Lothian Pension Fund’s Harburnhead wind farm is operational after the construction phase was completed ahead of schedule and under budget.
The site is already generating electricity and can power 31,000 homes when fully operational. More importantly for the fund, it is now generating a return, which is targeted at 3.5% above inflation.
The West Lothian asset was bought in partnership with Falkirk Council Pension Fund back in June 2015. Lothian Pension Fund invested £10m in the project for a 50% shareholding.
This is just one of the fund’s investments in the renewable infrastructure space. In the 12 years Lothian Pension Fund has been investing in infrastructure it has spent £25m on hydro power developments in Scotland and £15m on solar power.
The fund, which also has investments in Europe and North America, is targeting infrastructure for the long-term income it provides. “Infrastructure assets can generate positive cash flows for many years and these cash flows are sometimes also linked to inflation rates,” the fund told portfolio institutional.
“These long-lived infrastructure assets can be a reasonably good match for a pension fund whose long-lived liabilities are tied to inflation.”
Lothian Pension Fund’s target is to have 8% of its £6bn assets in infrastructure. It currently has more than 10% of its cash invested in this sector.
Harburnhead looks unlikely to be the fund’s last infrastructure deal. “There are several opportunities pro-actively being appraised in the deal pipeline,” Lothian Pension Fund said.
