SWF Weekly News Roundup: Sovereign Wealth Funds Target Energy

June 12, 2015 by Loch Adamson

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Yngve Slyngstad

In the news this week, Norway’s SWF is ordered to sell its holdings in coal companies. The Future Fund and Mubadala eye investments in clean energy. And Asian property markets continue to attract capital from state-owned investors.

Hunting Both Clean Fuel…

Energy dominated the sovereign wealth fund news. Norway’s $870 billion state-owned fund is coping with the fallout from a parliamentary vote on June 5, which saw the country’s lawmakers ban the fund from holding shares in coal-related businesses.

Norges Bank Investment Management (NBIM), the arm of the central bank that manages the Government Pension Fund Global, will be forced to sell its holdings in companies that derive 30 percent or more of their revenue from coal mining or the burning of coal for energy generation. 

NBIM may consequently look to shift more of its assets into cleaner energy sources, as two of its peers did this week. Masdar, the alternative energy subsidiary of Abu Dhabi's $61 billion Mubadala Development Co., is reportedly forming a joint venture with German utilities group RWE to invest in renewables.

RWE, Germany's second largest utility, is looking to reduce its exposure to conventional energy sources. Masdar, on the other hand, aims to build up its European presence: It already holds stakes in two wind farms in the U.K.

Australia’s $89 billion Future Fund has reportedly led a $40 million funding round for Delhi-based off-grid solar energy service provider Applied Solar Technologies (AST). Other participants include existing AST shareholders, venture capital firms Bessemer Venture Partners and Capricorn Investment Group, both with headquarters in New York, and International Finance Corp. (IFC), the Washington, D.C.-based private equity arm of the World Bank Group. 

...And Dirty Too

While some funds are keen to promote the development of low-carbon energy sources, others take a different view. This week Qatar Holding, the direct investment arm of the Qatar Investment Authority (QIA), which has an estimated $304.4 billion in assets, bought a 19.9 percent stake in HK Electric Investments (HKEI), a Hong Kong-based power generation group that forms part of the conglomerate owned by Chinese billionaire Li Ka-Shing.

While HKEI is developing a wind farm in Hong Kong, most of its energy is generated by coal-fired power stations. 

Asian Property Heats Up

Asian property continues to draw sovereign fund interest. Singapore’s GIC, which Sovereign Wealth Center estimates to have about $343 billion in assets, for instance, looks set to increase its stake in Hong Kong-based real estate developer Franshion Properties. According to media reports, the fund will invest around HK$1.2 billion ($149.6 million) when Franshion issues shares this month, increasing its stake to 6.5 percent from 3 percent.

GIC is building on its existing Asian real estate portfolio, which comprises prime Tokyo properties. The fund paid ¥170 billion ($1.6 billion) for the Pacific Century Place office building in central Tokyo last August. Now Norway is now following GIC’s lead — NBIM is reportedly ready to open a new office in the Japanese capital as it seeks to invest in the country’s real estate for the first time.

Singapore’s $177.2 billion state investor Temasek Holdings is reportedly considering teaming up with a private equity firm to buy Seoul-based Homeplus, which owns a chain of retail outlets. Struggling U.K.-based retailer Tesco, which currently owns the South Korean chain, has invited private equity firms, including Washington, D.C.-based Carlyle Group and KKR & Co., of New York, to bid for the unit, which is valued at about $6 billion.

Those two firms, and others, are believed to be sounding out Temasek to provide financial backing. It’s likely that the investors are attracted to Homeplus’ extensive portfolio of South Korean real estate as well as its retail business.

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