Scottish Equity Partners has completed a direct secondary investment in nine green energy companies owned by SSE Ventures, using capital from Lexington Partners, Hermes GPE, F&C Private Equity and Partners Group.
The four firms and SSE have backed the creation of a £95 million (€115 million; $147 million) fund that will invest in the nine companies and will also be able to invest in five additional SSE assets in the future.
The vehicle, called the Environmental Energies Fund, will be managed by SEP in a partnership with SSE and the four firms. SEP has formed a separate team to manage the fund, headed by SEP partner Gary Le Sueur.
“It’s a somewhat unusual structure,” Le Sueur told Private Equity International. “A very significant portion of the £95 million will be used for reinvestment in the nine companies.”
Lexington Partners is the largest backer of the Environmental Energies Fund. “They played a lead role, but Hermes and F&C in particular have a lot of clean energy experience and they’re both investing from clean energy funds,” Le Sueur said. Partners Group is also backing the vehicle with capital from a natural resources fund, he added.
SEP approached SSE about 18 months ago to discuss the secondary fund concept, after which it approached Lexington and the other groups.
The nine companies in the portfolio represent a variety of clean technology sub-sectors, including solar energy, ground source heat pumps, energy efficiency services, electricity grid management, water recycling, wave energy, hydroelectric projects and low-carbon based heating systems.
“It’s a very diverse mix of companies,” Le Sueur said. “Some [are] venture capital stage companies and some [are] growth equity. For us, it comprises a very well balanced and diversified portfolio combining venture capital and growth equity.”
SEP’s foray into the direct secondary market comes just one week after the firm closed its fourth fund on £200 million. Fund IV will make growth equity and venture capital investments in the IT, energy and healthcare sectors across the UK.