NextEnergy aims to raise £150m solar fund through London listing

Will Nichols
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Company intends to tap into growing institutional investor interest in UK solar

NextEnergy has unveiled plans to raise £150m to invest in UK solar projects by floating a new fund on the London Stock Exchange.

The newly formed company intends to service growing investor demand for solar PV projects, particularly from institutional investors such as pension funds or insurance companies.

NextEnergy is part of NEC Group, Europe's largest solar fund manager, which manages solar farms in Italy, the UK, and South Africa on behalf of investors, including banks, private equity funds, and institutional investors.

"The beauty of solar farms is they offer long term stable returns that are RPI-linked," Abid Kazim, UK managing director at the company, told BusinessGreen. He said investors could expect between seven and nine per cent return on investment from the already operational solar farms the fund has targeted.

Kazim said healthy "but not excessive" returns are guaranteed by government subsidy schemes, which last year settled into a predictable framework following more than a year of disruption. Investment plateaued after ministers moved to change the feed-in tariff scheme following a boom in new solar installations, but Kazim said the sector has recovered in recent months and is now poised for growth.

The cost of solar technology has fallen dramatically - dropping by half between summer 2011 and March 2012 - and surveys consistently show solar to be the most popular energy technology currently being pursued in the UK. A YouGov poll published last year found seven times as many people would rather live next door to a solar farm than a fracking rig.

The UK has elevated solar PV to one of its key technologies in achieving an EU target of producing 15 per cent of its energy from renewable sources by 2020 and believes it could bring forward 22GW of capacity by that date.

These factors should ensure more and more solar farms coming forward on both green and brownfield sites, Kazim said.

The announcement will further fuel optimism that clean energy investment is poised for a recovery durign 2014. The past year has seen the launch of multi-million pound renewable energy funds from Bluefield, which raised £130m, The Renewables Infrastructure Group, which raised £300m, and Foresight, which raised £200m, prompting speculation that the green IPO market is regaining some momentum.

Kazim said he was confident there is sufficient room in the market - and new projects coming forward - for more players and a second wave of funding beyond the initial £150m is already being planned by the company.

"The sector is professionalising ... [but] at least £11.5bn is required between now and 2020 in solar to mobilise the target the government has," he said. "Right now, if we look at the funds that have been launched we've not made a dent in that, so there's a huge opportunity."

NEC Group has an established track record in solar, investing £120m in 14 projects in the UK and Italy since 2007. Its asset management business manages and monitors over 1,100 solar power plants with an estimated asset value of £3.1bn.

NextEnergy said it intends to tap into that expertise to purchase UK solar assets that are already operational, which reduces the risk for investors. It is in due diligence discussions with seven projects and, once the share offering closes in March, it plans to deploy the funds within four months.

In related news, Sharp has confirmed it will cease solar panel production at its Tennessee factory in March as the company reviews its PV business. The move follows last month's announcement that the company will close its UK plant at Wrexham by the end of February with the loss of 250 jobs.

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