Powering up energy transition with Vortex Energy

Vortex Energy, part of the private equity business of EFG Hermes, an EFG Holding company, and the leading investment bank in the MENA, is driving sustainable growth with strategic investments in energy transition globally.

As the global shift toward a net-zero future gains momentum, Vortex Energy is expanding its reach and scope to cover wider energy transition sectors and geographies. Launched in 2014, it has built an impressive portfolio of companies that operate in wind, solar, electric vehicle changing, hydrogen and batteries globally, strategically expanding its assets under management.

In this interview, Bakr Abdel-Wahab, CIO of Vortex Energy, delves into how the platform has solidified its position in the energy transition market and discusses the future plans to encompass sustainable digital infrastructure investments.

Tell us more about Vortex Energy and what are your key priorities for growth going forward?

We launched with a focus on renewable energy investments in Europe, recognizing 2 key drivers: the push for energy security and diversification of energy sources, as well as meeting global climate net zero targets and EU green directives.

We began with 3 funds, with AUMs that peaked at around €1.3bn, or approximately $1.4bn. The journey started with identifying an opportunity in France, where we created Vortex I. We acquired a 49 per cent stake in a portfolio of wind assets operated by EDPR – one of the world’s largest owners and operators of wind power at the time. The investment amount was c.€170m, primarily funded by Abu Dhabi sovereign wealth funds.

A year later, we launched Vortex II, a €560m investment covering 664 MW of operating and under construction wind assets in Spain, Portugal, France, and Belgium. These investments were underpinned by long-term feed-in-tariffs and PPAs, generating double-digit internal rates of return (IRRs) in an environment of low interest rates. The rationale behind these investments was their robust electricity tariffs, yielding steady cash flows and stable regulatory frameworks.

For instance, Portugal at the time was sub-investment grade, but we anticipated a credit rating upgrade as part of the investment rationale. Spain was recovering from retroactive regulatory changes, but we saw value due to the quality of the operator and site-specific advantages.

By 2017, we launched Vortex III, focusing on solar assets in the UK under the Renewable Obligation Certificates (ROCs) scheme, which provided government-backed incentives. We acquired 24 operating and under construction solar assets outright from SunEdison, an operator which later was undergoing bankruptcy, enabling us to secure a competitive deal. This was a £500mn deal funded by Malaysian institutional investors and managed by our London-based asset management team.

Between 2019 and 2020, we exited Vortex I and II to JP Morgan Infrastructure and Vortex III to a Malaysian utility, achieving returns of 13-15 per cent IRR. This marked a successful phase of astute origination, financial engineering and operational optimisation, culminating in top quartile returns for our investors.

Vortex has undergone significant transformations. How did your strategy shift after 2020?

Post-2020, the global industry landscape changed. In response to this, we began taking on development risks and shifted toward investing in development platforms and companies versus projects and portfolios. This approach transformed us into a private equity-style investor, funding not only project development but also company growth.

We also noticed emerging trends such as decarbonisation, electrification of transport, and advancements in energy storage. This broadened our focus from renewable energy to the broader concept of energy transition, including e-mobility, battery storage, and hydrogen.

In response, we launched Vortex IV in 2021, an energy transition-focused fund and co-investment vehicle with $400m in AUM. It was backed by a wide range of investors, including Abu Dhabi SWFs, global asset managers, and European family offices. Since 2022, we’ve made two significant investments:

1-Ignis Energy: A renewable energy platform with +12 GW globally, with operations in Spain, Italy, UK, USA, Peru, and the Philippines. It covers solar and wind development, operations, energy management and green hydrogen.

2-EO Charging: A UK-based company specialising in EV charging for fleets and buses, serving clients like Amazon and DHL in UK and USA. This aligns with our focus on scalable and captive charging solutions.

Looking ahead, could you launch ‘Vortex V’? Added to this, are there any emerging trends you’re observing in the market?

While we haven’t officially labelled it Vortex V, we are exploring opportunities in data centres, particularly in Spain, leveraging synergies with Ignis’ renewable energy assets. Madrid is an emerging city in the digital space and strategically located data centres are increasingly sought after by hyperscalers such as Google and Amazon. We are fine tuning this investment programme at present.

We’re also planning an emerging markets climate fund targeting Central and Southeast Europe, Latin America, and Africa. This fund will focus on renewable energy, energy storage, hydrogen, and circular economy initiatives, addressing the global south’s growing demand for sustainable infrastructure. We have identified 2 early deals to seed this fund. We are excited about this initiative which follows the COP 28 recommendations.

How have government-backed incentives changed, and how does that impact your strategy?

Feed-in tariffs have largely been phased out. The current landscape revolves around private corporate power purchase agreements (PPAs) and government auctions. Corporate PPAs often offer higher returns, but declining renewable energy prices are challenging project economics in certain markets like Germany. As a result, we’re focusing on markets with greater growth potential, green power shortfall and supportive policies.

How does Vortex Energy differentiate itself from other financial investors in the sector?

Our unique selling proposition lies in our hybrid investment approach, combining private equity-style investing with infrastructure characteristics. We’re hands-on, focusing on a few portfolio companies to drive value through growth initiatives and cost optimisation.. Additionally, our Abu Dhabi presence ensures we continue our close collaboration with investors; reinforcing trust and alignment.

Lastly, what are the biggest challenges to achieving global net-zero targets, and how can Vortex Energy contribute to this transition?

Achieving net-zero requires, amongst other areas, scaling renewable energy capacity drastically, but this must be paired with structural changes to power markets. Low power prices, because of cannibalisation, for renewables can hinder development in certain countries. Energy efficiency is another key pillar – reducing losses, focusing on smart energy management and improving grid stability through AI and technology.