Copenhagen Infrastructure Partners (CIP) is discussing a far-reaching restructuring of its EUR 3bn inaugural energy transition fund – the world’s largest dedicated clean hydrogen fund – as it faces major market headwinds, according to two sources familiar with the situation.

The Danish investor is in talks with LPs in its Copenhagen Infrastructure Energy Transition Fund I (CI ETF I) to return a significant part of the EUR 3bn capital raised at final close in 2022, as it considers that many of its proposed investments are unlikely to be profitable as originally planned, said the sources.

CIP has carried out a review of the planned investments of CI ETF I – over 20 projects globally according to Infralogic’s tally – to determine the best strategy for each, according to one of the sources.

These include projects spanning the globe, including Australia, Chile, Denmark, Germany, the Netherlands, Spain, Portugal, and the US, that were expected to have around 10 GW of electrolysers, according to CIP’s website.

The manager is considering selling certain projects and rescoping others, while continuing to develop others on a longer-term horizon, added the source, who was briefed on the plans.

“The fund was a hydrogen bet, and today hydrogen is not working out,” said this source. “The idea is to take the fund’s [portfolio], break it up and recover some value. That’s a smart move to make if you’ve realised things are not working out as planned.”

The restructuring is in response to a slow development of the global power-to-X and green hydrogen market over the past few years, the sources indicated, as bullish growth expectations in 2020-2023 have not materialised.

Green hydrogen is produced through electrolysis from renewable power sources, while power-to-X indicates more generally technologies that convert electricity into fuel sources such as ammonia or methanol. These technologies have been seen as a way to decarbonise hard-to-abate industries such as shipping, steel production, and agriculture, but their cost has sometimes also been criticised as too high.

The changes of CI ETF I are also a sign of how investors are adapting to shifts in global energy transition, re-focusing on power generation and embracing faster-growing investment opportunities such as data centres.

Investment review

CIP has not entirely given up on hydrogen, however. The manager is discussing with LPs in the fund to set up a continuation vehicle to take on the assets of CI ETF I that will not be immediately sold to continue to develop them, said the sources.

This would let LPs participate in any potential long-term upside if the hydrogen market’s outlook brightens and projects become more profitable, added the sources.

Final details of the continuation fund are yet to be agreed, although CIP has proposed a structure targeting a 10% gross IRR and 4.5% net IRR based on current expectations, according to one source. This compares to an initial target net IRR in the mid-teens for CI ETF I.

CIP has indicated to LPs that it expects to recover all the capital invested through the fund so far, although in a worst-case scenario the expected recovery could be around 0.7x of capital, added the source.

Only part of the EUR 3bn raised by CI ETF I has been deployed, public filings suggest.

The 2025 annual report for Copenhagen Infrastructure Energy Transition Fund I K/S, a sub-fund of CI ETF I that accounts for EUR 831m of its capital, showed that only about 29% of its commitments had been paid in by the end of last year.

CIP declined to comment on the fund’s performance and future plans, saying the information is confidential to the fund’s limited partners.

However, a spokesperson for the firm acknowledged there have been challenges to the “original investment thesis” of the fund, which was “built on expectations of a rapid expansion of the green molecules market”.

“Since the fund was established in 2022, as has been seen across the market, the hydrogen and broader power-to-X markets have developed slower than anticipated due to slower offtake market formation and delays in regulatory implementation,” said the spokesperson.

“In response, we have over the last years been adapting the portfolio to current market conditions and focused the fund on system integration assets, including power-led projects, data centre-related opportunities, carbon capture and storage as well as European hydrogen projects,” the spokesperson added.

CI ETF I raised capital from around 65 institutional investors, including pension funds, life insurance companies, sovereign wealth funds, asset managers, and family offices, according to CIP’s website.

Some 25% of its capital came from Nordic investors and 45% from Europe, while LPs from Asia-Pacific accounted for 20% and North America for 10%.

Known LPs include Danish pension funds such as PensionDanmark and PFA Pension, as well as wind turbine manufacturer Vestas, which is also a shareholder in CIP, and the New Zealand Superannuation Fund, according to Infralogic data.

Portfolio re-construction

Exact plans for all the assets in CI ETF I are not known, but apart from selling some projects, the sources indicated two main strategies that CIP is pursuing to recover value: convert some projects into data centres, and focus on tried-and-tested renewable power production in other projects.

One source said CIP is specifically considering turning its EUR 1bn-plus MadoquaPower2X green hydrogen and ammonia project in Sines, Portugal into a data centre development. The manager is exploring options to convert its available grid connection at the site, which was expected to serve 500 MW of electrolysers, for this purpose, added the source.

Infralogic reported in January 2025 that CIP had tapped MUFG to advise on raising debt financing for the hydrogen scheme after winning subsidies from the European Hydrogen Bank in 2024, while last March the Portuguese government declared the project of “public interest”.

Another project being rescoped is the IJmuiden Ver Beta project in the Netherlands, which CIP is developing together with Vattenfall through their Zeevonk joint venture. The sources said the JV is focusing on developing the first 1 GW offshore wind power element, while delaying the following 1 GW wind phase and 500 MW electrolyser.

The consortium has already secured an extension of the project’s permits by three years to 2032, and according to the sources it would only go ahead with hydrogen production if a pipeline to transport the molecules to Germany through the Delta Rhine Corridor is built.

Less clear is the future of the Catalina project in Spain, another flagship scheme of CI ETF I that would combine 1.1 GW of onshore wind and solar plants with a 500 MW electrolyser. The investor last year tapped Santander to advise on financing options, but later in the year it handed back EU Hydrogen Bank subsidies due to difficulties in meeting development deadlines.

One of the sources said that CIP is prioritising hydrogen projects in Germany, which may have better chances of progressing, potentially including a 100 MW scheme in Lubmin, in which CIP bought a 70% stake last year.

Its partner, H2APEX, has said it has secured a “preliminary agreement” for the hydrogen offtake, without naming the buyer, and expects production to start in 2029.

Another project that is seeing some progress is the EUR 2bn HØST PtX Esbjerg scheme in Denmark, which is designed to produce green hydrogen for the grid, ammonia for fertilisers, or maritime fuel.

The project won an auction for subsidies from the German government in May, as it is expected to export green hydrogen to supply German industry.

The CIP spokesperson said “a number of projects across the ETF portfolio are progressing positively through key commercial and development milestones”, although it declined to elaborate on individual schemes.

The delays and headwinds are reflected in developments at CIP Molecule Technologies, a company that CIP set up to develop CI ETF I’s projects, which one source said is being downsized, with around 30 staff out of nearly 80 having left in the past year.

A brighter area where projects are progressing faster is carbon capture and storage (CCS). CI ETF in particular agreed to invest USD 500m last year into a joint venture with New York-listed energy group BKV Corporation that holds a CCS portfolio in Texas. The JV’s first projects started operating in the first half of 2026.

European regulation under scrutiny

At launch in 2021, CI ETF I said it would target investments across Western Europe, North America, Australia and developed Asian countries, although project data compiled by Infralogic shows that most of its projects were eventually in Europe.

This chimes with CIP’s comments that it sees better prospects in European hydrogen, although it is facing pressure even in the continent.

One “overarching hurdle”, according to one of the sources, is the slow implementation of EU rules that were designed to incentivise the adoption of green hydrogen and other clean fuels – particularly the Renewable Energy Directive III (RED III).

The Hydrogen Council, a trade body, describes RED III as “one of Europe’s most powerful demand-side tools for hydrogen” but said in May that most EU member states have not yet implemented the rules, a year after the deadline.

“Countries have been reluctant to impose meaningful industry quotas, primarily due to the rising energy prices for heavy industry and competitiveness concerns,” according to the council.

This means that very few offtakes are available for CI ETF I, added the source, as green hydrogen and other clean fuels are not competitive enough.

CIP has not lost hope that change is coming, however.

“We have recently seen encouraging developments across the sector, including greater regulatory clarity in Europe, implementation of RED III in several EU member states, and the introduction of substantial hydrogen support mechanisms,” said the firm’s spokesperson.