Investing in unlisted infrastructure through a fund

The fund invests in infrastructure for renewable energy, including the production, storage and transmission of electricity. CIP’s strategy is to develop and build infrastructure projects. Our investment in the fund complements our portfolio of direct investments in unlisted renewable energy infrastructure. Copenhagen Infrastructure V[1] will provide exposure to an earlier phase in the lifecycle of these projects. The fund invests in developed markets globally and will therefore also provide opportunities to build insights into regions and technologies where the Government Pension Fund Global does not currently have infrastructure investments. The table below provides an overview of Copenhagen Infrastructure V’s underlying assets at the end of the third quarter of 2024. At the beginning of the fund’s life, most projects will be in the development phase. The bulk of its revenue stream is expected to come from sales of projects that CIP has developed and/or built. 

In line with market practice, we pay a fee to the manager when we invest through a fund. This is to cover the costs associated with the investment work. In addition, the manager is entitled to a share of the profit if the return hits a certain level. This is to ensure that the interests of the manager and investors are aligned. The fees we have paid are shown in the table below. Investors also pay their share of costs related to the fund’s establishment phase, such as fees to advisers. In line with market practice, we too have covered our share of costs related to setting up the fund.  As the number of projects and the amount of capital invested increase over time, fees and costs will fall in relation to invested capital.

Infrastructure projects are usually funded partly with debt, and CIP can be expected to do this with its fifth flagship fund. Debt in relation to the value of investments is shown in the table below.

The lifecycle of an infrastructure project 

Renewable energy infrastructure goes through three main phases during its lifecycle. The first is the development of the project, which includes securing a site and obtaining permits for construction and connection to the grid.  The development phase generally features relatively low investment costs and requires local expertise and presence. Towards the end of this phase, once permits have been obtained and the risk of the investment failing is lower, construction contracts and funding agreements can be entered into. If the project is considered profitable once the necessary licences, contracts and funding are in place, it proceeds to the construction phase. In this phase, the actual facility and any necessary associated infrastructure are completed. This is the most capital-intensive period, and so also the period with the greatest risk of impairment losses. Once the facility is complete and producing, storing or transmitting electricity, it moves into the operational phase. This phase often has a steady revenue and cost profile with less investment risk than the construction phase.

[1] Norges Bank Investment Management is the fund management division of Norges Bank. All unlisted (or direct) investments in real estate and renewable energy infrastructure are made and managed by subsidiary structures set up by Norges Bank.