Why investors are looking at the Asia-Pacific region

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Ilaria Valtimora
April 23, 2018
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Why investors are looking at the Asia-Pacific region

No region is off-limits. In the last 12 months, we’ve seen global infrastructure managers Brookfield, Global Infrastructure Partners and Macquarie conclude a series of big renewables deals around the world. Wind now attracts players with deep pockets.

And that means large institutions can’t confine their investment horizons to Europe and North America. Many are equally comfortable investing in renewable energy in the Asia-Pacific region too. This is now a key market for firms looking to diversify.

The importance of Asia-Pacific in global wind is hardly a revelation. In January, consultancy PwC reported that, in 2016, the renewable energy sector in Asia-Pacific countries attracted $115bn of $242bn invested globally in renewables. Almost half of that amount was invested in the wind sector. That includes the huge amount of investment in building new wind farms in China, for example.

That may not be earth-shattering, but it does give context to some of the deals concluded in the region this year.

For example, Canada Pension Plan Investment Board has so far invested $66.6bn in all sectors in Asia-Pacific. That ominous-looking figure includes its recent $247m investment to support Indian developer ReNew Power’s acquisition of Ostro Energy.

We see parallels with another deal concluded last quarter, when US investment fund Global Infrastructure Partners completed the acquisition of Singapore-based developer Equis Energy for $5bn. This is set to provide GIP with a platform to expand in the Asia-Pacific region, including Australia, India, Indonesia and Japan.

Likewise, Australia’s Macquarie Infrastructure & Real Assets this month achieved a $3.3bn close of its second Asian infrastructure fund, which is set to target deals in the Asia-Pacific region in infrastructure, storage and renewables including wind.

So why are multinational renewables investors looking at the Asia-Pacific region now?

The first and most obvious reason is diversification. More mature markets including Germany, the UK and the US are now facing political uncertainty, end of subsidies and rising interest rates. Yes, they are still established markets and that may offer a degree of security, but it also means lower returns, and so investors are looking into other promising countries to diversify their portfolio.

Second, investing in Asia-Pacific makes sense from an economic perspective. Over the last 15 years, the region has seen its share of world GDP grow from just 7% to over 20% at the expense of developed markets. Its abundant natural resources and the increasing value of its industries have contributed to this growth.

And third, countries in the Asia-Pacific region are forecast to account for around 60% of global energy use between now and 2040. Since the costs of implementing and maintaining renewable energy assets have kept falling down in the past few years, many governments in the region are now committing to accelerate the transition to sustainable energy by focusing on renewables, wind and solar in particular.

Investing in the region still comes with risks, though.

For example, the World Economic Forum lists economic risks, cybersecurity, socio-political instability and uncertain prospects for international trade due to an increase in protectionist measures among the challenges that investors of every sectors have to face in the region.

Meanwhile, PwC lists restrictions on foreign investment and high levels of corruption among the challenges for renewable investors.

For investors, this means they need to use extra caution when approaching these markets, even when governments are trying to attract them. Many politicians in the region have implemented favourable regulatory and legal frameworks for renewable energy; and some of them, including Japan, India, Thailand and South Korea, are planning some form of competitive selection process for renewables, including wind farms.

This means there is no shortage of opportunities for investors, who often decide to diversify their exposure across different countries within the Asia-Pacific region so that they can avoid being exposed to the risks of a single country. With the rise of deep-pocketed global wind investors, such strategies could be key.

No region is off-limits. In the last 12 months, we’ve seen global infrastructure managers Brookfield, Global Infrastructure Partners and Macquarie conclude a series of big renewables deals around the world. Wind now attracts players with deep pockets.

And that means large institutions can’t confine their investment horizons to Europe and North America. Many are equally comfortable investing in renewable energy in the Asia-Pacific region too. This is now a key market for firms looking to diversify.

The importance of Asia-Pacific in global wind is hardly a revelation. In January, consultancy PwC reported that, in 2016, the renewable energy sector in Asia-Pacific countries attracted $115bn of $242bn invested globally in renewables. Almost half of that amount was invested in the wind sector. That includes the huge amount of investment in building new wind farms in China, for example.

That may not be earth-shattering, but it does give context to some of the deals concluded in the region this year.

For example, Canada Pension Plan Investment Board has so far invested $66.6bn in all sectors in Asia-Pacific. That ominous-looking figure includes its recent $247m investment to support Indian developer ReNew Power’s acquisition of Ostro Energy.

We see parallels with another deal concluded last quarter, when US investment fund Global Infrastructure Partners completed the acquisition of Singapore-based developer Equis Energy for $5bn. This is set to provide GIP with a platform to expand in the Asia-Pacific region, including Australia, India, Indonesia and Japan.

Likewise, Australia’s Macquarie Infrastructure & Real Assets this month achieved a $3.3bn close of its second Asian infrastructure fund, which is set to target deals in the Asia-Pacific region in infrastructure, storage and renewables including wind.

So why are multinational renewables investors looking at the Asia-Pacific region now?

The first and most obvious reason is diversification. More mature markets including Germany, the UK and the US are now facing political uncertainty, end of subsidies and rising interest rates. Yes, they are still established markets and that may offer a degree of security, but it also means lower returns, and so investors are looking into other promising countries to diversify their portfolio.

Second, investing in Asia-Pacific makes sense from an economic perspective. Over the last 15 years, the region has seen its share of world GDP grow from just 7% to over 20% at the expense of developed markets. Its abundant natural resources and the increasing value of its industries have contributed to this growth.

And third, countries in the Asia-Pacific region are forecast to account for around 60% of global energy use between now and 2040. Since the costs of implementing and maintaining renewable energy assets have kept falling down in the past few years, many governments in the region are now committing to accelerate the transition to sustainable energy by focusing on renewables, wind and solar in particular.

Investing in the region still comes with risks, though.

For example, the World Economic Forum lists economic risks, cybersecurity, socio-political instability and uncertain prospects for international trade due to an increase in protectionist measures among the challenges that investors of every sectors have to face in the region.

Meanwhile, PwC lists restrictions on foreign investment and high levels of corruption among the challenges for renewable investors.

For investors, this means they need to use extra caution when approaching these markets, even when governments are trying to attract them. Many politicians in the region have implemented favourable regulatory and legal frameworks for renewable energy; and some of them, including Japan, India, Thailand and South Korea, are planning some form of competitive selection process for renewables, including wind farms.

This means there is no shortage of opportunities for investors, who often decide to diversify their exposure across different countries within the Asia-Pacific region so that they can avoid being exposed to the risks of a single country. With the rise of deep-pocketed global wind investors, such strategies could be key.

No region is off-limits. In the last 12 months, we’ve seen global infrastructure managers Brookfield, Global Infrastructure Partners and Macquarie conclude a series of big renewables deals around the world. Wind now attracts players with deep pockets.

And that means large institutions can’t confine their investment horizons to Europe and North America. Many are equally comfortable investing in renewable energy in the Asia-Pacific region too. This is now a key market for firms looking to diversify.

The importance of Asia-Pacific in global wind is hardly a revelation. In January, consultancy PwC reported that, in 2016, the renewable energy sector in Asia-Pacific countries attracted $115bn of $242bn invested globally in renewables. Almost half of that amount was invested in the wind sector. That includes the huge amount of investment in building new wind farms in China, for example.

That may not be earth-shattering, but it does give context to some of the deals concluded in the region this year.

For example, Canada Pension Plan Investment Board has so far invested $66.6bn in all sectors in Asia-Pacific. That ominous-looking figure includes its recent $247m investment to support Indian developer ReNew Power’s acquisition of Ostro Energy.

We see parallels with another deal concluded last quarter, when US investment fund Global Infrastructure Partners completed the acquisition of Singapore-based developer Equis Energy for $5bn. This is set to provide GIP with a platform to expand in the Asia-Pacific region, including Australia, India, Indonesia and Japan.

Likewise, Australia’s Macquarie Infrastructure & Real Assets this month achieved a $3.3bn close of its second Asian infrastructure fund, which is set to target deals in the Asia-Pacific region in infrastructure, storage and renewables including wind.

So why are multinational renewables investors looking at the Asia-Pacific region now?

The first and most obvious reason is diversification. More mature markets including Germany, the UK and the US are now facing political uncertainty, end of subsidies and rising interest rates. Yes, they are still established markets and that may offer a degree of security, but it also means lower returns, and so investors are looking into other promising countries to diversify their portfolio.

Second, investing in Asia-Pacific makes sense from an economic perspective. Over the last 15 years, the region has seen its share of world GDP grow from just 7% to over 20% at the expense of developed markets. Its abundant natural resources and the increasing value of its industries have contributed to this growth.

And third, countries in the Asia-Pacific region are forecast to account for around 60% of global energy use between now and 2040. Since the costs of implementing and maintaining renewable energy assets have kept falling down in the past few years, many governments in the region are now committing to accelerate the transition to sustainable energy by focusing on renewables, wind and solar in particular.

Investing in the region still comes with risks, though.

For example, the World Economic Forum lists economic risks, cybersecurity, socio-political instability and uncertain prospects for international trade due to an increase in protectionist measures among the challenges that investors of every sectors have to face in the region.

Meanwhile, PwC lists restrictions on foreign investment and high levels of corruption among the challenges for renewable investors.

For investors, this means they need to use extra caution when approaching these markets, even when governments are trying to attract them. Many politicians in the region have implemented favourable regulatory and legal frameworks for renewable energy; and some of them, including Japan, India, Thailand and South Korea, are planning some form of competitive selection process for renewables, including wind farms.

This means there is no shortage of opportunities for investors, who often decide to diversify their exposure across different countries within the Asia-Pacific region so that they can avoid being exposed to the risks of a single country. With the rise of deep-pocketed global wind investors, such strategies could be key.

No region is off-limits. In the last 12 months, we’ve seen global infrastructure managers Brookfield, Global Infrastructure Partners and Macquarie conclude a series of big renewables deals around the world. Wind now attracts players with deep pockets.

And that means large institutions can’t confine their investment horizons to Europe and North America. Many are equally comfortable investing in renewable energy in the Asia-Pacific region too. This is now a key market for firms looking to diversify.

The importance of Asia-Pacific in global wind is hardly a revelation. In January, consultancy PwC reported that, in 2016, the renewable energy sector in Asia-Pacific countries attracted $115bn of $242bn invested globally in renewables. Almost half of that amount was invested in the wind sector. That includes the huge amount of investment in building new wind farms in China, for example.

That may not be earth-shattering, but it does give context to some of the deals concluded in the region this year.

For example, Canada Pension Plan Investment Board has so far invested $66.6bn in all sectors in Asia-Pacific. That ominous-looking figure includes its recent $247m investment to support Indian developer ReNew Power’s acquisition of Ostro Energy.

We see parallels with another deal concluded last quarter, when US investment fund Global Infrastructure Partners completed the acquisition of Singapore-based developer Equis Energy for $5bn. This is set to provide GIP with a platform to expand in the Asia-Pacific region, including Australia, India, Indonesia and Japan.

Likewise, Australia’s Macquarie Infrastructure & Real Assets this month achieved a $3.3bn close of its second Asian infrastructure fund, which is set to target deals in the Asia-Pacific region in infrastructure, storage and renewables including wind.

So why are multinational renewables investors looking at the Asia-Pacific region now?

The first and most obvious reason is diversification. More mature markets including Germany, the UK and the US are now facing political uncertainty, end of subsidies and rising interest rates. Yes, they are still established markets and that may offer a degree of security, but it also means lower returns, and so investors are looking into other promising countries to diversify their portfolio.

Second, investing in Asia-Pacific makes sense from an economic perspective. Over the last 15 years, the region has seen its share of world GDP grow from just 7% to over 20% at the expense of developed markets. Its abundant natural resources and the increasing value of its industries have contributed to this growth.

And third, countries in the Asia-Pacific region are forecast to account for around 60% of global energy use between now and 2040. Since the costs of implementing and maintaining renewable energy assets have kept falling down in the past few years, many governments in the region are now committing to accelerate the transition to sustainable energy by focusing on renewables, wind and solar in particular.

Investing in the region still comes with risks, though.

For example, the World Economic Forum lists economic risks, cybersecurity, socio-political instability and uncertain prospects for international trade due to an increase in protectionist measures among the challenges that investors of every sectors have to face in the region.

Meanwhile, PwC lists restrictions on foreign investment and high levels of corruption among the challenges for renewable investors.

For investors, this means they need to use extra caution when approaching these markets, even when governments are trying to attract them. Many politicians in the region have implemented favourable regulatory and legal frameworks for renewable energy; and some of them, including Japan, India, Thailand and South Korea, are planning some form of competitive selection process for renewables, including wind farms.

This means there is no shortage of opportunities for investors, who often decide to diversify their exposure across different countries within the Asia-Pacific region so that they can avoid being exposed to the risks of a single country. With the rise of deep-pocketed global wind investors, such strategies could be key.

No region is off-limits. In the last 12 months, we’ve seen global infrastructure managers Brookfield, Global Infrastructure Partners and Macquarie conclude a series of big renewables deals around the world. Wind now attracts players with deep pockets.

And that means large institutions can’t confine their investment horizons to Europe and North America. Many are equally comfortable investing in renewable energy in the Asia-Pacific region too. This is now a key market for firms looking to diversify.

The importance of Asia-Pacific in global wind is hardly a revelation. In January, consultancy PwC reported that, in 2016, the renewable energy sector in Asia-Pacific countries attracted $115bn of $242bn invested globally in renewables. Almost half of that amount was invested in the wind sector. That includes the huge amount of investment in building new wind farms in China, for example.

That may not be earth-shattering, but it does give context to some of the deals concluded in the region this year.

For example, Canada Pension Plan Investment Board has so far invested $66.6bn in all sectors in Asia-Pacific. That ominous-looking figure includes its recent $247m investment to support Indian developer ReNew Power’s acquisition of Ostro Energy.

We see parallels with another deal concluded last quarter, when US investment fund Global Infrastructure Partners completed the acquisition of Singapore-based developer Equis Energy for $5bn. This is set to provide GIP with a platform to expand in the Asia-Pacific region, including Australia, India, Indonesia and Japan.

Likewise, Australia’s Macquarie Infrastructure & Real Assets this month achieved a $3.3bn close of its second Asian infrastructure fund, which is set to target deals in the Asia-Pacific region in infrastructure, storage and renewables including wind.

So why are multinational renewables investors looking at the Asia-Pacific region now?

The first and most obvious reason is diversification. More mature markets including Germany, the UK and the US are now facing political uncertainty, end of subsidies and rising interest rates. Yes, they are still established markets and that may offer a degree of security, but it also means lower returns, and so investors are looking into other promising countries to diversify their portfolio.

Second, investing in Asia-Pacific makes sense from an economic perspective. Over the last 15 years, the region has seen its share of world GDP grow from just 7% to over 20% at the expense of developed markets. Its abundant natural resources and the increasing value of its industries have contributed to this growth.

And third, countries in the Asia-Pacific region are forecast to account for around 60% of global energy use between now and 2040. Since the costs of implementing and maintaining renewable energy assets have kept falling down in the past few years, many governments in the region are now committing to accelerate the transition to sustainable energy by focusing on renewables, wind and solar in particular.

Investing in the region still comes with risks, though.

For example, the World Economic Forum lists economic risks, cybersecurity, socio-political instability and uncertain prospects for international trade due to an increase in protectionist measures among the challenges that investors of every sectors have to face in the region.

Meanwhile, PwC lists restrictions on foreign investment and high levels of corruption among the challenges for renewable investors.

For investors, this means they need to use extra caution when approaching these markets, even when governments are trying to attract them. Many politicians in the region have implemented favourable regulatory and legal frameworks for renewable energy; and some of them, including Japan, India, Thailand and South Korea, are planning some form of competitive selection process for renewables, including wind farms.

This means there is no shortage of opportunities for investors, who often decide to diversify their exposure across different countries within the Asia-Pacific region so that they can avoid being exposed to the risks of a single country. With the rise of deep-pocketed global wind investors, such strategies could be key.

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Not a member yet?

Become a member of the 6,500-strong A Word About Wind community today, and gain access to our premium content, exclusive lead generation and investment opportunities.