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Investing in energy efficiency

Energy efficiency pays off for owners of buildings and facilities, and can be financed in line with market conditions by fund investors, says Patrick Fankhauser, co-founder and fund manager of the SUSI Energy Efficiency Fund.

Energy efficiency pays off for owners of buildings and facilities, and can be financed in line with market conditions by fund investors, says Patrick Fankhauser, co-founder and fund manager of the SUSI Energy Efficiency Fund.

Interview: Steffen Klatt

What does a fund that specialises in energy efficiency do?
Patrick Fankhauser: While classic funds purchase, for instance, assets in renewable energy, the Efficiency Fund finances investments in existing infrastructure. In doing so, it saves energy, which generates a negative cash flow and therefore refinances the investments. Such a fund is a financing construct, but it has no shares in the investment object itself. It is about financing a revalution of infrastructure. In this way, industry partners can save energy and the investor assigns a portion of the energy savings with a higher rate of return.

Where do these projects come from?
Projects come in two ways. On the one side are technology companies that help their clients become more energy efficient. If the client does not want or is unable to finance the necessary investments themselves, the technology provider requires a financing solution in order to be able to sell their project. On the other side, owners of buildings or infrastructure are directly approached whose property must be made more energy efficient.

Who are the investors?
The classic spectrum of cornerstone investors. These are family offices, but also institutional investors that are looking for alternative investment opportunities. A sustainable added value is offered, which is also measurable in tonnes of CO2 saved. In addition, there are investments that do not correlate directly with listed investments.

How large is the fund that you are preparing at this time?
We are in the preparation stage; we now have our first reference project. Our Efficiency Fund will be launched in the second half of this year. The start-up amount is 60 to 80 million francs. We have a Euro Fund, which focuses on investments in European countries. A small portion is being kept in Swiss francs and focuses on Switzerland.

In which markets would you like to invest?
The Euro fund has as its main focus at this time Germany, France and Belgium. Should it expand geographically, then it would be in northern countries such as Holland. Southern European countries are not excluded from its scope, but are regarded more critically because of investment security.

Where does the greatest potential for energy efficiency lie?
Among the public, one usually thinks about the building envelope when it comes to energy efficiency in the building sector. But this doesn't work for our fund due to the length of amortisation. We are focusing on the maximum duration of ten years. The amortisation period must therefore be shorter. As a result, this means investing in energy-intensive building technology and the production of combined heating and power generation. But this can also mean public infrastructure such as street lighting and waste water facilities. In the industrial sector, the range of applications is very wide. It typically has to do with motors and pumps. There are many projects with which one can accomplish high savings for the client.

Can attractive returns be expected given the still relatively low energy prices?
You can achieve the basic premises – increasing energy efficiency to make it self-financeable – even with today’s prices without resorting to public pockets. Technology providers have the experience, projects exist, and reasonable rates of return for financial investors are possible.

Do real estate managers already know this?
This differs from one country to the next. It depends also on the portfolio. If the property is more modern, then the savings potential is lower. With the older stock of large buildings, the savings potential is higher. With private buildings, such as single-family homes, the savings potential is surely there, but not the critical project size.

What do conferences such as the Liechtenstein Congress in Vaduz bring, in which you participated as a speaker in the beginning of May?
Our interest lies in making the subject of energy efficiency more widely known. It is about how one can make the subject of a market model more attractive to the different parties involved and therefore push forward with the market even further. The market is there, but the potential is considerably larger than has been realised to date.

Did you find new partners in Vaduz?
We made two or three exciting contacts. We were met with positive interest. This interest comes especially from technology partners, but also from investors.

Patrick Fankhauser is the co-founder and fund manager of the SUSI Energy Efficiency since August 2011. Prior to that, he was responsible for operations and energy optimisation of the entire property portfolio of Credit Suisse. Previously, he worked as an entrepreneur in real estate management services in North America. Patrick Fankhauser studied economics at the University of Basel. SUSI Partners AG is a fund provider in Zurich that specialises in renewable energy and its infrastructure.