Solar investment ‘yield co’ NextEnergy Solar Fund has struck a deal to acquire 28MWp of additional PV generation capacity in the UK for £32.7 million, meaning the company now holds over 100MWp of such assets.
The company, which was started up earlier this year, will purchase Cock Hill, a 20.0MWp solar farm, as well as Llwyndu solar plant, which is an 8.0MWp facility. The former will cost NextEnergy Solar Fund up to £23.3 million, while the latter will cost up to £9.4 million.
Both are registered as special purpose vehicles and are expected to be connected before March 2015 and qualify for support under the existing 1.4ROCs regime. Construction is already underway, with Cock Hill, in Wiltshire, somewhat further advanced than the Llwyndu plant, which is in Wales.
NextEnergy Solar Fund has now put some £125 million into the purchase of 106MWp of solar, across 10 assets. The investment vehicle was launched as part of a wave of yield co launches both in the UK and internationally, with NextEnergy Solar Fund making an IPO in April, which raised over £80 million.
Yield cos, which represent the bundling of a number of generation assets into one fund yielding returns for shareholders, are thought to represent a relatively safe and steady return on investment. While not offering huge upsides, they have been thus far popular in their appeal to institutional investors, such as pension funds.
NextEnergy Solar Fund this week also filed the placement of some 4,000,000 shares, to raise just over £4 million, with the London Stock Exchange at a price of £1.03 per share. It went into effect this morning and according to NextEnergy, brings the firm’s capital to over £185 million.
Jamie Richards, a partner at Foresight Group, one of the other prominent UK yield cos, explained their appeal thusly in an interview with the international edition of Solar Business Focus magazine earlier in the year:
“We are seeing increasing institutional appetite for solar investment as institutions are made aware of the low volatility and index linked yields that can be achieved.”
Steven Baird, of investment advisory firm Kyra Partners, explained then that the popularity of these vehicles with the wider investment community was evidence of solar’s growing maturity.
“The fact that solar and other renewable assets are being placed into such structures is a testament to the fact that they are establishing themselves as a separate and acceptable asset class. The fact that the press like to call these vehicles 'yield cos' is only because the nature of the asset, even in an externally managed structure, lends itself to paying out much higher regular income to investors than in other competing asset classes,” Baird said.