Armstrong launches SE Asia cleantech fund

With a target size of $150 million, the fund started approaching investors in early 2011. The key challenge for Armstrong was to find cornerstone investors which were credible enough to attract other LPs. Securing its first investor - European clean energy investor GEEREF, the fund-of-funds advised by the European Investment Bank (EIB) and the European Investment Fund (EIF) - was a milestone that allowed them to garner commitments from other parties.

The fund is expected to receive $66 million from three investors for a first close later this month. German investor DEG, a member of KfW Bankengruppe, and an unidentified Southeast Asian-based corporate have also participated in the initial round. Andrew Affleck, managing partner of Armstrong Asset Management, tells AVCJ that the vehicle is expected to hold a final close in May 2013, with potentially as much as 40% of the total corpus being committed by development finance institutions (DFI).

"ADB continue to support us with technical assistance funding, and other DFIs such as International Finance Corporation have also expressed initial interest in our fund, given their mandate to support increased renewable energy implementation across Asia," says Affleck. "We anticipate a further 40% being committed by companies and family offices, with the remaining 20% coming from institutional players such as pension funds and fund-of-funds."

As favorable policies on renewable energy are being enacted by governments across the region, Affleck adds that European investors whom have been looking at China and India have shifted their focus to Thailand, Malaysia and Indonesia. The 10-year fund will invest primarily in the three countries, while an allocation of up to 25% of the fund's gross assets will be put into other Southeast Asian countries such as Philippines and Vietnam.

With a four-year investment commitment period, the strategy of the Armstrong fund is to start small by targeting investments between $5 and $15 million. "If you are looking at projects which are larger than 10 megawatts in Thailand's solar and Indonesia's hydro sectors, you are required to negotiate a power purchase agreement on an individual basis, which could take longer to agree terms and potentially be less attractive financially," Affleck adds.

The fund, which has an IRR target of over 20%, is already in the process of negotiating investments in several companies. Two deals are expected to be completed this year.

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• Topics
• Fundraising
• Cleantech
• Southeast Asia
• Fundraising
• Cleantech
• Southeast Asia