Project with Spanish turbines in Wales -- More new private equity

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Private equity investor HgCapital has bought its first wind farm, a 21.25 MW project at Tir Mostyn in north Wales from Windjen Power Ltd. The sale is worth £21.6 million which comprises acquisition and construction costs. HgCapital Trust, an investment trust listed on the London Stock Exchange, is investing in the project along with HgCapital's clients.

The plant will be built and operated by Gamesa Eólica of Spain using 25 of Gamesa's 850 kW turbines. It is to begin operating in September. Tom Murley, head of the HgCapital Renewable energy team, says Tir Mostyn is on a high wind quality site and is a first class project with sound long term economics.

Tir Mostyn has a power purchase contract running until 2016 awarded under the UK's previous support mechanism, the Non-Fossil Fuel Obligation (NFFO). Murley says that while the NFFO contract made setting up the deal easier, the company is still keen to invest in projects under the current Renewables Obligation mechanism.

The plant is the first of a series of investments planned by HgCapital in renewable energy projects in western Europe. As well as wind, it is looking at small hydro, landfill gas and waste-to-energy. The company is focusing on permitted projects ready to begin construction and operating projects, but says it will also consider corporate investments in proven developers. It began investigating renewables over two years ago and aims to become one of the leading investors in renewables in Europe.

The company, which manages EUR 1.3 billion of funds, says the sector has excellent growth opportunities and strong market fundamentals: contributing to environmental goals, reducing dependence on foreign gas and oil, and provides a credible alternative to nuclear.

"Renewable energy is securing an increasing share of the market and is a rapidly maturing industry," says Murley. "Investors are looking to broaden their alternative investment strategies to include new assets classes that can provide current income and appealing risk-adjusted returns over the long term. Renewable energy can meet these objectives."

Debt facilities for the Tir Mostyn project were arranged by Bank of Scotland, which was advised by Norton Rose and Garrad Hassan & Partners. HgCapital was advised by Vinson & Elkins, Deloitte Touche and Wind Prospect Ltd.

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