Dutch pension fund asset manager APG Asset Management and alternative investments manager Aquila Capital have agreed a partnership deal that could see them invest around €500 million in the acquisition and development of European hydropower plants.

APG has commissioned Aquila Capital to establish an investment vehicle dedicated to hydropower infrastructure, which aims to make investments in operational plants and develop new projects across Europe. APG will commit €250 million to the venture, and through the use of debt financing, the total enterprise value of the investments is projected to amount to up to €500 million. Aquila Capital will provide the operational management of the hydropower assets as well as portfolio management services to the partnership.

“APG puts a lot of effort in finding infrastructure investments with high-sustainability characteristics," commented Patrick Kanters, Managing Director Global Real Estate & Infrastructure at APG. "Hydropower is the most efficient of all main energy sources and ticks the right boxes for us in terms of the risk-return profile and the high cash flow visibility, as well as its strong sustainability profile. There are relatively few companies with the expertise and industry networks to access the best opportunities in the sector, which is why we have teamed up with Aquila Capital."

"Hydropower is an attractive proposition for investors looking for stable long-term inflation protected yields to match pension liabilities," added Oldrik Verloop, responsible for the partnership at Aquila Capital. "The key challenge in accessing these types of assets is the ability to bundle enough volume in transactions to create sufficient scale to appeal to institutional investors and that is where Aquila’s experience in the hydropower sector is of prime importance."