German asset manager KGAL Group is raising a €500 million (US$680 million) to €750 million (US$1,022 million) clean energy infrastructure fund targeted at German investors.

The future fund will invest directly in the renewable energy infrastructure sector of European western markets, to the exclusion of biomass and geothermal projects.

Chancellor Angela Merkel this month endorsed cuts to incentives for renewable energy projects. If adopted, the measures would reduce subsidies for renewable energy generation to an average of Eur0.12 per kWh by next year.

Michael Ebner, KGAL's Head of Infrastructure, said in an interview:

Cuts will be implemented; nobody knows to what degree. We will see some caps for the relevant technologies and there will be changes in the overall remuneration system but for the time being we don't have a clear view.

I'm not sure whether the appetite from conservative investors will shift to eastern markets, but for the time being, we will not shift to more risky markets in Europe. I think there is still enough volume to invest in western markets.

KGAL will be relatively insulated from any changes to the German market as it already invests outside the country.

KGAL has already made investments from its latest clean energy infrastructure fund, which it started raising in Q2 2013, in four wind farms in France and Germany that have a combined capacity of 129 MW. The acquisitions comprise two wind farms in German state Schleswig-Holstein, which were purchased from WKN AG, and two French wind farms that the fund expects to close a deal for in February.

KGAL currently manages capital for 110,600 investors with equity investments in a total of 135 active limited partnership funds. Investors have entrusted €6.4 billion in equity capital to KGAL for these funds. KGAL is an investment company owned by Commerzbank, BayernLB, HASPA Finanzholding and Sal. Oppenheim.