Norway’s US$1.3 trillion Government Pension Fund Global – overseen by Norges Bank Investment Management (NBIM) – has made a third weighty investment in European renewable energy with the acquisition of a 16.6% in He Dreiht, a 960MW offshore wind project in the German North Sea, for EUR430 million (US$468 million).
The acquisition is expected to close in Q3 and will be made together with Allianz and AIP Management as a consortium that will acquire a 49.9% interest in the project, which is valued at approximately EUR2.6 billion. German utility EnBW will retain a 50.1% stake. He Dreiht is set to come onstream by end-2025, becoming Germany’s largest offshore wind farm, suppling 1.1 million households.
The investment in Germany comes after NBIM’s acquisition in January of a 49% interest in a 1.3GW portfolio of solar plants and onshore wind farms – both operational and under development – located in Spain for EUR600 million (US$653 million); Iberdrola retains 51%. Its previous investment in unlisted infrastructure was a 50% stake in the Borssele 1 and 2 windfarm off the Netherlands which it bought in April 2021 for US$1.63 billion. At the time, Borssele was the world’s second-largest offshore wind farm in operation, with an installed capacity of 752MW.
The Norwegian SWF is a long way short of its initial target of 2% AUM in the sector, but NBIM is investing at earlier development stages. The Dutch windfarm is a mature asset, the Spanish portfolio is only partly complete and the German windfarm is still nearly three years from generating power. Investing at an earlier stage is set to lead to higher long-term returns and it appears NBIM is gradually building up momentum.
By end-2022, the value of unlisted renewables assets in NBIM’s portfolio totalled NOK12 billion (US$1.21 billion), compared to NOK14 billion (US$1.56 billion) at end-2021, indicating that the value of its stake in Borssele fell US$420 million in just 20 months. The latest acquisitions almost double the value of the renewables portfolio, but its size is still only a tenth of the 2% AUM target.
The sheer scale of the fund and its ethical commitment means it could influence trends in European renewables – and further afield, if it looks to upscale its investments to a global level. NBIM continues to look seriously at offshore wind in Europe, which it forecasts will rise four-fold to 102GW by 2030, and it is planning on making chunky investments.
From 2017 to date, state-owned investors allocated more than US$19 billion of capital in European renewables generation. The latest acquisition by NBIM makes it the second biggest SOI investor in the sector with 14% of the total, after Dutch public pension fund manager APG with 17%. The rest of the top five SOI investors are Abu Dhabi sovereign fund Mubadala (13%), Canada’s federal public pension fund CPP Investments (11%), and Dutch public pension fund PGGM (10%).
