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First Reserve invests $150m to develop wind with Renovalia

WORLDWIDE: Partnership with Spanish developer strengthens US-based investment group's renewables portfolio.

Energy investor and private-equity group First Reserve has bought into its first wind-energy projects following a joint venture with global developer Renovalia.

The new company, Renovalia Reserve, will see First Reserve invest $150 million in developing and acquiring new wind capacity. Renovalia will contribute 259MW of its existing online wind capacity in Spain and Hungary, as well as a 300MW project pipeline across Canada and Romania.

Although it is the Anglo-American investment group's first move to own projects, it is a co-owner of wind-turbine maker Kennersys. The company acquired Gamesa Solar in 2008 for $222 million. It also has substantial investments in other forms of energy generation, including oil and gas, as well as utilities.

The deal comes as private-equity groups look to increase their spending on European wind. Investors including Munich Re, KKR, Blackstone and Bridgepoint have been involved in around $4.4 billion of deals in the past six months.

Under the terms of the Renovalia Reserve deal, Renovalia will run the wind farms while First Reserve will have discretionary powers over what projects to develop in the future. The joint venture will be headed by Renovalia chairman Juan Domingo Ortega.

The investment was made out of First Reserve's EUR1.2 billion infrastructure fund, which targets three areas: contracted power from renewables and conventional generation; oil and gas contracted mid-stream; and regulated utilities. "We are targeting a reasonable proportion of our infrastructure capital to be deployed into renewables more widely, whether it's hydro, solar or wind," said First Reserve director John Barry. "We have been looking at investment in North America and Europe for some time."

In terms of picking Renovalia as a partner, Barry said it offered a large capacity in one hit and projects with two to five years' operating history. More projects may be acquired, although the $150 million budget is unlikely to be expanded for the time being.

"Anything smaller would have been too small," said Barry. "Renovalia has plans for more than just one country, and there are not that many players who can broaden out from one jurisdiction. The other was they were looking for a partnership.

Barry said the venture remained focused on North America and Europe. However, it will not be getting involved in offshore. "There are enough attractive opportunities in the onshore space without the risk of going offshore," Barry said. "It's potentially a huge market, depending on how the credit crisis resolves itself."

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