Allianz Specialized Investments has acquired a wind farm to the north of Prignitz, Brandenburg in Germany. The Freyenstein investment marks the Allianz Group's first renewable energy project in Germany and reflects the company's aim to diversify its portfolio of renewable energy investments in Europe.

"It is best to diversify your risks by investing in different countries - the wind might be blowing stronger in one country than another so spreading your investment geographically leads to less volatility in your earnings," explains David Jones, chief executive officer of Allianz Specialized Investments.

The Freyenstein wind energy project was built in the first half of 2006 and started commercial operation in early August. The wind farm generates enough electricity to power around 7,200 households, using eight Vestas V80 wind turbines with a total installed capacity of 16 megawatts.

"We quickly realised that this German wind farm represented a good opportunity for Allianz," says Jones. Indeed, Germany is the most advanced country in Europe in terms of wind energy. More wind farms are installed in Germany than in any other country in the world and there are many projects currently being built as the country attracts investors due to its long-term fixed price regime. And Allianz is keen to make the most of further opportunities within the country, before it becomes saturated.

At the same time, Allianz Specialized Investments is also pursuing other opportunities around Europe. The company is looking at potential projects in Belgium, France, Italy, Portugal, Spain and the UK and is also starting to investigate possibilities in central European markets, such as Poland, said Jones.

The Freyenstein transaction represents the second investment under Allianz's strategy of investing in long-term renewable energy projects, and its first in Germany. Moreover, it allows the Allianz Group to further strengthen its successful cooperation with WKN Windkraft Nord AG. In December 2005, Allianz Specialized Investments bought 100 percent of Aero-fonte S.r.l., the project company for the Francofonte wind farm in South-eastern Sicily. The project was developed by Aero-sol S.r.l, a joint venture between WKN Windkraft Nord AG and local partners.

Once operational Francofonte will be the largest wind farm in Italy, comprising 24 Vestas V90 3-megawatt wind turbines and generating enough power to satisfy the needs of more than 46,000 households. And the project is "progressing well," says Jones. "Construction of roads and foundations is coming to an end. The tower sections and turbine components will start to arrive at site next month," the CEO says. The wind farm is on schedule to start operating in April 2007.

The Freyenstein investment marks Allianz's commitment to renewable energy, which is growing globally at a rate of 20 percent per annum. Allianz Group plans to invest as much as 500 million euros in renewable energy over the next five years. Allianz's commitment comes as the field of renewable energy sources becomes increasingly important within the international financial world. Investment in renewable energy offers a good yield with an acceptable risk profile, as well as generating an attractive annual income stream.

Allianz considers wind power to be a particularly attractive growth sector. Indeed, wind power is the cheapest form of renewable energy. "Turbines are getting larger and more efficient and production costs are falling," says Jones. "The technology is improving so you can get more energy out of less wind."

At the same time, more countries are putting into place regulatory frameworks for renewable energy, which is easing the introduction of further projects.

Wind energy is one of the main opportunities presented by the need to tackle climate change. Allianz is directly affected by climate change, in terms of liability for climate-induced claims on the insurance side, as well as a reduction in borrowers' ability to pay and impairment of collateral on the banking side.

In 2005, worldwide capacity of wind-powered generators reached 58,982 megawatts, representing less than 1 percent of worldwide installed capacity. Although wind energy is still a relatively minor source of electricity for most countries, it accounts for 23 percent of energy use in Denmark, 4.3 percent in Germany, and around 8 percent in Spain. Globally, wind power generation more than quadrupled between 1999 and 2005.

Wind energy is abundant, renewable, widely distributed, clean, and mitigates the greenhouse effect if it is used to replace electricity derived from fossil fuels.

David Jones has been head of Allianz Specialized Investments in London since October 2004. Previously, Jones led Shell's global wind power business, building it up from scratch to the seventh largest in the world in less than four years.

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