PKA AIP / Årsrapport / Annual Report / 2014

M M X I V

A N N U A L

R E P O R T

—

2 0 1 4

P K A A I P

A N N UA L R E P O R T

2 0 1 4 — M M X I V

PKA AIP A/S

Rosenborggade 1B

DK-1130 Copenhagen

Denmark

pkaaip.dk

Regarding charts on pages

17, 18, 19, 24, and 26

all numbers are calculated

using a fixed exchange rate

at the day of the commitment

for each investment.

Where figures are shown

as DKK (USD), the USD figures

are calculated using a

fixed exchange rate of 650.00.

Where figures are shown

as DKK (EUR), the EUR figures

are calculated using a

fixed exchange rate of 745.00.

Graphic design Wy

Printing Stenby Tryk

C O N T E N T S

7P K A A I P I N 2 0 1 4

A N D G O I N G F O R WA R D

The year 2014 at a glance

2014 in review and outlook for 2015

1 1 A B O U T

P K A A I P

Background

Organization

1 5P R I VAT E

F U N D S

PKA AIP 1 status

PKA AIP 2 strategy

PKA’s aggregate portfolio

2 9D I R E C T

I N F R A S T R U C T U R E

PKA AIP Direct 2012-2014

PKA AIP Direct 2015-2017

3 7A G G R E G AT E C O M M I T M E N T

O V E R V I E W

4 4G LO S S A RY

Contents 5

Courtesy of Anholt Offshore Wind Farm, DONG Energy

6

PKA AIP in 2014 and going forward

P K A A I P I N 2 0 1 4 A N D G O I N G F O R WA R D

7

T H E Y E A R 2 0 1 4 AT A G L A N C E


7

4

1

6PKA AIP was responsible for investing approximately

DKK 4 billion in funds and co-investments,

as well as approximately DKK 3 billion in direct

infrastructure assets.

PKA AIP was responsible for making four new co-

investments along with selected infrastructure and

private equity managers.

PKA AIP was chosen to perform asset management of

the Gode Wind 2 asset on behalf of an equity consortium

consisting of four Danish pension funds.

PKA AIP assisted PKA in making six commitments to

private equity funds across different geographies and

industries.

D K K B I L L I O N

C O - I N V E S T M E N T S

2PKA AIP advised PKA on two new direct investments:

Gemini Offshore Wind Farm in Holland and Gode Wind 2

Offshore Wind Farm in Germany.

D I R E C T C O M M I T M E N T S

4PKA AIP strengthened its organization by adding four

highly-skilled professionals to the team.

N E W T E A M M E M B E R S A S S E T M A N A G E M E N T A G R E E M E N T

F U N D C O M M I T M E N T S

8

2 0 1 4 I N R E V I E W A N D O U T LO O K F O R 2 0 1 5

The year 2014 was an exciting year for PKA AIP,

characterized by strong team developments and a solid

investment pace.

During the year, PKA AIP was responsible for

investing in excess of DKK 7 billion (USD 1.1 billion)

– more than in any single prior year. Approximately

DKK 4 billion was committed to private funds and

co-investments, while DKK 3 billion was invested

into direct infrastructure assets. Today, PKA AIP has

approximately DKK 38 billion (USD 5.8 billion) under

management, of which approximately DKK 32 billion

are in exposure to private funds and co-investments

and approximately DKK 6 billion are invested in direct

infrastructure assets.

The year 2014 marked the third year of operation

since the establishment of PKA AIP in April 2012.

During this period, the team has evolved from three

dedicated investment professionals to a broad-based

team of nine employees by the end of 2014. During the

year, PKA AIP strengthened its organization by adding

four highly-skilled professionals to the team across the

areas of office management, finance, fund investment,

and direct asset management. In order to accommo-

date current and future team expansions, PKA AIP

moved into a new office in March 2014, located in

central Copenhagen.

P R I VAT E F U N D S

The year 2014 was the final year of the commitment

period for PKA AIP 1. It was also the year that our efforts

to increase the capital deployed in co-investments

started to show significant traction, with 21% of 2014’s

total commitments going into co-investments.

Today, a total of DKK 11.6 billion (USD 1.8

billion) has been committed to 24 funds and seven

co-investments in PKA AIP 1. The program consists of

managers from PKA’s legacy portfolio and a number of

new strong managers that we are very pleased to have

partnered with. The carefully chosen commitments,

collectively, represent a promising portfolio, which

we expect to perform strongly over the decade.

The four co-investments that were made during

2014 represent a significant step up in terms of

number and value relative to previous years. This has

been achieved through a structured effort to increase

awareness about PKA’s co-investment appetite and

through an improved co-investment process, which

has enabled us to become sufficiently flexible and

efficient to match the process requirements of our

partners.

In 2014, the strong fundraising environment

from 2013 continued with significant capital coming

into the market. This has supported very short

fundraisings for top tier managers and has made it

increasingly difficult to get significant allocations

with the best performing managers. From our

perspective, the strong fundraising environment

has tempted a number of managers, facing easy

fundraisings, to increase fund sizes excessively. While

time may prove them right, we are concerned with

the inherent style drift and potential impairment of

investment discipline.


The year 2014 was an exciting

year for PKA AIP,

characterized by strong team

developments and a

solid investment pace.

9


D I R E C T I N F R A S T R U C T U R E

In 2014, PKA AIP continued its strategy of investing in

essential infrastructure in geographies with reliable

regulation and via long-term partner models with

strong alignment.

In May 2014, PKA AIP advised PKA in its commit-

ment to the Gemini Offshore Wind Farm - a project

which was recently awarded “European Wind Deal

of the Year” by Infrastructure Journal. PKA invested

EUR 120 million in the subordinated debt tranche in a

process where banks and financial investors provided

a debt financing package totaling approximately EUR

2.2 billion.

In September 2014, PKA AIP closed the second

direct infrastructure transaction of the year when

an equity consortium of four Danish pension funds

acquired 50% of the Gode Wind 2 Offshore Wind

Farm in Germany. PKA AIP advised PKA as the lead

investor in the consortium and was subsequently

chosen to perform asset management on behalf of the

consortium. The agreement is the first of its kind to

extend beyond the role of advisor to PKA, as PKA AIP

will actively manage the Gode Wind 2 asset on behalf

of four investors in order to maximize the investment

value. In order to cater for this new assignment,

PKA AIP further strengthened its organization in

the beginning of 2015 by adding a dedicated asset

manager.

The year 2014 saw a surge of capital into the

European infrastructure market from traditional

fund investors and an increasing number of direct

investors, thus continuing the trend from the year

before. In many cases, this capital found its way into

large coveted assets with a perceived low risk. The

result – according to other market participants –

has been a decoupling of the market, whereby core

infrastructure assets on one side have become more

competitive, while more complex assets have seen

a structuring premium included in the expected

returns. At PKA AIP, market developments are closely

monitored, and there is a continuous focus on retaining

pricing discipline throughout the investment process.

O U T LO O K F O R 2 0 1 5

PKA AIP expects to continue assisting PKA – and poten-

tially other institutional investors – in their efforts to

strengthen the focus on alternative investments.

In 2015, PKA AIP expects to make commitments

to private funds and co-investments in the amount

of DKK 4 billion. Commitments will be given to

managers with strong performances in a combination

of existing and new relationships. Within the direct

infrastructure space, PKA AIP expects to advise on one

to two investments worth DKK 2-3 billion.

The current investment strategy will continue to

apply with a focus on essential infrastructure assets

in Northern Europe. To facilitate these ambitious

investment programs, PKA AIP will continue to build

and strengthen its team during the course of 2015.

In 2015, PKA AIP expects to

make commitments to private

funds and co-investments in

the amount of DKK 4 billion.

10

Om PKA AIPAbout PKA AIP

A B O U T P K A A I P

11

About PKA AIP

B A C K G R O U N D

Since 2012, PKA AIP has assisted PKA in the field of

alternative investments through private funds,

and direct commitments in energy, as well as infra-

structure assets.

PKA is an administrative company that manages

and develops labor market pensions on behalf of three

independent pension funds with a total of approx-

imately 260,000 members within the social welfare

and health care sectors in Denmark. The total capital

amounts to approximately DKK 200 billion.

PKA has been active within private fund in-

vestments and direct investments in energy and

infrastructure assets since the 1990s. PKA AIP was

established in April 2012, as PKA chose to spin off the

administration of its alternative investment activities

into a separate entity.

PKA AIP was established to hive off the man-

agement of these alternative investments into an

independent unit for the purpose of:

• Strengthening and professionalizing the selection

and management of alternative investments;

• Reducing the costs of alternative investments

through increased co-investing with funds, as

well as direct investing in selected energy and

infrastructure assets;

• Creating a framework for achieving premium

returns relative to investing in publicly listed

assets; and

• Creating greater transparency and meeting added

regulatory requirements applied to alternative

investments.

PKA AIP manages PKA’s investments in private

funds and co-investments, as well as PKA’s existing

portfolio – in total, 118 funds and co-investments. PKA

AIP also manages PKA’s direct investments in energy

and infrastructure assets, and hence manages four

existing offshore wind farm investments on behalf of

PKA.

PKA and PKA AIP recently concluded a manage-

ment agreement for 2015-2017, under which PKA AIP

is to advise on commitments totaling approximately

DKK 13 billion into private equity funds and co-in-

vestments, as well as approximately DKK 7-8 billion

directly into infrastructure assets.

Since 2012, PKA AIP has

assisted PKA in the field

of alternative investments

through private funds,

co-investments, and direct

commitments in energy, as

well as infrastructure assets.

12

About PKA AIP

O U R I N V E S TO R S

The State Registered Nurses and Medical Secretaries’ Pension Fund.

The Social Workers’, Social Pedagogues’ and Office Staff Pension Fund.

The Healthcare Professionals’ Pension Fund.

O U R I N V E S T M E N T M A N DAT E

PRIVATE FUNDS

PKA AIP 1: DKK 11.6 bn. (USD 1.8 bn.) invested in 2012-2014

across private equity, and infrastructure/energy

—

PKA AIP 2: DKK 13 bn. (USD 2 bn.) to be invested in

2015-2017 across private equity, and infrastructure/energy

—

Asset under management: DKK 31.5 bn. (USD 4.8 bn.)

managed across PKA AIP 1 and PKA’s

legacy portfolio

DIRECT INFRASTRUCTURE

PKA AIP Direct 2012-14: DKK 6.4 bn. (EUR 0.9 bn.)

invested in four offshore wind assets

—

PKA AIP Direct 2015-17: DKK 7-8 bn. (EUR 0.9-1.1 bn.)

to be invested in essential infrastructure assets

—

Asset management: Gode Wind 2 managed on behalf of

four Danish pension funds, and Gemini, Butendiek, and

Anholt managed on behalf of the three PKA pension funds

W H AT W E A R E H E R E TO A C H I E V E

Support the creation of a strong financial foundation for the retirement life of

pension savers by delivering the best possible risk-weighted returns

O U R A S P I R AT I O N F O R P K A A I P

Recognition as Nordic tier 1 alternative investment

partner based on results delivered

W H O W E A R E

Currently, a growing team of ten professionals with relevant and complementary

experience from management consulting, investment banking, and the industry

dedicated to achieve the overall purpose of PKA AIP

13

O R G A N I Z AT I O N

The current organization consists of ten employees

with mutually complementary experience from a

range of professional services, including management

consulting, investment banking and legal affairs, as

well as from industry.

A N D E R S DA L H O F F

Managing Partner

LL.M., Aarhus University and MBA, INSEAD

Formerly management consultant with Quartz+Co and

attorney-at-law with Kromann Reumert, and Plesner

—

B R I A N S C H L E I M A N N N O R D L U N D

Partner

M.Sc. in Finance and Accounting,

Copenhagen Business School

Formerly management consultant with Quartz+Co

—

J O H A N B E R N T N O R DA N G

Investment Director

M.Sc. in Economics, University of Copenhagen

Formerly held M&A positions with DONG Energy,

Macquarie Investment Bank, and Copenhagen Airports

—

C H R I S T I A N K V O R N I N G

Investment Director

M.Sc. in Finance and Accounting, Aarhus University

MBA, Rice University, Houston, TX

Formerly investment consultant with Cambridge

Associates in London

—

J A C O B L I S E LY N G S G A A R D

Senior Investment Manager

M.Sc. in Finance and Strategic Management

and CEMS MIM, Copenhagen Business School

Formerly held M&A and strategy positions with Dako,

Implement Consulting Group, and Macquarie

Investment Bank

U L R I K PA L L I S Ø B O R N Ø

Senior Investment Manager

M.Sc. in Applied Economics and Finance,

Copenhagen Business School

Formerly held M&A and investment positions with DONG

Energy, SEB Enskilda Corporate Finance, and Credit Suisse

Investment Bank

—

N I S H A N DA N G A N E S A L I N G A M

Investment Manager

M.Sc. in Software Development and Technology,

IT University of Copenhagen

Formerly consultant with EY and analyst with Nordea and SAS

—

M A R T I N V E R I N G DA L S A G E R

Asset Manager

M.Sc. in Finance, Aarhus University

Formerly held finance and M&A positions with DONG

Energy and Catella Corporate Finance

—

T R I N E L I S B E R G

Finance Manager

M.Sc. in Economics and Management, Aarhus University

Formerly held finance positions with Deloitte,

DONG Energy, and Trelleborg Sealing Solutions

—

H E L L E B R O N É E

Office Manager

Clerical training with the business travel industry

Formerly held personal assistant positions with

Folketeatret, Quartz+Co, PA Consulting Group, PwC,

Danisco, and Carlsberg

About PKA AIP14

Private funds

P R I VAT E F U N D S

15

Private funds

P K A A I P 1 S TAT U S

P R O G R A M R E V I E W

The PKA AIP 1 mandate of DKK 11.9 billion (USD

1.8 billion) has been deployed from 2012-2014. The

mandate covers commitments to private funds and co-

investments within two asset classes: private equity

and infrastructure/energy.

With the new commitments made during 2014,

total commitments in PKA AIP 1 reached DKK 11.6

billion. The program consists of 31 commitments of

which seven are co-investments. In terms of value, 10%

of the commitment has been given to co-investments.

For 2014 alone, co-investments made up 21% of the

committed value.

Of the total commitments, 68% has been

committed to private equity, followed by 17% to

energy, 11% to infrastructure and 4% to agriculture.

The majority of the commitments (53%) are with funds

focused on investing in the US and Canada, while 20%

are with European funds. 16% are invested in funds

with a global mandate, which include funds focusing

on emerging markets or US/EU strategies.

With the new commitments

made during 2014, total

commitments in PKA AIP 1

reached DKK 11.6 billion.

Courtesy of Peak 10, GI Partners Fund IV

16

Private funds

B R E A K D O W N O F C O M M I T M E N T S

BY A S S E T C L A S S

B R E A K D O W N O F C O M M I T M E N T S

BY I N V E S T M E N T F O C U S

4% Africa

16% Global

20% Europe

4% Australia

17% Energy

4% Agriculture

11% Infrastructure

4% Asia

68% Private Equity

53% US/Canada

17

Private funds

Out of the DKK 11.6 billion in commitments to PKA AIP

1, DKK 4.1 billon has been called corresponding to 34%

of the program and 35% of the actual commitments

given.

The total value of the program amounts to DKK

4.3 billion, of which DKK 4.0 billion is the current

market value, and DKK 0.3 billion has been distributed.

In total, this corresponds to a TVPI of 1.05.

While PKA AIP 1 is now fully committed, many of the

funds in the portfolio are still immature, and three

had not yet drawn their first capital as 2014 ended.

Although it is still too early to evaluate performance,

we are satisfied with the progress of the program and

note that with 35% of commitments already paid-in,

the investment pace is well above the market median

(benchmarked to the FoF index).

P K A A I P I N V E S T M E N T P R O G R A M

DKK billion

11.611.9

4.1 4.3

4.0

0.3

Paid-in capital

Commitments given

Programme

Distributed

Market value

Total value created

PIC0.35

TVPI1.05

18

Private funds

I N V E S T M E N T S I N 2 0 1 4

During the final commitment year of PKA AIP 1, six

new fund commitments and four co-investments

were made by PKA within the mandate. In total,

commitments worth DKK 3.8 billion were made

during 2014, including a commitment extension to

Trackmanager (DKK 0.1 billion).

N E W C O M M I T M E N T S M A D E I N P K A A I P D U R I N G 2 0 1 4

DKK million

382H.I.G. Middle Market LBO Fund II

721HGGC Fund II

442Comvest Partner V

166Star West Generation

89PPC Industries

550GI Partners Fund IV

441Abraaj Africa Fund III

516Exponent Fund III

95EV Offshore Limited

299SSI

Funds Co-investments

19

F U N D C O M M I T M E N T S

Of the six new fund commitments, three commit-

ments were given to existing relationships, i.e. H.I.G.

(Middle Market Fund II), Abraaj (Africa Fund III), and

Comvest (Comvest Partners V). The three remaining

commitments were given to the following new

managers:

Exponent

In December 2014, PKA made a GBP 55 million

commitment to Exponent III. Exponent is a UK-based

and UK-focused manager. The team targets companies

that have strong market positions, but in one way or

other are constrained in reaching their full potential.

GI Partners

GI Partners is a US-based private equity firm operating

in the middle market. Part of their strategy is to target

deep value investments with limited downside, while

at the same time aiming for significant value creation

through strategic and operational levers. PKA has

committed USD 100 million to Fund IV.

HGGC

HGGC operates in the US middle market and typically

targets companies with an enterprise value between

USD 100-500 million. HGGC works on creating value

by sourcing via its extensive network and by working

closely with management in investments, where

the previous owner typically roll over part of their

ownership. PKA has committed USD 125 million to the

team’s second fund.

Private funds20


PKA committed to four co-investments during 2014.

The commitments, which include both the initial

funding and capital set-aside for future add-ons

and expansions, correspond to 21% of the total

commitments to private funds during 2014.

EV Offshore

EV Offshore designs and develops cameras for the

oil and gas industry in the UK and internationally.

EV uses well-known technologies and applies them

in the oil and gas industry with its own down-hole

video technology. With the use of in-house research

and engineering capabilities, EV designs camera

systems to work 10,000 meters below the surface in

environments up to 175° C and 15,000 psi in all areas

of the world. PKA committed GBP 10.0 million in

November 2014 alongside Dunedin Fund III.

PPC Industries

PPC Industries is a leading extruder and converter

of polyethylene bags, films, and tubing for food

and industrial packaging applications. PPC is a

manufacturer, which includes extrusion, converting,

and printing processes. PPC has two main facilities in

the US and Costa Rica. PKA committed USD 15 million

in November 2014 along with Kohlberg Fund VII.

SSI

SSI is a global provider of technology enabled data

collection services and survey research. The customer

base includes market research firms, consulting

firms, and end-clients including corporate users. The

company has 25 offices across 18 countries. PKA co-

invested in SSI shortly after the commitment to HGGC

Fund II.

Star West Generation

Star West Generation (SWG) is a 1.7 GW portfolio,

consisting of five gas-fired power generation plants

located in Arizona and California, which operate

within the Arizona, New Mexico, Southern Nevada,

and Southern California power markets. PKA

committed USD 30 million to SWG in February 2014

along with Highstar Capital Fund IV.

Private funds

Courtesy of Green Team Group, Adelis Equity Partners Fund I

21

P K A A I P 2 S T R AT E G Y

I N V E S T M E N T F O C U S

As the commitment period of PKA AIP 1 ended on

December 31, 2014, the new mandate, PKA AIP 2, came

into existence on January 1, 2015. The commitment

target for PKA AIP 2 will be approximately DKK 13

billion (USD 2 billion) over the next three years. PKA

AIP 2 will continue the strategy of PKA AIP 1. As the

portfolio of PKA AIP 2 starts to build, we expect to see

a continued concentration of managers as our ticket

sizes are expected to increase (USD 75-125 million

sweet spot). Furthermore, we expect to see very

limited reliance on fund-of-funds.

The primary focus of the program is North

America and Europe, but will also include commit-

ments to global mandates and potentially local/

regional funds outside of North America and Europe.

To ensure alignment of interests, PKA AIP will

mainly invest through independent managers with

a single or a few investment products. This helps to

ensure that investors commit to a product, which is

essential for the manager’s future success.

PKA aims to increase the amount of co-

investments with managers that PKA has already

committed to, and in which PKA AIP already has

in-depth knowledge of the team, the strategy, and its

value-creation processes.

Co-investments offer an opportunity to cost-

efficiently increase participation in investments that

PKA is already part of. Typically, PKA invests USD 15-

50 million in any single co-investment. During 2014,

we have worked to improve our investment process

to ensure that we continue to be an attractive co-

investment partner.

The commitment target

for PKA AIP 2 will be

approximately DKK 13 billion

(USD 2 billion) over the next

three years.

Private funds


22

P R I VAT E E Q U I T Y

Commitments to new managers in PKA AIP 2 will

generally be given to mid-sized funds with total

commitments of USD 0.5-2.0 billion for the purpose

of: (i) achieving a professional, institutional product

without undue reliance on specific individuals; and

(ii) enabling PKA to invest at least DKK 400 million

per fund. In many cases, companies targeted by funds

in this segment are of a size, which is suitable for

expansion during the ownership period to make them

attractive targets of strategic acquisitions by major

competitors. Also, with this, a strong preference for

funds taking controlling interests exists.

PKA invests in private equity funds with a

proven, strong track record and a realized return

outperforming both competing funds and listed

companies.

It is essential that the funds can demonstrate

a controllable and repeatable ability to create value

by optimizing the portfolio companies and creating

growth.

I N F R A S T R U C T U R E

A N D E N E R G Y

The investment strategy for infrastructure and energy

funds will typically target funds larger than USD 500

million.

The funds must have one or more strategic and

operational value creation angles to their invest-

ments so as to generate an attractive return. It is also

essential that the strategy builds on initiatives that are

controllable and can be reproduced in future.

Private funds 23

P K A’ S A G G R E G AT E P O R T F O L I O

P O R T F O L I O S TAT U S

At the end of 2014, PKA’s total commitments to private

funds amounted to DKK 33.2 billion (USD 5.1 billion)

measured at actual exchange rates. This represents

an increase of DKK 5.0 billion from December 2013

– of this, DKK 4.0 billion represents actual change in

new commitments and terminated funds, while the

remainder of approximately DKK 1.0 billion is the

result of currency fluctuations impacting the DKK-

measured market value and outstanding commitments

of particular USD denominated funds.

D E V E LO P M E N T I N P K A' S TOTA L C O M M I T M E N T

DKK billion

D E V E LO P M E N T I N P K A' S E X P O S U R E

DKK billion

2010 20122009 2011 2013

15.7 17.720.1

24.328.2

33.2

2014

2010 20122009 2011 2013

8.011.8 12.4 14.2 15.7

6.4

6.4 7.19.2

10.2

14.3

18.219.5

23.4

25.9

2014

19.3

12.2

31.5

Remaining commitments Market value

Private funds24

Private funds

The total exposure of the portfolio amounted to

DKK 31.5 billion (USD 4.8 billion) – up DKK 5.6 billion

since last year. Of the total exposure, DKK 19.3 billion

(USD 3.0 billion) was the market value of the invest-

ments, while DKK 12.2 billion (USD 1.9 billion) were

the outstanding commitments. Of the total market

value, 53% is attributed to private equity, and 49% are

with funds or co-investments focused on the US.


25

Private funds

B R E A K D O W N O F M A R K E T VA L U E

BY A S S E T C L A S S

B R E A K D O W N O F M A R K E T VA L U E

BY I N V E S T M E N T F O C U S

3% Latin America

6% Asia

19% Global

19% Europe

20% Timber

2% Australia

13% Infrastructure

3% Agriculture

12% Energy

2% Africa

53% Private Equity

49% US/Canada

26

Private funds

During the year, PKA paid in DKK 3.3 billion

(USD 0.5 billion) and received DKK 2.7 billion (USD

0.4 billion) in distributions representing a net cash

outflow DKK 0.6 billion. The market value in the same

period increased by DKK 3.6 billion from 15.7 billion

(USD 2.4 billion) to 19.3 billion (USD 3.0 billion). The

total value creation over the year was DKK 3.0 billion.

In terms of IRR, this corresponds to a 19.4% IRR for

2014 as a whole. Netting out the currency effect, the

return of the portfolio was 9.1% in 2014. Across the full

life of the portfolio, the return has been 8.1% across

very different risk/return propositions.

The total portfolio returns were aggregated

across all five asset classes. In 2014, the one-year

return on private equity was 20.9%, measured at

actual exchange rates and 12.6% at fixed rates. The

lifetime return of private equity was 10.3% and 9.7%,

excluding the impact of currency fluctuations.

In 2014, the one-year return

on private equity was 20.9%,

measured at actual exchange

rates and 12.6% at fixed

rates. The lifetime return of

private equity was 10.5% and

9.7%, excluding the impact of

currency fluctuations.


27

Private funds


28

Direct infrastructure

D I R E C T I N F R A S T R U C T U R E

29


P K A A I P D I R E C T 2 0 1 2 - 2 0 1 4

P R O G R A M R E V I E W

The PKA AIP Direct 2012-2014 program covers the

direct energy and infrastructure investments made

by PKA until the end of 2014.

Since PKA’s investment in Anholt Offshore

Wind Farm in 2011, PKA has steadily increased its

direct investment focus on long-life assets with stable,

predictable income. Allocations to infrastructure

have allowed PKA to provide its members with solid

and attractive yields in the current low interest rate

environment.

During the mandate period 2012-2014, PKA

AIP has added three offshore wind investments to

PKA’s portfolio, making for a total of four offshore

wind farms. The portfolio is well diversified across

different wind capture areas and subsidy regimes,

and all assets use state-of-the-art components in order

to maximize production yield.


30


Anholt

2013

Siemens 3.6 MW-120

Monopile

DONG Energy

Butendiek

2015

Siemens 3.6 MW-120

Monopile

Multi contract

Gode Wind 2

2016

Siemens 6.0 MW-154

Monopile

DONG Energy

Gemini

2017

Siemens 4.0 MW-130

Monopile

Siemens / Van Oord

Asset

Commercial Operation Date

Wind Turbine Generator

Foundation structure

Main contractor(s)

P O R T F O L I O O F D I R E C T I N F R A S T R U C T U R E I N V E S T M E N T S

C O M M I T M E N T S TO D I R E C T I N F R A S T R U C T U R E 2 0 1 2 - 2 0 1 4

EUR million

338

846

2011Anholt

2012—

2013Butendiek

2014 Gemini / Gode Wind 2

Total

120 288

100

As of December 31, 2014, PKA’s direct

commitments to energy and infrastructure

assets totaled approximately EUR 850 million,

split across PKA’s four offshore wind assets.

31


I N V E S T M E N T S

During 2014, PKA made commitments to two direct

infrastructure assets: the Gemini Offshore Wind Farm

in Holland and the Gode Wind 2 Offshore Wind Farm

in Germany. Along with Butendiek Offshore Wind

Farm and Anholt Offshore Wind Farm, PKA now holds

interests in four offshore wind assets.

G O D E W I N D 2

O F F S H O R E W I N D FA R M

Asset overview

PKA invested in its second German offshore wind

project, Gode Wind 2, in September of 2014. Gode

Wind 2 is located in the North Sea, approximately

45 km from the German coastline, and will consist

of 42 turbines when completed in the spring of

2016. The project will benefit from the latest wind

turbine technology available in the market with the

6 MW turbine from Siemens Wind Power – giving

a total nameplate capacity of 252 MW. The turbines

are equipped with the latest gearless solution – the

direct drive technology and rotors with a span of 154

meters in diameter. Gode Wind 2 is expected to supply

CO2-free electricity corresponding to the annual

consumption of some 260,000 German households.

The wind farm will have its operational base in

the harbor town of Norddeich. Gode Wind 2 is the first

of two phases and will be the neighbor of Gode Wind 1,

once this project is completed in 2016.

Investment characteristics

The institutional investor consortium consisting of

PKA, Industriens Pension, Lægernes Pensionskasse,

and Lærernes Pension invested EUR 582 million for

a 50% stake in Gode Wind 2. DONG Energy holds the

remaining 50% ownership stake. DONG Energy is

acting as the turn-key contractor of the project and

takes the full construction risk for the project. The

investor consortium has also engaged DONG Energy

as the operator and service provider for the first 15

years of operation. DONG Energy is currently a market

leader in offshore wind projects and has a long, proven

track record from several German, UK, and Danish

projects. Gode Wind 2 benefits from a strong wind

regime, which combined with a government-backed

fixed price subsidy for approximately the first 10

years, will generate a stable, high cash flow.

PKA AIP has been engaged to lead and perform

active asset management for the investor consortium

of the Gode Wind 2 project throughout the construction

phase and will continue when the asset is operational.

During 2014, PKA made

commitments to two direct

infrastructure assets: the

Gemini Offshore Wind Farm

in Holland and the Gode

Wind 2 Offshore Wind Farm

in Germany.

32

Asset progress in 2014

The planning and construction of Gode Wind 2 has

reached several important milestones during 2014. The

project has secured the necessary permits and signed

all major supplier contracts. Furthermore, fabrication

of many of the wind farm’s major components is

progressing as planned. The project also has a binding

agreement with the local grid operator – Tennet – to

deliver the necessary infrastructure in order to deliver

electricity from the wind farm to the shore. During

2014, the project’s main offshore converter platform is

close to completion, and fabrication of foundations has

started and is following the planned schedule. Finally,

the site has been completely cleared from all identified

underwater objects which will allow the installation

of cables and foundations.

In 2015, the project will commence the large

offshore installation activities; initially, with the

installation of foundations and thereafter, with

the array cables, offshore substation, and the park

will finally be completed with the installation and

commissioning of the wind turbines.

G E M I N I


Asset overview

PKA entered into the financing consortium of the off-

shore wind project Gemini in May of 2014. With 150

Siemens 4.0 MW turbines, the Gemini Offshore Wind

Farm will be one of the largest wind farms in the world

in terms of size and production. The site is located in

the Dutch part of the North Sea, 85 km north of the

coast of Groningen and benefits from a strong wind

resource. Once completed in 2017, the wind farm will

supply CO2-free electricity corresponding to the an-

nual consumption of some 785,000 Dutch households.

The developer of the project is Typhoon Offshore,

who has contracted Van Oord and Siemens Wind Pow-

er on turn-key contracts for delivering the balance

of plant and turbines for the wind farm. The project

has also engaged Siemens as the operator and service

provider for the first 15 years of operation. Gemini

is owned by Northland Power Income Fund (60%),

Siemens (20%), Van Oord (10.0%), and HVG (10.0%).


PKA joined, along with a number of banks and financial

investors, a financing consortium, which has provided

a total debt financing facility of approximately EUR

2.2 billion to the Gemini project.

PKA has provided a junior debt facility of EUR

120 million. The facility has a tenor of approximately

17 years and will provide a high, secure coupon rate

in this period due to the revenue stream coming

principally from the government-backed subsidy

system for the first 15 years. Aside from PKA,

Northland Power Income Fund has provided a junior

debt facility of EUR 80 million. A number of financial

institutions have provided the senior debt facility,

including the European Investment Bank, EKF, Euler

Hermes, and Delcredere|Ducroire.


The Gemini project saw good progress in 2014. Fabri-

cation of key components is well underway, including

fabrication of the land cable, foundations, topsides for

both offshore substations, export cables, and other

electrical components. Furthermore, the project com-

menced the horizontal drillings for the export cable.

The project expects the commercial operation of

all turbines by 2017.

B U T E N D I E K


Asset overview

PKA invested in the Butendiek Offshore Wind Farm

in 2013. Butendiek Offshore Wind Farm is located in

the North Sea on the German-Danish border, 32 km

off the island of Sylt. The wind farm will consist of 80

Siemens 3.6 MW turbines resulting in a total capacity

of 288 MW.

The wind farm is being built by the German

developer, WPD, and a number of subcontractors

during the period 2013-2015. Once in full operation,

the wind farm is expected to produce CO2-free energy

to cover the annual consumption of 370,000 households

for 25 years.

Direct infrastructure 33



PKA invested approximately EUR 100 million in equity

for a 22.5% ownership interest. Co-investors Siemens

Financial Services, Marguerite Infrastructure Fund,

and Industriens Pension also acquired a 22.5% interest

each. WPD, the project developer, holds the remaining

10.0%. The total equity investment amounts to EUR

450 million. In addition to the equity investments, the

project has obtained external project financing from

commercial banks and various credit institutions,

including EKF, the Danish export credit agency.

External financing amounts to EUR 850 million for

total construction costs of approximately EUR 1.3

billion.

Butendiek is PKA’s first investment involving

external project financing. This is also the first time

PKA has assumed a construction risk in its direct

infrastructure investment program. The project is

expected to have an attractive, balanced risk/return

profile – in part due to the comprehensive insurance

package and guarantees, which addresses a number of

the construction risks. Due to the production profile

and the fixed tariff during the subsidy period, the

return is expected to have low correlation with the

general market.


The construction of the wind farm has shown

significant progress throughout the year with only

a minor delay to some of the components. Highlights

have been the full installation of all 80 foundations

and transition pieces, the installation of the offshore

substation, and completion of all the inner-array

cables. The installation of the wind turbine generators

has been slightly behind schedule, which was also the

case with the external grid provided by Tennet.

The first power was produced in February 2015,

and the park is expected to be in full operation by July

2015.

A N H O LT


Asset overview

PKA invested in the Anholt Offshore Wind Farm

in 2011. Located between Jutland and the island of

Anholt, this is Denmark’s largest offshore wind farm.

It has a nameplate capacity of 400 MW and consists of

111 3.6 MW turbines.

The wind farm was built during 2012 and 2013.

It is expected to supply CO2-free power corresponding

to the annual consumption of some 400,000 Danish

households, equal to about 4.0% of Denmark’s power

consumption. DONG Energy developed the project and

currently operates the wind farm.


PKA invested EUR 338 million in return for a 20%

interest in the overall project. Other investors in the

project are PensionDanmark (30%) and DONG Energy

(50%). There is no external project financing.

The project has a scheduled duration of up to 25

years and is expected to generate stable annual returns

throughout that period. Due to the production profile

and the fixed tariffs during the subsidy period, the

investment return is expected to have low correlation

with the general market.


The construction of Anholt Offshore Wind Farm took

place from 2011-2013, and since the middle of 2013,

the asset has been in full commercial operation. The

asset concluded its first full year of operation in 2014.

For the year as a whole, asset output was firmly above

expectations owing to solid average wind speeds and

strong wind farm availability.

On September 30, 2014, a failure occurred on the

export cable managed by Energinet.dk. The failure

was quickly located, and the grid connection was

reestablished on October 6, 2014. Anholt Offshore Wind

Farm has been compensated for direct production

losses during the period where no grid was available.

34

P K A A I P D I R E C T 2 0 1 5 - 2 0 1 7

I N V E S T M E N T

F O C U S

From 2015 to 2017, PKA AIP will continue to pursue

direct infrastructure opportunities on behalf of

PKA. The focus is unchanged from 2012-2014 and

will, therefore, be centered on proactively pursuing

investments in large infrastructure projects in long-

term partnership models in the UK and Northern

Europe, in greenfield and brownfield assets.

The common denominator for direct investments

pursued by PKA AIP is that the underlying assets are

subject to material downside protection through i.a.,

an economic regulation mechanism or through long-

term contracts with solid counterparts. Downside

scenarios with low absolute risk levels and low

market correlation, in particular, are prerequisites

for investments in the direct infrastructure program.

PKA’s current offshore wind portfolio fulfill these

criteria as fixed off take prices are agreed with

governments for the first 10 to 15 years on all assets,

for example, hence providing owners with good

visibility on cash flows in the payback horizon.

Given the overall investment strategy, PKA AIP has

set a number of investment screening criteria, which

promote an efficient investment selection:

• Cash profile: Long maturity cash f lows with a

significant fixed cash component

• Ticket size EUR 100-300 million per investment and

enterprise value from EUR 250 million

• Geography: Northern Europe and the UK

• Capital: Equity, mezzanine, subordinated debt, or

senior debt

• Partnership model with strong alignment and

operational skills present

• Costs: Low deployment costs per invested capital

unit and low monitoring costs



35


E X P E C T E D C O M M I T M E N T S TO D I R E C T I N F R A S T R U C T U R E 2 0 1 5 - 2 0 1 7

EUR million

1.000

2015

2016

2017

Total

333

333

333

PKA AIP seeks investments in projects with like-

minded investors and prefers consortia with strong

operational partners, who are aligned in the financial

performance of the project.

Typically, PKA targets a 20-49% shareholding,

and will not take a lead ownership role in the invest-

ment, which is instead handled by a significant co-

owner with strong operational skills and involvement.

Although offshore wind has been the sole invest-

ment theme during 2012-2014, the 2015-2017 mandate

will likely include additional essential infrastruc-

ture assets with similar cash flow characteristics and

downside protection.

As part of the newly concluded management

agreement covering 2015-2017, PKA AIP expects to

advise PKA on investments of approximately EUR

300-350 million per year directly into energy and

infrastructure assets. By the end of 2017, PKA is

expected to hold approximately EUR 1.85 billion of

energy and infrastructure assets.

As part of the newly concluded management

agreement covering 2015-2017, PKA AIP

expects to advise PKA on investments

of approximately EUR 300-350 million per year

directly into energy and infrastructure assets.

36

Aggregate commitment overview

A G G R E G AT E C O M M I T M E N T O V E R V I E W

37


Fund Manager Vintage Currency PKA commitment Fund size Investment Type Asset class

Abraaj Africa Fund III Abraaj Group 2015 USD 75,000,000 990,000,000 Fund Private Equity

Actis Emerging Markets 3 Actis 2008 USD 50,000,000 1,614,100,000 Fund Private Equity

Actis Energy 3 Actis 2013 USD 50,000,000 1,148,000,000 Fund Energy

Actis Energy 3 - Co-investment vehicle Actis 2013 USD 50,000,000 164,250,000 Fund Energy

Adelis Equity Partners Fund I Adelis Equity Partners 2013 SEK 380,000,000 3,724,100,000 Fund Private Equity

Amber Trust II Danske Capital Finland 2005 EUR 15,000,000 146,700,000 Fund Private Equity

Antin Infrastructure Partners Antin Infrastructure Partners 2008 EUR 50,000,000 1,105,000,000 Fund Infrastructure

Antin Infrastructure Partners Fund II Antin Infrastructure Partners 2013 EUR 75,000,000 2,000,000,000 Fund Infrastructure

Arsenal Capital Partners II Arsenal Capital Partners 2006 USD 20,000,000 500,000,000 Fund Private Equity

Arsenal Capital Partners III Arsenal Capital Partners 2012 USD 75,000,000 875,000,000 Fund Private Equity

Audax Private Equity Fund IV Audax Group 2013 USD 75,000,000 1,250,000,000 Fund Private Equity

Aureos Africa Fund Abraaj Group 2008 USD 30,000,000 381,111,111 Fund Private Equity

Axcel I Axcel 1993 DKK 157,142,857 1,100,000,000 Fund Private Equity

Axcel II Axcel 2001 DKK 188,485,805 2,390,000,000 Fund Private Equity

Axcel III Axcel 2006 DKK 200,000,000 3,016,666,667 Fund Private Equity

Axcel IV Axcel 2011 DKK 250,000,000 3,632,189,874 Fund Private Equity

Axiom Asia Private Capital III Axiom Asia Private Capital 2012 USD 75,000,000 1,161,500,000 FoF - primary Private Equity

Brookfield Brazil Timber Fund I (A) Brookfield Asset Management 2008 USD 22,500,000 280,000,000 Fund Timber

Brookfield Brazil Timber Fund I (B) Brookfield Asset Management 2008 USD 22,500,000 280,000,000 Fund Timber

Campbell Opportunity Timber Fund Campbell Global LLC 2008 USD 40,000,000 1,774,100,000 Fund Timber

Campbell Timber Fund II Campbell Global LLC 2007 USD 31,555,412 405,500,000 Fund Timber

Capricorn Forest Fund IWC (The International Woodland Company A/S) 2007 USD 37,371,015 209,647,000 Fund Timber

Care Capital Investments III Care Capital 2006 USD 30,000,000 300,000,000 Fund Private Equity

Comvest Partners IV Comvest Partners 2010 USD 50,000,000 582,064,000 Fund Private Equity

Comvest Partners V Comvest Partners 2015 USD 75,000,000 N/A Fund Private Equity

Cross Atlantic Partners IV Cross Atlantic Partners 2001 USD 6,000,000 48,101,012 Fund Private Equity

Danish Climate Investment Fund I IFU 2014 DKK 200,000,000 1,290,000,000 Fund Energy

Danish Microfinance Partners Maj Invest 2011 DKK 200,000,000 401,300,000 Fund Private Equity

Dansk Vækstkapital Vækstfonden 2013 DKK 75,000,000 4,786,800,000 FoF - primary Private Equity

Danske PE Partners II EUR Danske Private Equity Partners 2002 EUR 32,633,308 249,875,390 FoF - primary Private Equity

Danske PE Partners II USD Danske Private Equity Partners 2002 USD 29,325,618 224,571,859 FoF - primary Private Equity

Danske PE Partners III EUR Danske Private Equity Partners 2006 EUR 60,200,000 228,989,571 FoF - primary Private Equity

Danske PE Partners III USD Danske Private Equity Partners 2006 USD 73,700,000 270,139,947 FoF - primary Private Equity

Danske PE Partners IV EUR Danske Private Equity Partners 2009 EUR 43,500,000 159,100,000 FoF - primary Private Equity

Danske PE Partners IV USD Danske Private Equity Partners 2009 USD 69,596,300 211,646,300 FoF - primary Private Equity

Danske PE Partners V EUR Danske Private Equity Partners 2012 EUR 50,806,039 216,736,755 FoF - primary Private Equity

Danske PE Partners V USD Danske Private Equity Partners 2012 USD 70,584,332 342,769,384 FoF - primary Private Equity

Drug Royalty Fund III DRI Capital 2013 USD 75,000,000 1,446,195,000 Fund Private Equity

Dunedin Buyout Fund III Dunedin LLP 2013 GBP 35,000,000 306,000,000 Fund Private Equity

Eastern Timberland Resources Timberland Investment Resources LLC 2008 USD 29,338,313 112,854,710 Fund Timber

Edradour BTG Pactual Timberland Merchant Banking 2006 USD 20,450,000 86,800,000 Fund Timber

Energy Capital Partners I Energy Capital Partners 2006 USD 50,000,000 2,250,000,000 Fund Energy

Energy Capital Partners II Energy Capital Partners 2009 USD 75,000,000 4,335,000,000 Fund Energy

EQT VI EQT Partners 2011 EUR 50,000,000 4,815,312,000 Fund Private Equity

European Clean Energy Fund EIG Global Energy 2006 EUR 40,000,000 354,229,500 Fund Energy

Exponent Fund III Exponent Private Equity 2015 GBP 55,000,000 N/A Fund Private Equity

GI Partners Fund IV GI Partners 2014 USD 100,000,000 2,000,000,000 Fund Private Equity

Global Timber Investors VII Global Forest Partners 2004 USD 25,000,000 300,475,000 Fund Timber

F U N D S

38



Abraaj Africa Fund III Abraaj Group 2015 USD 75,000,000 990,000,000 Fund Private Equity

Actis Emerging Markets 3 Actis 2008 USD 50,000,000 1,614,100,000 Fund Private Equity

Actis Energy 3 Actis 2013 USD 50,000,000 1,148,000,000 Fund Energy

Actis Energy 3 - Co-investment vehicle Actis 2013 USD 50,000,000 164,250,000 Fund Energy

Adelis Equity Partners Fund I Adelis Equity Partners 2013 SEK 380,000,000 3,724,100,000 Fund Private Equity

Amber Trust II Danske Capital Finland 2005 EUR 15,000,000 146,700,000 Fund Private Equity

Antin Infrastructure Partners Antin Infrastructure Partners 2008 EUR 50,000,000 1,105,000,000 Fund Infrastructure

Antin Infrastructure Partners Fund II Antin Infrastructure Partners 2013 EUR 75,000,000 2,000,000,000 Fund Infrastructure

Arsenal Capital Partners II Arsenal Capital Partners 2006 USD 20,000,000 500,000,000 Fund Private Equity

Arsenal Capital Partners III Arsenal Capital Partners 2012 USD 75,000,000 875,000,000 Fund Private Equity

Audax Private Equity Fund IV Audax Group 2013 USD 75,000,000 1,250,000,000 Fund Private Equity

Aureos Africa Fund Abraaj Group 2008 USD 30,000,000 381,111,111 Fund Private Equity

Axcel I Axcel 1993 DKK 157,142,857 1,100,000,000 Fund Private Equity

Axcel II Axcel 2001 DKK 188,485,805 2,390,000,000 Fund Private Equity

Axcel III Axcel 2006 DKK 200,000,000 3,016,666,667 Fund Private Equity

Axcel IV Axcel 2011 DKK 250,000,000 3,632,189,874 Fund Private Equity

Axiom Asia Private Capital III Axiom Asia Private Capital 2012 USD 75,000,000 1,161,500,000 FoF - primary Private Equity

Brookfield Brazil Timber Fund I (A) Brookfield Asset Management 2008 USD 22,500,000 280,000,000 Fund Timber

Brookfield Brazil Timber Fund I (B) Brookfield Asset Management 2008 USD 22,500,000 280,000,000 Fund Timber

Campbell Opportunity Timber Fund Campbell Global LLC 2008 USD 40,000,000 1,774,100,000 Fund Timber

Campbell Timber Fund II Campbell Global LLC 2007 USD 31,555,412 405,500,000 Fund Timber

Capricorn Forest Fund IWC (The International Woodland Company A/S) 2007 USD 37,371,015 209,647,000 Fund Timber

Care Capital Investments III Care Capital 2006 USD 30,000,000 300,000,000 Fund Private Equity

Comvest Partners IV Comvest Partners 2010 USD 50,000,000 582,064,000 Fund Private Equity

Comvest Partners V Comvest Partners 2015 USD 75,000,000 N/A Fund Private Equity

Cross Atlantic Partners IV Cross Atlantic Partners 2001 USD 6,000,000 48,101,012 Fund Private Equity

Danish Climate Investment Fund I IFU 2014 DKK 200,000,000 1,290,000,000 Fund Energy

Danish Microfinance Partners Maj Invest 2011 DKK 200,000,000 401,300,000 Fund Private Equity

Dansk Vækstkapital Vækstfonden 2013 DKK 75,000,000 4,786,800,000 FoF - primary Private Equity

Danske PE Partners II EUR Danske Private Equity Partners 2002 EUR 32,633,308 249,875,390 FoF - primary Private Equity

Danske PE Partners II USD Danske Private Equity Partners 2002 USD 29,325,618 224,571,859 FoF - primary Private Equity

Danske PE Partners III EUR Danske Private Equity Partners 2006 EUR 60,200,000 228,989,571 FoF - primary Private Equity

Danske PE Partners III USD Danske Private Equity Partners 2006 USD 73,700,000 270,139,947 FoF - primary Private Equity

Danske PE Partners IV EUR Danske Private Equity Partners 2009 EUR 43,500,000 159,100,000 FoF - primary Private Equity

Danske PE Partners IV USD Danske Private Equity Partners 2009 USD 69,596,300 211,646,300 FoF - primary Private Equity

Danske PE Partners V EUR Danske Private Equity Partners 2012 EUR 50,806,039 216,736,755 FoF - primary Private Equity

Danske PE Partners V USD Danske Private Equity Partners 2012 USD 70,584,332 342,769,384 FoF - primary Private Equity

Drug Royalty Fund III DRI Capital 2013 USD 75,000,000 1,446,195,000 Fund Private Equity

Dunedin Buyout Fund III Dunedin LLP 2013 GBP 35,000,000 306,000,000 Fund Private Equity

Eastern Timberland Resources Timberland Investment Resources LLC 2008 USD 29,338,313 112,854,710 Fund Timber

Edradour BTG Pactual Timberland Merchant Banking 2006 USD 20,450,000 86,800,000 Fund Timber

Energy Capital Partners I Energy Capital Partners 2006 USD 50,000,000 2,250,000,000 Fund Energy

Energy Capital Partners II Energy Capital Partners 2009 USD 75,000,000 4,335,000,000 Fund Energy

EQT VI EQT Partners 2011 EUR 50,000,000 4,815,312,000 Fund Private Equity

European Clean Energy Fund EIG Global Energy 2006 EUR 40,000,000 354,229,500 Fund Energy

Exponent Fund III Exponent Private Equity 2015 GBP 55,000,000 N/A Fund Private Equity

GI Partners Fund IV GI Partners 2014 USD 100,000,000 2,000,000,000 Fund Private Equity

Global Timber Investors VII Global Forest Partners 2004 USD 25,000,000 300,475,000 Fund Timber

39


Global Timber Investors VIII Institutional Investors Global Forest Partners 2007 USD 35,000,000 700,100,000 Fund Timber

Goldman Sachs PEP 2004 Goldman Sachs Private Equity Group (AIMS) 2004 USD 100,000,000 1,186,000,000 FoF - primary Private Equity


GreenGold Equity Fund Romania I GreenGold Asset Management 2008 EUR 25,000,000 53,291,615 Fund Timber

GreenWood Tree Farm Fund GreenWood Resources Inc 2007 USD 36,363,636 210,000,000 Fund Timber

H.I.G. Bioventures II H.I.G. Capital 2012 USD 50,000,000 256,140,119 Fund Private Equity

H.I.G. Middle Market LBO Fund II H.I.G. Capital 2014 USD 70,000,000 1,789,200,000 Fund Private Equity

Hancock Timberland VII Hancock Timber Resource Group 2005 USD 10,000,000 631,920,000 Fund Timber

Hancock Timberland VIII Hancock Timber Resource Group 2006 USD 35,000,000 552,800,000 Fund Timber

Hancock Viking Global Timber Fund Hancock Timber Resource Group 2004 USD 28,799,362 123,701,955 Fund Timber

HGGC Fund II HGGC 2014 USD 125,000,000 1,327,000,000 Fund Private Equity

Highstar Capital III Oaktree Capital Management 2007 USD 100,000,000 1,739,222,222 Fund Infrastructure

Highstar Capital IV Oaktree Capital Management 2011 USD 75,000,000 820,166,680 Fund Infrastructure

IFU Investment Partners IFU 2012 DKK 125,000,000 250,000,000 Fund Private Equity

ISQ Global Fund I Squared Capital 2014 USD 125,000,000 3,000,000,000 Fund Infrastructure

Kohlberg Investors VII Kohlberg & Co. 2012 USD 50,000,000 1,596,849,998 Fund Private Equity

Landmark Equity Partners XIV Landmark Partners 2008 USD 50,000,000 1,997,242,424 FoF - secondary Private Equity

Landmark Equity Partners XV Landmark Partners 2013 USD 50,000,000 3,250,000,000 FoF - secondary Private Equity

Latin American Fund I BTG Pactual Timberland Merchant Banking 2010 USD 11,989,525 99,513,054 Fund Timber

LD Equity 2 Maj Invest 2005 DKK 317,000,000 2,998,650,000 Fund Private Equity

LD Equity 3 Maj Invest 2007 DKK 155,000,000 706,900,000 Fund Private Equity

LD Invest Vietnam Maj Invest 2009 DKK 100,000,000 404,340,000 Fund Private Equity

Lindsay Goldberg III Lindsay Goldberg LLC 2008 USD 70,000,000 4,680,850,000 Fund Private Equity

LS Power Equity Partners II LS Power 2007 USD 45,000,000 3,085,000,000 Fund Energy

Macquarie European Infrastructure II Macquarie Group 2006 EUR 25,000,000 4,634,841,727 Fund Infrastructure

Morgan Stanley Infrastructure Partners Morgan Stanley Infrastructure Partners 2008 USD 178,000,000 4,003,270,000 Fund Infrastructure

New Energy Solutions I New Energy Solutions Partners 2002 DKK 75,000,000 385,500,000 Fund Private Equity

New Energy Solutions II New Energy Solutions Partners 2007 EUR 25,000,000 109,070,000 Fund Private Equity

Odin Equity Partners I Odin Equity Partners 2005 DKK 197,570,349 1,094,191,919 Fund Private Equity

Odin Equity Partners II Odin Equity Partners 2008 DKK 152,429,651 1,416,656,426 Fund Private Equity

Odyssey Investment Partners Fund V Odyssey Investment Partners 2014 USD 50,000,000 2,000,000,000 Fund Private Equity

Panda Power Fund II Panda Power Funds 2013 USD 100,000,000 610,000,000 Fund Energy

Pantheon Global Secondary Fund II Pantheon Ventures 2004 USD 40,000,000 676,900,000 FoF - secondary Private Equity

Partners Group Direct Investments 2006 Partners Group AG 2006 EUR 40,000,000 510,050,000 Fund Private Equity

Partners Group Secondary 2004 Partners Group AG 2004 EUR 35,000,000 428,535,354 FoF - secondary Private Equity

Partners Group Secondary 2006 Partners Group AG 2006 EUR 60,000,000 1,009,910,960 FoF - secondary Private Equity


PENM I Private Equity New Markets K/S 2007 DKK 297,000,000 423,450,000 Fund Private Equity

PENM II Private Equity New Markets K/S 2008 DKK 247,500,000 689,850,000 Fund Private Equity

PENM III Private Equity New Markets K/S 2012 USD 48,100,000 143,700,000 Fund Private Equity

Pickwick Forest BTG Pactual Timberland Merchant Banking 2005 USD 26,000,000 69,912,609 Fund Timber

Resilience Fund III Resilience Capital Partners 2011 USD 50,000,000 222,500,000 Fund Private Equity

Riverstone Global Energy and Power Fund V Riverstone Holdings LLC 2012 USD 100,000,000 7,713,575,000 Fund Energy

RMK Select Timberland Investment Fund I BTG Pactual Timberland Merchant Banking 2004 USD 20,000,000 164,000,000 Fund Timber

RMK Select Timberland Investment Fund II BTG Pactual Timberland Merchant Banking 2007 USD 30,000,000 162,800,000 Fund Timber

SilverStreet Private Equity Strategies SilverStreet Capital 2010 USD 50,000,000 201,953,100 Fund Agriculture

SK Capital Partners III SK Capital Partners 2011 USD 50,000,000 500,000,000 Fund Private Equity

SLM Australia Livestock SLM Partners 2012 AUD 75,000,000 75,750,000 Fund Agriculture


F U N D S ( C O N T I N U E D)

40


Global Timber Investors VIII Institutional Investors Global Forest Partners 2007 USD 35,000,000 700,100,000 Fund Timber



GreenGold Equity Fund Romania I GreenGold Asset Management 2008 EUR 25,000,000 53,291,615 Fund Timber

GreenWood Tree Farm Fund GreenWood Resources Inc 2007 USD 36,363,636 210,000,000 Fund Timber

H.I.G. Bioventures II H.I.G. Capital 2012 USD 50,000,000 256,140,119 Fund Private Equity

H.I.G. Middle Market LBO Fund II H.I.G. Capital 2014 USD 70,000,000 1,789,200,000 Fund Private Equity

Hancock Timberland VII Hancock Timber Resource Group 2005 USD 10,000,000 631,920,000 Fund Timber

Hancock Timberland VIII Hancock Timber Resource Group 2006 USD 35,000,000 552,800,000 Fund Timber

Hancock Viking Global Timber Fund Hancock Timber Resource Group 2004 USD 28,799,362 123,701,955 Fund Timber

HGGC Fund II HGGC 2014 USD 125,000,000 1,327,000,000 Fund Private Equity

Highstar Capital III Oaktree Capital Management 2007 USD 100,000,000 1,739,222,222 Fund Infrastructure

Highstar Capital IV Oaktree Capital Management 2011 USD 75,000,000 820,166,680 Fund Infrastructure

IFU Investment Partners IFU 2012 DKK 125,000,000 250,000,000 Fund Private Equity

ISQ Global Fund I Squared Capital 2014 USD 125,000,000 3,000,000,000 Fund Infrastructure

Kohlberg Investors VII Kohlberg & Co. 2012 USD 50,000,000 1,596,849,998 Fund Private Equity

Landmark Equity Partners XIV Landmark Partners 2008 USD 50,000,000 1,997,242,424 FoF - secondary Private Equity

Landmark Equity Partners XV Landmark Partners 2013 USD 50,000,000 3,250,000,000 FoF - secondary Private Equity

Latin American Fund I BTG Pactual Timberland Merchant Banking 2010 USD 11,989,525 99,513,054 Fund Timber

LD Equity 2 Maj Invest 2005 DKK 317,000,000 2,998,650,000 Fund Private Equity

LD Equity 3 Maj Invest 2007 DKK 155,000,000 706,900,000 Fund Private Equity

LD Invest Vietnam Maj Invest 2009 DKK 100,000,000 404,340,000 Fund Private Equity

Lindsay Goldberg III Lindsay Goldberg LLC 2008 USD 70,000,000 4,680,850,000 Fund Private Equity

LS Power Equity Partners II LS Power 2007 USD 45,000,000 3,085,000,000 Fund Energy

Macquarie European Infrastructure II Macquarie Group 2006 EUR 25,000,000 4,634,841,727 Fund Infrastructure

Morgan Stanley Infrastructure Partners Morgan Stanley Infrastructure Partners 2008 USD 178,000,000 4,003,270,000 Fund Infrastructure

New Energy Solutions I New Energy Solutions Partners 2002 DKK 75,000,000 385,500,000 Fund Private Equity

New Energy Solutions II New Energy Solutions Partners 2007 EUR 25,000,000 109,070,000 Fund Private Equity

Odin Equity Partners I Odin Equity Partners 2005 DKK 197,570,349 1,094,191,919 Fund Private Equity

Odin Equity Partners II Odin Equity Partners 2008 DKK 152,429,651 1,416,656,426 Fund Private Equity

Odyssey Investment Partners Fund V Odyssey Investment Partners 2014 USD 50,000,000 2,000,000,000 Fund Private Equity

Panda Power Fund II Panda Power Funds 2013 USD 100,000,000 610,000,000 Fund Energy

Pantheon Global Secondary Fund II Pantheon Ventures 2004 USD 40,000,000 676,900,000 FoF - secondary Private Equity

Partners Group Direct Investments 2006 Partners Group AG 2006 EUR 40,000,000 510,050,000 Fund Private Equity

Partners Group Secondary 2004 Partners Group AG 2004 EUR 35,000,000 428,535,354 FoF - secondary Private Equity



PENM I Private Equity New Markets K/S 2007 DKK 297,000,000 423,450,000 Fund Private Equity

PENM II Private Equity New Markets K/S 2008 DKK 247,500,000 689,850,000 Fund Private Equity

PENM III Private Equity New Markets K/S 2012 USD 48,100,000 143,700,000 Fund Private Equity

Pickwick Forest BTG Pactual Timberland Merchant Banking 2005 USD 26,000,000 69,912,609 Fund Timber

Resilience Fund III Resilience Capital Partners 2011 USD 50,000,000 222,500,000 Fund Private Equity

Riverstone Global Energy and Power Fund V Riverstone Holdings LLC 2012 USD 100,000,000 7,713,575,000 Fund Energy

RMK Select Timberland Investment Fund I BTG Pactual Timberland Merchant Banking 2004 USD 20,000,000 164,000,000 Fund Timber

RMK Select Timberland Investment Fund II BTG Pactual Timberland Merchant Banking 2007 USD 30,000,000 162,800,000 Fund Timber

SilverStreet Private Equity Strategies SilverStreet Capital 2010 USD 50,000,000 201,953,100 Fund Agriculture

SK Capital Partners III SK Capital Partners 2011 USD 50,000,000 500,000,000 Fund Private Equity

SLM Australia Livestock SLM Partners 2012 AUD 75,000,000 75,750,000 Fund Agriculture

Aggregate commitment overview 41


Southern Cone Timber Holdings BTG Pactual Timberland Merchant Banking 2005 USD 37,500,000 210,000,000 Fund Timber

Spur Ventures III Spur Capital Partners 2008 USD 50,000,000 129,900,000 FoF - primary Private Equity

Sunstone Biomed Venture III SunStone Capital A/S 2001 DKK 75,000,000 1,690,500,000 Fund Private Equity

Sunstone Biomedical Venture Annex II SunStone Capital A/S 2004 DKK 6,300,000 70,913,831 Fund Private Equity

Sunstone Biomedical Venture Annex III SunStone Capital A/S 2004 DKK 25,800,000 534,697,864 Fund Private Equity

Tenaska Power Fund II Tenaska Capital Management LLC 2008 USD 75,000,000 2,444,550,000 Fund Energy

The Energy and Fertilizer Investment Fund K/S Maj Invest 2013 USD 62,500,000 177,109,587 Fund Energy

The Fourth Cinven fund Cinven Partners LLP 2007 EUR 35,000,000 6,500,000,000 Fund Private Equity

Thomas H. Lee Parallel Fund VI Thomas H. Lee Partners 2006 USD 50,000,000 7,891,400,000 Fund Private Equity

Timbervest Crossover Partners II Timbervest 2008 USD 25,000,000 250,000,000 Fund Timber

Timbervest Partners II Timbervest 2007 USD 30,000,000 374,950,000 Fund Timber

Timbervest Partners III Timbervest 2010 USD 30,000,000 409,525,000 Fund Timber

Triton Fund II Triton Partners 2006 EUR 35,000,000 1,126,000,000 Fund Private Equity

Triton Fund III Triton Partners 2009 EUR 50,000,000 2,382,000,000 Fund Private Equity

Triton Fund IV Triton Partners 2013 EUR 60,000,000 3,468,000,000 Fund Private Equity



Fund Manager Vintage Headquarter Currency PKA commitment Asset class

Archroma SK Capital 2013 Reinach, Switzerland USD 21,000,000 Private Equity

EV Offshore Ltd. Dunedin LLP 2014 Aberdeen, UK GBP 10,000,000 Private Equity

PPC Industries, Inc. Kohlberg & Company 2014 Pleasant Prairie (WI), USA USD 15,000,000 Private Equity

SSI HGGC 2014 Shelton (CT), USA USD 50,000,000 Private Equity

Star West Generation Highstar Capital 2014 Houston (TX), USA USD 30,000,000 Energy

TractManager Arsenal Capital Partners 2013 Chattanooga (TN), USA USD 55,852,539 Private Equity

UTEX Industries Riverstone 2013 Houston (TX), USA USD 15,000,000 Energy

D I R E C T I N V E S T M E N T S

Direct investment Developer(s)/Operator(s) Investment year Country Asset type Investment type Currency Investment amount

Anholt Offshore Wind Farm DONG Energy 2011 Denmark Offshore Wind Equity DKK 2,500,000,000

Butendiek Offshore Wind Park wpd/Siemens 2012 Germany Offshore Wind Equity EUR 100,000,000

Gemini Northland Power Inc./Siemens 2014 The Netherlands Offshore Wind Subordinated loan EUR 120,000,000

Gode Wind 2 DONG Energy 2014 Germany Offshore Wind Equity EUR 288,000,000

F U N D S ( C O N T I N U E D)

42


Southern Cone Timber Holdings BTG Pactual Timberland Merchant Banking 2005 USD 37,500,000 210,000,000 Fund Timber

Spur Ventures III Spur Capital Partners 2008 USD 50,000,000 129,900,000 FoF - primary Private Equity

Sunstone Biomed Venture III SunStone Capital A/S 2001 DKK 75,000,000 1,690,500,000 Fund Private Equity

Sunstone Biomedical Venture Annex II SunStone Capital A/S 2004 DKK 6,300,000 70,913,831 Fund Private Equity

Sunstone Biomedical Venture Annex III SunStone Capital A/S 2004 DKK 25,800,000 534,697,864 Fund Private Equity

Tenaska Power Fund II Tenaska Capital Management LLC 2008 USD 75,000,000 2,444,550,000 Fund Energy

The Energy and Fertilizer Investment Fund K/S Maj Invest 2013 USD 62,500,000 177,109,587 Fund Energy

The Fourth Cinven fund Cinven Partners LLP 2007 EUR 35,000,000 6,500,000,000 Fund Private Equity

Thomas H. Lee Parallel Fund VI Thomas H. Lee Partners 2006 USD 50,000,000 7,891,400,000 Fund Private Equity

Timbervest Crossover Partners II Timbervest 2008 USD 25,000,000 250,000,000 Fund Timber

Timbervest Partners II Timbervest 2007 USD 30,000,000 374,950,000 Fund Timber

Timbervest Partners III Timbervest 2010 USD 30,000,000 409,525,000 Fund Timber

Triton Fund II Triton Partners 2006 EUR 35,000,000 1,126,000,000 Fund Private Equity

Triton Fund III Triton Partners 2009 EUR 50,000,000 2,382,000,000 Fund Private Equity

Triton Fund IV Triton Partners 2013 EUR 60,000,000 3,468,000,000 Fund Private Equity


Fund Manager Vintage Headquarter Currency PKA commitment Asset class

Archroma SK Capital 2013 Reinach, Switzerland USD 21,000,000 Private Equity

EV Offshore Ltd. Dunedin LLP 2014 Aberdeen, UK GBP 10,000,000 Private Equity

PPC Industries, Inc. Kohlberg & Company 2014 Pleasant Prairie (WI), USA USD 15,000,000 Private Equity

SSI HGGC 2014 Shelton (CT), USA USD 50,000,000 Private Equity

Star West Generation Highstar Capital 2014 Houston (TX), USA USD 30,000,000 Energy

TractManager Arsenal Capital Partners 2013 Chattanooga (TN), USA USD 55,852,539 Private Equity

UTEX Industries Riverstone 2013 Houston (TX), USA USD 15,000,000 Energy

Direct investment Developer(s)/Operator(s) Investment year Country Asset type Investment type Currency Investment amount

Anholt Offshore Wind Farm DONG Energy 2011 Denmark Offshore Wind Equity DKK 2,500,000,000

Butendiek Offshore Wind Park wpd/Siemens 2012 Germany Offshore Wind Equity EUR 100,000,000

Gemini Northland Power Inc./Siemens 2014 The Netherlands Offshore Wind Subordinated loan EUR 120,000,000

Gode Wind 2 DONG Energy 2014 Germany Offshore Wind Equity EUR 288,000,000

43

G LO S S A RY

AA L P H A

Expresses the component of a return that cannot

be explained by general market volatility

—

A LT E R N AT I V E I N V E S T M E N T S

Investment in non-listed assets or companies

—

A N C H O R I N V E S TO R

One or more investors driving an investment process and

typically holding most of the investment

BB E TA

Expresses the component of a return that can be

explained by general market volatility

CC O - I N V E S T M E N T

Investment made directly in a business in partnership

with a fund the investor is already invested in

—

C O M M E R C I A L O P E R AT I O N DAT E

( C O D)

Date for full operation of the wind farm where all

wind turbine generators have been commissioned

DD I R E C T I N V E S T M E N T

Investment made directly in an asset

—

D P I

Distributions to paid-in; measure of total

distributions divided by paid-in capital

EE X P O S U R E

Sum of accumulated remaining commitment

and market value

FF O U N DAT I O N

Lowest part of the wind generating structure used to

ground and stabilize the wind turbine generator

—

F U N D - O F - F U N D S

A fund investing in other private funds

—

F U N D C O M M I T M E N T

Obligation to provide capital to future

investments in a fund

Glossary44

II R R

Internal Rate of Return; expresses the average

annual return on a given investment

—

I T D

Investment to date

MM W

Megawatt; measure of the production capacity

of a power generation asset

NN A M E P L AT E C A PA C I T Y

The intended maximum output of an offshore

wind farm; also known as “installed capacity.”

PPA I D - I N C A P I TA L

Capital called against a commitment

to a private fund

—

P I C

Paid-in to commitment; measure of total paid-in

capital divided by total committed capital

—

P M E

Public market equivalent; measure of the return on one

or more listed investments with similar profiles

TT R A C K R E C O R D

A fund’s historical record of investments

and related returns

—

T V P I

Total value to paid-in; measure of current market value

plus sum of distributions divided by paid-in capital

VV I N TA G E Y E A R

The year that a fund receives its initial

infusion of capital

WW I N D T U R B I N E

G E N E R ATO R ( W T G )

Generating unit that converts energy from

wind into electrical power

Glossary 45

PKA AIP A/S · Rosenborggade 1B

DK-1130 Copenhagen · Denmark — pkaaip.dk

PKA AIP / Årsrapport / Annual Report / 2014

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