Par Sustainability Fund I will launch early next year and, initially, it will focus on investments in renewable energy such as wind and geothermal energy, as well as coal bed methane and coal mine methane. The fund will add to Par’s existing business angel syndicate and £15m innovation fund, which will close within a few weeks.
“The amount of money, interest and political will in this sector will throw up enormous opportunities, and we hope to participate in them,” says Paul Munn, a partner at Par. “Having a Scottish base helps, when you look at the country’s strong engineering skills and great natural resources.”
The move strengthens Par’s existing relationship with Senergy, which has been involved recently in identifying sustainable investment opportunities in renewable energy. Although Par intends to invest across Europe, its primary focus will be Scotland.
When Par started operations in 2008, it had planned to make investments in renewable energy along other high-growth opportunities, but Munn said they revised an initial £2m ceiling on the innovation fund, with the new fund making investments of £5m at a time in any venture.
Unlike Par’s other funds where fundraising is aimed at individuals, the Sustainability Fund for renewable energy will be targeted at institutions. Munn says they want to soft-close within 9 months, but did not disclose the initial fundraising target nor speculate on how long it would take to raise £50m.
Senergy will take an initial stake of between 10% and 20%, says managing director Nial McCollam. “This is an exciting opportunity to capitalise on the investment opportunities to which we often have favourable access.”
Par is targeting an internal return rate of 30% on all renewable energy investments and will seek to exit each deal within 7 years. Munn does not expect to experience the problems faced by other venture capital start-ups.