3.5GW in 2009, he said. The pricing of the KKR-Sorgenia deal at nearly EUR1.5m per MW of operating assets is in line with the global average of EUR1.58m, he added, and slightly lower than the French average for 2010 of EUR1.7m.
 
The deal is the first investment for KKR’s new infrastructure fund, which had its first close at the end of 2010, said Jesus Olmos, European head of KKR’s infrastructure business.
 
"Wind being the first investment is not a coincidence,” said Olmos, adding that KKR considered the Sorgenia wind parks as “core infrastructure assets providing long-term cash flow visibility”.
 
Olmos said KKR would look at making further infrastructure investments in Europe, especially in the four main renewables markets of Germany, Spain, Italy and France, though the UK and Poland were “also on the screen”.
 
The group also believed India showed promise. “But we feel more comfortable for the time being in Europe,” he said, adding the region had a mature and stable regulatory environment. France is the fourth-largest wind market in Europe, behind Germany, Spain and Italy, and wind provides nearly 2 per cent of its total electricity.
 

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