LONDON, Feb. 12, 2001 (PRIMEZONE) -- Old Mutual plc ("Old Mutual"), the financial services group, is taking advantage of rapid changes to the European energy market by sponsoring, through an offshore subsidiary, the launch of a new fund, Gerrard Energy Ventures SA, a Luxembourg company ("GEV" or "the fund"). Old Mutual aims to raise a minimum of Euro 150 million from institutions and high net worth individuals to invest in gas and electricity businesses throughout Europe.
GEV is chaired by John Devaney, former Chief Executive of The Energy Group, and the Board also includes Clare Spottiswoode, former Director General of Ofgas and Peter Wilson, the ex-vice President of Nuon, one of the Netherlands largest energy companies. Eric Anstee, Chief Executive, Financial Services, of Old Mutual is Chairman of the Investment Managers and GEV's joint managing directors are Ian Perkins and Jim Whelan, who are Chief Executive and Deputy Chairman respectively of Old Mutual's GNI subsidiary.
The Board of GEV believes that the European power and gas sector provides an under-exploited investment opportunity, which is undergoing a revolution brought about by market liberalisation, new techology and environmental pressures. Hundreds of new businesses are being formed, and cross border acquisitions are running at a rate of 85% above last year's levels. The sector is comparable in size to the European telecoms marketplace and accounts annually for Euro 300 billion, or 6% of European GDP.
For most of Europe the existing players have little experience in liberalised markets, although in some areas (for example UK and Scandinavia) liberalisation has been underway for a number of years. There is a huge potential for investment in the sector in general, and in growth opportunities in particular. These opportunities for investment are not yet being exploited effectively.
GEV is one of the first investment vehicles designed to take advantage of these growth opportunities. To achieve its ambition of 30% per annum growth in value over its planned five-year life, GEV has assembled an advisory team with a combined total of 80 years of experience in the deregulated UK and Scandinavian markets; a leading-edge transaction record in deals which lead the way in these markets; and considerable depth of knowledge and transaction experience throughout Europe.
The fund has decided to focus first on early stage financings of high growth businesses and a deal stream is already established (using committed funds of Euro 15 million provided by Old Mutual) which is intended to be transferred into the GEV investment vehicle after the initial closing, currently scheduled for April 30.
GEV has the industry knowledge and the medium term perspective to capitalise on the opportunity in what is currently an opaque and illiquid market. This is borne out by the number of companies that have already approached GEV, even before its inception. Moreover, as the markets in which these businesses are operating become more transparent and liquid over time, the value of successful investments will increase further.
Investment Strategy
The Board will build a balanced portfolio of investments across all parts of the energy value chain. It expects to make individual investments of between Euro 1 million and Euro 15 million in the best of the new breed of power and gas companies currently being created throughout Europe. GEV's investments will normally be for either a minimum of 25% of the issued capital of the target companies or over Euro 6 million. GEV intends to invest in a minimum of 10 companies, any one of which is unlikely to represent more than 15% of the funds invested.
GEV will invest primarily in early stage financing of companies and is likely to exit via medium term trade sales and possibly IPOs. Average returns are expected to be 30% per annum, although this will vary between investments and the fund will seek higher returns from project opportunities at a very early stage due to the higher risk profile. GEV's objective is to identify opportunities that demonstrate a strong market advantage through superior technology or niche positioning.
Commenting on the launch of GEV, Jim Whelan, joint Managing Director, states: "We strongly believe that liberalisation of the European power and gas sector provides a unique opportunity for us to launch this fund and to build up a broadly-based portfolio of investments in this dynamic sector."