Greencoat Plans U.K.’s Biggest Wind-Energy IPO to Buy SSE Sites

Greencoat U.K. Wind Plc plans to raise 205 million pounds ($321 million) in the British wind industry’s biggest initial public offering, a sign confidence is returning following political rifts over its future.

Greencoat will use the proceeds to purchase wind-power assets from utilities RWE AG and SSE Plc, the infrastructure fund said today in a statement. SSE has agreed to invest 43 million pounds and the government 50 million pounds in Greencoat shares, due to list on the London Stock Exchange in March.

The news is a boon for the wind industry, the focus of U.K. plans to get 30 percent of its power from renewable sources by the end of the decade, up from almost 12 percent now. Land-based turbines have faced objections from local communities and lawmakers in Prime Minister David Cameron’s Conservative Party, who say they’re inefficient and too heavily subsidized.

“An IPO by Greencoat could boost investor confidence in U.K. wind after a period of uncertainty over government support,” said Angus McCrone, a senior analyst at Bloomberg New Energy Finance. “But as an infrastructure fund, Greencoat would be a different –- and lower-risk –- type of animal than previous U.K stock-market debutants in the wind sector.”

Clipper Windpower Ltd., a turbine manufacturer, listed on London’s Alternative Investment Market in 2005, raising 75 million pounds. Developer Renewable Energy Generation Ltd. raised 25 million pounds in an IPO the same year.

Subsidy Benefit

Greencoat, established in late 2012, is seeking to benefit from a U.K. program that pays subsidies to clean-power generators for 20 years. Today’s agreement with SSE and RWE also releases funds for the utilities to build new renewable-energy projects, they said in separate statements.

“The wind farms produce a steady, transparent income stream from day one,” said Stephen Lilley, a partner at Greencoat Capital LLP, which manages the London-based fund. Greencoat expects to pay an initial 6 percent dividend on each 100-pence share, which will increase in line with the Retail Price Index, he said today by phone. The company can increase its issue size by 55 million pounds.

SSE, based in Perth, Scotland, agreed to sell four wind farms totaling 79.5 megawatts for 140 million pounds, with as much as 43 million pounds of that to be invested in Greencoat. RWE Innogy, the German utility’s renewables unit, agreed to sell 49.9 percent in its Rhyl Flats offshore park to Greencoat and the U.K.’s Green Investment Bank. It will also sell as much as 41 percent in its Little Cheyne Court venture.

The stock sale means Greencoat won’t use project-finance debt for its first purchases, in a market where fewer banks are willing to lend on longer terms, said Lorna Shearin, a managing director at RBC Capital Markets, which is joint bookrunner on the sale with Barclays Plc.

“Greencoat are putting in place an acquisition facility so they can buy new assets in the future,” she said by phone. “Ultimately, as they grow, they may put in some long-term debt, but it would be much less gearing than you see with project financing.”

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