London, 30 January 2020
Macquarie Infrastructure Debt Investment Solutions (“MIDIS”), working in conjunction with BAE Systems Pension Funds Investment Management Ltd (“BAPFIM”), has invested in a synthetic securitisation of NatWest’s £1.1 billion portfolio of project finance loans in the United Kingdom’s (“UK”) sustainable energy market.
The transaction was a structured finance solution delivered by MIDIS in partnership with BAPFIM, allowing NatWest to recycle capital which it can use for further lending to the UK’s renewables sector.
The portfolio is made up of onshore and offshore wind, solar, smart meters, energy from waste and biomass power. The green credentials of the transaction are underpinned by all underlying loans meeting the LMA Green Loan Principles. In addition, Macquarie’s Green Investment Group has calculated that the portfolio’s annual electricity generation is anticipated to power the equivalent of 4.6 million households – with the CO2e avoided equivalent to taking 2.3 million cars off the road.
This type of transaction – also referred to as a capital relief trade – allows investors with less capital restrictions, such as pension funds, to gain exposure to debt portfolios at an attractive point in the risk/return spectrum. MIDIS and BAPFIM invested into this transaction on behalf of the BAE Systems Pension Schemes, which in aggregate comprise approximately £24.5 billion in assets. MIDIS’ deep expertise within the UK’s renewable energy sector and strong execution capabilities, along with BAPFIM’s flexible approach to structuring transactions and assessing risk, were key factors in delivering a successful outcome for all parties.
Tom van Rijsewijk, Managing Director, MIDIS, said; “We are committed to the renewable energy sector and are pleased to have delivered this innovative ‘alternative’ capital management solution to NatWest. It offers an attractive investment opportunity for our investors whilst at the same time supporting further investments into the decarbonisation of the UK energy market. MIDIS is actively pursuing a pipeline of opportunities to deliver solutions, utilising its institutional investor capital base combined with strong execution capabilities.”
Toby Buscombe, Deputy Chief Investment Officer, BAPFIM, said; “We are very pleased with this transaction, it offered a good opportunity for us to build on our existing exposure to the UK renewables sector in a structured and non standard manner, which put the opportunity beyond the reach of many institutions. The investment offered commensurately attractive risk/return characteristics including a significant premium for illiquidity and complexity.”
Bruce Riley, Head of Project Finance, NatWest, said; “The nature of the transaction enables a significant release of the capital allocated to the portfolio, which we will then be able to recycle to further increase our lending to the sustainable energy sector, helping support the growth in renewable generation that will be essential for the UK to meet its targets on reducing carbon emissions and climate change goals”.
NatWest has a real, tangible focus on the wider sustainability agenda, having already completed a number of different initiatives in the past 12 months, including joining the Climate Financial Risk Forum, as well as being the first bank to commit to The Climate Group’s three commitments: EV100; EP100 and RE100 to manage its own carbon footprint.
Since 2012, MIDIS has invested over £2 billion in renewables project transactions globally with a total capacity of approximately 12.8 GW. Macquarie has a long track-record of investing in the renewable energy sector and has recently announced its commitment to develop a 20 GW pipeline of renewable energy projects, including 4 GW in emerging markets, through its Green Investment Group. Over the past decade, Macquarie and the Green Investment Group have helped finance more than 22 GW of green generation capacity around the world.
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BAE Systems Pension Funds Investment Management Ltd
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NatWest serves customers in England and Wales, supporting them with their personal, private, and business banking needs. NatWest helps customers at all stages in their lives, from opening student accounts, to buying their first home, setting up a business, and saving for retirement. Alongside a wide range of banking services, NatWest offers businesses specialist sector knowledge in areas such as sustainable energy, commercial property and technology, as well as access to specialist entrepreneurial support.
BAE Systems Pension Funds Investment Management Ltd (“BAPFIM”) is the in-house asset manager responsible for the investment and oversight of the BAE Systems Pension Schemes. BAPFIM is responsible for the entirety of the Schemes’ assets, and has allocated meaningfully across listed and unquoted markets, the latter spanning both higher and lower risk investments, and via a mix of third-party managed vehicles and directly managed assets.