Powering Up Energy Transition with Vortex Energy

As the global shift towards a net-zero future accelerates, Vortex Energy is broadening its reach and scope to encompass a wider array of energy transition sectors and geographies. Established in 2014, the company has developed an impressive portfolio that includes wind, solar, electric vehicle charging, hydrogen, and battery operations worldwide, all while strategically expanding its assets under management.

In an interview, Bakr Abdel-Wahab, the Chief Investment Officer of Vortex Energy, shares insights into how the platform has solidified its position in the energy transition market and outlines future plans to include sustainable digital infrastructure investments.

About Vortex Energy

What are your key priorities for growth going forward?

Vortex Energy began with a focus on renewable energy investments in Europe, driven by two key factors: the need for energy security and diversification of energy sources, alongside the global commitment to achieving net-zero climate targets and adhering to EU green directives.

Initially, we launched with three funds that peaked at around €1.3 billion (approximately $1.4 billion) in assets under management (AUM). Our journey began by identifying an opportunity in France, leading to the establishment of Vortex I. We acquired a 49 percent stake in a portfolio of wind assets managed by EDPR, one of the largest wind power operators at the time, with an investment of approximately €170 million, primarily funded by Abu Dhabi sovereign wealth funds.

A year later, we launched Vortex II, a €560 million fund that covered 664 MW of operating and under-construction wind assets in Spain, Portugal, France, and Belgium. These investments were supported by long-term feed-in tariffs and power purchase agreements (PPAs), generating double-digit internal rates of return (IRRs) in a low-interest-rate environment. The rationale behind these investments was their robust electricity tariffs, which provided steady cash flows and stable regulatory frameworks.

For example, while Portugal was initially rated below investment grade, we anticipated a credit upgrade as part of our investment strategy. Similarly, although Spain was recovering from retroactive regulatory changes, we recognized value due to the quality of the operator and site-specific advantages.

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

Between 2019 and 2020, we successfully exited Vortex I and II to JP Morgan Infrastructure and Vortex III to a Malaysian utility, achieving returns of 13-15 percent IRR. This marked a successful phase characterized by astute origination, financial engineering, and operational optimization, ultimately delivering top-quartile returns for our investors.

Strategic Shifts Post-2020

How did your strategy shift after 2020?

Post-2020, the global industry landscape underwent significant changes. In response, we began to embrace development risks and shifted our investment focus from specific projects and portfolios to development platforms and companies. This evolution transformed us into a private equity-style investor, funding not only project development but also company growth.

We identified emerging trends such as decarbonization, electrification of transport, and advancements in energy storage. This led us to broaden our focus from renewable energy to encompass the entire energy transition landscape, including e-mobility, battery storage, and hydrogen.

In 2021, we launched Vortex IV, an energy transition-focused fund and co-investment vehicle with $400 million in AUM. It attracted a diverse range of investors, including Abu Dhabi sovereign wealth funds, global asset managers, and European family offices. Since 2022, we have made two significant investments:

• Ignis Energy: A renewable energy platform with over 12 GW of capacity globally, operating in Spain, Italy, the UK, the USA, Peru, and the Philippines. It focuses on solar and wind development, operations, energy management, and green hydrogen.

• EO Charging: A UK-based company specializing in EV charging for fleets and buses, serving clients such as Amazon and DHL in the UK and USA. This investment aligns with our focus on scalable and captive charging solutions.

Future Plans and Market Trends

Looking ahead, could you launch ‘Vortex V’? What emerging trends are you observing in the market?

While we haven’t officially named it Vortex V, we are actively exploring opportunities in data centers, particularly in Spain, leveraging synergies with Ignis’ renewable energy assets. Madrid is emerging as a significant player in the digital space, and strategically located data centers are increasingly in demand from hyperscalers like Google and Amazon. We are currently fine-tuning this investment program.

Additionally, we are planning an emerging markets climate fund targeting Central and Southeast Europe, Latin America, and Africa. This fund aims to focus on renewable energy, energy storage, hydrogen, and circular economy initiatives, addressing the growing demand for sustainable infrastructure in the Global South. We have already identified two early deals to seed this fund and are excited about this initiative, which aligns with COP 28 recommendations.

Government Incentives and Market Differentiation

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

Feed-in tariffs have largely been phased out, and the current market landscape is dominated by private corporate power purchase agreements (PPAs) and government auctions. Corporate PPAs often yield higher returns, but declining renewable energy prices present challenges for project economics in certain markets, such as Germany. Consequently, we are focusing on markets with greater growth potential, a 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, which combines private equity-style investing with infrastructure characteristics. We take a hands-on approach, concentrating on a select few portfolio companies to drive value through growth initiatives and cost optimization. Additionally, our presence in Abu Dhabi ensures close collaboration with our investors, reinforcing trust and alignment.

Challenges to Achieving Global Net-Zero Targets

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

Achieving net-zero targets requires a significant scaling of renewable energy capacity, paired with structural changes to power markets. Low power prices, often caused by cannibalization of renewables, can hinder development in various countries. Energy efficiency is another crucial element—reducing losses, emphasizing smart energy management, and enhancing grid stability through AI and technology are essential for success.

In 2021, we launched Vortex IV, an energy transition-focused fund and co-investment vehicle with $400 million in AUM, further solidifying our commitment to driving the energy transition.