Pension funds hunting for higher returns are buying direct equity stakes in wind power projects that are being shunned as too risky by banks and other investors.
It is a major change for the funds, which favored government bonds for years until the debt crisis gripping Europe turned this once low-risk strategy on its head and drove down interest rates elsewhere, leaving few alternatives.
Green power needs heavy investment if the European Union is to reach targets for boosting its share of total energy supply to 20% by 2020 and cut both carbon emissions and dependence on fossil fuels.
But a funding gap has emerged because banks are staying away, in compliance with new rules aimed at reducing risk.
Wind power plants, particularly offshore farms, are expensive to build and maintain. Regulation is seen to be uncertain and the plants can face logistical and technological problems connecting to the wider grid. Forecasting reliable returns is difficult.
Nonetheless, some pension funds are thinking longer-term, to steady cash flow over 20 to 30 years once projects are in place, and have decided to step in. . .View Full Article