China Exim Bank fund commits $78m to Polish renewables player
The China-CEE Fund, a $500 million vehicle backed by China Exim Bank that invests in Central and Eastern Europe, has committed PLN240 million ($78 million) to renewable energy developer Polish Energy Partners (PEP).
The fund has agreed to subscribe to 7.3 million new shares in PEP at PLN33.03 apiece, according to a presentation by the Polish company. The deal is part of a restructuring that will see PEP's offshore wind farm and biomass assets merged with the electricity distribution, gas transmission, trading, coal-fired generation and offshore wind farm operations of its unlisted parent, Polenergia Holding.
Polenergia Holding owns 60.8% of PEP with other investors - mainly pension funds - holding the remainder. Assets from the parent will be injected into PEP and it will receive shares worth PLN557 million in return, taking a 65.6% stake in the merged entity, which will be renamed Polenergia and remain listed on the Warsaw Stock Exchange. The China-CEE Fund will own 16% and the other investors will have 18.4%.
A third tranche of the fundraising will see up to PLN420 million raised from institutional investors through the issuance of 12.7 million new shares.
The merger was completed on an operational basis in 2013 and it is expected to become legally binding in August or September as Polenergia Holding completes the asset-for-equity transfer. All investors will be subject to an 18-month lock-up period.
The long-term objective is to create an integrated electricity producer with a strategic focus on renewable energy and energy and gas infrastructure with regulated and predictable returns. PEP currently has three onshore wind farms in operation with a combined capacity of 80 megawatts. An additional 380 MW is under construction or in development and slated to be operational by 2016.
Between 2017 and 2022, the company wants to build a further 500 MW in onshore wind farm capacity, 600 MW in offshore capacity with another 600 MW in development, and a gas transmission pipeline connecting Poland and Germany that can deliver 5 billion cubic meters of fuel per year. The merged entity will also have gas-fired power generation facilities with 116 MW of electrical output and 31 MW of biomass electrical output.
These plans are in line with government targets to reduce the coal-fired share of Poland's fuel mix from 48.6% in 2013 to 25.9% in 2035, while increasing total output by 28%. PEP expects wind power to account for 11.8% of the fuel mix by 2035, with biomass and biogas on 13.1% and gas on 11.6%.
The China-CEE Fund was established by China Exim Bank in partnership with institutional investors from Central and Eastern Europe. It is managed by CEE-Equity Partners. The fund targets infrastructure, energy, telecom and specialized production assets, typically investing $20-70 million in equity and also helping to arrange debt financing.
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