There’s a very interesting IPO coming next month – Greencoat U.K. Wind Plc will be Britain’s biggest renewable energy IPO
and will buy wind farms from local utilities.
The infrastructure fund, which is managed by investment group Greencoat UK, plans to raise $321 million when it lists on the London exchange.
That money would be used to purchase its first wind farms – 126.5 megawatts (MW) from utilities RWE and SSE.
Greencoat plans to buy only operating wind plants and give shareholders a 6% dividend on the initial share price, triple that of bonds.
"With an anticipated initial dividend yield of 6 percent, limited planned gearing, and investment only in proven operating wind farms, Greencoat UK Wind offers a very attractive opportunity for investors seeking a sustainable and growing return on their investment," says Tim Ingram, chair of Greencoat UK Wind.
Both the UK government and utility SSE will buy shares.
The UK’s target is to source 30% of electricity from renewables by 2020 (up from 12% now), but the government is struggling to finance them.
With Greencoat standing ready to buy them, utilities would continue to build wind farms and once operational, sell them to Greencoat. Utilities would use the cash to build more wind farms, onshore and offshore.
It would boost investor confidence in the UK wind energy sector which has been waning because of uncertainty over government support.
"The IPO being progressed by Greencoat Capital is an elegant solution, and something that is likely to be replicated," Richard Simon-Lewis of Lloyds Banking told Bloomberg.
Once operational, wind farms have predictable, low operating costs, which are well suited to long term ownership through a fund. Returns don’t depend on the changing cost of fuel, as is the case for natural gas and coal plants.
The same is true for solar plants, which are also attracting long term investors in the US.
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