PensionDanmark, Copenhagen, acquired a 50% stake in three U.S. wind farms — two in Texas and one in Pennsylvania – from German energy giant E.ON, said Torben Moeger Pedersen, CEO of the 125 billion Danish krone ($21.7 billion) fund.
It's first time PensionDanmark has invested in an overseas wind farm and is E.ON's first partnership with an institutional investor on renewable energy projects.
“Further transactions are likely to follow,” Marcus Schenck, E.ON's CFO, said in a news release about the deal. E.ON will continue run the day-to-day operations of the wind farms.
“We believe this is promising and hope we'll be able to make further (similar) transactions,” Mr. Pedersen said in a telephone interview. Financial terms were not disclosed, but Mr. Pedersen valued the transaction at several hundred million dollars. An attractive characteristic of the investment is a stable income stream since 90% of the power generated will be sold under fixed-price power purchase agreements over the next 15 years.
PensionDanmark, like many other funds, is facing “quite great challenges” within an environment in which “government bond yields are close to zero and equity markets are very volatile,” Mr. Pedersen said. Infrastructure projects such as wind farms present an opportunity to obtain returns “close to listed equities but with lower risk,” said Mr. Pedersen, adding that fund executives are considering other infrastructure investments in North America. He did not name specific projects.
“The level of political risk is relatively low” in North America, Mr. Pedersen said. “As we're looking at a long-term arrangement of highly illiquid nature, political stability is an important consideration.”
PensionDanmark currently has about $960 millioninvested in wind farms as part of a broader infrastructure strategy, which comprises about 6% of the total portfolio. The aim is to invest another $2 billion in infrastructure over the next five years, according to Mr. Pedersen.