Target Information

Border to Coast Pensions Partnership is the largest Local Government Pension Scheme (LGPS) pool in the UK. On November 13, 2024, it committed GBP 48.5 million to Capital Dynamics’ Clean Energy UK Fund. This investment represents a key milestone as it is the first commitment within Border to Coast’s innovative UK Opportunities portfolio for its Partner Funds. The funds will be utilized to finance the construction of renewable energy infrastructure, focusing primarily on four onshore wind projects located in Scotland, which will collectively generate 193 MW of energy, sufficient to power approximately 46,000 homes upon completion.

Industry Overview in the UK

The UK renewable energy sector has seen significant growth over the past decade, spurred by governmental initiatives aimed at reducing carbon emissions and transitioning towards a more sustainable energy system. The UK's commitment to achieving net zero carbon emissions by 2050 has resulted in increased investments in renewable energy sources such as wind and solar. The onshore wind industry, in particular, has become a vital component of the UK’s energy mix, providing a substantial share of the country's electricity while contributing to local economies.

Moreover, the UK government has implemented supportive policies and financial incentives to attract private investment into the renewable energy sector. The Renewable Energy Guarantees of Origin (REGO) scheme and various subsidies have further bolstered the financial viability of renewable projects. As a result, numerous pension funds and institutional investors have recognized the potential for long-term, risk-adjusted returns in this sector.

Additionally, the transition from fossil fuels towards renewable energy sources is not just an environmental imperative but also an economic opportunity. By investing in clean energy, entities like Border to Coast are not only helping to meet governmental targets but also positioning themselves strategically in a rapidly evolving market that promises sustainable growth.

The growth of renewable energy infrastructure in the UK is crucial for enhancing energy security and reducing dependence on oil and gas imports. As traditional energy sources face increasing scrutiny, the expansion of renewables presents a robust avenue for both investors and the national economy.

Rationale Behind the Deal

The partnership between Capital Dynamics and Border to Coast represents a strategic alignment of interests, aiming to address the urgent need for renewable energy infrastructure in the UK. The investment will play a vital role in the development of new onshore wind projects, thereby contributing to the nation’s cleaner energy goals.

This commitment aligns with Border to Coast's vision of adding value to its Partner Funds through innovative financing solutions that support the construction of essential infrastructure. The expected return on investment, coupled with the positive environmental impact, makes this deal a compelling opportunity for all stakeholders involved.

Investor Information

Capital Dynamics is an independent global private asset management firm specializing in private equity and clean energy investments. Established in 1988, Capital Dynamics has built a strong reputation for its commitment to responsible investment practices, managing over USD 15 billion in assets. The firm has demonstrated its dedication to sustainability by achieving a 5-star rating from the United Nations Principles for Responsible Investment (UNPRI) and excelling in various performance benchmarks.

With approximately 150 professionals across 13 offices worldwide, Capital Dynamics combines local expertise with a global perspective to deliver innovative investment strategies. The firm's Clean Energy UK Fund specifically targets renewable energy projects, focusing on onshore wind and solar power, and is recognized for its unique approach to securing stable, long-term returns while fostering positive local impacts.

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The collaboration between Border to Coast and Capital Dynamics can be viewed as a promising investment opportunity due to the increasing demand for renewable energy in the UK. With the government's strong commitment to achieving net zero emissions, investing in clean energy infrastructure like onshore wind projects not only aligns with broader environmental objectives but also presents potential for significant financial returns.

Additionally, the backing of several major pension funds further validates the investment strategy of the Clean Energy UK Fund, indicating a growing consensus on the attractiveness of renewable energy assets. Border to Coast's commitment to fund the construction of important infrastructure will likely resonate well within the local communities while also addressing the critical energy needs of the nation.

Moreover, Capital Dynamics has a proven track record in the renewable energy sector, having invested successfully in numerous UK clean energy projects since 2010. Their experience and expertise in securing long-term power purchase agreements offer strong downside protection, making this investment more appealing to risk-averse investors.

In summary, this deal represents a strategic investment in essential renewable energy infrastructure. Given the positive market dynamics and the imperative for a sustainable energy transition, involvement in this venture is likely to yield favorable outcomes for Border to Coast, its Partner Funds, and the broader UK economy.

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