Investment trusts investing in renewable energy sources have embarked on a spree of capital raising as the popularity of the sector continues to grow, the FT Adviser has reported.
Last week, the Foresight Solar fund announced it had raised £60m to invest in new projects, while three other renewable trusts are looking to raise a combined £320m.
Although the renewable infrastructure sector is very young – of the six trusts, four were launched in 2013 and the other two this year – it has already attracted a significant amount of investment.
The six trusts launched with an aggregate of nearly £1.1bn and have already raised £273m of extra funding, even before this latest wave of fundraising.
A dividend yield of between 6% and 7% is the target, though none of the trusts have yet reached this; their assets are recently purchased and some have yet to start paying the trusts.
The trusts have also committed to raising their dividends at least in line with the rise in the retail prices index every year, because the payments on the renewable energy assets tend to be linked to inflation.
The renewable infrastructure trust shares are also trading on lower premiums to their net asset value than the more conventional infrastructure trusts.
The average premium on the shares of trusts in the renewable energy sector stands at 4.8%, according to data from the AIC, while the average premium in the infrastructure sector is 16.5%.
The fundraising from the renewable energy trusts is used to either fund the acquisition of new energy-generating assets, such as wind farms or solar power facilities, or to pay off debt that has been incurred buying up these assets.
The three trusts looking to raise money are Bluefield Solar Income, Greencoat UK Wind and NextEnergy Solar.
Greencoat UK Wind, which is already the largest trust in the sector with assets of £484.4m, is looking to raise £100m in order to pay off debt it incurred from purchasing wind farms.
The gearing on the trust stands close to its limit of 40% and the £100m will lower that to roughly 20%.
Greencoat UK Wind’s management team has said there is a £60bn investment market for wind farms in the UK. It will continue to raise capital to acquire more assets if there is investor demand.
Bluefield Solar Income is looking to raise £150m to finance the purchase of new assets and to pay off the £30m of debt it has already incurred.
NextEnergy Solar plans to sell 75 million more shares by early November as part of a 12-month ongoing placing programme for up to 250 million shares.