24 November 2020

Amber Infrastructure Group is a specialist international investment manager focused on investment origination, asset management and fund management. With over £8 billion of assets managed across more than 150 investments in the UK and elsewhere. Headquartered in London and with over 130 staff, it invests through six funds, including the Mayor of London’s Energy Efficiency Fund, which is supported by the European Regional Development Fund (ERDF).

Investing across public infrastructure, real estate, transport, energy and digital infrastructure sectors, Senior Investment Director Jenny Curtis says the impact of COVID-19 on the business has been marginal: “It felt pretty major,” she says, “and while some investments have naturally needed more hand holding, actually the majority of our investments continued to perform exactly as we would expect and want.”

Jenny’s focus is sustainable energy, where among other things, Amber operates in partnership with the public sector to leverage private finance to develop projects and raise funds for decentralised energy, energy efficiency, energy storage and renewable generation. “Again, the sector has proved to be reasonably resilient,” she says. “There was a reduction in energy demand, which had an impact on the energy mix and provided us with some interesting data points. We have seen some developments around enhanced requirements for energy storage to support the National Grid.”

In the past six months, Amber closed four deals through the Mayor’s £500 million fund, which is two years into its five-year investment period and combines GLA funding with money from the European Commission to help achieve London’s ambition of being a zero carbon city by 2050. That fund is a successor to the London Energy Efficiency Fund, also established through the Commission and managed by Amber, which invested nearly £90 million and mobilised over £420 million of external finance into innovative low carbon projects across London. Amber is also investing funds from The Scottish Partnership for Regeneration in Urban Centres (SPRUCE), using the same model in Scotland.

“It is a model we have been working on since 2011,” says Curtis, “and we are now on our third fund, using ERDF money allocated regionally, which a regional decision-making body can use as a grant or to put into financial instruments. We have found it works extremely well – we’ve delivered 18 low-carbon projects and the funds have been getting bigger because we have been able to bring in more private sector funding.”

She adds: “What is interesting is the model provides essentially an interest rate subsidy as an incentive. There are challenges around managing State aid but it does allow for projects that wouldn’t otherwise get done to proceed and for projects to be delivered in a more rigorous or robust way because of the involvement of the private sector and the requirements that we put in alongside those loans.”

It is not yet clear how the government will replace ERDF money going forward, but, according to Curtis, there is a lot of interest from other regions in developing similar funds. She says the issue with low-carbon infrastructure is that a lot of the technology is still quite nascent, with new risks that sometimes require access to tools which are not always readily available.

Amber and its investors are bullish about the concept of the green recovery: “That chimes with the public and also has the potential to deliver growth and jobs,” she adds. “We have been following quite closely what the EU is doing with its Green Deal. The UK government is obviously fighting fires on so many fronts, but we would hope and imagine that those same priorities will become key themes going forward.”

The Commission hopes financing for the Green Deal will come by attracting at least €1 trillion in public and private investment over the next decade, with half coming from the EU budget and €25 billion from the EU Emissions Trading Scheme.

Curtis says: “There has been a huge commitment of vast sums of money by the EU to the green recovery, and that is a double-edged sword. Putting in place the right structures and projects to effectively spend that money will be a challenge, but it obviously creates an opportunity. It is also a flag to the UK government that they need to be thinking quite hard about how they are going to deliver this green recovery.”

To that end, the Prime Minister announced in July that £350 million was being made available to cut emissions and drive the economic recovery from coronavirus, with funding for decarbonisation of heavy industry, construction, space and transport. That is part of the government’s goal of leading the most ambitious environmental programme worldwide.

Curtis says: “The question is how we use that public sector capital alongside private sector skills and expertise, and match funding, to deliver projects that really add value. It’s not all about the money – often the skills are held by the private sector and we need to bring those in to help develop plans. There’s not currently a huge amount of clarity about how that money will be spent and what it will deliver.”

One of Amber’s priorities for the year ahead is to build its business in battery storage: “We use our own balance sheet to try and unlock new areas and demonstrate ‘proof of concept’ to investors, particularly in new technologies and sectors,” says Curtis. “We see energy storage as absolutely central to the energy transition, and we hope to be able to prove it is something that can attract institutional investment, because there is a lot of interest and a strong business case.”

Amber also continues to look closely at hydrogen and carbon capture, but is waiting on a clear government strategy or intervention. The decarbonisation of heat also requires further government commitment.

“There’s a little bit of a backlog in energy policy in the UK,” says Curtis. “We are waiting for the white paper, the infrastructure finance review, and to hear what they are going to do on the green recovery. The other key policy issue that is becoming more and more urgent is the net zero legislative requirement. Hopefully, the delay means that when these policies do come out they will take into account a COVID lens and we will see the focus that we need.”

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Perspectives on Infrastructure: Investment opportunities in the UK

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