NextEnergy secures ‘first-of-its-kind’ £100m debt financing for subsidy-free sites

NextEnergy Capital (NEC) has secured what it is lauding as a “first-of-its-kind” debt financing to construct two subsidy-free solar sites as it unveils a new subsidy-free private fund.

Santander is to provide a non-recourse debt financing structure of £100 million to cover investment in the projects, which are to have a constructed value of over £60 million, NEC said.

The 75MW Llanwern site in South Wales and the 40MW Strensham site in Worcestershire are to benefit from the financing, with NEC stating that Llanwern is to be both the largest subsidy-free solar site in the UK, as well as the largest solar farm in the country to date.

It is expected that the two farms will be connected to the grid in Q4 2020, with both to be contracted with Power Purchase Agreements. NEC plans to move the farms to a new subsidy-free private fund NextPower UK ESG, which is to target a “significant number” of new-build subsidy-free solar projects in the UK.

NextEnergy has laid claim to a number of the UK's subsidy-free solar sites, including the 5.4MW Hall Farm II project and the 50MWp subsidy-free Staughton solar farm, which NextEnergy Solar Fund (NESF) celebrated as the UK's largest subsidy-free site when it was connected to the grid in 2019.

Michael Bonte-Friedheim, CEO and founding partner of NEC, said it was a “pleasure” to announce the new financing structure and the beginning of construction, particularly in light of the “challenging backdrop” of the COVID-19 pandemic. This, he said, “shows the strength and depth of the teams involved, coupled with the resilience of solar as an asset class in these times”.

In April, NESF stated it was planning to start construction back up again “shortly”, with an 8.5MWp extension first on the list. Its UK portfolio performed above expectations in the year ended 31 March 2020, with a generation outperformance of 4.6%. NESF is targeting an operational subsidy-free solar pipeline as large as 150MW by the end of this year.

Santander has partnered the NextEnergy Capital Group previously, having agreed a £40 million revolving credit facility with NextEnergy Solar Fund in 2018. Santander has also funded battery storage as well as solar, announcing it was providing a £25 million non-recourse debt facility to UK battery storage firm Zenobe in 2019, allowing the storage firm to target behind-the-meter services and construction of new utility-scale projects.

Santander Corporate & Investment Banking's Alejandro Ciruelos said: “This is a groundbreaking transaction and an important step forward in making subsidy-free renewables viable in the UK.“