Frontier Investment Management, a Danish private equity firm that invests in and develops renewable energy projects in sub-Saharan Africa, has held a $116 million first close for its second fund. Frontier Energy II will pursue a similar strategy to its predecessor fund, the €60 million DI Frontier Market Energy and Carbon Fund, which is now fully deployed in six investments which will generate 139MW from a mix of hydro, solar and geothermal power projects in East Africa.
Several European development finance institutions made commitments to the fund as well as a foundation and a number of ultra-high net worth investors. Of the DFIs, the UK’s CD and European Investment Bank’s GEEREF, are re-upping from the first fund, while FMO, Proparco, Swedfund and the Development Bank of Austria are participating for the first time.
The 10-year closed-end fund, which is targeting $200 million for its planned final close in early 2018, will back greenfield renewable energy projects across the sub-Saharan region. It aims to deliver its investors an IRR in excess of 20% by investing between $3 million and $30 million of equity in projects that require capital amounts ranging from $5 million up to $300 million.
While the fund has yet to deploy any capital, the plan is to transfer twenty projects from the previous find which are currently under development into Frontier Energy II’s portfolio. After that, the fund expects to add an additional ten to fifteen projects over the fund’s investment period, starting construction on about five projects each year.
Copenhagen-headquartered Law firm, Bech-Bruun, provided legal advisory services for the formation of the fund.