Greencoat Raises $395 Million in IPO to Buy SSE, RWE Sites

Greencoat U.K. Wind Plc raised 260 million pounds ($395 million) in Britain’s biggest clean-energy initial public offering to buy projects from RWE AG and SSE Plc.

Greencoat offered 260 million shares at 100 pence each to bring in more than its initial goal of about 205 million pounds, the company said today in a statement. It will buy stakes in six operating wind farms with combined capacity of 126.5 megawatts.

The sale is positive for a wind industry that’s the focus of government plans to get 30 percent of the U.K.’s power from renewable sources by the decade’s end, compared with almost 12 percent now. Britain’s program of wind-farm subsidies underpins Greencoat’s targeted 6 percent dividend yield, the company said.

“What we’ve done is move the market on in one sense,” Stephen Lilley, a partner at the company’s investment manager Greencoat Capital LLP, said by phone. “We’ve got to the next stage as the wind industry is developing, which is a forerunner to how long-term operating assets will be held.”

SSE, based in Perth, Scotland, has agreed to sell four wind farms to London-based Greencoat for 140 million pounds. While the utility had planned to invest 43 million pounds of the proceeds in the IPO, it cut that to 10 million pounds after the share offer was oversubscribed. The Department for Business, Innovation and Skills also contributed 50 million pounds.

Recycle Capital

Greencoat’s acquisitions will include 24.95 percent of the 90-megawatt Rhyl Flats wind park off North Wales. Britain’s Green Investment Bank also bought a stake of the same size in Rhyl Flats from RWE, it said in a separate statement. The German utility raised 165.2 million pounds through the sale of 49.9 percent and from selling 41 percent in the Little Cheyne Court onshore park to Greencoat, it said in a statement.

“The principle is about raising cash to be able to re-invest it,” Julia Lynch-Williams, managing director at RWE Npower Renewables Ltd., said by phone. “It was never intended that we’d finance all these things off balance sheet so we always created structures to co-invest through construction or subsequently to sell down in order to raise cash.”

The model may be replicated elsewhere, according to RBC Capital Markets LLC. “People will naturally see the success of the deal and see it as a window of opportunity to look at this market,” Dai Clement, managing director and head of utilities and industrials, said by phone. “For investors who want low-risk, high cash returns in an environment where interest rates are very low and it’s hard for them to obtain yield elsewhere, it’s a pretty good asset class,” he said. Greencoat will admit the shares to the London Stock Exchange on March 27.

(Updates with Greencoat comment in fourth paragraph.)
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