Major insurance group places bet on solar energy

The energy transition requires efforts by many groups and individuals. Pilita Clark writes in the Financial Times about an investment by Prudential in a new private equity fund set up by NextEnergy Capital, a specialist solar investor and asset manager


Prudential raises its bet on green energy

UK insurance group Prudential has raised its bet on the future of green energy with a planned €150m investment in Italian solar farms.

The move is a departure for the UK’s largest insurer by market value, which has a string of renewable energy investments in its home country, including the planned Swansea Bay tidal power scheme.

The investment arm of Prudential in the UK has contributed €150m to a new private equity fund set up by NextEnergy Capital, a specialist solar investor and asset manager.

The fund, which has achieved its initial close with Prudential’s investment, will aim to buy Italian solar power plants.

“This is our first move into Italian solar. We think it’s a really interesting space,” said Mike Howard, head of alternative investments at the Prudential Portfolio Management Group, the insurer’s investment arm in the UK.

“It looks like its ripe for consolidation and this helps diversify our portfolio.”

Italy has about 19 gigawatts of installed solar power generating capacity, the largest amount in the EU after Germany, and enough to meet almost 8 per cent of the country’s annual electricity demand.

But Italy’s solar market is highly fragmented, with the 10 largest companies accounting for just 7 per cent of the market, according to NextEnergy. It has stakes in 10 solar power plants in Italy.

At the moment, a lot of Italian solar photovoltaic plants are run by small companies with little expertise in the industry, creating “very significant inefficiencies” in the market, said Michael Bonte-Friedheim, chief executive of NextEnergy Capital.

He added he expected NextEnergy to start announcing deals in Italy in the third and fourth quarters of this year.

The solar industry boomed after Italy launched generous renewable energy subsidies nearly a decade ago.

Support was cut back by prime minister Matteo Renzi’s government in 2014, prompting industry complaints that the move would alienate investors.

That decision affected all existing equity owners of solar power plants, said Mr Bonte-Friedheim.

But NextEnergy believes there is still ample room for investor returns.

“The original owner may have lost value but when we buy assets now we make sure that they have the appropriate returns,” said Mr Bonte-Friedheim, a former banker at Goldman Sachs and Morgan Stanley.

Prudential has backed NextEnergy in the past, investing more than £50m in a London Stock Exchange-listed fund set up by the bank that focuses on UK solar power plants.

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