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Private equity still looking for green investment opportunities

Private equity investors are increasingly eyeing up green building and renewable specialists as providing opportunities for growth despite the global credit crunch.

The past few years has seen a steady stream of investors moving into the market, but the economic gloom in other sectors, tightening regulation and the financial problems faced by conventional construction firms are heightening interest.

Invisible Heating Systems deal

Belfast based Beltrae Partners confirmed this week it has bought a majority equity stake in Scotland based Invisible Heating Systems (IHS) – although the full financial details have not been released.

IHS specialises in sustainable heating installation and design including underfloor heating, heat pumps and biomass.

Ciaran Rafferty, the Beltrae director who oversaw the deal, said it was an example of how attractive these type of companies are becoming.

He said: 'We believe this sector is now interesting for private equity companies. Up until recently, most purchasers would have been construction or related trade companies, but the construction sector is now somewhat limited by financial constraints, and there are therefore opportunities emerging for financial purchasers.”

He said Beltrae believed IHS could grow substantially: “We are interested in investing to support the continued growth of the business. We were attracted to it by the fact they had been working in this area for 14 years, long before it became fashionable, and they have done thousands of renewable energy heating installations.

'With the changes to the building regulations coming into force in 2016 there is a real opportunity to grow this business to become a UK market leader.”

Investment could still expand in green building

At the end of November, Joost Becker, London based investment director at global investment firm Good Energies, told the Solar Smart HEAT 2008 conference organised by Cambridge Investment Research, his company was looking at expanding investment in green building.

Good Energies has an investment global portfolio of 32 companies and an annual investment budget of 350 million euros.

In the past its portfolio has been largely focused on solar PV and wind, but Mr Becker said energy efficiency was becoming increasingly important.

He said: “Solar will be the key driver for generating electricity in the longer term, but the other issue is energy savings and the big part of that will be green building.”

Mr Becker said the company’s confidence in green building was backed up by research led by Good Energies managing director, Greg Kats, which will be officially released next year.

United States research claims green building only two per cent more expensive

Mr Kats was lead author on ‘Greening Buildings and Communities: Costs and Benefits’ which was sponsored by a number of bodies including the World Green Building Council. It reviewed the construction costs of 150 buildings in 10 countries and claimed the average cost compared to conventional approaches was only two per cent higher.

Mr Kats said: “Green building is attractive because it is a fast growing market when the rest of the market is shrinking

'It is a difficult environment right now as more firms are looking to invest in this space, but our view is that it is a very complicated space and you need to understand it well to invest well and add significant value.

“We believe there are great companies out there and they will benefit from a strong strategic investor in this climate.”

Mr Kats said attractive companies would have “strong, ethical management” with “services or products which are substantially better - not marginally better” than the market average.