Pension fund can’t withdraw £10m from renewable energy group, experts say

Dyfed Pension Fund, a major public sector pension scheme, finds itself unable to retrieve a £10 million investment from a renewable energy company, experts have disclosed. The fund, with assets exceeding £3.4 billion, counts councils in Carmarthenshire, Pembrokeshire, and Ceredigion among its members. The fund’s committee was tasked with evaluating the possibility of divesting from an investment in Bute Energy Ltd, a parent company linked to a developer proposing to construct a contentious overhead power line through Carmarthenshire.

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The developer, Green GEN Cymru, aims to erect a 97km power line from Mid Wales along the Towy Valley to a grid substation south of Carmarthen. The proposal faces strong opposition from local landowners and residents who advocate for underground cable installation instead of overhead pylons. The committee also pondered whether the fund and its partners could engage with Bute Energy and Green GEN Cymru to advocate for a detailed assessment of burying the cables using cable-ploughing, a cost-effective and less disruptive technique.
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Reports presented to the committee stated that the Dyfed Pension Fund had invested £3.4 million of the pledged £10 million in a Bute Energy subsidiary, Bute Energy Development Holdings Ltd. This investment forms part of a £70 million commitment from several Welsh public sector pension funds to support onshore wind projects exclusively. Although Green GEN Cymru’s grid initiatives share a parent company with Bute Energy, they are considered distinct entities, with the grid projects excluded from the £70 million investment pool.

The report highlighted the absence of an exit mechanism for the £10 million contribution, implying full payment is necessary. Capital Dynamics, an energy asset manager, provided guidance during the investment process, conducting thorough due diligence encompassing legal, technical, financial, and reputational factors. The report’s oversight of the possibility of engaging with Bute Energy or Green GEN Cymru on cable-ploughing costs was noted.

The committee endorsed the report’s findings without deliberation, returning it to the initiating body – the Dyfed Pension Fund board, through an employer representative, Cllr Alun Lenny of Carmarthenshire Council’s cabinet member of resources. The situation underscores the intricacies involved in divesting public funds from high-stakes investments interlinked with controversial projects, necessitating a delicate balance between financial interests and community concerns.

The scrutiny faced by the Dyfed Pension Fund exemplifies the challenges inherent in managing investments tied to contentious developments and underscores the importance of aligning financial decisions with broader societal values and environmental considerations. The outcomes of such deliberations can have far-reaching consequences, impacting not only financial returns but also public perception and stakeholder relationships. As the debate continues over the future of the renewable energy group and the proposed power line, the need for transparency, accountability, and stakeholder engagement remains paramount to navigate complex investment landscapes effectively.