Europe needs to invest massively in renewable energy. It is the premise behind RGreen Invest’s excitement for the sector’s growth over the next 10 years. By Nick Herbert
France-based independent investment management company RGreen Invest, founded in 2013 by CEO Nicolas Rochon, has made it its mission to enable the directing of investor capital towards financing projects that accelerate the world’s energy transition, adaptation to climate change and mitigation of its effects.
It is a lofty ambition, but not one driven entirely by altruistic planet-saving aspirations – although that would be sufficient justification in itself to look forward to ongoing growth in the renewable energy sector over the next decade.
Despite an acknowledgement that the world needs to be weaned off its fossil fuel addiction in order to reduce greenhouse gases and limit global warming, there are more prosaic reasons fuelling RGreen’s enthusiasm.
“Without securing access to a sustainably-priced, locally-produced renewable energy mix, it will be impossible for Europe to secure economic growth. If we are going to be successful with the energy transition, then it will be primarily because it's good for the economy and for energy security,” said Rochon.
There seems to be little choice. Europe is almost fully dependent for its fossil fuels and investment in nuclear energy has been reduced to the extent that renewable energy and the transition are some of the most important topics for Europe.
It is the driver behind RGreen’s positive outlook. “The energy transition is a key issue for Europe,” he said. “It’s a sector that will undergo huge growth over the next 10 years.” It is also a sector that enables its funds’ Limited Partners (LPs) to be impactful: “and, at the same time, record double-digit returns”, he said.
Funds
RGreen has four fund strategies, all of which are SFDR/Article 9 compliant.
“We've evolved over the years,” said Stephanie Begue, partner – head of business development and investor relations, who joined the firm in 2016.
“We started off by offering a debt solution because the sector was initially dependent on subsidies, and we were not comfortable with equity risk. In 2016 the sector reached an inflection point, when renewables became competitive versus fossil fuels, and that’s when we started investing equity in addition to debt.”
The firm’s two main funds are dedicated to the European market, one in short-term senior debt and one with equity, which gives it the capability and capacity to fill the renewable energy financing gap.
“We are in a position to be a financing solution for entrepreneurs who are the driving force behind the energy transition in Europe,” said Begue. “We have the pricing power, through our range of funds, to provide a solution that helps our partners and the sector grow. At the same time, we are capable to provide our LPs with resilient strategies coupled with very good return on capital.”
It is on its fifth vintage of its Infragreen fund that supports long-term investee growth through equity and preferred equity. It is currently fundraising for Infragreen V and fundraising will continue into 2025.
Through its previous Infragreen iterations, the first launched in 2013, RGreen has financed the installation of 8 GW in energy projects, supported around 50 developers and invested/committed €1.8bn. It is also raising funds for its fourth debt fund, Infrabridge, which is a short-term senior debt fund.
Through its previous three funds, it has invested €637m to support around 30 developers in installing 525MW of renewable energy. Its overall portfolio has contributed to the production of 5.5TWh in 2024.
“Infrabridge is a short-term maturity fund aiming to achieve 9%–10% gross returns in senior debt,” said Begue. “I think we are the only general partner (GP) that can offer such short-term maturity in the infrastructure space: we provide liquidity in an illiquid asset class.”
RGreen also manages two other strategies.
Afrigreen, at the end of its fundraising mainly subscribed by development finance institutions (DFI), is a long-term senior debt impact fund dedicated to Africa. Afrigreen was created to support West African and Central African C&I companies to accelerate the continent’s green energy transition and reduce its energy bill and reliance on fossil fuels.
“We have a several DFIs as LPs in this fund as we can fill a gap with our investments in small and medium-sized tickets that the DFIs can't address directly in the market given their larger minimum ticket sizes,” said Begue.
In 2022, it established its first growth equity fund, RSolutions, which in its first vintage is an €18m early stage infra fund. It is currently managing its investments. “We wanted to ensure we were well positioned for the energy infrastructure of the future, so we invested in earlier stage growth opportunities alongside five to 10 LPs,” she said.
“It's like an incubator for players in this sector. It's a new initiative. It's a test bed. I'm pretty sure that in a couple of years, we'll come back with an even more focused investment strategy with the second vintage.”
The gap
There is a team of 57 at RGreen, half of which is dedicated to investing. They are specialists, drawn from the industry and working day to day with all the different service providers. It mainly focuses its investments on three sectors: renewable energy; the electrification of uses – mobility, the grid, storage; and energy efficiency, “because before producing green energy, you must reduce your consumption”, said Rochon.
“With these three pillars, we can address 90% of the European Union’s 2030 target. But what is really important is that with our technology we can help fill a gap in the energy transition infrastructure.” The EU has a binding renewable energy target for 2030 of a minimum 42.5%.
Classical infrastructure investment is mainly driven by the large infrastructure funds, which invest big tickets in large projects. In RGreen’s view, the energy transition market in Europe works differently.
“In Europe, you need to invest locally in small and medium-sized projects, because there just isn’t enough space for massive scale infrastructure in Europe,” said Jacques Cikurel, senior investment director. “So, the usual suspects in the infrastructure world cannot address the mid-market, which remains underserved.”
More than 80% of its transactions have been sourced by the team directly. “We are not in competition for deals because part of the team is coming directly from the industry,” said Cikurel. “We talk the same language. We're always creating linkages. We’re trying to maximise the value we bring to the table.”
Building a bridge
RGreen offers a different solution to bridge the gap between the needs of the entrepreneur and the expectation of the classic infrastructure of players.
“We are not here to bet on new technologies,” said Rochon. “After the initial development phase, you have the construction phase and this inflection point is where we start to invest.”
The firm targets investments in companies valued at between €100m and €200m that already have a track record, generally with Ebitdas below €20m, but with the potential to increase Ebitda generation above €100m and valuations over €1bn during its hold of six to eight years. It is looking for growth – and quickly.
“We really need clear visibility over the next 24 months or so, so that we will be able to deploy a €100m ticket – our sweet spot is between €75m and €125m for our own account, but we can punch significantly above our weight with co-investment capital,” said Cikurel.
The next stage is an exit to the generalist infrastructure funds, utilities or corporates.
“This is our mission: to fill the financing gap for small and mid-sized entrepreneurs to build large, utility-scale platforms,” said Rochon. “It’s why we can help accelerate the energy transition in Europe, whereas classical infrastructure funds are not set up to address the issue.”
Qair Group is a case in point. An early investor in the European renewable energy company, RGreen reinvested €45m in Qair in 2021 to help simplify the group’s structure and accelerate its expansion plans on its way to meet a 2022 target of 1GW of assets. That brought its share capital to €300m. In 2022, Dutch investor DIF Capital joined as a minority shareholder in a deal that valued Qair at €1.2bn.
Building scale
Scale comes from investing and growing a platform that continues to develop and expand the pipeline.
“The real value comes from investing in and growing a platform,” said Cikurel. “There's a lot of value uplift associated with continued development.”
In its latest vintage of funds, it is steering away from investing in single assets – unless the team identifies unique opportunities to deploy in such assets. The firm partners with entrepreneurs earlier in the company life cycle than many of its competitors – the ones that tend to be targeted for exits. Value creation is linked to various different KPIs – Ebitda on the one hand, and significant pipeline generation on the other.
“It’s about developing and building the team, maximising the value of the energy that's generated, combining different technologies, integrating energy storage, developing M&A know how, minimising the margins on construction, maximising internal O&M, effective asset management, putting in place good data management tools and reporting frameworks,” said Cikurel. “Those are the key value drivers in the business.
“It's not a case where we deploy the capital and forget about it. It's a very active management approach. The right team needs to be there and there needs to be a mature pipeline because if we can't deploy capital, then the model doesn't work.” RGreen’s approach and a resilient asset base is responsible for a loss ratio “close to 0%”.
The renewable challenge
In the next five to seven years, RGreen Invest believes hydrogen will become an increasingly important part of Europe’s renewable energy mix. Storage is also key. But, in Europe, the scarcity of land is an issue that is not going away.
“It makes developing large projects very challenging,” said Rochon. “Achieving grid connections for larger projects is also more complicated compared with smaller projects. One of our specialities is selecting the right players that can develop, integrate and scale smaller projects to create platforms – ideally greater than one gigawatt in terms of installed capacity, preferably over two gigawatts, before we reach the exit stage.”
The message does not change despite volatility in the geopolitical landscape and in energy prices. Since Russia’s invasion of Ukraine, energy security has become a top priority; Europe needs to be energy independent. And even the prospect of a fossil fuel friendly administration returning to power in the US, does not alter the imperative.
“Nothing will change for Europe. In the US, they have oil and gas, and they can do what they want. But in Europe, we don't have a choice,” said Rochon. “It's really clear that, more than ever, we have to invest in renewable energy to secure economic growth.”
“We need to collaborate with Asia, as the region will play a pivotal role in driving the energy transition,” said Rochon. “If Europe wants affordable energy, we need Asia, as we lack our own manufacturing industry for essential components, such as batteries and solar panels, for example.”
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