Singapore PE firm targets $150m second close
Singapore-based Armstrong Asset Management is approaching family offices and institutional investors as it aims to have a hard-close for its clean energy private equity fund this August.
After holding a first close of the Armstrong South East Asia Clean Energy Fund last August at $65 million, the PE firm is looking to raise $150 million by the second close this August.
Yasushi Ujioka has just joined as investment director of the fund and will work on originating deals and coordinating project construction. Most recently, he was investment director at Singapore alternatives firm Swiss-Asia Financial Services, which manages the China District Energy Fund.
Armstrong's fund will invest in small-scale businesses that develop, construct, own and operate renewable energy and resource efficiency companies in Indonesia, the Philippines, Thailand and Vietnam. It is targeting a 20% annual return over a 10-year period.
DEG, a division of German government-owned development bank KfW, and the Global Energy Efficiency and Renewable Energy Fund (GEEREF), are both invested in Armstrong’s Clean Energy fund, while International Finance Corporation (IFC) is proposing a $20 million investment. Now Armstrong is reaching out to family offices.
“Family offices are a key area for us," says Andrew Affleck, managing partner at Armstrong. "We’re working [with some] to reach our target close."
There’s been a notable increase in interest from Asian and European family offices seeking to make more socially conscious investments, he tells AsianInvestor.
“I think [the fund] meets not only their financial objectives to continue to protect and grow their wealth, but there are the altruistic gains, too,” adds Affleck. “Many family offices are looking to have a [social and environmental] impact as well.”
Armstrong is also meeting Asian and European institutional investors and expects to see a few coming into the fund. But US institutional investors, namely pensions, are unlikely to invest any time soon, he adds, given that this is a relatively new and niche opportunity.
“The size of the opportunity is too small [for US pensions], and also this is a new investment sector in this region," he says. "It’s understandable that many institutional investors want to see more of a track record before they commit."
But there are institutional investors in Asia and Europe that want to be involved in renewable energy in Southeast Asia now because of the anticipated growth and energy security demand drivers that exist today, notes Affleck.
He declines to name potential investors as the firm is conducting due diligence.
The opportunity in Southeast Asia is unique, he suggests, as the region is expanding rapidly but lacks sufficient investment in the grid. The problem is especially pronounced in Indonesia, the Philippines and Thailand, where daily power outages of six hours or more are relatively frequent.
“There is a very big need for de-centralised power [in the Philippines, Thailand and Indonesia]," notes Affleck. “The Philippines is experiencing ‘rolling brownouts’ due to insufficient capacity. And their solutions right now are to resort to diesel power-operated generators. Not only is that bad from an environmental perspective, but on a pure financial perspective; in some cases this costs over 50 cents per kWh. It’s unsustainable and socially unacceptable.”
Armstrong is eying opportunities in solar energy in Thailand, hydroelectric power in Indonesia and across both sectors in the Philippines.
The fund will make up to 12 investments over its 10-year life, with each company developing four or five new projects each.