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Impact Investment Group targets $1b investment in solar power

Former top Labor adviser Ross Garnaut will chair a new $100 million solar income fund by the Liberman family-backed Impact Investment Group, which is targeting a $1 billion investment in solar infrastructure by 2020.

IIG chief executive Chris Lock said the new fund, seeded by three solar projects currently under construction, would tap into the "really quite attractive" economics for solar ventures in many parts of Australia. It will own 100 per cent of its solar plants, which will all have long-term offtake contracts in place with an investment-grade counter-party.

Construction of the first three projects, at Karratha in Western Australia, and the Mount Majura and Williamsdale projects in the ACT, is expected to complete in 3-4 months. After being seen through to operational completion by IIG, the solar income fund will have an option to acquire them, subject to approval by its board.

"Having the seed portfolio on Day One gives investors confidence on exactly what it is that they are investing into," Mr Lock said.

IIG's move into solar reflects a rapidly growing investor appetite for solar investments as declining costs for the technology raise expectations for the contribution it will make in the future energy mix.

Bloomberg New Energy Finance estimates the Australian solar market will grow from 4.1 gigawatts at present to about 52 GW by 2040. Melbourne-based Lighthouse Infrastructure recently also closed a $100 million solar fund.

Mr Lock said solar was "almost becoming a no-brainer" in terms of its suitability for new energy investment, noting that the development and construction of solar farms also involve less community risk and can be completed in much sorter time-frames than wind.

Management of the new fund will be led by former Pacific Hydro Australia head and current head of renewable energy infrastructure at IIG, Lane Crockett, with Mr Garnaut to chair an independent board to support the credibility of the fund with institutional investors.

"We really see this solar income fund as a stepping stone to a much bigger goal to invest $1 billion in solar or renewables by the end of 2020," Mr Lock said.

"Whilst the solar income fund is a $100 million fund we had the desire to create a really robust corporate governance structure so we could attract some institutional-type capital which would support our longer term goals for potentially the solar income fund number two or future funds to get us to that $1 billion target."

Professor Garnaut, a Melbourne University economics professor and the designer of the Rudd Labor government's carbon scheme, said the launch of the fund came at a "crucial time" for the renewables sector.

"Bold steps by investors like IIG will support Australia's utilisation of its opportunity to be a superpower of the low carbon world economy." Prof Garnaut said.

Melbourne-based IIG, which has over $400 million in funds under management, mostly in property but also in wind power, is owned by Mr Lock and Small Giants, the family office of Daniel Almagor and Berry Liberman.

IIG's new solar income fund, which was officially launched on Monday as flagged by Street Talk, is targeting a pre-tax rate of return for investors of about 10 per cent. Mr Lock said IIG's mandate was to bring investment products to the Australian market that blended financial returns with positive impact.

The three initial solar projects are worth about $60 million. During the life of the fund the pool of solar infrastructure is expected to create about 270 jobs during construction, and yield $57 million in savings from health and environmental costs, cutting carbon emissions by about 1.2 million tonnes.

Source: Australian Financial Review

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