Department for International Development Annual Report & Resource Accounts - International Development Committee Contents


Written evidence submitted by Berkeley Energy

1.  EXECUTIVE SUMMARY

This memo aims to provide information about the catalysing role of CDC in the establishment of Berkeley Energy's Renewable Energy Asia Fund, a private equity fund focused focused on the development and construction of new renewable energy infrastructure assets in Asia.

2.  BERKELEY ENERGY

2.1  Berkeley Energy is a private equity fund manager specialising in renewable energy infrastructure investments in developing markets with an initial focus on Asia.

2.2  Berkeley's Renewable Energy Asia Fund ("REAF") invests into post-permitted projects and project developers using proven technologies in those geographies demonstrating mature renewable energy legislation and deregulated power markets. Berkeley Energy seeks to mature and consolidate these investments into operating portfolios.

2.3  The Fund's technology focus is wind, small hydro, biomass, solar, geothermal and landfill gas. The Fund's geographical focus is primarily India with additional target markets including Philippines, Sri Lanka, Thailand and Vietnam.

2.4  The Fund seeks to make equity investments with a positive, significant and sustainable impact. The Fund has a positive environmental impact by focusing only on constructing new and clean power generating capacity in emerging Asian economies otherwise reliant upon fossil fuels (eg diesel generators or coal-fired power stations). The Fund has a positive social impact as renewable energy resources are typically in rural, poorer areas, and the Fund's investment activity results in new job creation, village electrification, enhancement to the integrity of rural power grids, and delivery of stakeholder projects such as building schools or micro-finance activity.

3.  BERKELEY AND CDC

3.1  Berkeley initially met with CDC in October 2007. From that date until our first closing in December 2009, a period spanning one of the trickiest ever fundraising times in private equity, CDC were professional, supportive, and a powerfully enabling force in the establishment of the Fund. A number of themes stand out for Berkeley, including:

3.2  Leadership. CDC was at the forefront of key milestones of the Fund's development. In December 2008 CDC became the first investor to commit to the Fund. In April 2009 CDC agreed to a "dry closing" of the Fund whereby it would negotiate the Limited Partnership Agreement and commit to the Fund, conditional upon the Fund raising a minimum sum. In May 2009 CDC hosted and led the initial Fund negotiations. During documentation CDC was prompt and articulate in its recommendations and preferences facilitating an efficient process. CDC's pro-active participation and reputation as a "thought-leader" undoubtedly played a critical role in the successful launch of the Fund.

3.3  Partnership. Our fund-launching relationship with CDC started before the financial crisis began in earnest, strengthened when the Fund commitment was made just three months after the collapse of Lehman Brothers, and matured up until our first close. Throughout that time the CDC team were patient, supportive and creative. Example activities include introductions to other potential LPs, being available to speak with other potential LPs about CDC due diligence process and investment decision, an understanding approach to fundraising delays, and deciding to negotiate the Fund's documentation to provide additional comfort to potential LPs (work done at risk given the condition precedent of a minimum amount may not have been reached in such a difficult fundraising climate). From Berkeley's perspective CDC has acted throughout our relationship as a supportive partner as opposed to simply a client.

3.4  Professionalism. Over the three years we have matured our relationship with CDC its experience and professionalism has been apparent. Process has been clearly articulated, timelines met, and effort expended on important issues at the right time. This approach is much appreciated by Berkeley and clearly best-practice in the market.

3.5  Accordingly Berkeley is delighted to be involving CDC in the Renewable Energy Asia Fund. We are sincerely grateful for the quality of engagement and leadership it contributed, playing a stand-out role in the successful launch of the Fund in such a difficult market.

4.  RECOMMENDATIONS

4.1  Berkeley notes the "leverage" and "development impact" achieved by CDC when deploying its capital.

4.2  As the first investor into the Renewable Energy Asia Fund (for €10 million), CDC played a crucial role in attracting a further €40 million into the first close (4x its own investment). The final fund size is yet to be determined but is expected to be €100 million + (10x the CDC investment). The Fund's equity will subsequently be leveraged at c.70% (€333 million total investment).

4.3  This means CDC will have meaningfully contributed to activating 33x its original investment for the construction of new renewable energy generating capacity in emerging Asia, at precisely the time it was needed most, namely when these poorer countries were struggling to attract private sector capital and experience for clean energy investment.

4.4   Berkeley recommends further support for CDC going forward.

9 September 2010



 
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