Ancala interview with Bioenergy Insight

Ancala is a leading infrastructure investment manager with over €4.2bn assets under management diversified across 19 investments in infrastructure sectors including renewable energy and energy transition, transport and utilities.

“We have been investing in renewables since 2015, when we completed an investment in hydro-specialist Green Highland Renewables.  Since then, we have invested in a wide range of renewables, particularly in bioenergy with biomass, biomethane and biogas,” said Ajmera.

“To date, almost 50% of our investments have been within the renewables and energy transition space and we have invested almost €1bn in companies related to renewable energy, energy transition and decarbonisation. It’s an area we’ve built up a deep knowledge of and are actively looking for more opportunities to help grow.”

Renewables investment

Ancala recently increased its footprint of biomass plants after acquiring a new site in Croatia. The firm’s activity covers a wide range of infrastructure.

“Having the ability to invest freely across different sectors gives us the agility to capitalise on new opportunities as they arise,” he said.

In the renewables sector, Ancala primarily focuses on opportunities where there is a high level of downside protection, whilst also meeting its return requirements.

“This frequently results in a focus on more operationally involved sectors, such as biomass, where we can apply our operational expertise and active asset management approach to drive value creation.”

For example, since its investment in leading biogas and biomethane producer Biogen, Ancala has led the business to complete four bolt-on acquisitions and optimise performance at its plants. The value creation plan has led the business to almost treble its generation capacity from 13MWe to approximately 36MWe.

“We have industry partners in our team – former CEOs and chairs – that work alongside our experienced asset management and investment teams,” added Ajmera.

“The experience our Industry Partner approach provides has been instrumental in Biogen’s growth. The prior experience from running blue-chip infrastructure businesses has been pivotal in guiding the business strategy, providing support to management, introducing new relationships, challenging business plans, and enhancing operations.”

Another successful project has been Ancala’s investment in Magnon – a carve out from Ence Energía y Celulosa.

“Since our investment in 2020, we have been working with the business to develop a pipeline of projects in the Iberian region to continue the decarbonisation of the power industry. It has also expanded its biomass supply services and industrial customer base to serve the growing demand for renewable energy,” said Ajmera.

“In all of our biomass investments to date, one of the key things has also been revenue subsidy and regulatory regimes. Government support or contracted offtakes are key for providing downside protection on revenues and supporting stable cash flows, which are essential characteristics of a high-quality infrastructure investment.”

European Infrastructure Investment

Ancala typically invests in Europe because it sees a large and diversified range of opportunities across the entire continent where an infrastructure investor can really enable and empower progress.

“In particular, EU-wide directives being implemented into each member state can add further support to projects,” said Ajmera.

“The directives provide a direction of travel for government policies and subsidy regimes which can help support growing a company and in providing downside protection for investors.”

Ancala’s recently acquisition of a Croatian biomass plant expanded its presence in that market, and beyond its existing biomass investment in the UK and Spain, as it looks to explore more opportunities across Central and Eastern Europe.

“Our third flagship fund, which we closed last year, is predominantly focused on Europe but we are beginning to explore the increasingly attractive North American market, such as our recent investment in decarbonised heating and cooling specialist, Noventa Energy,” continued Ajmera.

He added: ” Europe is our core focus market, however, we are increasingly looking into opportunities in North America due to the regulatory tailwinds, close alignment with our investment criteria and a significant requirement for infrastructure investment more generally, including electricity generation in particular. It’s a really exciting market at the moment with lots of opportunities.”

Croatian biomass plants

When Bioenergy Insight asked more about how the Croatia-based biomass plants will benefit Ancala, he reiterated it enhances Ancala’s presence in an attractive market.

“A lot of investors can be overly focused on Northern and Western Europe, however we see a lot of growth potential in central and eastern Europe, particularly when it comes to the energy transition and government objectives to reach decarbonisation targets. It’s an area we continue to actively explore,” he said.

For the Croatia-based plants, Ancala is working closely with the management teams of both sites.

“Knowledge sharing between Ancala and the management teams is already enhancing the operations of the plants and helping to enhance health and safety standards,” he explained. “We’re focused on maintaining close relationships to help achieve this. The team particularly enjoy travelling to the sites to meet the teams and see the operations. We are actively looking to grow the platform to further benefit the existing plants through synergies and biomass sourcing relationships.”

Other renewables investments

Ancala’s mandate covers a wide range of infrastructure. It has invested in more than 20 assets across utilities, energy transition and renewables, transport, circular economy, digital, social and traditional energy. Renewables is an attractive market because technologies like bioenergy have more operational levers than other renewables subsectors.

“Beyond commercial and operational improvements, we’ve identified a number of interesting avenues to add material value to assets,” said Ajmera.

“For example, we have been exploring how to monetise some of the additional benefits and byproducts within our portfolio of biomass companies. We have seen a lot of benefit in participating in balancing systems where the base load nature of biomass plants is valuable to the grid and can help bring in additional revenues. Similarly, the digestates from the anaerobic digestion process have great benefits as natural fertilisers which can be sold on.”

There is also a lot of work going into biomass quality and sourcing. Ancala’s biomass plants in Spain and Croatia promote sustainable forestry practices, which provide significant employment opportunities in local regions, according to Ajmera.

He added: “We are also seeing some exciting developments within biogenic CO₂, which is produced when combusting biomass and can be used to derive new biofuels. It’s an area we are actively involved in as the market develops.

“Ultimately, our portfolio of assets within food and organic waste is supporting the circular economy. We see a long-term future in this as more countries look to boost energy resilience and sourcing of more sustainable sources of energy. Investment activity in this space helps to enable this.”

As for Ancala’s greatest achievement to date, Ajmera pinpointed Ancala’s fundraise for its third flagship infrastructure fund last year.

“The fund closed €200m above target at €1.4bn and is our first fund over €1bn. It really demonstrates the trust investors around the world place in our approach.

“We’ve already helped our portfolio companies to increase revenues by an average of over 65% since we first invested. We’re looking forward to using this capital to enable even more critical infrastructure companies to grow,” he concluded.

This article can also be found in the November/December edition of Bioenergy Insight’s printed magazine.