U.K. Set for Biggest Clean-Power IPO in Shift Toward EquityReed Landberg and Louise Downing
The Renewables Infrastructure Group Ltd. plans the biggest initial public offering of a U.K. clean-power company as developers turn to stock investors to pay for projects because utilities have less cash for acquisitions.
The green-energy fund plans to raise 300 million pounds ($460 million) via a sale of shares in London, and buy 14 wind farms and four solar parks in Britain, France and Ireland with total capacity of 276 megawatts, it said today in a statement.
“The IPO market appears to be heating up for renewables,” Ben Warren, who works on environmental finance for Ernst & Young LLP, said today by e-mail. “As the conventional exit routes of utility purchasers remain stifled by constrained balance sheets, developers and infrastructure funds are looking to the deeper pools of capital in the public markets.”
The offering, due to be completed by the end of July, would beat the 260 million pounds raised by Greencoat U.K. Wind Plc. Greencoat is up 7 percent since debuting on March 22. Renewables Infrastructure will probably raise more equity in the next year, said Richard Crawford, a director of infrastructure at InfraRed Capital Partners Ltd., which will manage the fund after the IPO.
As much as three-quarters of Renewables Infrastructure’s planned purchases of green projects are in the U.K., where the government today unveiled 110 billion pounds of investments to help replace aging power stations and electricity distribution grids by 2020. The proposals include guaranteed support for low-carbon energy generation such as solar and wind power.
Bluefield Partners LLP yesterday said it plans to raise 150 million pounds in an IPO to invest in U.K. solar plants.
“We expect both institutional investors and both the debt and equity capital markets to become a much more common feature of the renewables landscape,” E&Y’s Warren said.
Renewables Infrastructure has rights to buy projects built by Renewable Energy Systems Ltd., a power-plant developer owned by construction company Sir Robert McAlpine Ltd. RES has built 120 wind-energy projects generating more than 7,500 megawatts.
While the fund will probably keep more than 50 percent of investments in the U.K., it’s looking at other areas in northern Europe including Germany and Scandinavia, Crawford said.
“We anticipate there is the opportunity to grow the fund substantially over the coming years,” he said, declining to say how much more equity the fund may raise in the next 12 months.
The company, based in Guernsey, plans a dividend of 6 pence a share and internal rate of return of as much as 9 percent.
“It’s attractive for investors in the listed market to have steady dividends,” Crawford said. InfraRed has 14 infrastructure funds and $6 billion under management.