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The biggest asset manager in the Netherlands has pledged to invest A$1bn ($651,945) in renewable energy group Octopus Australia, in a boost to Australia’s efforts to shift away from fossil fuels.
APG Asset Management, which manages the €544bn Dutch pension fund ABP, said on Tuesday it was committing the funds to help develop big solar and battery projects, ending a two-to-three-year search by the energy company for a global funding partner.
Sam Reynolds, chief executive of Octopus Australia, said it marked the start of what he expected to be a “multibillion-dollar, multiyear relationship”.
He added that Australia needed “about £250bn” spent on its energy projects over the next 10 years, which was “too much” for the country’s own A$4.1tn superannuation system — already large domestic investors — to absorb.
The move by APG underscores its commitment to meeting its net zero emissions target of 2050 or sooner and its confidence in the returns the sector can deliver.
Hans-Martin Aerts, head of infrastructure & private natural capital, Asia-Pacific, for APG said the partnership was “a unique opportunity to participate in the rapidly growing Australian renewable energy market . . . with the potential to deliver attractive risk-adjusted returns”.
Octopus Australia is part of the London-based Octopus Group, an investment business, which also owns a large stake in UK-based household energy supplier Octopus Energy.
Octopus Australia will use the funding from APG on its Blind Creek solar and battery project, in New South Wales, which it aims to start building in October.
It will have 300 megawatts of solar capacity and almost 500 megawatt-hours of battery storage capacity. The funding will also go towards its 1 gigawatt-hour Blackstone battery project, near Brisbane.
KPMG acted as senior financial adviser on the deal, led by M&A partner Gavin Quantock.
Australia sourced almost two-thirds of its electricity from fossil fuels — mostly coal — in 2023, but wants 82 per cent from renewable electricity by 2030. Prime Minister Anthony Albanese’s government is due to set a 2035 emissions reduction target in September.
Also on Tuesday, the UK’s £7bn Smart Pension, an acquisitive defined contribution pension scheme, announced a £330mn investment in two funds managed by Octopus Energy Generation, which invests in renewable energy.
The investment will make up about 5 per cent of Smart Pension’s default fund and will be used to finance wind farms through Octopus’s £1.5bn Sky fund and other projects including ground-source heat pumps through the smaller Octopus Energy Transition fund.
“It’s only just now that you are getting the products that you can invest in,” said Andrew Evans, group chief executive of Smart, adding that there would be “more and more opportunities” to invest directly in British infrastructure because more pension funds had committed to do so.
Under a compact signed at Mansion House in London earlier this year, 17 of the UK’s largest workplace defined contribution pension providers pledged to invest at least 5 per cent of their default funds in UK private markets by 2030.
Alex Brierley, co-head of Octopus Energy Generation said it was a “big ticket” investment from Smart Pension that he hoped would grow as more savers paid into the fund.
He added that he had seen “an increase in interest over the course of the last six months” across other pension funds.
