New regional fund seeks profits in green energy

[PHNOM PENH POST]

INDOCHINA Capital, an offshore fund-management group with offices in Vietnam, is set to invest up to US$200 million in renewable resources in Cambodia, Vietnam and Laos starting in 2012, according to a company statement.

Indochina Capital’s Mekong Renewable Resources Fund has already raised $50 million from the Overseas Private Investment Corporation, a US government investment agency, the statement said.

The private equity fund is expected to raise an additional $100 million for investment in the Lower Mekong region starting in early to mid-2012.

“The way I look at it, the $200 million will just be the beginning. I believe the demand in this sector will continue to be quite large,” said Indochina Capital Chief Investment Officer Hai Hoang yesterday.

The fund will focus on renewable energy, environmental services and plantations. Indochina Capital has started talks with plantations, hydroelectric facilities and trash services in Cambodia, Hai Hoang said, although he declined to name the companies involved in the talks.

The majority of the fund will be invested in Vietnam because of Indochina’s familiarity with the Vietnamese market, he said. A significant portion of the fund, however, could be invested in Cambodia, pending the success of future deal-making with the Kingdom.

While construction costs in Cambodia are only slightly higher than in Vietnam, higher tariffs on electricity in the Kingdom make the energy sector potentially lucrative, Hai Hoang said. The main difficulty is securing concessions and projects, he said.

Because the effects of global warming on Cambodia are predicted to be large, the Kingdom will need protective infrastructure, Hai Hoang said, something local governments may not be prepared to fund. Clean water and refuse services are also in high demand in the region, he said.

While opportunities in hydroelectricity and agriculture exist in the region, the renewable resources sector may not be large enough for investment of this magnitude, said Leopard Capital Managing Partner Scott Lewis.

“I’m not sure if it [renewable resources] is big enough to justify a fund dedicated to the sector in Cambodia,” Lewis said.

A land rush and scramble for resources in the Cambodian countryside has generated additional competition in sectors including renewable resources, he said.

Leopard Capital announced this week a US$75 million investment fund focused on agriculture and power in Cambodia and Laos.

Leopard opened Cambodia’s first private equities fund in 2007.

Indochina Capital will partner with Vietnamese companies with concessions in Cambodia and with local Cambodian companies, Hao Hoang said.

The company has not decided if it will open an office in Phnom Penh.