Interview: Justin DeAngelis, Denham Capital

• Denham Capital recently agreed $2.1bn partnership with Aflac Global Investments
• New debt platform will invest in senior debt of sustainable infrastructure projects
• DeAngelis bullish about hybrid projects including wind

Investors are increasingly aware that there are a big returns to be made in sustainable infrastructure.

This was clearly illustrated by the recent announcement of a $2.1bn partnership between Denham Capital and US investor Aflac Global Investments.

Under the terms of the agreement, Aflac and Denham Sustainable Infrastructure have committed to launch a $2bn debt platform to invest primarily in the senior debt of sustainable infrastructure projects. Aflac has also committed $100m to Denham’s second dedicated equity fund to buy, develop and enhance sustainable assets.

The deal signified the continued evolution of investment firm Denham Capital, according to Justin DeAngelis, partner and co-head of infrastructure at the investment firm.

“We’ve been investing in the renewable power sector for around 15 years,” he tells A Word About Wind. “Ten years ago, if you said ‘sustainable infrastructure’ you basically meant renewable power but, as renewable power has grown… and as other aspects of sustainability have caught on, there is a natural extension of what we’ve been doing.”

Generation alone is not enough

The message is clear. For Denham, investing in generation alone is not enough. The company now focuses on investing in generation and complementary infrastructure.

DeAngelis stresses that this is not a new departure for the company, adding that Denham has been looking beyond generation for the last five years. For example, in 2019, Nexif Energy – a tie-up between Denham and Singapore’s Nexif – completed the addition of a 10MW battery facility at its Lincoln Gap wind farm in Australia as it increased capacity to 212MW. The project is now being expanded further to achieve wind capacity of 464MW.

“Lincoln Gap is an intermittent wind farm, and we put a battery storage project on it,” he says. “Battery storage will be a significant part of infrastructure investment in the future to complement intermittent renewable resources. You have to make it all work. The world has evolved from just renewable power as the solution.”

A misconception

Denham has been adding technologies like storage and hydrogen to its projects for the last decade. While the firm has been regarded as a specialist in emerging countries, DeAngelis says this isn’t entirely true.

He explains: “Our view was there were better opportunities in the developing markets, but what we’ve said is we focus on growth markets. We intentionally did not say emerging markets, like there was nothing else.” Previously the company would build renewable generation projects in developing nations that offered higher returns, but now it will look at where the returns are most attractive, which is likely to include projects using developing technologies, like storage, in developed markets.

Consequently, DeAngelis expects storage to be a major growth area for Denham in the coming years, even while wind and solar continue to expand rapidly. For example, he is bullish about the prospects for hybrid generation projects including wind.

“If you’re looking at the evolution of wind, and how to provide a better technical solution in the areas where you operate, then a hybrid solution makes more sense," DeAngelis says. "That could be a wind-and-solar hybrid, or it could be wind and batteries.”

Storage plus renewables: A ‘total solution’

DeAngelis sees a wide range of investment opportunities in storage. These include standalone storage assets where the operators can profit from fluctuating prices in merchant power markets, and storage capacity provided to specific counterparties.

Either way, he says, “you’re a piece of the puzzle” and negotiating these challenges is where Denham believes it can provide the greatest value.

“Our operational focus is on the total solution,” says DeAngelis. “That’s not to say we won’t do storage independently but, as an investor, we’d love to provide a total solution, which would be a renewable power project partnered with a storage project. Then you’re offering your counterparty more capacity as opposed to requiring them to manage the intermittency of a renewable plant.”

Denham’s track record of investing in developing markets is attractive to Aflac. Eric M. Kirsch, global chief investment officer of Aflac Global Investments, has said part of the appeal of the partnership with Denham was the sustainable investment focus and the ability to “capture higher yields while providing enhanced credit protection, adding value to our portfolio and to our stakeholders, while advancing our ESG priorities”.

And where are those higher yields to be found? As the example of Denham’s evolution proves, the best returns are not only achieved in new countries, but increasingly in new technologies.