Nicolás has over 25 years’ experience in private equity, M&A, and asset management. Prior to joining Marguerite in 2010, he spent 17 years with the Santander Group. He also worked at McKinsey (Madrid), Salomon Brothers (London), and Lazard Frères (Paris) before joining Santander. Mr. Merigó has a Physics degree from Imperial College of Science & Technology (London) and an MBA from UCLA.
Tell us about Marguerite, its objectives and the motivation behind the setting up of the fund.
Marguerite, also called the 2020 European Fund for Energy, Climate Change and Infrastructure, was established in 2010 with the backing of six major European financial institutions, which committed EUR 100 million each. These are Caisse des Dépôts et Consignations (France), Cassa Depositi e Prestiti (Italy), Instituto de Crédito Oficial (Spain), Kreditanstalt für Wiederaufbau (Germany), PKO Bank Polski SA (Poland) and the EIB. Three further investors, including the European Commission, have added an incremental EUR 110 million to the Fund, bringing the total commitments to EUR 710 million.
Marguerite’s mandate is to makes equity investments in new infrastructure projects in EU 28 countries. The Fund operates like a traditional infrastructure fund and seeks commercial returns, but pursues the following policy-driven objectives:
- Combat climate change and contribute to implementing the EU’s 20-20-20 climate and energy targets: this covers investments in renewables energy projects like onshore and offshore wind, solar, biomass, geothermal, etc.
- Make a significant contribution in the development of transport Trans-European Networks (TEN-T): this covers infrastructure assets such as motorways, airports, seaports, etc.
- Enhance the security and independence of energy supply of EU Member States: electricity and gas interconnectors, storage, etc.
- Contribute to the deployment of the best possible internet connection by investing in telecommunication networks projects, mostly fibre optic networks.
So far, Marguerite has invested in twelve projects across nine countries, comprising over EUR 5 billion in project size.
How does Marguerite differ from other infrastructure funds – are there specific funding gaps that you aim to address?
The Fund’s strategy is to take minority equity participations alongside strategic partners such as project developers and operators and to focus on situations with limited competition with traditional infrastructure funds, therefore filling an equity gap. This is done by targeting sectors, countries, or project stages that are outside the focus of mainstream funds. Our higher risk appetite is compensated by prudent forecasting and a structuring approach to restore an attractive risk return balance. In the renewables sector this largely involved entering the offshore wind market at a time when other investors were only looking at onshore wind.
Marguerite’s role on Alsace’s fibre optic FTTH network and Poznan’s waste to energy projects was referred to by the market as a “pathfinder”, and indeed we have opened new markets for financial investors. Thanks to its long term approach, Marguerite is also able to invest in countries judged to be riskier by most infrastructure investors at a certain point in time.
Finally, Marguerite can act on certain transactions as an anchor investor, such as the Butendiek project, for which Marguerite’s role has been to help attract equity for the construction of the project.
Energy and renewables are among your core sectors – tell us about projects that you have funded in this area.
In the energy sector, Marguerite invested in 2016 in Latvijas Gāze the Latvian vertically integrated gas operator. Latvijas Gāze operates and maintains the Latvian gas transmission and gas distribution pipelines as well as the Inčukalns underground gas storage facility, the third largest storage facility in the EU and a strategic asset for the security of gas supply in the Baltics. The company has a significant ongoing capex program and sponsors projects that will improve the regional security of gas supply.
In the renewables sector, Marguerite is very active in the offshore wind sector with two investments to date in the financing of the construction of offshore parks in Belgium (C-Power, 326 MW, with Innogy, EDF, and DEME) and Germany (Butendiek, 288 MW, with WPD).
In solar, Marguerite invested in the construction of a portfolio of utility scale PV projects in France with the Toul and Massangis projects.
At the time of its construction, Toul was Europe’s largest PV project contributing significantly to the development of this sector in France. Marguerite’s industrial partner on these projects is EDF Energies Nouvelles, which developed, built, and now operates the projects.
Marguerite is also present in the onshore wind sector in Eastern Europe, with 180 MW of projects built across Poland and Romania.
Finally, Marguerite invested, with Sita, in the first Energy from Waste Public Private Partnership (PPP) project in Poland. It covered the financing, design, construction and operation of a municipal waste incineration plant with a capacity of 210,000 tons per year. It allows the City of Poznań and the surrounding area to implement its waste management plan in local landfills, in accordance with the EU Landfill Directive and Poland’s Waste Law.
What, in your view, are the main obstacles to the funding of low-carbon technologies and what needs to be done to overcome them?
One particularity of investments in low-carbon technology projects is the fact that, for most technologies, the business case relies on subsidies being paid over their economic life. Cost saving on equipment, construction and operation is therefore the main lever to ensure these technologies can be deployed to a level where it can have a significant impact on carbon reduction and offer a true alternative to carbon intensive production sources.
Another element, that we are starting to see on our assets, is the fact that the penetration rate of renewables projects on the energy mix is putting downwards pressure on market prices, due to the fact that these projects usually have a marginal cost that is nil. This in turn lowers the attractiveness of further investments in this sector: market design needs be updated to take into account this new generation mix.
Ensuring the adaptability of the grid to this intermittent supply will also allow for a greater growth of the renewables sector. This implies investments in further interconnections and storage which is part of Marguerite’s strategy.
With respect to low-carbon technology, are there any areas where the need for funding is greater than others, or areas that should be prioritised for future funding?
The focus so far when it comes to low-carbon technologies has been on electricity. We believe renewable gas, or green gas (also called biomethane), offers great benefits, beyond its low-carbon feature. Biomethane projects produce methane from the fermentation of agricultural or industrial waste and inject it into the grid. We believe this technology deserves further support as it integrates the goals of security of supply, sustainability, waste management and local competitiveness.
Furthermore, E-mobility solutions (e.g. charging infrastructure) are at an early stage of development and will require funding support before being attractive to mainstream investors