Hudson Clean Energy Plans China Fund

U.S. buyout shop Hudson Clean Energy Partners is planning to raise its first yuan-denominated fund to invest in China’s expanding clean energy market, Reuters reported Friday. The firm manages a $1 billion clean tech fund in the U.S. The firm is setting up its China fund in partnership with the municipal government of Yangzhou, a city located in one of China’s most affluent provinces, Reuters wrote. The firm did not disclose the projected target for the fund.

(Reuters) – U.S. cleantech private equity fund Hudson Clean Energy Partners aims to raise its first yuan-denominated fund, the largest of its kind to invest in China’s rapidly expanding clean energy market.

Hudson, which manages a $1 billion clean tech equity fund in the United States, is bullish on China’s clean energy markets with urbanisation, rising pollution and a tremendous hunger for energy expected to drive demand for clean energy.

“We view China as the world’s most important market in clean energy, witnessing a continuation of a boom that began five years ago and look set to continue well into the future,” Hudson co-managing partner Neil Auerbach told Reuters.

Hudson, which invests exclusively in clean energy, is setting up its China fund with the municipal government of Yangzhou, a city located in Jiangsu, one of China’s most affluent provinces.

“We expect it to be the largest fund of its kind in China, in clean energy,” Hudson co-managing partner Neil Auerbach told Reuters, declining to give details on the size of the fund due to regulatory concerns.

Chinese private equity firm Green Capital Group raised 5 billion yuan in its cleantech fund launched in 2009, the largest yuan-based cleantech private equity fund to date, according to Zero2ipo Research, a data provider to private equity and venture capital firms.

Hudson aims to launch the fund by year-end, although said the actual timing would depend on government approvals.

ASIA INVESTMENT

Hudson will join a host of global private equity companies such as TPG Capital LP , Carlyle Group and Blackstone Group LP , which are launching yuan-based funds in an effort to carry out deals more quickly and easily in China, where it is difficult to obtain approval for major foreign investments.

Having a local government as a partner can also smooth a path to investment opportunities.

The company aimed to build an investment platform across Asia, although it planned to grow its business in China initially, before exploring opportunities in markets such as Japan, said Auerbach.

The company plans to invest about $70 million from its U.S. dollar-denominated fund in Chinese companies in clean energy sectors such as solar, wind and biomass.

“The sizes (of investment) in China tend to be smaller (compared with the U.S. market), so you’re investing more frequently,” said Auerbach, adding that $20-50 million was the firm’s sweet spot for China deals.

He said the company planned to make its first China investment this year.

Hudson also predicted an increased presence in the mainland to open up avenues for existing and future portfolio companies to do business there.

Hudson portfolio companies to benefit include wind and solar energy producer Element Power, technology system provider Wind to Power Systems and Calisolar, which last week announced plans for a $600 million expansion of its solar silicon facility in the United States.

Outside China, Auerbach said Japan, Australia and South Korea were attractive markets for clean energy.

“We plan to grow our investment in Asia, but in order to invest in a region it needs to have a natural market that’s well developed as well as policy architecture that is robust, and I think China first and Japan second, in terms of attractiveness of those markets,” said Auerbach.

($1 = 6.394 yuan)

(Editing by Chris Lewis)