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First Reserve, Renovalia Create $1B Wind Venture

Spain’s Renovalia Energy and private equity firm First Reserve are partnering on a venture to invest in wind farm projects across Europe and North America, Reuters reported Monday. First Reserve is putting $150 million of equity into the project. When leveraged, the venture could have roughly $1 billion for investments in renewable energy, Reuters wrote.

(Reuters) – Energy specialist private equity firm First Reserve and Spanish group Renovalia Energy have created a new joint venture for investing in wind farm projects in Europe and North America, the companies said on Monday.

First Reserve is to put $150 million of equity into the joint venture, Renovalia Reserve. When matched by Renovalia and leveraged, the venture could have about $1 billion to spend on renewable energy projects, a person familiar with the situation said.

First Reserve is one of a few private equity firms to focus entirely on investments in the energy and natural resources industries. Its current investments include a stake in commodities group Glencore and miner China Coals Energy Company.

However, more and more private equity firms including Blackstone, KKR and Terra Firma have entered the renewable energy sector looking for safe long-term returns.

Renovalia Reserve has 295 megawatts of energy capacity in operation, principally in Spain. It’s pipeline of projects in Canada, Romania and Spain will more than double that capacity.

The investment comes despite concerns over the future of subsidies in Spain, which threatens to push down returns in the world’s fourth largest market for wind power.

Talks between the wind power sector and Spain’s outgoing government on new regulation broke down when the government offered an internal rate of return for new windfarms that the sector said was unsustainable.

The new centre-right government is expected to reduce subsidies to renewable power to reduce a 20 billion euro deficit in regulated power tariffs.

Renovalia Energy is a privately-owned renewable energy group, created by the Ortega Martinez family to provide power for their Grupo Forlasa dairy business.

In 2010, the family sold its dairy interests to France’s Lactalis at the beginning of 2010 to concentrate on its energy investments.