Greater Manchester Pension Fund and the London Pension Fund Authority have made their first investment via their infrastructure partnership.
Greater Manchester & London Infrastructure, a £500m joint venture owned by the two pension fund authorities, has committed £60m towards the construction and operation of British renewable energy assets.
The move comes after chancellor George Osborne said in his speech to the Conservative Party conference that Local Government Pension Scheme funds would pool their investments into six pots and would invest in infrastructure projects.
Employing equity and private debt fund management firm Iona Capital to source and manage the investments, the two funds aim to invest the £60m in five to ten UK bioenergy infrastructure projects, including anaerobic digesting and biomass combined heat and power. The first will be a £9m investment in Essex biomass plant Leeming Biogas.
The joint venture will finance projects from planning consent through construction, intending to hold the operational plants “through their economic life”.
Paddy Dowdall, assistant executive director of the GMPF, said he expected the Leeming investment to provide “a double-digit return” and “early cash-flows”.
LPFA chief investment officer Chris Rule (pictured) said: “Infrastructure investments provide an attractive opportunity to drive both capital appreciation and inflation linked cash-flows and are well suited to our long-term investment horizon.
“We are building a diversified portfolio of operational and greenfield assets and are delighted to make this first investment, which will provide equity capital for the development of essential new build energy infrastructure in the UK.”
The funds aim to deploy all £500m in the venture within the next two years.