EQUITIX: Sustainable Financial Force Fuelling Transition

Creating valuable propositions, with true return potential, has been both a challenge and opportunity in the renewable energy transition space. Without money, the transition halts. Even with the best ideas and intentions, there has to be financial clout to power the progress. Fuelling this whole industry is not easy and does require infrastructure investment on a significant scale.

Since 2007, Equitix has been leading the charge. An international investor, developer, and infrastructure fund manager, the company has more than 360 assets under management, valued at around $12 billion. 200 people across 10 countries help the business to drive value for investors, while working towards the vision of ‘creating a lasting legacy for generations’.

Today, the company has six focus areas: social infrastructure, renewable energy, transport, environmental services, network utilities and data infrastructure.

In the renewable energy sector, the company has significant interests across a number of projects with a total electricity generating capacity of 7.1GW and over £3.5 billion of AUM. MD Asset Management, Nathan Wakefield, tells Energy Focus more about the strategy which will position the company on a strong path for advancement of the space while generating returns for investors and general improvements for local communities and stakeholders.

“Our renewable power sector, which I head, is focussed on wind, solar, and hydro, and we are looking into net zero assets including storage,” he says.

Working across different applications, and gaining a strong portfolio, Equitix is embracing the missing links in the system, including storage.

In July 2022, the company acquired an additional stake in the Hornsea One offshore windfarm – the largest operating offshore wind farm in the world – which powers more than one million UK homes and businesses. In September 2022, Equitix acquired the Westfield EFW plant from Brockwell Energy. Westfield Energy Recovery Ltd is under construction in Fife and will process 240,000 tonnes of non-recyclable residual waste each year, saving from landfill and generating 23 MW of low-carbon electricity. In January 2023, Equitix welcomed one of the UK’s largest recycling businesses to the Westfield Energy Recovery ecosystem when it signed a JV with Viridor to invest and deliver the project by 2025. Highlighting its commitment to renewables, the company showcased its co-owned Beatrice offshore wind farm to politicians in March – explaining the impact of the site which powers 450,000 homes. A significant agreement was inked in April, when Equitix acquired Macquarie’s stakes in 8 operational offshore windfarms. This acquisition increases Equitix’s interests to 11 offshore windfarms in the UK and one in Europe, contributing to more than 33% of the UK’s installed offshore wind capacity, and making Equitix one of the largest financial investors in offshore wind.

FRESH MANDATE

In a deliberate and considered approach, Equitix has been investing into green energy for more than 10 years, now with more than £2.1bn invested into carbon-reducing, renewable power-generating projects across Europe and the UK with 6GW capacity AUM.

Storage is one of the few sticking points in the sector – how can you efficiently make the most of energy produced during times of maximum generation, making it available at times of peak demand? Battery storage is a growing space, and Equitix is busy here.

“We have entered into a strategic partnership with the UK Infrastructure Bank (UKIB) to invest into UK electricity storage projects, which presents a great opportunity for us. This will be the first major foray into storage specifically,” explains Wakefield.

Further into the future, the company holds the vision of deploying longer-duration technologies and electricity storage technologies with superior discharge rates and degradation levels, while investing into local skills development and sustainable management of projects – critical for Equitix.

CEO Hugh Crossley, was buoyant about the opportunities in storage, saying: “Investing in the development of critical energy infrastructure and supporting the UK Government’s net zero targets and energy security objectives… firmly aligns with our own strategic objectives and offers attractive opportunities for like-minded investors.”

While the storage market has seen some positive jumps in terms of technology in recent years, there is still much to be understood about the investment and yield process. Thankfully, Equitix takes a long-term view in its investment strategy.

“We are typically a buy and hold investor with our core funds typically having a 25-year term,” says Wakefield. “The challenge we’ve had is to understand how the revenue stacks are put together for storage projects. It is clear over the short term, but we need to understand what happens over a longer time horizon.”

EARLY-STAGE DEVELOPMENT

Getting new projects off the ground in a sustainable manner is also a priority for Equitix. Involvement from the early stages allows for deeper exposure and understanding, and larger investment opportunities.

Wakefield says: “We have recently launched a sustainable greenfield strategy on the back of strong track record in this space across the UK and Europe which is an exciting new phase for us.”

These new initiatives and investment opportunities are ultimately built, delivered, and managed by people and the industry remains a people-focussed space. There is a level of trust required that is created over long periods of time, based on proven ability and ambition. Equitix is a people business – investors, employees, and communities are at the heart of decision making. For Wakefield, the future of the renewable energy transition is absolutely about the development of people just as much as it is about boosting returns for investors.

“We have the largest asset management team, on a pound for pound basis. We have a vast amount of different technical expertise, whether that is financial, commercial or technical, and that is a depth and breadth of resource that other investors don’t have,” he says of the company’s competitive advantage. “We have been really careful with growing the business and the type of projects and assets that we have acquired. We have a low loss rate, and that supports our credibility in the marketplace.

“In renewable power, the biggest challenge is growth in the market,” he continues. “Offshore wind has huge growth targets in the UK and Europe and the challenge of building the assets in the medium term, and maintaining them in the longer term, is large. There is a lot of expertise in the older generation. We need to bring through the younger generation and get that experience into those guys. It’s how you support development to reduce the skills gap that is going to make the big difference.

“Typically in the past, it would take a cable jointer 10 years before they moved into dealing with the higher voltage ranges. Today, that is being fast tracked and one of the highest costs in offshore wind is power cable failure. We are moving into higher voltages and that is a skills gap that will need supporting as array cable installations continue at 66kV and move into 132kV connections.”

REAL CONNECTIONS

The founding principles behind Equitix are Partnership, Excellence, and Trust. These are people-focussed values and, with two of the founders still active in the company, trusting in human relationships is part of the underlying success the business. Where skills gaps exist, the company will work with partners to supply. There is no ‘parachute in and jump straight out’ mantra around the investments. “Connections between people are crucial and our people make our business what it is. We are hugely conscious of those that live in the communities that we serve – the millions of lives that we touch, in the real world, using real assets,” says Crossley.

Understanding what plans are made by authorities in key markets is the long-term hurdle for the Equitix people, as well as learning more about the ongoing market changes resulting from global economic and political shifts.

“The challenge we face across renewable power and environmental services is that all of this growth needs to be supported by appropriate regulations and subsidies from government,” states Wakefield. “The last two or three years have been chaotic with Covid – we saw a collapse in the power price and then a spike in power prices over the last six months of 2022, and the impact of market intervention that has taken place across Europe in different ways. There is a lack of consistency across approaches, and we are responding to how the Electricity Generator Levy and the price caps in Europe will affect our business. Governments across Europe, and eventually across the world, will drive this investment and we are keen to continue investing. We have been successful through the three-year period and there is significant interest in the space.”

Today, according to the International Energy Agency, renewable power is still only 5.2% of the global mix. Clearly, there is a long and strong upward trajectory for the technologies that are already in place, and there remains significant attractive prospects for investors across the industry. With Equitix, there is proven reliability and success, and the company continues to hunt for expansion while achieving its vision of lasting legacy.

“We are exploring if there are other parts of the supply chain that we can invest in. In the past, we have looked at deals involving provision of service operation vessels for offshore wind – we can see there is a huge gap in the market in the UK, Europe, and further afield as the markets in the US and Far East take off,” Wakefield concludes.