NZ, according to Federation Asset Management partner, Stephen Panizza, has “world class wind”.
For Wellingtonians battling through a southerly gale the accolade might not be surprising, or welcome, but Panizza said the country had huge potential to breeze through the transition to full sustainable energy production.
Over this side of the Tasman last week to scope out investment opportunities and promote the Australian specialist private equity manager’s Alternative Investments II (F2) fund, he said while NZ was already 70 per cent renewable an extra burst of wind and solar power could complete the green shift.
“Adding extra capacity of wind and solar would allow NZ to produce the cheapest electrons,” Panizza said.
The prospect of cheap electrons might seem well out of reach right now amid a vicious surge in spot wholesale electricity prices in NZ to about $900 per megawatt hour (MwH): in 2021 the average MwH price was $100.
Radio NZ reported last week: “Wholesale power prices have doubled in the past three weeks, in part because of the country’s hydro lakes storage which is about 57% of what it would normally be at this time of year.”
Despite the current crisis, Panizza said investment in renewable energy resources would pay off for NZ over the long term.
“We’re keen to find NZ projects to invest in,” he said. “We can bring our capital and experience.”
However, Federation holds exclusively Australian assets in its portfolios at the moment with the F2 fund, for example, owning the “largest fully operational battery” in NSW – a project developed and operated by the manager.
The fund also invests in Australian wind-farmer, Windlab, among a handful of other assets across the ‘renewable infrastructure’, financial, healthcare and childcare sectors.
Built for both wholesale and retail investors, the F2 product is available in NZ on the Apex and FNZ platforms with a target net long-term annualised return of 15 per cent.
According to the latest F2 update, the fund returned 17.6 per cent over the 12 months to June 30 and 10.8 per cent annualised since inception in 2021.
In the F2 ‘target market determination’ – a mandatory disclosure item in Australia – Federation says: “The product may be suitable for investors seeking long-term capital growth, preferring to invest in predominantly growth assets which strives to generate a higher total return. The Fund will endeavour to maintain capital preservation wherever possible however investors may not get back the full value of their investment and in certain circumstances investors could lose all of their investment.”
Featuring a retail management fee of 1.7 per cent (1.5 per cent for wholesale), F2 is in line with private equity offers that generally cost more than public market counterparts.
NZ research firm, MyFiduciary, noted last year that the Federation “strategy provides investors with a better access point and liquidity terms than typically offered in private equity funds”.
“The fund may suit investors who have a sustainability criterion given the areas of focus in the product of clean power, provision of health and education related real estate, and companies meeting a social and economic need.”
In total, Federation manages about A$2 billion of “capital commitments” across several strategies with the F2 fund sitting at A$50 million or so.
The “technology agnostic” Panizza said the manager remains focused on proven solar and wind generation rather than possible energy solutions such as hydrogen and nuclear (a subject of political debate in Australia this year).
In a recent opinion piece, he says: “Achieving net zero will require a mix of generation and storage technologies. Nuclear and hydrogen may play a part in that transition, but we are of the view that it will be peripheral until new these technologies mature, and costs are reduced substantially.”
Panizza, is optimistic that both Australia and NZ can finish the journey to ‘net zero’ by producing clean energy from their respective natural resources – sun in the case of the former and (mostly) wind for the latter and, pray for it, rain.