Old Mutual To Sponsor Offshore Fund In European Energy Sector

Caroline Maxwell, Investors offshore.com

13 February 2001

Old Mutual plc, the London-listed financial services group, is sponsoring, through an offshore subsidiary, the launch of a new fund to take advantage of rapid changes to the European energy market, the group announced on Monday. Called Gerrard Energy Ventures (GEV) SA, the Luxembourg-based company aims to raise a minimum of 150-million euro from institutions and high net worth individuals to invest in gas and electricity businesses throughout Europe.

GEV is chaired by John Devaney, former CEO of The Energy Group, while the board also included Clare Spottiswoode, former director general of Ofgas, and Peter Wilson, ex-vice president of Nuon, one of the Netherlands largest energy companies.

GEV believed that the European power and gas sector provided an under-exploited investment opportunity, as it was undergoing a revolution brought about by market liberalisation, new technology and environmental pressures.

Hundreds of new businesses were being formed, and cross-border acquisitions were running at a rate of 85% above 2000 levels.

The sector is comparable in size to the European telecoms market place, accounting annually for 300-billion euro, or 6% of European GDP. For most of Europe, the existing players have little experience in liberalised markets, although in some areas, such as the UK and Scandinavia, liberalisation has been underway for a number of years.

The group believes there is huge potential for investment in the sector in general, particularly given the growth opportunities involved. GEV would be one of the first investment vehicles to take advantage of these growth opportunities, it said.

GEV was targeting growth of 30% per annum in value over its planned five-year life. It had decided to focus first on early-stage financing of high growth businesses, and a deal stream had already been established using committed funds of 15-million euro provided by Old Mutual. These would be transferred into the GEV investment vehicle after the initial closing, set for April 30.

GEV's investment strategy was to build a balanced portfolio across all parts of the energy value chain. It expected to make individual investments of between 1-million-15 million euro in the best of the new breed of power and gas companies currently being created throughout Europe.

Investments would normally be for either a minimum of 25% of the issued capital of the target companies, or over 6-million euro. The group intended to invest in a minimum of 10 companies, any one of which was unlikely to represent more than 15% of the total funds invested.

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