Ardian Clean Energy Evergreen Fund (ACEEF) is working on onshore wind and battery storage deals totalling close to 400 MW of operational or under construction capacity which it aims to close by the end of 2025, with 70 MW currently in exclusivity and another 300 MW at a “materially advanced stage”, fund head Ben Kennedy told NPM in a recent interview.

“We have transactions in exclusivity, we have transactions where we’re negotiating exclusivity, and we have transactions where due diligence is ongoing with the hope to reconfirm our valuation and enter exclusivity,” said Kennedy. “And that’s going on across all our markets.”

Recent acquisitions as a result of the constant flow of work in this area include a 35% stake in two Spanish wind farms, and a 116 MW Italian solar PV portfolio, both announced in June.

If acquired, the projects currently in negotiations will add to a portfolio and pipeline that includes 1 GW of net operating capacity and just under 200 MW of projects under construction, across Italy, Spain, France, the Nordics, Chile, and Peru.

“Our portfolio is about 60% wind, about 25% solar, and about 10% hydroelectricity,” said Kennedy. “And the remainder, about 5% right now, is mainly invested in battery storage. I think though that will grow in the mid-term.”

According to Kennedy, the majority of construction is in France, where ACEEF has a strong solar development platform. The country accounts for around 60–70% of current construction activated, representing an estimated capex cost of EUR 120m–130m.

There is also construction activity in Italy for around 25 MW of wind, costing around EUR 45m.

In Finland, two BESS projects have been underway totalling 60 MW, one of which has been completed. Together the projects represent a capex cost of around EUR 30m.

“Almost all of our projects that are under construction are built over 12–18 month timelines, so the pace of annual capacity additions is at approximately 100–150 MW per year,” said Kennedy.

He also noted that ACEEF supports construction of its projects with the support of leverage, particularly in the French and Italian markets where the funds projects can secure 15–20 year revenue contracts, allowing high leverage levels of 70–90% of capex.

In markets such as Spain of Scandinavia, which see shorter PPAs and more merchant exposure, Kennedy said achievable leverage is in the 40–50% range.

Around 75% of the electricity volumes from its operating portfolio are contracted via PPAs, feed-in tariffs, a centralised government auction – “something that gives very long-term revenue security and cashflow visibility to the assets,” said Kennedy.

Meanwhile almost all of the projects that ACEEF has under construction are contracted.

The fund also pursues contracts for battery assets, but these are not entirely hedged, allowing revenues to benefit from high merchant volatility and volatility in cashflow projection.

ACEEF’s project pipeline additionally totals approximately 3 GW of gross capacity, comprising solar, wind, and hybridisation and repowering projects. “That pipeline is probably a bit more solar, but it’s a balanced mix of wind and solar with a small amount of storage,” said Kennedy.

He added: “We see a very strong M&A pipeline. Why is that? I think the reality is that in the recent years what we’ve seen is that return expectations across most renewable markets were relatively low, to be honest, and also the risks that investors had to underwrite to be competitive in the markets actually got a bit larger than they historically had been. That had been a trend since probably going back to the early 2020s. We see this reversing, which is why we see attractive M&A opportunities.

“What we’ve now finally seen is a real change in the return expectations in the market, and a change in the risk required to get to those returns.

“Right now we are seeing much better returns than I’ve seen since pre-2020 on assumption sets and underwriting criteria that are the least aggressive that we’ve seen in a number of years. And so we have a very good pipeline.

“The result of that is that we probably deployed less capital over the last couple of years than we really wanted to because we’ve really struggled to be competitive in a lot of situations. And now we really see a shift in the market.

“We’re really quite optimistic about the investment in assets going forward.”

Fund targets

Seeded in 2022, ACEEF currently has a size of more than EUR 1bn, and the evergreen fund is accepting new investors with the aim of raising EUR 350m by the end of 2025.

“We’ve already welcomed a number of investors into the fund, and we’re on track to meet [that] goal,” said Kennedy.

He added: “Our target is to grow by EUR 350m, approximately, on an annual basis and we’re targeting a EUR 3bn fund size by 2030.”

According to Kennedy, the raise target aligns with ACEEF’s deployment target, which is also set at around EUR 350m annually.

Kennedy also noted that ACEEF is considering shifting to a perpetual fundraising round, as opposed to having annual deadlines, but has yet to make a decision on this.

Ardian has been investing in renewables since 2007 though Ardian’s flagship infrastructure fund.

Kennedy said: “Since 2007, the overall business has grown and grown in size and now when you look at our core flagship fund products, these are doing half a billion, EUR 1bn, EUR 2bn transactions.

“And as those funds were scaling what the business started to think about was what do we do with all of the investment opportunities we see in the smaller- and middle-size of the market, which previously back in 2007 were appropriate for our core flagship fund strategy? What do we do with these opportunities?”

In 2014, Ardian launched a separate clean energy fund strategy focussed on small- and mid-sized renewables in Italy, where Ardian has a strong history, and expanding into Spain, the Nordics, Chile, and Peru.

This strategy was strengthened in 2022, with the creation of ACEEF, which was started with a seed portfolio accumulated since 2014. This has been expanding, scaling-up, and accelerating capital deployment over the last three years.

The fund is focussed on investing in mature renewable technologies, such as wind, solar, and hydroelectricity, with select exposure to other energy transition technologies the likes of battery storage.

“We invest in assets where believe we can add value – with operation improvements, with additional strategies that increase power generation like hybridisation or repowering – [and] we engage also in offtake contracting and re-contracting of existing assets and selling power. And we also play a role, selectively, in development and de-risking development as a part of our portfolio,” Kennedy said.

*This story was originally published exclusively for NPM Europe subscribers.