The UK wind industry has had a big boost in confidence after a wind farms investment fund revealed it had raised £260m in the second-biggest initial public offering on the London Stock Exchange this year.
The money raised from the oversubscribed flotation by Greencoat UK Wind will be used to buy stakes in six operating wind farms from the RWE and SSE utilities, five onshore parks and RWE’s offshore Rhyl Flats park off the coast of North Wales.
The deal means Greencoat has raised more than half the £450m in equity placed by conventional oil and gas companies on the main London market last year. It is also more than half the £470m such companies raised on Aim, London’s junior market, the traditional destination for early stage funding for energy ventures.
The move heralds cheaper sources of capital for wind farm developers and means retail investors can now put their money directly into operating wind farms, according to Boston Consulting Group’s Andrew Mack.
“It’s great news for retail investors and great news for the wind industry, and I would expect more similar schemes to follow in the next couple of years because these are incredibly stable assets with good cash flow profiles,” Mr Mack said. “It should lead to a more healthy industry.”
Greencoat, which had planned to raise at least £205m, said it had placed 260m shares at 100 pence a share in the flotation, which was also backed by the UK government, with the Department for Business, Innovation and Skills investing £50m.
That helped encourage confidence that the government would not retreat from existing renewable energy subsidies, as other governments in Europe had done, said Dai Clement of RBC Capital Markets, the lead advisers on the flotation.
“It gives a good indication of their view that the UK does not make retrospective changes,” he said.
About half Greencoat’s revenues are expected to come from what it called “green benefits”, or payments made under policies such as the Renewables Obligation, which encourages electricity suppliers to buy power from clean energy generators including wind farms.
In addition, the UK Green Investment Bank is buying a 24.95 per cent stake in the Rhyl Flats wind farm for £57.5m – the bank’s first direct equity investment in offshore wind.
“Rhyl Flats was an ideal investment for us as it helps to develop the market for buying and selling operating offshore wind assets, allowing the release of capital back to the original developers, which will be invested in new renewable projects in the UK,” said the Green Investment Bank’s chief executive, Shaun Kingsbury.
As a result of the oversubscription, SSE reduced its investment to 10m shares after previously saying it would invest up to £43m in the stock.
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