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PSP, IMCO, Sandbrook acquire German wind company for $1B

Canadian investment funds take steps on ESG strategies

Courtesy Public Sector Pension Investment Board and Investment Management Corporation of Ontario.

Public Sector Pension Investment Board (PSP Investments), Investment Management Corporation of Ontario (IMCO) and renewables-focused investment firm Sandbrook Capital have partnered to acquire German renewables company NeXtWind Capital Ltd. for approximately $1 billion.

The two Canadian funds and Stamford, Conn.-based Sandbrook announced they will acquire NeXtWind from Fort Worth, Tex.-based investment management firm Crestline Investors.

The $1 billion in equity capital committed by the three entities will be used to acquire NeXtWind’s portfolio of operating wind assets and fund future growth, according to a release.

NeXtWind, headquartered in Berlin, specializes in acquiring and repowering onshore wind farms, with a mission to expand its portfolio of 10 wind farms in Germany and repower the country's aging wind turbines. It launched in 2020 with a US$100 million financing round led by Crestline.

"We are delighted to partner with NeXtWind and co-investors to support NeXtWind’s mission to rejuvenate Germany’s renewable energy asset base," Matthew Mendes, managing director and head of infrastructure at IMCO, said in the release.

NeXtWind’s management team is led by founders Ewald Woste, Werner Süss and Lars Meyer, who combined have decades of experience in the German power market. The transaction will significantly strengthen its balance sheet.

Germany represents the largest onshore wind market in Europe with approximately 58 gigawatts of installed capacity at the end of 2022. Approximately 30 per cent of this capacity (13,000 turbines) has been in service for more than 15 years, presenting a large market of older turbines to be updated.

In the release, Patrick Samson, PSP Investment’s senior vice-president and global head of real assets investments, said, “Onshore wind repowering represents an important lever in enabling Germany’s energy transition. We are proud to join forces with NeXtWind’s highly experienced team to deliver on their repowering strategy and to reinforce our commitment to using capital and influence to support the transition to global net-zero emissions by 2050.”

PSP Investments’ and IMCO’s history of sustainable investments

PSP Investments and IMCO are among the largest institutional investors in Canada. Montreal-headquartered PSP Investments has $243.7 billion of net assets under management as of March 31, 2023, while Toronto-based IMCO manages $73.3 billion of assets.

Like its Canadian pension and investment funds peers, PSP Investments and IMCO have established climate targets. PSP Investments has set out to reduce its portfolio greenhouse gas emissions intensity by 20 to 25 per cent relative to a 2021 baseline by 2026.

IMCO has committed to a net-zero emissions portfolio by 2050 or earlier.

In its 2023 Annual Report, PSP Investments listed its wind power-related investments and portfolio activities made in fiscal year 2023.

  • A US$250-million investment with Sandbrook into a Norwegian company that will operate a fleet of vessels to aid construction of offshore wind turbines.
  • FirstLight Power, its wholly owned portfolio company, and its consortium partners were awarded a lease to develop, build and operate an offshore wind farm of up to 2,100 megawatts off the coast of New York and New Jersey over the next 30-plus years.
  • Funded Asian offshore wind companies like Singapore-based Vena Energy.

PSP Investments launched its inaugural climate strategy in 2022 with actions such as issuing its first-ever $1 billion green bond and creating a Green Asset Taxonomy.

Around 20 per cent of PSP Investments’ assets under management ($46.5 billion) are green assets, its 2022 Responsible Investment Report stated.

IMCO’s goal, as laid out in its Climate Action Plan, is to invest 20 per cent of its portfolio in “climate solutions” by 2030, such as renewable energy/alternative fuels, green buildings and climate change adaptation.

In June 2023, IMCO invested US$400 million into Swedish battery maker Northvolt as part of its strategy.

In 2021, IMCO took steps like acquiring U.K.-based Pulse Clean Energy, a developer, owner and operator of battery energy storage projects, and planned to invest up to US$500 million over years. It also participated in a take-private transaction of AusNet Services alongside Brookfield Asset Management to support renewables penetration in Australia.

IMCO's investment into NeXtWind is its first into the German wind sector, Mendes said, and demonstrates its commitment to "boost renewable energy production and enable the global energy transition, in alignment with IMCO's Climate Action Plan."

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