Pension funds flocking to invest in infrastructure

Research from Aurium Capital Markets has revealed a 36% increase in the number of pension schemes investing in infrastructure during a 12 month period over 2014/15. Online analysis by the investment house found 136 pension schemes with direct investment in infrastructure projects in 2014, followed by an increase to 185 schemes a year later. Pensions identified as investing in infrastructure last year included Australian Government Future Fund; Canadian Forces Pension Plan, John Lewis Partnership; Pensionskasse Post; Ontario Municipal Employees Retirement System and The Pension Protection Fund, the company says.

Aurium has also announced that it has raised £270 million to help fund UK renewable energy projects, including over £100 million from institutional pension funds. The attraction of renewables to investors is growing significantly, the company says, as falling costs in the sector coincide with government looking to phase out coal fired power stations. Green energy is increasingly seen as a good bet for investment despite the phasing out of government subsidies for onshore wind and solar power. 

Aurium partner Steven Blase, said: “We are seeing more and more pension schemes investing in infrastructure, and we believe green energy projects here are very attractive for them. Such schemes improve the ‘green’ impact of pensions' investment portfolios, they can pay an attractive return and there is very little correlation with mainstream asset classes.

"We have already raised £200m to help build and acquire a portfolio of major biomass and EfW (energy from waste) plants in the UK and we are looking to raise further funds for more projects in this area.”

Aurium claims to be overcoming a fundamental barrier for developers of UK renewable projects by providing specialist finance. In October last year, Aurium helped to launch the Bioenergy Infrastructure Group (BIG) for investing in the construction of biomass and EfW plants in the UK.

BIG has recently agreed to finance a 21.5MW EfW plant at Ince Park, Cheshire with a construction value of £87 million and also a £200 million 25 MW plant in Hull, East Yorkshire. The latter is expected to operational by January 2018 and will be the first Refuse Derived Fuel (RDF) based advanced combustion technology plant supported by the Government’s new Contracts for Difference (CfD) arrangements.  CfDs aim to help stimulate investment in green energy developments to achieve carbon reduction targets by guaranteeing a fixed price for generators supplying energy.