With rapidly growing populations and economies, frontier markets throughout the world are seeing a spike in energy demand. Although certain aspects of a country’s energy sector are often publicly managed — such as grids and other transmission infrastructure — the private sector also has a role to play in helping frontier markets meet their current and future energy demands.
In particular, Schulze Global sees tremendous promise in smaller-scale renewable technologies, like small hydropower plants, to sustainably generate energy in a way that is environmentally responsible while still yielding highly attractive returns on investment.
Schulze Global looks for markets that have the natural potential to generate renewable energy. Next, it is important to understand the country’s regulatory framework. Does the country allow private investors to own renewable energy generation assets? Can off-take contracts be signed with private buyers? Are multi-year power purchase agreements possible?
If the market has natural potential and a hospitable regulatory framework, Schulze Global will consider renewable energy investments in the market. Schulze Global structures its investments conservatively, ensuring that any assets in which it invests have all necessary permits in place and all studies completed. On a selective basis, Schulze Global will also invest in existing assets. For energy investments, Schulze Global has a preference for majority ownership.
In 2016, Schulze Global conducted a first close on the Caucasus Clean Energy Fund I (CCEF), a fund that invests in small and medium-sized hydropower plants in Georgia. The fund will invest in a selection of assets, bundle the assets, and sell the offtake in Georgia and other markets in the Caucasus region, notably Turkey. CCEF’s anchor investors include leading international financial institutions.