SEP launches infrastructure fund – £135m raised to invest in UK energy

Scottish Equity Partners (SEP), which has offices in London as well as Glasgow, has announced that it has raised £135 million for a new infrastructure fund to invest in UK-based clean energy projects.

The Environmental Capital Fund (ECF) has been backed by SSE plc, the FTSE 100 energy company, as well as a syndicate of financial investors led by Lexington Partners, the world’s largest independent manager of secondary private equity and co-investment funds.

SEP logoThe fund has been anchored with the acquisition of an existing SSE infrastructure business (SSE Pipelines), which provides low pressure gas connections for residential and commercial customers across the UK.

SEP will use the balance of the fund to invest in a diversified portfolio of new, UK-based, clean energy infrastructure projects – such as hydro power, energy efficiency, heat pumps and district heating schemes.

The UK clean energy infrastructure market is growing rapidly, with a substantial requirement for new capital.  Demand for capital is driven by the need to replace ageing traditional power assets, to increase the cost competitiveness of renewable power, and the requirement for increased security of energy supply.

Calum Paterson St George St mediumECF marks the first move into the infrastructure market for SEP, but complements the Environmental Energies Fund (EEF) launched in 2011, which acquired a portfolio of venture capital and private equity cleantech investments from SSE.

SEP has recruited a new team to manage the fund, headed by existing SEP partner Gary Le Sueur.

Managing Partner Calum Paterson said:

“This is another significant fund for us, which helps to broaden our reach without undermining our core focus.  We are particularly pleased to extend our successful partnerships with SSE and Lexington Partners.  The market opportunity for energy infrastructure finance is very attractive, and the new fund fits well with our existing activities.”

Gregor Alexander, Finance Director said:

“We have identified a range of assets and businesses which are not core to SSE’s future plans.  This disposal represents the latest step in the programme to significantly simplify the SSE group and secure proceeds and debt reduction estimated to total around £1bn.

“We are delighted to have the opportunity to complete the disposal and, at the same time, participate in SEP’s new fund targeted at small-scale clean energy projects throughout the UK. The transaction ensures our resources are fully focused on SSE plc’s core purpose of providing the energy people need in a reliable and sustainable way whilst supporting future investment in clean energy.”

Marshall Parke, Managing Partner in Lexington Partners’ London office, said:

“This is the second time Lexington has partnered up with SEP and SSE in an innovative secondary transaction, this time for the infrastructure and clean energy sectors. Both sectors are relatively new to the secondary market, and areas in which we expect to see more secondary activity in the future.”

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