NZ Super Fund writes down wind turbine investment; remains committed to investing in early stage companies
POSTED ON: 21 April 2017
The NZ Super Fund remains committed to investing in early stage companies after writing down its investment in US wind turbine company Ogin Inc.
After receiving independent power curve validation in July 2016 and certification for its wind turbine prototype design in early 2017, Ogin recently closed a transaction for its wind turbine platform for applications of 100 kW and above with global wind energy leader Vestas, for an undisclosed amount. Ogin’s remaining assets are now being divested, with Sherwood Partners managing the winding down of the company.
NZ Super Fund Chief Investment Officer Matt Whineray said: “We are pleased that the Vestas transaction provides a home for Ogin’s wind turbine platform for applications greater 100 kW. Nonetheless, commercially this has not been a successful investment for the NZ Super Fund, and we are disappointed with the outcome.”
“We went into this investment knowing that the company was early-stage. We accepted that because of the earlier stage investment there were a broader range of possible outcomes associated with the potential for high returns. Our decision to invest was based on a wide range of supporting expert evidence and we continued to support the company for a number of years. In the first half of 2016, the company was unable to raise the growth capital needed to continue on the path towards commercialization. In June 2016 the Ogin Board of Directors and management mutually agreed to separate. At that point we wrote the Fund’s NZ$47.5 million investment down to nil, and that was included in our annual accounts.”
The outcome of the investment has not had a material impact on Fund returns, with NZ$47.5 million representing just 0.16% of the NZ$30.1 billion Fund as at 30 June 2016. Since then the Fund has increased nearly NZ$4 billion in size to NZ$34.1 billion as at 31 March 2017.
Mr Whineray said investment write-offs can happen in the expansion capital sector and that the experience wouldn’t dissuade the Guardians from investing in early stage companies in the future.
“The Fund is highly diversified and focused on the long-term. Investments in early stage companies are an appropriate part of the mix. The Fund may well experience further individual investment write-offs in the future. Overall, however, we will invest where we have a high level of confidence that the Fund will be compensated for the risks taken. We continue to see long-term value in investing in alternative energy.”
The Guardians’ active investment activities, where it invests outside its passive Reference Portfolio, have added $5.8 billion in value to the Fund since inception.
The NZ Super Fund continues to be one of the strongest performing sovereign wealth funds in the world, returning 10.1% p.a. since inception in 2003 (after costs, before NZ tax). The Fund has returned 16.1% for the financial year to date.
The NZ Super Fund made a commitment to invest up to US$55 million in Ogin in 2013, comprising US$25 million debt and US$30 million equity. The debt component of the investment was refinanced and the amount drawn (US$5.4 million) was repaid in 2014. Along with other investors, between 2013 and 2015 the NZ Super Fund contributed additional capital to the company, bringing its total investment to US$37.8 million (NZ$47.5m) based on the prevailing foreign exchange rate at the time of the investment.
Media contact: Karren Beanland, Acting Head of Communications, +64 9 308 2015. +64 21 617 407, KBeanland@nzsuperfund.co.nz