Chinese clean tech firm targets $350 million fund

By Leonora Walet

HONG KONG (Reuters) - Chinese private equity firm Nature Elements Capital plans to raise up to $350 million for a fund that will invest in clean energy projects in China, chief executive Chan Ka-keung told Reuters.

Chan said the firm was also looking to invest in the world's third-largest economy by setting up yuan-denominated funds worth up to 1 billion yuan within the next two years.

The former Credit Suisse banker said the company was investing in clean energy projects to take advantage of increased government cash incentives expected for the sector.

"Now is best time to invest clean energy which, despite the crisis, remains very robust and could easily outperform all other industries," said Chan, who set up his own firm in June after serving as head of China investments for alternative private equity firm Climate Change Capital.

China, the world's top greenhouse gas polluter, has been increasing its investment in the environment sector, offering generous cash incentives that have spawned a wave of entrepreneurs developing clean energy projects and new green technologies.

Beijing plans to further boost the renewable energy sector by tripling its wind power capacity target to 100 gigawatts by 2020 and raising the solar power generation target more than fivefold to 10 gigawatts.

Nature Elements' $350 million fund would come from financial institutions and high-net worth investors, Chan said without disclosing the names of interested parties.

Chan declined to identify target companies, but said they were key local players in China's environmental sector and were engaged in the manufacture of wind power component parts and waste-heat recovery systems.

The firm is looking at annual returns on investments of about 25 percent, he said.

Nature Elements will also set up a local-currency denominated fund in China to enable the firm to quickly expand investment in the mainland.

"A local currency fund will give the flexibility to make timely and opportunistic investment in China," said Chan.

"I see a huge appetite for yuan-denominated funds because there's so much liquidity in the China market chasing a very limited number of financial instruments," he added.

(Reporting by Leonora Walet; Editing by Chris Lewis)